The Exchanges

Q Speaking of kind of types of investors, I do want to kind of just follow some form of chronology before I just get lost and peppy with questions. Your first venture role was with Sequoia. Um, how did that come to be and what was that entry like? Can you just take me to it?

A Yeah, absolutely. Uh, you know, I was not, uh, an unknown entity for Sequoia. Sequoia, uh, I joined Sequoia in 2009. Um, but Sequoia invested, uh, 12 years, uh, beforehand in my first venture. I was, you know, it was 1997. I was, uh, 27 years old. That was my first, uh, startup. Uh, and, and they invested in that business. It was a terrific team. Um, Pierre Lamont from Sequoia was on the board, and we were the first team to build a WAF, a web application firewall. Um, in the late nineties, that was a big thing. Um, eventually the business was acquired by IBM. I went to start another company and then, um, relocated back to Israel. Was lucky enough for the, for Sequoia to look for a new partner in Israel. I met a local team in Israel, and then I got to, to meet Michael Moritz. Um, he interviewed me, and that was it. I was becoming part of the team.

AI assessment note: “I met a local team in Israel, and then I got to, to meet Michael Moritz.”

Q to hit target, I honestly, I was like, yes, but so many companies plateau. They hit 2030, and then pfft, and the markets are just not as deep as we thought. They're more crowded, and we thought, what, the market is not what we thought it was. Am I wrong? And does great quarter compound to next great quarter? And how do you think about that? The majority do plateau.

A I don't think you are wrong. I, I'll give you two, two, um, two contrary examples, and, and, and, and, you know, that's the beauty of our profession, that it's, it's, it's, it's made up of the exceptions, uh, because the rules Who cares about the rules? Um, so, so, uh, take a company that focused early on one of my portfolio companies, uh, in, in fund one called no name. It was focused on, on API security. Amazing company. And, and, uh, you know, they did first year, I believe it was three million dollars or so. Second year, 15. Ok, that's amazing. And they, they slow down. Why? The market for API security was, you know, it wasn't a market. It was a niche segment within application security. And the company, in order to really sustain that growth, had to really reinvent itself into a much Bigger product vision, market vision, and it was super hard, and eventually we, we sold the business, uh, to Akamai for half a billion dollars or so, and you know, that was the end of story. Um, on the other hand, another company in our portfolio, you know, same year, founded on the same year, 2019. Company called, uh, uh, Island. Um, amazing founders, uh, Mike Fay is the CEO, Dan Amiga is the CTO, and the company is, is, is, is basically selling browsers, and their idea is enterprise browser. Now, believe me, in 2019, the number of, uh, Uh, customers, number of CISOs, number of chief informat…

AI assessment note: “I don't think you are wrong. I, I'll give you two, two, um, two contrary examples”

Q But if you notice, I don't ski. I'm like Bridget Jones on the ski slope ghillie, but I really appreciate that. I would love to start there with some of your early years and move away from my skiing elegantly. So, I know it's a weird one, but I think childhoods actually inform a lot of who we are. How would your parents or teachers describe the young ghillie?

A You know, I grew up in a, in a, in a small town in, in Israel, uh, which, uh, you know, is probably 15 miles away from Tel Aviv, but it's in that period of time it, you know, Tel Aviv could be on the moon as far as I'm concerned. It was so far away for me. And, you know, I, I grew up as a You know, my parents would probably tell you that I was a bright, um, student that never, uh, made, uh, prepared homework, and, and, and the teachers always complained that, uh, you know, whenever they, um, ask me to read my homework assignment, I would stand up, You know, very casually read out of my notebook, you know, the complete answer that I was supposed to make last night. And then when they approach my desk, they'll figure out the notebook is empty and I was just making it up. And I think that that characteristic of a smart and somehow lazy child. You know, was one of the driving forces behind my career, cause, ah, Unlike, uh, young people today, I was introduced to my first, um, computer. It was a Commodore, uh, computer, if, uh, people still, uh, recall that magnificent machine. Um, and I had to choose it. You know, I was not born with, um, computers, and, and, uh, when I faced that machine that, uh, you know, I could Tell it what to do, and it would do it repeatedly without getting tired, without complaining. You know, as a gifted and somehow lazy person, I really like the idea, and…

AI assessment note: “my parents would probably tell you that I was a bright”

Q Can I ask you, does it get easier then? You know, with that hit rate, every single multi-stage fund will just go. We have to invest in cyber starts companies will pay double, but we have to be in them like the Sequoia brand makes it easier to raise more money to get deals. Does it get easier? Now you go, look how good we are.

