The Exchanges

Q Is that actually justified? If you go to very enterprise sticky revenue that SAP or Oracle have with some of the largest enterprises, have we got data to prove that enterprise sticky revenue of old is no longer that sticky?

A Yes, we have rev, we have the data, which is at every single quarter since Q one of 20, 22 growth has slowed for the, for all public software stocks. Every single quarter it has slowed and it continues to slow. And there are a handful of folks that have reaccelerated like Mongo and Palantir. And there are a few that bounce off a dead cat bounce like Twilio, but if you look at the basket of the top, not the worst, the top 25 public software stocks, every quarter their growth rates declines, every single quarter, right? And, and you can hide in your GRR and your logo retention, but that is, that is, that is, that is a slow death, that is dying of cancer in 20 years.

AI assessment note: “Yes, we have rev, we have the data, which is at every single quarter”

Q focus and adding to it, so often founders want to do that, and boards and investors say, no, no, no, don't, don't, we need to focus and we need to make sure that we nail the core market. Sometimes they're right, sometimes they're wrong. How do you think about when's the right time to nail the core market versus when's the right time to have the founder aspiration and expand?

A Yeah, I've thought about this a lot, at least in B to B. I think, um, I think it's actually fairly straightforward. Um, it seems complicated. This is like, well, you got to be careful with a lot of knee-jerk VC advice, right? As you approach 10% market share in your core ICP, your core market, you got to expand because growth, at some level, growth slows as you cross 10% market share. Like, you can't get to 200% market share. Now if you may now here's the thing, here's the disagreement now going from 10 to 20 may happen relatively quickly, so you won't you only see it in some of the metrics. You'll only see it in some in something in like deals taking longer to close because you already got all the easy ones, right? You may only see another, but you've got us, but I always see something as folks class 10% in their core ICB. I always see something getting harder and you have enough time at 10 to be implementing your second act calmly. To be implementing it calmly. And so that's why I, and founders don't see this. This is a tiny way I try to help them. When I see this happening, I'm like, okay, let's break it down. Who's your core buyer? Well, you know, it's, it's restaurants in the south coast of France, but between two and four, uh, tables outside. Okay. Okay. Great. I get why you got that. Um, how many of them are there? 3000. Okay. How many customers do you have? 250. Okay. O…

AI assessment note: “As you approach 10% market share in your core ICP, your core market, you got to expand”

Q cut back on team. They've turned, you know, into much better lean and more efficient businesses, but growth has absolutely slowed. And Jason, we chatted about it before where it's like, They got a path for growth slowing and that's fine because they're more efficient. Does that continue where it's like, okay, low growth fine because you're capital efficient, or do we go back to needing and wanting more growth?

A The path was a gift for a lot of founders. The path was a gift for founders that had long runways and mediocre growth. They got a year to be left alone. I was in a board meeting where the founder said, I'm, you know, I'm frustrated. I'm only growing 60% this year. And one of the huge VCs said, You've got five years of runway. I don't care. Like I got so many fires in my portfolio last year. Like I'm, I'm glad you're worried about it. Cause I don't have time to worry about the fact you're only growing 60% this year. Uh, everyone got a pass for a year and it was a gift. And I remember right when COVID hit in, in 2020, Byron Dieter, we did this thing and he said to all the founders, you get, you're getting a little bit of a pass for a quarter or two. Now it ended up last, we didn't go back to the office, the world changed, but everyone got a pass and, but the pass is over and. You can't have, whether the venture outcome is three hundred million or a billion or ten billion, you can't avoid triple, triple, double, double, at least in B to B. You can't avoid it. You can have a year gap. You literally can take a year off, but you can go triple, triple nuts, double, double, double, double, like, but if you don't get back on the wagon, uh, it's over, right? And this is a cruel thing for founders, but it is over from a venture perspective and you either got to get back to growth or, Move…

AI assessment note: “the pass is over and... you either got to get back to growth or”

Q Can you give me an example of that? Just so I understand that you said your risk profile on the valuation side and how that differs. Is that because outcome scenario planning for contact center software might be a very different outcome scenario plan for Salesforce competitor?

