The Exchanges

Q How do you think about navigating secondary markets? You know, when we look at, you know, there's a very strong chance that we have a trillion dollar private company in an open AI of the world. How do you think about navigating secondary markets when public market, uh, is sometimes not there?

A Well, look, I think for the very best companies, private markets behave like public markets. There's a secondary market, you can liquidate, so your shareholders can take liquidity, employees can take liquidity, you have access to credit, you can do M&A, your stocks value, you know, your valuations believed. I'm talking about the Stripes, the SpaceX's, I think OpenAI is going to get there, uh, and Tropic and so on, right? So the very bad, the Databricks is getting there slowly. So the very best, that's what happened. Then there's the very good companies, but not the, let's say the top 10 or 15, uh, uh, Private ones, not, not the magnificent, magnificent private 10, if you will. For them, uh, going public and, and getting validated actually could be more helpful. It may be that the secondary market, uh, isn't behaving as well, or they can't do M&A as effectively, or they need to access a lot more capital than they can just being in the private markets. And I think those decisions are what ultimately then push you to go public. And then there is the, as I said, this bloated, Set of companies that are good companies, that'll compound at 20, 25%, maybe, maybe forever, that have no access to public market because they're too small. They're not a billion dollar company growing 30% a year that the public markets, you know, would be excited about. And, and they're too slow, uh, for vent…

AI assessment note: “for the very best companies, private markets behave like public markets. There's a secondary market”

Q How do you think about navigating secondary markets? You know, when we look at, you know, there's a very strong chance that we have a trillion dollar private company in an open AI of the world. How do you think about navigating secondary markets when public market, uh, is sometimes not there?

A Well, look, I think for the very best companies, private markets behave like public markets. There's a secondary market, you can liquidate, so your shareholders can take liquidity, employees can take liquidity, you have access to credit, you can do M&A, your stocks value, you know, your valuations believed. I'm talking about the Stripes, the SpaceX's, I think OpenAI is going to get there, uh, and Tropic and so on, right? So the very bad, the Databricks is getting there slowly. So the very best, that's what happened. Then there's the very good companies, but not the, let's say the top 10 or 15, uh, uh, Private ones, not, not the magnificent, magnificent private 10, if you will. For them, uh, going public and, and getting validated actually could be more helpful. It may be that the secondary market, uh, isn't behaving as well, or they can't do M&A as effectively, or they need to access a lot more capital than they can just being in the private markets. And I think those decisions are what ultimately then push you to go public. And then there is the, as I said, this bloated, Set of companies that are good companies, that'll compound at 20, 25%, maybe, maybe forever, that have no access to public market because they're too small. They're not a billion dollar company growing 30% a year that the public markets, you know, would be excited about. And, and they're too slow, uh, for vent…

AI assessment note: “for the very best companies, private markets behave like public markets. There's a secondary market”

Q I have two more. What was the most memorable first founder meeting? And then I'll tell you why I laughed.

A The most memorable founder meeting was I mean, I have to say it was with, uh, uh, Patrick Collison. I mean, one of the questions that I asked him that, uh, you know, that just, it's just one of those, you know, like the movie Sixth Sense when the ring falls and the guy's like, oh shit, I'm the one who's dead. Uh, and you just feel like you didn't know something about the world and how to think about it. That's how I felt with him. Cause I asked him who, um, uh, who are your ideal customers? And he said, they haven't been born yet. And he was talking about the developer movement. Remember this is 2010, right? Developer movement and what's about to come. And I'm just like, oh crap. I don't even have a complete view of the world and what's happening around me is how I felt in that meeting. And I was like, I have to back this person. I don't even know payments. I mean, everybody, all the payments people are telling me what's wrong with the payments. I was like, I kind of don't care. Like, I don't know what's in this thing, but like he sees something and we have to be part of it. And in that moment, Taught me a lot about humility, you know, uh, in terms of like what this business is all about. It really is about, you know, backing the best people. And, you know, and honestly, it had a huge impact because I saw him and John build Stripe. I was like, well, why does our business run so…

AI assessment note: “The most memorable founder meeting was I mean, I have to say it was with, uh, uh, Patrick Collison.”

Q So many things to say there. Uh, you said that kind of bigger funds, lower returns. Do you disagree with that as a premise then?