A It gets easier to, to raise money and recruit talent. And, and, and fundraising for Cyberstarts is, is a pleasure. And I think the last seed fund, you know, I think it took me like, um, 90 seconds to raise the fund, you know, nine WhatsApp messages and it was done. But the subways process itself and the company's journey themselves, that doesn't get easy. That's as hard As it was in the first summer. It's an ego, um, destroying process. You know, you, you, you die like Dozens time during the process. It's so difficult, because you hear all the reasons people are not going to buy your product. There are all the reasons people are not going to like you. All the reasons people are going to pass on you, and that's hard, really hard. By now, um, between Cyberstarts and Sequoia, like, 35 times, Probably more than most people on earth, and it's still, each time I'm getting into a new sunrise process with a new team, I have to prepare myself mentally. It's super hard.

AI assessment note: “It gets easier to, to raise money and recruit talent.”

Q of how he really evaluates people, especially when hiring them. And he says he looks for the, the kind of misadjusted children, the ones with the chips on their shoulders who were bullied at school and got beaten by their older brother or sister. Um, That's his signals of someone that excites from a potential perspective in that conversation on childhood, mother, family, father, what are your signals that excite?

A I listened to the lifestyle, you know, and, and I try to understand the, the why, why they did what they do, why they move from station A to station B in their life. And I'm looking for early signs of them being unique or simply excellent in something, and it doesn't have to be tech. The other thing I'm looking at is whether they've Have they gone through real life difficulty? Have they gone through something that's really difficult and managed to be successful, although they, they face that difficulty? And in many cases, I meet brilliant people, really amazing, top-notch individuals, and they, Tell me how brilliant, you know, students they were and amazing officers in the intelligence forces and the best, you know, Java developer in the company. And I listened to that patiently. And then I asked them one simple question. Hey, I listened to your story. It's amazing. You've done so well. But it sounds like everything was easy for you. You have been that brilliant kid, brilliant student, brilliant officer, you know, straight A student, you know, what has been difficult for you? And the, you know, they think for a while, and typically their first answer is, well, at college, at the first year, I got B minus in, in physics, or something along those lines. And I said, well, that's not really hardship. So I'm looking for the individual who, whose parents went through ugly divorces. I…

AI assessment note: “I'm looking for people who went through real difficulty in life and became successful.”

Q When you go through this process, how are you and the founders interacting? Are you on these calls with the founders? Are you doing them for the founders? I'm just trying to understand. Cause it feels like you're founding the company.

A I don't babysit founders. Uh, I'm not in the meetings, but, um, we do follow up, either me or my partners, um, Lior, Emily, Hilang, you know, we would follow up after each conversation. We have a system where we rate those meetings together with the founders, and we would meet weekly to discuss, you know, what we've learned and how we should Go forward with our, with our process. The sunrise process is an amazing, is an amazing, um, process. It's a super hard experience to go through because unlike, unlike the traditional first year experience, you take All the hypothetical objections you might face as a company in the next three or four years and bring it to present. So you ask all the tough questions yourself. You, you know, if, if a potential customer says, I like your solution, you'd respond with, why? Why wouldn't you buy it from Palo Alto networks? Why wouldn't you buy it from Weez? Why do you need us? And, and then we would ask them, how would we price it? And why it's so high? Why it's so low? You know, what's the right channel? How, how would you technically evaluate that type of solution? Even before we, we have written the first line of code, we don't have a product. But we ask you, how would you evaluate that product? How would you run a POV for that product? So essentially, we ask all the tough questions in the first few months for the venture, and then that then a…

AI assessment note: “I'm not in the meetings, but, um, we do follow up”

Q Can you just unpack that? If we do, if we just do one by one, learn the power of brand in what way?

A The venture business is, is, is, is a service business. You provide services and, and once you, I mean, it's very hard to tell, you know, if that, Service provider, if service provider A is significantly better than service provider B, because, you know, what you sell is cash. Once you manage to, to create brand for yourself, and Sequoia is probably the, the biggest brand in our, in the venture business, um, you know, you create, you create an amazing cycle where the, the best entrepreneurs like to work for you, Or partner with you. The best executives like to work for your portfolio companies. All other investors like to invest in your portfolio companies, and the gain becomes Easier and faster and, and allows you to, to do great things just because of brand. I spent before and they spent, um, 10 years working for, um, uh, the Israeli NSA and then in two small startup companies I've founded. I never walked in a, in a, in a, for a terrific brand and walking for Sequoia, you felt the brand, you felt the power of, um, tradition and quality.