A No, I don't do outcome planning. Um, I remember when I, when I invested in talk desk, the best comp was five, nine, which is public today. They were worth a stunning hundred and fifty million dollars as a public company. So the comp was horrific, right? It was terrible. Um, you know, we can look at, I think five nines were six billion today and on paper talk desk is worth ten billion. So you have to be careful with comps as, you know, as, as markets change, right? Some of it, you have to back into your fund size, right? What's two percent of the fund per check. Um, and so for me, I learned there were two types of investments I wanted to make like traditional seed where you had at least a little bit of revenue, at least 10 customers, 15 customers, 20 customers. And then I wanted to do what used to be called late seed, which is hard for me cause it's been obliterated, but late seed was sort of approaching a million in revenue, right? With real traction, no management team, like a lot, but, but getting to a million in revenue. And I wanted to do one of each. So I did, you know, talk desk at a million, but Algolia at a 100,000, right? In terms of annualized revenue, right? And I did pipe drive at a million. I kind of ping pong back and forth between the two. And I was able to write smaller checks to try to get at least In the others. And then the late seed ones, I would write up to…

AI assessment note: “No, I don't do outcome planning.”

Q And you sold your company to Adobe. What advice would you have for founders thinking about selling to large companies? Would you be learning differently?

A Yes. So here's my, and the world's changed, right? I sold in 2011, which in internet time is like 50 years ago. We were just recovered from Lehman Brothers, and multiples were about half of what they are today, so it seemed like a fair deal at the time, but today I, I can't believe that I sold. Um, and, but a lot of other things have changed. If you have a successful company, there's more secondary liquidity. Um, the capital markets, the later stage investors are much more aggressive today. And so, Here's what I boiled it all down to. Um, there's many reasons to sell and many reasons not to sell, and you'll know in your gut whether it makes sense. We could talk about that forever. But I will say this to you, and I say this to all my friends going through it. Once you hit what I call initial scale, when the business, it's usually around a million a month in recurring revenue, or maybe ten million a year, 800 K a month in recurring revenue. Once you hit that, you can't be killed in SaaS. You cannot die. You cannot be stopped. And my learning is there's, while operationally that may be a good time to sell, that's when I sold it, basically a million a month in revenue, it's the worst time to sell. So never sell at that point unless it's twice the maximum amount of money you would ever want. Then do it. Because that's, there's different times when it gets good, and the last thing yo…

AI assessment note: “never sell at that point unless it's twice the maximum amount of money”

Q What is the bull case for linear from here at two and a half billion, given what you just said?

A Well, listen, generally speaking, project management is one of the oldest categories and has been muchly bypassed by AI. Look at the abysmal performance of Asana. Atlassian has survived, but mainly by diversifying outside of tech. Um, humans just don't need to build Kanban cards and wait weeks for other people to build features. It is a dying category. However, linear Linear is the winner here. Linear is the clear winner. They have built an agentic product first that allows the fact that we are building a hundred times more software. And that means a hundred times more features than ever before. Humans cannot keep up with it and humans still have to work with agents and the native tools do have a certain amount of issue tracking and, and, but it's overwhelming. If every human on your team is going to build 500 features and a thousand issues and you have 10 people on your team, you need a process and, and Not to use a dated term, a system of record for managing all these issues with your agents. If we're going to build software, a hundred times more software, 50 times faster than before with agents, we need a new system of record for it. And it ain't Kanban cards in Asana, I can tell you that. That's why Duskin Moskovitz quit his own company. He couldn't see it. But the team at Linear has figured it out. We have seen an explosion, 50 times more agent usage than 90 days ago. This…

AI assessment note: “Linear will be the one powering them all. I, I vote for a hundred million”

Q investing. And, um, you know, Pat and Alfred had recently taken over the leadership from Roloff. And now Doug is back in an investing capacity, not in a leadership capacity. That's still very much with Pat and with Alfred, but Doug's back in the firm investing. Um, which is very big news given he is one of the OGs. How do we read Doug back and back in the trenches?