A No, I, I actually have a strong belief that venture capital, uh, can't scale and performance at the same time. I, I deeply believe that. And, and, uh, the reason is because just because we have more money doesn't mean they're more on Patrick Collison's or, um, you know, pick your favorite founder, uh, Sam Altman's, uh, that are going to go build iconic companies. So we're actually in some ways fighting in the zero sum game of, Founders that are naturally, you know, going and doing great things. So that's not necessarily going to scale because we have more money. But if we can create more tools to have more founders to scale, then we can actually manufacture more outliers than the ones that naturally exist on the power law. And that's our mindset is how do we actually expand, uh, the proposition to founders so that they can be more companies on the power law. That is a very different way to think about it than do you have enough capital to get everything that's on the power law.

AI assessment note: “No, I, I actually have a strong belief that venture capital, uh, can't scale”

Q What are you seeing there? Because like the MIT study was discouraging. You know, it's like, 95% actually doesn't actually have much impact. And I read and I'm like, God, this is a bit of a downer. So what are you saying?

A Okay. So let me, let me back up. I do think there is merit to the, the MIT study for the following reason. When you think about transforming an enterprise with AI, you actually have to do four things correctly. Okay. First is you have to get your data infrastructure ready so that your technology, your company can adopt AI. Your data readiness is huge. Infrastructure readiness is huge. Second is you need models that understand your business. You have to train these models in the context of your secret sauce, your business. Third is you to think about a workforce transformation because now you're going to have humans and you're going to have AI working next to each other. Some humans are going to manage AI agents. Some AI agents are going to manage humans. Imagine how the org charts have to change. And the fourth, for all this to work, you actually need courage at the top. The CEOs need to really get behind it to drive it. So the idea that all four of these things are happening in a company to make the, uh, Uh, adoption of AI go from beyond just prototyping a open AI or an anthropic model to really creating change in your business is very, very difficult. That's why these things are hitting a wall, but that's why this MIT study is giving you the signal that it's giving you. Now, one place where businesses already outsourced And let go of core operations was wherever they wanted t…

AI assessment note: “That's where we're seeing a lot of this. So we've bought call centers.”

Q So starting on the founder element, very much consider you're opening GC on the west coast a of founding experience. So question from a portfolio founder of yours in Sam Class Dojo. What were the hardest elements of establishing GC on the west coast? Let's start with that.

A Yeah. So when I moved out, I did that with a few other team members as well and didn't really know many people on the West coast. So first thing was figuring out how to build a network here, reached out to my friends from MIT and that's how I started bootstrapping it. The interesting thing was I was coming from 3000 miles away and I was investing in energy, not even software when I moved here. So it was quite a change because it would be both geography and sector. And so that was, uh, difficult to connect with the technology entrepreneurs here firsthand. And then, uh, I would tell them, Hey, we are the firm that incubated kayak and we did HubSpot and all these great companies and nobody really cared. In fact, viewed them as investments of firms on the West coast. So I learned very quickly that this is a business where you have to develop local reputation. So, you know, very early on, we just went to work saying, let's focus on building a great portfolio and, you know, start from there. Luckily, my first investment ended up being Stripe because I had met the Colisons while I was teaching at MIT. So that helped in getting us a jumpstart because it was a highly reputable team to be backing from the beginning. But it was difficult because there's so many notable firms here.

AI assessment note: “difficult to connect with the technology entrepreneurs here firsthand”

Q So starting on the founder element, very much consider you're opening GC on the west coast a of founding experience. So question from a portfolio founder of yours in Sam Class Dojo. What were the hardest elements of establishing GC on the west coast? Let's start with that.

A Yeah. So when I moved out, I did that with a few other team members as well and didn't really know many people on the West coast. So first thing was figuring out how to build a network here, reached out to my friends from MIT and that's how I started bootstrapping it. The interesting thing was I was coming from 3000 miles away and I was investing in energy, not even software when I moved here. So it was quite a change because it would be both geography and sector. And so that was, uh, difficult to connect with the technology entrepreneurs here firsthand. And then, uh, I would tell them, Hey, we are the firm that incubated kayak and we did HubSpot and all these great companies and nobody really cared. In fact, viewed them as investments of firms on the West coast. So I learned very quickly that this is a business where you have to develop local reputation. So, you know, very early on, we just went to work saying, let's focus on building a great portfolio and, you know, start from there. Luckily, my first investment ended up being Stripe because I had met the Colisons while I was teaching at MIT. So that helped in getting us a jumpstart because it was a highly reputable team to be backing from the beginning. But it was difficult because there's so many notable firms here.