AI assessment note: “you create an amazing cycle where the, the best entrepreneurs like to work for you”

Q Can I ask, in terms of, like, the ideas, if they do have one, you mentioned the kind of different frameworks, if they do, if they don't, if it's bad. If they do, do you like them to be an insider to the problem, where, They've worked in the space for years and they've seen the pains, or do you prefer them to come at it fresh, naive, but optimistic?

A I don't really care. I don't really care. I care about their enthusiasm. I care about, um, their energy level when they think about it. Um, and I've done both. I've, I've gone with, you know, Uh, you know, when I met the WIS team in the previous company in Adelom, it was 20, 20 12. They came to me with, with an idea of securing, um, uh, Securing Microsoft business applications. Um, I thought it's a terrible idea, but I invested in the team, and then we went to, to do our product market fee process, which is called Sunrise, and we asked potential customers, you know, is that a real pain point? And, you know, after a few conversations, it was clear that the pain point is in the cloud and securing cloud applications is, is, is so much more important or perceived to be important by, by those customers than protecting the on-prem Microsoft product. And Adalon became a cloud security company. Now, did Asaf know anything about cloud and cloud security in 2012? I guarantee you not. And, you know, it took them two iterations, you know, Adalon was the first iteration, sold that business to Microsoft eventually, and then started Weez. And now Weez is, is, is a ten billion dollar business. Oh, and, and, you know, so You, you know, you don't have to be an expert to the field to, to really innovate in that field. And on the other, uh, maybe a, a different example is, um, is another company c…

AI assessment note: “I don't really care. I don't really care. I care about their enthusiasm.”

Q I think market timing is so crucial to building amazing companies. How do you reflect on the importance of market timing when partnering with founders?

A First of all, when I make the investment decision at the seed stage, I don't think about markets, and I don't think about market timing, and I don't think about all of that. I make a very simple decision. Do we like to Partner with those individuals. Do we like to be their partners? The way I, you know, at CyberStarts we deal with market time in question, which is super important, is by running our Sunrise process. And the Sunrise is, is almost like a counterintuitive, uh, process for most entrepreneurs cause Instead of going and chasing your ideas and, and, you know, dealing with, with prospects, objections, and really getting to engagements and closing deals, you do just the opposite. You go and talk to a significant number of You know, representative customers, you know, large fortune, 500 companies, chief information security officers. Those are the customers of most of the companies cyber starts investing. You tell them, hey, hey, here's a new team. You don't ask the, what's your biggest pain point or what's your biggest need? Because again, you, you get so many BS answers. It's not even funny. Um, you ask them something, we ask them something else. We ask them, Hey, this is a new cyber starts team that Is going to spend about a hundred million dollars in the next three years on engineering alone to solve one pay point. That's the average for a cyber starts company. Hundre…

AI assessment note: “The way I, you know, at CyberStarts we deal with market time in question”

Q When you go through this process, how are you and the founders interacting? Are you on these calls with the founders? Are you doing them for the founders? I'm just trying to understand. Cause it feels like you're founding the company.

A I don't babysit founders. Uh, I'm not in the meetings, but, um, we do follow up, either me or my partners, um, Lior, Emily, Hilang, you know, we would follow up after each conversation. We have a system where we rate those meetings together with the founders, and we would meet weekly to discuss, you know, what we've learned and how we should Go forward with our, with our process. The sunrise process is an amazing, is an amazing, um, process. It's a super hard experience to go through because unlike, unlike the traditional first year experience, you take All the hypothetical objections you might face as a company in the next three or four years and bring it to present. So you ask all the tough questions yourself. You, you know, if, if a potential customer says, I like your solution, you'd respond with, why? Why wouldn't you buy it from Palo Alto networks? Why wouldn't you buy it from Weez? Why do you need us? And, and then we would ask them, how would we price it? And why it's so high? Why it's so low? You know, what's the right channel? How, how would you technically evaluate that type of solution? Even before we, we have written the first line of code, we don't have a product. But we ask you, how would you evaluate that product? How would you run a POV for that product? So essentially, we ask all the tough questions in the first few months for the venture, and then that then a…

AI assessment note: “I don't babysit founders. Uh, I'm not in the meetings, but, um, we do follow up”

Q am intrigued. You know, you scaled up cyber starts as fund size quite a lot over time. Can you just take me to that decision-making given you said earlier, my business is seed and it's that really early why on people. Now you have funds that are significant. I mean, really significant. Um, can you tell me about that decision-making process and why you decided to scale in that way?