A Well, look, I don't know. Rory may have more thoughts. I, I don't know, but, um, from, from, from a distance, it feels like something to calm the LPs. I mean, everyone is raising so much capital, so much change there, um, that, uh, you know, I, I think, I mean, you guys have even more experience than I do. LPs are uncomfortable with change. LPs say that they're looking at the new generation and the Vanguard. But they are comfortable when the old leadership is still actively involved in the fund. It does make LPs more comfortable, um, whether they're writing, investing half the fund or a few deals. So it struck me as that simple is you, you, you bring back someone that makes the LPs comfortable and you get through this crazy amount of fundraising everybody's doing, but I could be wrong. I could be wrong, but I don't think it's just to get somebody on your slack and get a little wisdom. You, you don't need to bring them back to just to To get an hour or two of, of, of insights on, uh, on deals. That you already have.

AI assessment note: “from a distance, it feels like something to calm the LPs.”

Q Um, we, we have the CMO stepping down due to health reasons. Um, we have the CRO out. We have Fiji, um, who is head of apps, taking a short leave of absence, um, with health problems. Um, how do we read this very significant multitude of changes at the management layer?

A If we step back a minute, it, it ties to Anthropic passing them. You don't, you don't just sit there and make no changes on the team when your competitor over the last six months has radically changed the competitive posture. So look, I don't think any of us like that amount of change in any management team, right? It feels almost a wholesale change at some level, but, um, and it's risky, but you, you gotta, you know, calling code red for three months ago, didn't magically change the trajectory here. So It ties. You got, you got, you got to try to mix things up in some fashion. Hopefully you can do it with the team you have, but in, in the context of, of, of Anthropic now out accelerating OpenAI, it just makes sense to, to, to reboot the team. It just makes sense. Yeah.

AI assessment note: “it ties to Anthropic passing them... it just makes sense to, to, to reboot the team.”

Q Is that actually justified? If you go to very enterprise sticky revenue that SAP or Oracle have with some of the largest enterprises, have we got data to prove that enterprise sticky revenue of old is no longer that sticky?

A Yes, we have rev, we have the data, which is at every single quarter since Q one of 20, 22 growth has slowed for the, for all public software stocks. Every single quarter it has slowed and it continues to slow. And there are a handful of folks that have reaccelerated like Mongo and Palantir. And there are a few that bounce off a dead cat bounce like Twilio, but if you look at the basket of the top, not the worst, the top 25 public software stocks, every quarter their growth rates declines, every single quarter, right? And, and you can hide in your GRR and your logo retention, but that is, that is, that is, that is a slow death, that is dying of cancer in 20 years.

AI assessment note: “Yes, we have rev, we have the data, which is at every single quarter”

Q mentioned liking these rounds for their low dilutive characteristic or nature. Um, you know, there was, there was a good piece from the information this week about Benchmark lowering their ownership requirements, and McCall being the example. They only have 10% where they always normally needed 20%. We always knew this was Benchmark. In general, has AI seen a reduction in ownership across the board for this generation of venture?

A Every deal I've been in, my god, uh, it's, it, it is, uh, ownership is attacked at a level I've, I've never seen. Um, and so that's my conceit investing today, um, is give it, giving up on that, right? Is for me, you know, I, I, I feel like I can only make money if I own double digits Of two winners per fund. I feel like that mathematically, that's the only way I can make money. And the last three investments I've done are in the six to eight percent range, even though that's my rule. But what am I going to do? Not do the, not do the deal. We also know that's the dumbest thing of all time, right? Um, so I'm literally going to write my LP, uh, report up in a couple of weeks. I'm going to say my, my resolution for 2026 is to get my ownership up. We'll see, we'll see how I do against my resolution, but that's my main, uh, my main resolution. It's like, yeah, you can do it a few times, but if you don't, if you do it every time, it's tough, but I don't know what you do in this world. If the companies are capital efficient, they don't need you. It's complicated. You don't really, in a hot company, you don't really control the die to use kind of like lame VC terminology. You don't control the die.

AI assessment note: “Every deal I've been in, my god, uh, it's... ownership is attacked”

Q I was walking in the park with a founder this morning. He said, hey, if you can't get your company profitable in an age of AI after the seed round, honestly, you're running your business wrong. Do you think we actually see a reduced role for VCs in a more efficient company run world with AI?