AI assessment note: “first thing was figuring out how to build a network here”

Q I have two more. What was the most memorable first founder meeting? And then I'll tell you why I laughed.

A The most memorable founder meeting was I mean, I have to say it was with, uh, uh, Patrick Collison. I mean, one of the questions that I asked him that, uh, you know, that just, it's just one of those, you know, like the movie Sixth Sense when the ring falls and the guy's like, oh shit, I'm the one who's dead. Uh, and you just feel like you didn't know something about the world and how to think about it. That's how I felt with him. Cause I asked him who, um, uh, who are your ideal customers? And he said, they haven't been born yet. And he was talking about the developer movement. Remember this is 2010, right? Developer movement and what's about to come. And I'm just like, oh crap. I don't even have a complete view of the world and what's happening around me is how I felt in that meeting. And I was like, I have to back this person. I don't even know payments. I mean, everybody, all the payments people are telling me what's wrong with the payments. I was like, I kind of don't care. Like, I don't know what's in this thing, but like he sees something and we have to be part of it. And in that moment, Taught me a lot about humility, you know, uh, in terms of like what this business is all about. It really is about, you know, backing the best people. And, you know, and honestly, it had a huge impact because I saw him and John build Stripe. I was like, well, why does our business run so…

AI assessment note: “The most memorable founder meeting was I mean, I have to say it was with, uh, uh, Patrick Collison.”

Q So many things to say there. Uh, you said that kind of bigger funds, lower returns. Do you disagree with that as a premise then?

A No, I, I actually have a strong belief that venture capital, uh, can't scale and performance at the same time. I, I deeply believe that. And, and, uh, the reason is because just because we have more money doesn't mean they're more on Patrick Collison's or, um, you know, pick your favorite founder, uh, Sam Altman's, uh, that are going to go build iconic companies. So we're actually in some ways fighting in the zero sum game of, Founders that are naturally, you know, going and doing great things. So that's not necessarily going to scale because we have more money. But if we can create more tools to have more founders to scale, then we can actually manufacture more outliers than the ones that naturally exist on the power law. And that's our mindset is how do we actually expand, uh, the proposition to founders so that they can be more companies on the power law. That is a very different way to think about it than do you have enough capital to get everything that's on the power law.

AI assessment note: “No, I, I actually have a strong belief that venture capital, uh, can't scale”

Q What are you seeing there? Because like the MIT study was discouraging. You know, it's like, 95% actually doesn't actually have much impact. And I read and I'm like, God, this is a bit of a downer. So what are you saying?

A Okay. So let me, let me back up. I do think there is merit to the, the MIT study for the following reason. When you think about transforming an enterprise with AI, you actually have to do four things correctly. Okay. First is you have to get your data infrastructure ready so that your technology, your company can adopt AI. Your data readiness is huge. Infrastructure readiness is huge. Second is you need models that understand your business. You have to train these models in the context of your secret sauce, your business. Third is you to think about a workforce transformation because now you're going to have humans and you're going to have AI working next to each other. Some humans are going to manage AI agents. Some AI agents are going to manage humans. Imagine how the org charts have to change. And the fourth, for all this to work, you actually need courage at the top. The CEOs need to really get behind it to drive it. So the idea that all four of these things are happening in a company to make the, uh, Uh, adoption of AI go from beyond just prototyping a open AI or an anthropic model to really creating change in your business is very, very difficult. That's why these things are hitting a wall, but that's why this MIT study is giving you the signal that it's giving you. Now, one place where businesses already outsourced And let go of core operations was wherever they wanted t…

AI assessment note: “That's why these things are hitting a wall, but that's why this MIT study”

Q That's a very forward thinking CEO and business leader. To what extent are governments prepared, thinking, and equipped for this labor change that could be there within a five year period?