A I'll explain it, and you'll figure out immediately why I said that. We are simply in the seed business and that hasn't changed. So, uh, at CyberStart we have two, um, two types of funds. Um, seed, uh, uh, funds we are now investing out of CyberStart seed three. Our seed funds are sixty million dollars in size and we write first and last check. To, uh, new teams. No follow-on investments out of the seed funds. Um, and then we have, uh, half a billion dollars, five hundred million dollars, um, opportunity fund that where we invest in follow-on, uh, rounds in, in our own portfolio companies. The whole, uh, so we didn't become, we didn't transform our business. We didn't shift it To late stage or multi-stage investments. We are seed investors with a big wallet to invest in follow on rounds in our own companies where we do not set the price. So we do not set the price out of the opportunity fund.

AI assessment note: “We are seed investors with a big wallet to invest in follow on rounds”

Q We mentioned Wiz there. You mentioned being on the phone to Asaph until one a.m. When we've spoken before, you said you invest in people, not in products. And I wanted to double down on that one and just unpack that. So why people, not products? And, and how does that lead your thinking when investing?

A That, uh, type of thinking change, uh, changing me considerably since the early days, um, For me as a, as a venture capitalist, because in the early days I was looking at markets and total addressable market time and technology and differentiators. And I, I, I simply realized that all of that is bullshit. You know, it's not important at all. The only, the only, you know, You know, when I meet a team of entrepreneurs, um, whatever they tell me, even if they tell me the truth, and often they don't, but even if they tell me the truth about, you know, the market they want to go after and the technology they've built, you know, in, in eight weeks, that would change, you know. Considerably. And in another eight weeks, that would change again. So why would I spend calories on something that's so temporal in the life of the venture, while I could spend time on the more, on the most stable element in the venture, which is the team. You know, the team would change, but it would not change as dramatically as the market and technology. And when you bet, and there's another reason for that. When you meet a young team, young for me now is Embarrassingly, uh, and old age, but, you know, when you meet, uh, you know, folks that are 25, 27, 28 years old, that's probably their, they've done, like, two, three jobs in the market. They haven't been senior executives in any business. To really expect…

AI assessment note: “why would I spend calories on something that's so temporal... spend time on the most stable element”

Q Can you just unpack that? If we do, if we just do one by one, learn the power of brand in what way?

A The venture business is, is, is, is a service business. You provide services and, and once you, I mean, it's very hard to tell, you know, if that, Service provider, if service provider A is significantly better than service provider B, because, you know, what you sell is cash. Once you manage to, to create brand for yourself, and Sequoia is probably the, the biggest brand in our, in the venture business, um, you know, you create, you create an amazing cycle where the, the best entrepreneurs like to work for you, Or partner with you. The best executives like to work for your portfolio companies. All other investors like to invest in your portfolio companies, and the gain becomes Easier and faster and, and allows you to, to do great things just because of brand. I spent before and they spent, um, 10 years working for, um, uh, the Israeli NSA and then in two small startup companies I've founded. I never walked in a, in a, in a, for a terrific brand and walking for Sequoia, you felt the brand, you felt the power of, um, tradition and quality.

AI assessment note: “you create an amazing cycle where the, the best entrepreneurs like to work for you”

Q Is speed of execution the single most important trait in scaling in that first zero to seven million dollar range?

A I think that cyber security is, is a market where being first to market is not necessarily an advantage. Sometimes it's better to be number two, number three to market. Uh, and come in with, with more knowledge, more context, and simply, you know, deliver a, a better product, and better product would, you know, not just make customers happier, it would attract, um, better channels, and would translate to faster, um, sales velocity, uh, in go to market. Speed by itself, No, it's not bad, but that's not the most important thing. The most important thing is really figure out product market fit. Understand the pain point. Who has that pain point? How do you explain that pain point to that individual? Um, what's the right demo to convince them to take your product for technical evaluation? How do you run the most efficient technical evaluation for that individual to get conviction that they like to procure your software? And what's the right pricing? For your solution, for the pain point it solves. If you figure this out, You can move. You have a repeatable process that you can simply execute again and again and again successfully. You can raise a lot of money, put, you know, as many, um, account executives and channels around that, and you've got a beautiful company. In my view, that's way more important than just sheer speed.

AI assessment note: “Speed by itself, No, it's not bad, but that's not the most important thing.”

Q I think market timing is so crucial to building amazing companies. How do you reflect on the importance of market timing when partnering with founders?