A No. I don't think, I don't, I think very few people believe that other than a circular group of folks in the asset Bay Area, and I think there will be a few of these. One, there's way too much competition. You can't stand still. I, there's no question that, um, I mean, RevenueCat, we're both an investor, did an analysis recently, and they got about 50%, two extra productivity using AI tools, about two extra productivity using Cursor and Codip. That's huge at their scale. They're 40% of all mobile apps running RevenueCat. They're, and they're lean and mean. They're cashflow positive. It's a tiny team for their scale, ok? They got two X productivity. But the space is competitive. What did they do with the two X? I'm like, ok, Jacob, can I talk about how you got two X productivity? He's like, Well, sort of, but we plowed it all into new hiring. So they took the productivity and they didn't keep the head count flat. They just hired twice as many people that are twice as productive. So I don't know whether that's four X or whether cubes out to six to eight X or 16 X, but how can you sit still with your little two person company in San Francisco when the best of the best are reinvesting those gains? They're reinvesting those gains, which is stressful because the bar has gone up and that's, so I'm like, okay, like that's a good nuance point, right? So yeah, twice as productive, but we…

AI assessment note: “No. I don't think, I don't, I think very few people believe that”

Q Listen, when, when things go faster, um, cracks appear. You mentioned more frauds taking place in AI. What, what are you seeing before we have Barvin join in five minutes?

A I've seen it. I've seen several AI startups over the last couple months with Zero to multimillion in revenue in a couple months. Um, zero to eight figures in less than a year. Okay. Where the founders quite honestly showed me under the hood, the AI was barely there. It was often humans running a prompt. And then shipping that prompt to an ignorant customer. It was often humans running a report in a BI tool with a little bit of AI and shipping it to customers that are unable to do this type of analysis, right? There is so much demand for increased efficiency, increased from AI that sometimes that the definition of AI has been stretched to implausibility, right? I mean, these, there's a couple of founders I love. They're super, super fancy. These guys are great. Okay. And they went from zero to two million in 60 days, ok? And I asked them, that's, this is my, show me a demo. And they're like, we gotta be honest, there's really nothing to demo. I mean, what do you mean there's no demo? And they just opened it up, and it, they just built a nice little wrapper around ChatGBT, and they just write content for, for ignorant, big customers. I'm not saying that's not real revenue. It's earned, right? But there's just, when you move this fast, you might not even know. You might not even know.

AI assessment note: “Where the founders quite honestly showed me under the hood, the AI was barely there.”

Q Can you ask, given the changing times, how does that impact how you invest today?

A I don't know. I'm still learning. Um, I think that, uh, it's harder if you have less time to get to know people, it's, it's harder to catch the cynics. It's harder to catch the bullshit artists. Um, and, um, but the main thing I just do is I almost immediately do, um, another zoom with the CTO. That's actually the way it's changed. In the old days, I would do it late in the process. I would, I would get to know the CO would talk to the customers, right? I would go deep and then at the very end, I'd be like, okay, I gotta talk to your CTO Harry to make sure that this is real. Now I immediately skip everything else and at the second call I wanna have is with the CTO. That's how it's changed for me. That's how it's changed for me.

AI assessment note: “Now I immediately skip everything else and at the second call I wanna have is with the CTO.”

Q Okay. Talk to me about that one. What did you get wrong?

A Well, okay, here's a really interesting, I reflected a lot on it. This is a mistake I think a lot of us, a lot of folks are quiet, are quietly making even now, which is, um, and I know you, you wouldn't make this mistake, I don't think, Harry, although maybe as you raise bigger funds, you might. I lost it on the third check. So, this is a company, what, what actually happened, this was my one where the, the signal was that the CEO, um, misrepresented some, some of the financials. Not, Not Sam Brankman Flea level or Theranos level, but just enough that it crossed the bullshit line. Just enough that it crossed the bullshit line. And, um, I ended up still writing a third check into the company. The first check was small, right? Um, the second check was a supporting check, right? And the third check, they just started to grow like a weed in twenty-twenty-one, like everybody did, right? It exploded, right, in twenty-twenty-one. But there were a lot of issues with the company, even as it, you know, started growing double digits each month. And from a venture perspective, the right thing to do is just not have written the third check. Um, we were all geniuses in 20, 21, and we all had extra money to invest, and it all made sense to allocate a certain amount of capital per investment, but I should have lost a million and a half and not written that third check, or two million instead o…

AI assessment note: “I should have lost a million and a half and not written that third check”

Q What would you say is the biggest surprise that you saw in 23? What, when you look to your phone, were you like, holy shit?