A I think not enough. I, I, I don't think, I think people are still grappling with What does AI really mean? Um, what is, how fast is it going to diffuse? They're not even thinking enough about reskilling. I'll leave you with sort of one interesting thought on this particular topic. Imagine we're in London today. Okay. Imagine if every nurse and every lawyer and every accountant that works in London becomes a, uh, AI agent of some company in the United States in the next 10 years. You're going to hollow out a lot of your labor productivity and give it to a U S company or a Chinese company. My point is more about like, it could actually hollow out the service sector, just like we hollowed out manufacturing jobs for globalization before. So getting every region to think about this, this is actually a point that, uh, you know, Jeanette makes with her European champions initiative a lot, which is how do you retain productivity onshore in these countries so that while you do the AI transformation, You're maintaining vibrancy, not only because your businesses got more profitable, but also because, uh, you're capturing the productivity gains onshore as well. The governments need to think about this as it's, as they are architecting this sort of next, uh, uh, phase of their, you know, transformation with AI.

AI assessment note: “I think not enough. I, I, I don't think, I think people are still grappling”

Q What do you do with the generation of SaaS companies you have? Because, like, I, I hope you have it, because I have it. Well, they're, they're good companies.

A They're good companies. By the way, they're good companies, they're durable companies, they're going to be around. And, and this is actually, uh, and I was, I give, uh, Pranav and our team a lot of credit. He sort of said, hey, these companies, venture capital doesn't like them anymore, because they grow at 20%, and they're not the hyper-gross, nobody wants to fund them. But there are some founders' life's work. And if you give them Uh, alternate ways to endure and scale. They will, and they will create value. It'll just take longer. And that's where we actually, you know, uh, have also sort of made sure our customer value fund supports those types of founders as well. We obviously want to support the fastest growing, uh, companies in venture, but also the ones that are fundamentally good businesses that are profitable if they were not investing in sales and marketing and give them capital to scale their sales and marketing. That's what customer value strategy does. And it's entirely focused on those founders deserve to endure and compound because their companies are good, their customers like them, the value proposition, they're, they're growing. They're just not, you know, uh, in the zeitgeist.

AI assessment note: “give them capital to scale their sales and marketing”

Q That's a very forward thinking CEO and business leader. To what extent are governments prepared, thinking, and equipped for this labor change that could be there within a five year period?

A I think not enough. I, I, I don't think, I think people are still grappling with What does AI really mean? Um, what is, how fast is it going to diffuse? They're not even thinking enough about reskilling. I'll leave you with sort of one interesting thought on this particular topic. Imagine we're in London today. Okay. Imagine if every nurse and every lawyer and every accountant that works in London becomes a, uh, AI agent of some company in the United States in the next 10 years. You're going to hollow out a lot of your labor productivity and give it to a U S company or a Chinese company. My point is more about like, it could actually hollow out the service sector, just like we hollowed out manufacturing jobs for globalization before. So getting every region to think about this, this is actually a point that, uh, you know, Jeanette makes with her European champions initiative a lot, which is how do you retain productivity onshore in these countries so that while you do the AI transformation, You're maintaining vibrancy, not only because your businesses got more profitable, but also because, uh, you're capturing the productivity gains onshore as well. The governments need to think about this as it's, as they are architecting this sort of next, uh, uh, phase of their, you know, transformation with AI.

AI assessment note: “I think not enough. I, I, I don't think, I think people are still grappling”

Q That is the caption for it. Um, when you look then out, do you put another few hundred million dollars into the next round?

A It depends on how the business does it, and it depends on how they're expanding. But, you know, when you get into growth, you have to be very fundamentally focused on You know, actual economics, revenues, margins, profitability, scale, and this market size for these things is endless. Five hundred billion dollars of, uh, payroll is developers in the world. Probably I think about 10 trillion of like white collar jobs if I, if I have that generally correct. It's an insanely large market and, and, and you're naturally well positioned to be one or two or three players that's going to go capture it. So if you believe that, You know, this company could cap, could be 10 to 20 times bigger from here, and it's well priced even at this valuation. If it keeps on that trajectory, of course you would want to invest. Who would not want to invest?

AI assessment note: “If it keeps on that trajectory, of course you would want to invest.”

Q I completely agree. Does margin not matter anymore today?