A First of all, when I make the investment decision at the seed stage, I don't think about markets, and I don't think about market timing, and I don't think about all of that. I make a very simple decision. Do we like to Partner with those individuals. Do we like to be their partners? The way I, you know, at CyberStarts we deal with market time in question, which is super important, is by running our Sunrise process. And the Sunrise is, is almost like a counterintuitive, uh, process for most entrepreneurs cause Instead of going and chasing your ideas and, and, you know, dealing with, with prospects, objections, and really getting to engagements and closing deals, you do just the opposite. You go and talk to a significant number of You know, representative customers, you know, large fortune, 500 companies, chief information security officers. Those are the customers of most of the companies cyber starts investing. You tell them, hey, hey, here's a new team. You don't ask the, what's your biggest pain point or what's your biggest need? Because again, you, you get so many BS answers. It's not even funny. Um, you ask them something, we ask them something else. We ask them, Hey, this is a new cyber starts team that Is going to spend about a hundred million dollars in the next three years on engineering alone to solve one pay point. That's the average for a cyber starts company. Hundre…

AI assessment note: “when I make the investment decision at the seed stage, I don't think about markets”

Q I'm 27. You should slam me as an LP if I'm not incredibly honed on, on where I sit, market analysis, where the future venture market is going, just in terms of thoughts, you know, I, by no means comparing myself to any of these names, but the Collison's, your Alex at scale, the best do, no?

A That's not my experience. My experience that many times Those young individuals, they make horrible assumptions on, on the market, or on, ah, go to market, and that's not the right, ah, measurement to, to pick, to, to pick the best teams. As time went by, I, I became more and more purist In my approach to the point where I started CiderStarts in 2018, I decided that I would not even ask them about market or technology or product, you know, so I meet with a team, a new team, which I don't know, and we spend an hour, you know, speaking about their childhood and their mother. And not about products or technology. That's enough to really pick, to pick amazing teams. And, you know, my assumption is that if they have a terrific idea, that would be a nice bonus. If they have an okay idea, mediocre idea, I'll help them improve it. And if they don't have an idea at all what to do, that's even better. I'll work with them, and I'll, I'll, I'll, I'll, I'll, we leverage the entire Cyberstarts platform. To really help them pick a significant pain point they can go after and build an important company. And we've done it, you know, multiple times successfully.

AI assessment note: “That's not my experience. My experience that many times Those young individuals, they make horrible assumptions”

Q Can I ask you, does it get easier then? You know, with that hit rate, every single multi-stage fund will just go. We have to invest in cyber starts companies will pay double, but we have to be in them like the Sequoia brand makes it easier to raise more money to get deals. Does it get easier? Now you go, look how good we are.

A It gets easier to, to raise money and recruit talent. And, and, and fundraising for Cyberstarts is, is a pleasure. And I think the last seed fund, you know, I think it took me like, um, 90 seconds to raise the fund, you know, nine WhatsApp messages and it was done. But the subways process itself and the company's journey themselves, that doesn't get easy. That's as hard As it was in the first summer. It's an ego, um, destroying process. You know, you, you, you die like Dozens time during the process. It's so difficult, because you hear all the reasons people are not going to buy your product. There are all the reasons people are not going to like you. All the reasons people are going to pass on you, and that's hard, really hard. By now, um, between Cyberstarts and Sequoia, like, 35 times, Probably more than most people on earth, and it's still, each time I'm getting into a new sunrise process with a new team, I have to prepare myself mentally. It's super hard.

AI assessment note: “It gets easier to, to raise money and recruit talent... that doesn't get easy.”

Q Is speed of execution the single most important trait in scaling in that first zero to seven million dollar range?

A I think that cyber security is, is a market where being first to market is not necessarily an advantage. Sometimes it's better to be number two, number three to market. Uh, and come in with, with more knowledge, more context, and simply, you know, deliver a, a better product, and better product would, you know, not just make customers happier, it would attract, um, better channels, and would translate to faster, um, sales velocity, uh, in go to market. Speed by itself, No, it's not bad, but that's not the most important thing. The most important thing is really figure out product market fit. Understand the pain point. Who has that pain point? How do you explain that pain point to that individual? Um, what's the right demo to convince them to take your product for technical evaluation? How do you run the most efficient technical evaluation for that individual to get conviction that they like to procure your software? And what's the right pricing? For your solution, for the pain point it solves. If you figure this out, You can move. You have a repeatable process that you can simply execute again and again and again successfully. You can raise a lot of money, put, you know, as many, um, account executives and channels around that, and you've got a beautiful company. In my view, that's way more important than just sheer speed.

AI assessment note: “Speed by itself, No, it's not bad, but that's not the most important thing.”