A The biggest surprise I saw, this is a, this is a, a, a, a tactical point. I was very surprised that huge funds were not doing, were not supporting their companies in up rounds, good rounds that were very, very good companies, but not necessarily Decacorns. I was surprised. I, I, I grew up in a world where big funds If you, if you, if you doubled since the last round, tripled your revenue, right? And there was an outside lead or whatever lead, every big fund did their pro rata or they came close, right? I've got three billion under management. I did 10, ten million in the A. I'll do two million in the B or three million in the C or four. Like I never saw a big fund not do this. And then I watched a deal, a very good deal where a multi-billion dollar fund said they're going to do zero. And I didn't call the partner out, but I, I asked him what happened. He's like, ah, we're just very particular. I've only, we're, we're generally not doing our pro radas now. I've only done two or three recently. And, um, that is a level of conservatism that doesn't make sense to me, right, on a bunch of levels. It doesn't make sense to me as an efficient way to deploy a large fund, and it doesn't make sense to me as a good long-term play, and it doesn't make sense to me as something that will improve returns. Right? Uh, there are a lot of reasons to support your portfolio companies, right? And, an…

AI assessment note: “I was very surprised that huge funds were not doing, were not supporting their companies”

Q cut back on team. They've turned, you know, into much better lean and more efficient businesses, but growth has absolutely slowed. And Jason, we chatted about it before where it's like, They got a path for growth slowing and that's fine because they're more efficient. Does that continue where it's like, okay, low growth fine because you're capital efficient, or do we go back to needing and wanting more growth?

A The path was a gift for a lot of founders. The path was a gift for founders that had long runways and mediocre growth. They got a year to be left alone. I was in a board meeting where the founder said, I'm, you know, I'm frustrated. I'm only growing 60% this year. And one of the huge VCs said, You've got five years of runway. I don't care. Like I got so many fires in my portfolio last year. Like I'm, I'm glad you're worried about it. Cause I don't have time to worry about the fact you're only growing 60% this year. Uh, everyone got a pass for a year and it was a gift. And I remember right when COVID hit in, in 2020, Byron Dieter, we did this thing and he said to all the founders, you get, you're getting a little bit of a pass for a quarter or two. Now it ended up last, we didn't go back to the office, the world changed, but everyone got a pass and, but the pass is over and. You can't have, whether the venture outcome is three hundred million or a billion or ten billion, you can't avoid triple, triple, double, double, at least in B to B. You can't avoid it. You can have a year gap. You literally can take a year off, but you can go triple, triple nuts, double, double, double, double, like, but if you don't get back on the wagon, uh, it's over, right? And this is a cruel thing for founders, but it is over from a venture perspective and you either got to get back to growth or, Move…

AI assessment note: “the pass is over and... you either got to get back to growth”

Q What are the big mistakes you're seeing there, Jason?

A Look, the biggest mistake I I've seen, which. It's probably twofold. Um, the number one, one is not enough sensitivities to models and this got people in trouble last year, but it's going to hurt again this year, which is that if you miss your growth plan, even by a smidge, um, it can dramatically increase your burn rate. People do not build sensitive enough models, right? If I've hired all this head count, extra head count, and they don't hit the number, but I've incurred all the expenses for that head count. Um, my burn rate often is Materially higher than I think. So people don't build the right sensitivity analysis to when they underperform, right? So you have to have at least either you have to have a great model or what you have to do is build a worser case model, right? Where you miss the plan significantly and you're sort of stuck with a certain amount of expenses and just understand what your burn rate is. So, so really that's the, that's the biggest problem I see. The second one is There is still delusion out there on the odds of raising a, a later round. There's still delusion across all of the markets, and I still anger founders when I bring it up. I still get toxic comments, but you just have to assume absent evidence, you're unfundable. Like go find, go get a term sheet or just go get someone you trust to tell you, Hey, Harry, if you hit ten million growing to the…

AI assessment note: “the biggest mistake I I've seen, which. It's probably twofold.”