A Margin matters. Absolutely. And, uh, and I actually think That's another place where they've done a good job. And, and the reality is that when you think about the ROI in the coding space, you're doing the work. This coding agent is essentially a replacement of engineering, right? You start with low end, uh, sort of engine junior engineers to more senior engineers. Even a junior engineer makes 80 to a hundred grand a year. So your pricing power there is actually pretty significant. And, uh, you know, you, you, if you're truly doing that kind of work, Uh, margins are not going to be an issue, and margins already are, are not an issue for entropy. They have a good command. They've been very disciplined about how they've built their business.

AI assessment note: “Margin matters. Absolutely.”

Q What do you do with the generation of SaaS companies you have? Because, like, I, I hope you have it, because I have it. Well, they're, they're good companies.

A They're good companies. By the way, they're good companies, they're durable companies, they're going to be around. And, and this is actually, uh, and I was, I give, uh, Pranav and our team a lot of credit. He sort of said, hey, these companies, venture capital doesn't like them anymore, because they grow at 20%, and they're not the hyper-gross, nobody wants to fund them. But there are some founders' life's work. And if you give them Uh, alternate ways to endure and scale. They will, and they will create value. It'll just take longer. And that's where we actually, you know, uh, have also sort of made sure our customer value fund supports those types of founders as well. We obviously want to support the fastest growing, uh, companies in venture, but also the ones that are fundamentally good businesses that are profitable if they were not investing in sales and marketing and give them capital to scale their sales and marketing. That's what customer value strategy does. And it's entirely focused on those founders deserve to endure and compound because their companies are good, their customers like them, the value proposition, they're, they're growing. They're just not, you know, uh, in the zeitgeist.

AI assessment note: “made sure our customer value fund supports those types of founders as well”

Q Is cross fund investing concerns bullshit? LPs often worry about it, don't like it.

A Well, I, I think, um, cross fund is, is an important consideration. We do think a lot about before we cross funds, but we do cross funds, but you want to make sure you have done enough, uh, uh, capital to work in the fund that it's in, where you feel uncomfortable about the risk you're taking before you cross it. If you really believe in something, you want to make sure that becomes one of your largest positions in that fund before you go to the next fund. But you also, you know, I, I try not to have more than 10 to 15% in a single company, uh, in a fund. So at some point it does. If it's truly a great company, you will be forced to cross because, uh, you know, you, you, you should have multiple funds benefit from that.

AI assessment note: “cross fund is, is an important consideration. We do think a lot about before we”

Q Totally understand that. How do you think about how you need to change the capital supply base with the different products? Yeah, I, I very much operate in the endowment fund foundation world, which is lovely and nice, but does it change drastically when you move across products?

A It's a great, it's a great, um, uh, uh, question because I think as we went through the succession at GC from David Joel and me running The business sort of most of last decade together, the two of them before that, to me taking on as CEO. I think at the same time, we also, we had a succession from a leadership standpoint, you know, Ken Chenault came and became our chairman, mentored me, but also had a interesting evolution of our LP base. Because the LP, uh, the endowment foundations, which many of them are, uh, huge backers of ours and, and I consider them sort of really part of our team. Um, the mindset there was, we want managers to be dedicated in single strategies, and, ah, we will create the portfolio. The break in strategy we did was to say, well, no, we need to have all the strategies that make the founders successful, and you back us to make the founders successful, because then we'll create alpha. And that's what we were on a campaign to convince enough of them to stay on with us and do that, and they did. Then we went and got, you know, a lot of the states in the US, states and pensions, because that part of it was Going back to your point, I want to make sure we create wealth for everybody in the US. So there was like a motivator there as well. And now we're actually very deeply partnering with sovereigns as well, because as I said earlier, the AI, the transformati…

AI assessment note: “had a interesting evolution of our LP base. Because the LP, uh, the endowment foundations”

Q In terms of the financials of the deals themselves, there's two elements that I'd love to touch on. Personal passion points for me being price sensitivity and reserve allocation. If we start on price sensitivity, how would you describe maybe your price sensitivity today in a very heavily funded environment that is the Valley?

A I don't focus on price. I try to find great people that are building a great product with a great purpose and focus on how much headroom they have from where they are today. And as long as we believe that that's a great return profile for our investors, you know, we'd like to be part of it. Price is an excuse that makes you rationalize not getting into great companies in my, in my experience. And I think if I look back at the successes, we've created a general catalyst. We have never really looked back and said, oh gosh, The price was too high, and this ended up becoming not a great return because of that. You're either in the companies that are going to change the world, or you're not.