Q we, we both love, you know, your Sequoias and your Andreessen's, and we have ten billion dollar funds. I mean Andreessen, I know it's combined, it's a little bit misleading, but you know, David George has a six, seven billion dollar pool. That's a lot of money. Do you think the mega funds will be able to return venture-like economics in this generation of venture, given what we just discussed?

A The funds that have the tradition, the textbook, the guardrails, uh, um, to, to, to make great investments, they would continue to do well. So, uh, would I, would I invest in those funds personally? Yes. We should, we should admit that we are looking at, uh, at a massive opportunity ahead of us, so it's not, it's not criticism of the opportunity. The opportunity is here, it's real, uh, and, and, you know, the investment in innovation is justified, and, and, and those companies, especially those companies that are Uh, growing very, very fast. They need a lot of cash, more cash than before. And, uh, you know, I don't think that, uh, uh, cloud, uh, code and, and, you know, AI, which at least in the next few years would not change that materially. And it takes a lot of money to build large companies. So yes, I, I encourage Founders to raise a lot of money if they like to continue and build significant companies. So you can, you can correlate find fund sizes to that. Um, my concern is around, uh, entry prices, um, and what, and whether that would Limit innovation at some point in time because disappointment would, would, um, would show up.

AI assessment note: “The funds that have the tradition... they would continue to do well.”

Q Is there any wrong answers to the why? And sorry, I know we're jumping around, but I'm just intrigued. You know, often we demonize. I really want to make a lot of money or I really want to be very powerful in a sector and we demonize that. Is there a wrong answer?

A I don't think there's a wrong answer. It just, you know, depends what the goal of the interview, but typically Um, I think that Mike liked to, to get to know me better. And when I talk to entrepreneurs today, I like to understand them and, you know, that understanding would, would help me predict their, their behavior going forward. So give you an example. You said, you, you, you gave the example of, I like to make a lot of money. You know, one of the questions I try to understand is, are you after fame or fortune? And you can get to real greatness By chasing fame, and you can get to real greatness by chasing fortune. But understanding what's driving you would, would help me better understand you, would help me better help you and become a better partner to you.

AI assessment note: “I don't think there's a wrong answer.”

Q I spoke to one of the greats the other day, and they said, um, the most important thing a founder can look for in their VC is a lazy VC, because truth be told, VCs don't add value and the best founders build the companies themselves. So if you pick anything, Pick a lazy VC. Do you agree?

A Well, I think that that lazy is probably in a different context. Um, I think that as a founder, I wouldn't say you pick the lazy VC. I think that you pick early on, I mean, at the seed stages. Um, I would go, if I'm an entrepreneur and I like to build, um, a large business, I would go after the style of company builders. And there are many terrific investors who are not company builders. They are simply terrific pickers in every In a successful company, there was at least one board member, and typically one board member, that's he or she are the first call for the CEO, and they're in the room whenever the big decisions, important decisions are being made. That's the type of investor you like to join you for, for the journey of building an important company.

AI assessment note: “I wouldn't say you pick the lazy VC.”

Q I agree. It's a different business actually in many respects. And I think that also very much applies to price and price sensitivity. I remember having Peter Fenton on the show and he said that price is a mental trap, Harry. How do you think about price sensitivity when doing deals today and when to pay up versus when not to?

A And the best companies, if you look at it, were insanely expensive at SEED, insanely expensive at Series A, insanely expensive at Series B, and so on. It's, you know, it's like almost part of their DNA to be expensive companies. We invested SEED, so Even expensive seed is not that expensive if you're building a multi-billion dollar business in valuation. But I agree that most investors mistakes were not to invest in the right company Because they thought it's too expensive. By the way, it goes, it goes both ways. When I speak with entrepreneurs, I always tell them the cider starts money is the most expensive money you can buy for your equity. Because it's a deal, you know, they buy cash and they pay with equity. And we are the most expensive cash they can buy. So the price track is not just for the investor. It's also for the entrepreneur. Would they pick You know, the best investor for them. Paying a higher price in the equity.

AI assessment note: “Even expensive seed is not that expensive if you're building a multi-billion dollar business”

Q Do you think great companies are up and to the right, though? Because I was always of the belief that actually companies zig and zag, and they pass it.