AI assessment note: “I don't focus on price. I try to find great people”

Q Absolutely, it has. Josh has done incredibly well. And then a final question from another one of your board founders being Elad Gill at Color, who asks, from your experience, have you seen strong commonalities in the help that founders require from the board?

A Yeah, I mean, I think one place where I feel it's my duty to spend a lot of time is helping them build a team. If you think about great people, which in the end ends up turning these great initial founding teams into epic companies, are in demand everywhere. So every great candidate, whether it's an engineer in the early days, or it's a, you know, CFO when you're trying to take a company public or scaling really fast, almost doesn't matter. It's all about Helping close great people. So selling them on the vision, getting them bought in, that's a core place where I think it's really important that we spend time. I think thinking about capitalization and how to do that in the best possible way is another one. I would say I do spend a lot of time on understanding the dynamics between the founders and how to be helpful to them. You know, you start with a certain understanding as people that come together to start a company and then people scale it in different ways, in different dimensions over time. And how do you navigate that and adapt and evolve your roles to Without impacting your culture. I think that's a important place. And, you know, I continue to see them having a first principles posture and everything is the other place. Uh, I like to spend time with the founders.

AI assessment note: “one place where I feel it's my duty to spend a lot of time”

Q In terms of the financials of the deals themselves, there's two elements that I'd love to touch on. Personal passion points for me being price sensitivity and reserve allocation. If we start on price sensitivity, how would you describe maybe your price sensitivity today in a very heavily funded environment that is the Valley?

A I don't focus on price. I try to find great people that are building a great product with a great purpose and focus on how much headroom they have from where they are today. And as long as we believe that that's a great return profile for our investors, you know, we'd like to be part of it. Price is an excuse that makes you rationalize not getting into great companies in my, in my experience. And I think if I look back at the successes, we've created a general catalyst. We have never really looked back and said, oh gosh, The price was too high, and this ended up becoming not a great return because of that. You're either in the companies that are going to change the world, or you're not.

AI assessment note: “I don't focus on price. I try to find great people”

Q Is that the best performing investment GC you've made?

A Um, I think you would have to give that to Stripe still. We've been investing in Stripe since the twenty-time. That's a big position for us. So, so look, my, my point more is, um, for us, we obsess over either that the companies are getting incubated at GC or we're investing in, in the seed round. If we don't, we want to be in the iconic companies. We will invest in them at growth stage as well. Uh, and that to me is about believing in the companies that you think will compound for a long time. So like take Stripe as an example. We seeded in, uh, we invested in 2010, and I've invested in Stripe 14 times in the last 15 years, just to give you a sense. Okay. So that's, that's one of our, uh, um, you know, uh, sort of core philosophies that when you think something's going to be compounding for a long time, B, Be strong, uh, uh, sort of supporters of the company along the way. We invested in, uh, Helsing. You know, Jeanette has seeded that, if you remember, uh, uh, before, and we've invested that in all the rounds that they've raised, uh, since then. If you look at Andrel, same thing. We seeded that, and we invested in every round that they've raised, uh, since then. So I think being part of these iconic companies and supporting them along the way, uh, is the reason to have the capital base. If we miss them at seed, we want to cash them as early as possible, and then continue to h…

AI assessment note: “I think you would have to give that to Stripe still.”

Q Do you worry about the transition of venture? Doug Leone said that we've moved from a high margin boutique community to a low margin commoditized industry. Do you agree with that?

A Yeah. So, um, I think, let me unpack that, uh, in a couple of ways. One is if you think about the innovation in venture as a role of technology has scaled, all the innovation for the most part ends up being on the three axes, state, sector, and geography. Make the funds bigger, put them in different geos, put them on, uh, you know, in, in different sectors. Well, the reality is that role of the companies that we're building is becoming far, far more sophisticated in society. And so the innovation in industry was much more focused on how do we deploy more dollars and try to keep as much of the return as possible, where the reality should be, how do we retool our proposition for founders so they can build the biggest companies possible? So when you think with that second lens, you have to innovate and you have to think broader than just that sort of fund formation mindset. And I think that is what allows you to break from, hey, going from High margin boutique. So smaller funds, better returns to low margin, uh, you know, scale, which is bigger funds, lower returns. That's only happening because we're thinking about innovation in a constrained way in this industry versus being first principled about how do we transform our proposition for founders?

AI assessment note: “That's only happening because we're thinking about innovation in a constrained way”

Q Do you worry about the ever-increasing inequality of wealth? You know, it plays in our favor in a lot of ways, but I look at so much of the next 10 years, and I just see the concentration of wealth to very small networks, and I get very worried.

A I am worried about that. And, and, uh, the, the whole idea of, you know, can we build these companies that can focus on, uh, being the most profitable, the biggest, but also in a way that they're inclusive, that's something that I think a lot about. I, I do think we have, we have this opportunity. There's this moment. If you think about the last five years, we've had wars, we had a pandemic, we, we had a situation where because of wars, we actually US, you know, kicked Russia out of swift. So financial infrastructure got questioned. Every part of our energy crisis happened. Every part of our, uh, sort of core pillars of society where capitalism, you know, maybe is starting to break all sort of manifested over the last A few years. And then AI comes along as an answer to all this. So now the choice we have to make is are we going to build these business in a way that the value accrues to very, very few, or can we actually do it with a mindset of abundance where everybody benefits? And that's a choice that we have in the way we set up the companies of the future. And I do worry that if it's not a mindset of abundance, uh, then that's not sustainable in the very long term. We won't feel that in the next 10 years and you and I will make a lot of money. Uh, our funds will do great, and our team, our partners will, you know, uh, generate great returns. But what do we, what do we crea…

AI assessment note: “I am worried about that.”

Q That is the caption for it. Um, when you look then out, do you put another few hundred million dollars into the next round?

A It depends on how the business does it, and it depends on how they're expanding. But, you know, when you get into growth, you have to be very fundamentally focused on You know, actual economics, revenues, margins, profitability, scale, and this market size for these things is endless. Five hundred billion dollars of, uh, payroll is developers in the world. Probably I think about 10 trillion of like white collar jobs if I, if I have that generally correct. It's an insanely large market and, and, and you're naturally well positioned to be one or two or three players that's going to go capture it. So if you believe that, You know, this company could cap, could be 10 to 20 times bigger from here, and it's well priced even at this valuation. If it keeps on that trajectory, of course you would want to invest. Who would not want to invest?

AI assessment note: “If it keeps on that trajectory, of course you would want to invest.”

Q I completely agree. Does margin not matter anymore today?

A Margin matters. Absolutely. And, uh, and I actually think That's another place where they've done a good job. And, and the reality is that when you think about the ROI in the coding space, you're doing the work. This coding agent is essentially a replacement of engineering, right? You start with low end, uh, sort of engine junior engineers to more senior engineers. Even a junior engineer makes 80 to a hundred grand a year. So your pricing power there is actually pretty significant. And, uh, you know, you, you, if you're truly doing that kind of work, Uh, margins are not going to be an issue, and margins already are, are not an issue for entropy. They have a good command. They've been very disciplined about how they've built their business.

AI assessment note: “Margin matters. Absolutely.”

Q Do you worry about the transition of venture? Doug Leone said that we've moved from a high margin boutique community to a low margin commoditized industry. Do you agree with that?

A Yeah. So, um, I think, let me unpack that, uh, in a couple of ways. One is if you think about the innovation in venture as a role of technology has scaled, all the innovation for the most part ends up being on the three axes, state, sector, and geography. Make the funds bigger, put them in different geos, put them on, uh, you know, in, in different sectors. Well, the reality is that role of the companies that we're building is becoming far, far more sophisticated in society. And so the innovation in industry was much more focused on how do we deploy more dollars and try to keep as much of the return as possible, where the reality should be, how do we retool our proposition for founders so they can build the biggest companies possible? So when you think with that second lens, you have to innovate and you have to think broader than just that sort of fund formation mindset. And I think that is what allows you to break from, hey, going from High margin boutique. So smaller funds, better returns to low margin, uh, you know, scale, which is bigger funds, lower returns. That's only happening because we're thinking about innovation in a constrained way in this industry versus being first principled about how do we transform our proposition for founders?