A I'll give you the other, so Sierra, Um, they had an amazing start. You know, they sold probably half a million dollars in the first quarter, and then a million dollar, and they, they sold zero for two quarters. Literally zero. It was, okay, what's going on? As an investor, you look at yourself and say, okay, I really fucked up. And then we, you know, the, the, the, the team, um, and I, I, I really attribute that to the founders, to your Tom Segev, the CEO, and Tamar Barilan, CTO. They really analyzed what's going on. They made some modifications, and the next 12 months, they sold Twelve million dollars of new business so they went two to 12, and then I, I don't like to disclose all the numbers because it's all still in, in, you know, it's a, it's an active company that's making terrific progress, but it continued, you know, it continued to grow extremely fast because when you see a company that grows that fast, it's part of the DNA. There's something about the company that make them grow fast. It may be Amazing execution on go to market. It may be weakness on the competitive side. It may be perfect timing with market. It's probably product market fit, but there's reasons that you can analyze, but that thing that makes them move so fast, typically, most of the cases would not simply fade away.

AI assessment note: “they sold zero for two quarters... next 12 months, they sold Twelve million dollars”

Q Who do you learn the most from as an investor? Like, if I'm fortunate to have people like you or Neil Major or Pat Grady as my mentors, who, who, who are yours?

A The decade I spent with Sequoia Capital was formation, you know, period for me, and It wasn't easy period. I couldn't do what I'm doing today without, uh, learning from, from, uh, Doug Leone and Michael Moritz and, and, and Jim Getz and, and, and, and Pat Grady. It wasn't easy. You know, you, as I told you, it took me a long time to mature as investor. And it's hard. It's hard to, to really, you know, It's crazy how you, you know, you show up, ah, to the office every day. You're surrounded by super achievers and who are building amazing companies, and you look yourself in the mirror and say, okay, I'm the shittiest investor in this room. You know, there are, I don't, 10 guys around me. I'm the worst. And the next day, I'm still the shittiest investor. And you go like that every day. It's really hard. It's really hard. You have really bad days sometimes. It takes a lot of, uh, greed and determination to keep, to keep going and believe that you're going to, to figure it out.

AI assessment note: “learning from, from, uh, Doug Leone and Michael Moritz and, and, and Jim Getz”

Q Who do you learn the most from as an investor? Like, if I'm fortunate to have people like you or Neil Major or Pat Grady as my mentors, who, who, who are yours?

A The decade I spent with Sequoia Capital was formation, you know, period for me, and It wasn't easy period. I couldn't do what I'm doing today without, uh, learning from, from, uh, Doug Leone and Michael Moritz and, and, and Jim Getz and, and, and, and Pat Grady. It wasn't easy. You know, you, as I told you, it took me a long time to mature as investor. And it's hard. It's hard to, to really, you know, It's crazy how you, you know, you show up, ah, to the office every day. You're surrounded by super achievers and who are building amazing companies, and you look yourself in the mirror and say, okay, I'm the shittiest investor in this room. You know, there are, I don't, 10 guys around me. I'm the worst. And the next day, I'm still the shittiest investor. And you go like that every day. It's really hard. It's really hard. You have really bad days sometimes. It takes a lot of, uh, greed and determination to keep, to keep going and believe that you're going to, to figure it out.

AI assessment note: “learning from, from, uh, Doug Leone and Michael Moritz and, and, and Jim Getz”

Q When you look back at the ambassadors that you were and that you are today, have you changed much?

A I think I changed a lot. You know, I probably went zero to one, meaning no business, seed investment, no idea to a real business, probably close to 50 times. That's a lot. And I hope that, you know, if you do, you know, that type of journey 50 times, uh, you learn something. So, and, and, and I think I'm learning every day. I think that, you know, what's the only constant in our business is the diversity and the change of the people I, I, I meet and partner with. And I think that, that's what makes this, this profession, you know, in many, in many ways, it's a terrible profession. You know, it's a, it's a profession where you, you don't know if you are good in what you're doing for five or six years. You know, show me another profession where you show up to work every day for five years. You have no idea if you are doing any good. Uh, so in that sense, it's a terrible profession. But I, I really think it's a, it's a, it's a, it's one of the most exciting professions in the world, um, just because it gives you the opportunity to, to share your life with so many amazing individuals, and you can gain just a little bit from, from every team you partner with, and, but, but Cumulatively, I think that we are gaining a lot and we become, we have to listen better. We have to become better listeners over time. We, we, and, and that by itself makes us, you know, better people, better pare…

AI assessment note: “I think I changed a lot. You know, I probably went zero to one”

Q I spoke to one of the greats the other day, and they said, um, the most important thing a founder can look for in their VC is a lazy VC, because truth be told, VCs don't add value and the best founders build the companies themselves. So if you pick anything, Pick a lazy VC. Do you agree?