AI assessment note: “That's only happening because we're thinking about innovation in a constrained way”

Q And you look at that, and I thought, my word, Well done founders and team. This is the greatest transfer of wealth from venture capitalists to founders and team members. When you look at the employee stock based comp that's going out now, This is the greatest transfer of wealth ever. Is it actually a great investment when you look at the dilutive nature and cash burn of these businesses?

A Well, I think OpenAI, um, because I, I, I was, I saw that early round, and, uh, you know, Sam's a force of nature, and I've said this publicly, I mean, the guy can bend reality, and he has, it's changed the world. Uh, I just couldn't get my arms around the structure, and, uh, if you, if those numbers are correct, I don't know if they're entirely correct, you would say at five billion, the two hundred million dollars at the billion dollar round Only generated 25 X. Our best companies, uh, that, you know, like Livongo and Circle and others, you know, Stripe and others, our first rounds were not 25 X. They were, you know, hundreds of X, uh, in terms of returns. So, so I agree with you. Dilution took, uh, took a huge toll here, but for two reasons. One is because that structure led to, hey, nonprofit needs to be given, uh, um, a share. And the second is the compute that was needed to make this happen Uh, the first one to provide that computer was Microsoft and they had a lot of leverage. That was a good deal for Microsoft. They made, they made a huge amount of return because without that, this was also, it was never going to be a company. So I think it's just the sequencing of who really took the risk, uh, sort of risk adjusted with capital. Microsoft maybe took more risk in a lot of ways and they did benefit. And then they were, so the dilution comes from a lot of that dynamic as …

AI assessment note: “So I agree with you. Dilution took, uh, took a huge toll here”

Q Do you worry about the ever-increasing inequality of wealth? You know, it plays in our favor in a lot of ways, but I look at so much of the next 10 years, and I just see the concentration of wealth to very small networks, and I get very worried.

A I am worried about that. And, and, uh, the, the whole idea of, you know, can we build these companies that can focus on, uh, being the most profitable, the biggest, but also in a way that they're inclusive, that's something that I think a lot about. I, I do think we have, we have this opportunity. There's this moment. If you think about the last five years, we've had wars, we had a pandemic, we, we had a situation where because of wars, we actually US, you know, kicked Russia out of swift. So financial infrastructure got questioned. Every part of our energy crisis happened. Every part of our, uh, sort of core pillars of society where capitalism, you know, maybe is starting to break all sort of manifested over the last A few years. And then AI comes along as an answer to all this. So now the choice we have to make is are we going to build these business in a way that the value accrues to very, very few, or can we actually do it with a mindset of abundance where everybody benefits? And that's a choice that we have in the way we set up the companies of the future. And I do worry that if it's not a mindset of abundance, uh, then that's not sustainable in the very long term. We won't feel that in the next 10 years and you and I will make a lot of money. Uh, our funds will do great, and our team, our partners will, you know, uh, generate great returns. But what do we, what do we crea…

AI assessment note: “I am worried about that.”

Q I've been very public on my concerns around the labor government in the UK and what it's done for the UK so far. It's the fastest access of millionaires out of any country. It's terrifying. Um, are you more bullish on the future of the states with the Trump administration or not?

A Look, uh, I, my, uh, belief is that US is very well positioned. We have energy, we have AI, we have the largest market, we have the largest entrepreneurial ecosystem. Um, you know, in a lot of ways, we're very well positioned. And I think in the short term, in some ways, we're actually increasing our modes. If we, you know, really focus on everyone investing in the US and creating, you know, more capital and whatnot. To me, I look at the mandate of companies, wherever we fund. When we fund companies, whether it's in Europe or in US, I always think about it as, Hey, you need to go win your market and then you need to become a global leader. And the thing I worry about, uh, in the U S today is mostly what is the sentiment and the appetite of the world to embrace companies coming out of the U S and let them be global leaders. And I think that's where there's going to be work to do it because we're doing this one time reshift with tariffs and everything on, Hey, we need to realign, uh, commerce and trade. Um, but we were also the, the keeper of the world order in a lot of ways. And as we are disrupting that, Um, you know, what is the relationship going to be with European countries and, and, and how well positioned would the American companies be to be global leaders? That's the place where I think rubber meets the road. In our ecosystem, we're talking about sort of companies funde…

AI assessment note: “my, uh, belief is that US is very well positioned. We have energy”