A Well, I think that that lazy is probably in a different context. Um, I think that as a founder, I wouldn't say you pick the lazy VC. I think that you pick early on, I mean, at the seed stages. Um, I would go, if I'm an entrepreneur and I like to build, um, a large business, I would go after the style of company builders. And there are many terrific investors who are not company builders. They are simply terrific pickers in every In a successful company, there was at least one board member, and typically one board member, that's he or she are the first call for the CEO, and they're in the room whenever the big decisions, important decisions are being made. That's the type of investor you like to join you for, for the journey of building an important company.

AI assessment note: “I wouldn't say you pick the lazy VC.”

Q When you look back at the ambassadors that you were and that you are today, have you changed much?

A I think I changed a lot. You know, I probably went zero to one, meaning no business, seed investment, no idea to a real business, probably close to 50 times. That's a lot. And I hope that, you know, if you do, you know, that type of journey 50 times, uh, you learn something. So, and, and, and I think I'm learning every day. I think that, you know, what's the only constant in our business is the diversity and the change of the people I, I, I meet and partner with. And I think that, that's what makes this, this profession, you know, in many, in many ways, it's a terrible profession. You know, it's a, it's a profession where you, you don't know if you are good in what you're doing for five or six years. You know, show me another profession where you show up to work every day for five years. You have no idea if you are doing any good. Uh, so in that sense, it's a terrible profession. But I, I really think it's a, it's a, it's a, it's one of the most exciting professions in the world, um, just because it gives you the opportunity to, to share your life with so many amazing individuals, and you can gain just a little bit from, from every team you partner with, and, but, but Cumulatively, I think that we are gaining a lot and we become, we have to listen better. We have to become better listeners over time. We, we, and, and that by itself makes us, you know, better people, better pare…

AI assessment note: “I think I changed a lot. You know, I probably went zero to one”

Q It's fine. It's fine. We know that my shorts are a little too short, but I want to start, dude, on our conversation that we literally just had, which is, does the venture business work anymore when we have entry prices of a 150 and a hundred X ARRs as we are seeing today?

A So You could say that there are multiple answers to that. First of all, the venture business as a whole doesn't, doesn't work. It doesn't work. It shouldn't work. Uh, and, and returns, uh, distribution, uh, are not divided equally between players. Otherwise it would be too easy and, and, and there won't be, uh, winners and losers. It would be boring. None of us would be playing that. We would do something else. So, uh, So, the expectation that the venture business would work out is, is, is set yourself for, for, um, disappointment from, from the get-go. It doesn't work. Now, it worked for some people. It worked for some people for some time, and the number of people, it works for them for a long period of time. You know, let's take our, you know, favorite friends from, uh, Sequoia Capital, or, uh, Andreessen Benchmark, Greylock, Lightspeed, I probably, you know, that number of players is, is super small, and, and if you look at all amount of money that's flowing into the markets, uh, right now and for the past few years, no, I don't think it's going to work. I, I think it's going to end up with some serious catastrophe for many of the players. Um, so if I'm, uh, If I'm a limited partner and I have distributed my venture allocation evenly, I wouldn't sleep well at night. Um, and again, I, I'm not, as you know, I'm focused solely, um, on, on cyber security. So I know very little …

AI assessment note: “no, I don't think it's going to work.”

Q actually in your cogs, and spending on inference, and allowing for a reduction in margin. Now, I was always taught that margin mattered, but we're seeing margins denigrate in a wave of AI as more and more is spent on inference. Do we just appreciate that margins Will come good eventually? Or do we appreciate that AI is just a different margin profile that we have to get used to?

A I'm not sure what's the right answer. Um, Cause I don't think that we have seen enough of healthy, profitable AI businesses to really, you know, drive back the, the important vital signs, uh, for, for a healthy AI company. Who knows? Um, I can tell you for sure that the vital signs for a healthy cybersecurity company, uh, involves, uh, uh, high, Uh, healthy gross margins. Uh, so my instincts are that, you know, gross margins matter. Now, Are they important? How much I discuss, how often I discuss gross margins with our, with my early stage companies? Never. I, you know, cause part of the journey and, and part of our job as investors is, is, you know, cause is to really help the founders Realize what challenges, what problems they need to tackle right now, this year, and let's say, twenty-twenty-six, and what are the challenges and problems they, they, that they would tackle in twenty-twenty-seven and twenty-twenty-eight. So if you have, you know, if I would be lucky enough and, and, and, and you become a founder of, uh, uh, uh, A young cyber security company in the cyber starts portfolio. I would tell you, you know, gross margins are important. Let's talk about it in 2029. And let's build the foundations of healthy business, assuming that we would get to deal with gross margins. Now that's true for cyber security. It may not be the truth For AI businesses, as I said, I don't th…

AI assessment note: “I suspect that gross margins would continue to be important.”