Q if you think about kind of the first sales hires, often founders do, say they've built the playbook, and they're in a million in error, say whatever. They go, should I hire a head of sales who brings in the team around them and crafts that team, or should I bring in two sales reps and build it from the ground up? How do you advise founders in that situation?

A We've learned over time there's this scenario that works 80% of the time. What works 80% of the time is 80% of the great cloud SaaS CEOs we've worked with, they hire two quirky sales reps and get them Doing pretty well. Hitting quota or beyond. Often one of them just crazy good, right? And we can talk about what that persona looks like. And when you've hired two, you're generally ready to hire a VP to hire a 300. You have just enough of an engine, just enough of a playbook, just as importantly, a playbook that works that you can start reproducing that playbook from three to 300. If you don't have those two AEs and you hire a VP of sales, 80% of the time it doesn't work because there's nothing for them to work with. Right. And importantly today, a good VP of sales usually join a startup at that phase. That's one thing that's changed the last five years we could chat about is the great VP of sales are waiting for ten million. The ones that used to join at one million, they're all waiting for a ten million ARR startup today, or a unicorn, whichever comes earlier. But if you possibly can get two performing reps yourself, it's going to make that whole process 10 times easier.

AI assessment note: “they hire two quirky sales reps and get them Doing pretty well”

Q I want to talk about those two reps. You mentioned that. What do we want in those two reps? What do they look like? What are the character types? What makes you go, this is a 10 X rep, and we want you in our team.

A Well, let's be clear. The X reps in the early days are not the X reps later. Hopefully they stay forever. The best ones stay. If you're lucky, keep them, but they're different. But I will tell you, hire them and what they look like, because they're two different things. The X sales rep in the early days has one and a half criteria. It's really this simple. First, make sure they've sold at your price point. A sales, if you're a five K ACV startup, do not hire someone from a million dollar a year group, no matter how much you love them. It's the wrong toolkit. The toolkit is roughly the same for every startup at a given ACV, at a given price point. So make sure they've sold in cloud, in SaaS at your price point. Otherwise, don't fall in love with them. Two, and most folks screw that up. The second one, all the founders screw this up. Harry, would you buy from her? They listen to the buzzwords, and they listen to the talk, and they do the reference check. But if Harry, if you've sold the first hundred copies of your product, if you've sold the first 200 sponsorships at 20, you know whether you can trust these precious leads to somebody else. And whenever I talk with the founder, I'm asked, how did it go? Well, my first two reps didn't work out. I'm like, Uh, what happened? And I always ask them one question. What would you have bought from them? Would you buy your answers? Always …

AI assessment note: “The X sales rep in the early days has one and a half criteria.”

Q Tell me what is the most underappreciated public company, Jason?

A I'm still going to say Klaviyo for a variety of reasons, and I'll tell you why. Klaviyo, for folks that don't know, is basically the HubSpot for e-commerce, okay? They are coming up on a billion in revenue. In fact, they are bigger in marketing revenue than HubSpot. They're actually bigger. But they're very specialized on Shopify. 70, 70% of the revenue comes on Shopify. This is a company that was almost bootstrapped, right, as you talked with Andrew. But here's what's interesting. Here's, just like data, everyone loved Datadog back in the day, right? People love Wiz, look at it. I know, I know a bit about the B to B e-commerce space. Until there was a little bit hiccup recently when they increased prices at Klaviyo, but until then, this was a grab you on the street and tell you how much you love the company coming up on a billion in ARR, growing, approaching, you know, 40 to 50% growth. It's a magical story that's not understood well enough. In fact, no one, I, I don't think anyone outside of e-commerce had even heard of this company before it filed to go public, right? Everyone in e-commerce, it's the giant, right? It was, it was the giant, right? Um, That hundred and fifty million ARR CEO I was talking about that I talked with yesterday, like, oh, half the conversation was about, I wish I was Klaviyo or Klaviyo this, and he's at a hundred fifty million. The fact that that is…

AI assessment note: “I'm still going to say Klaviyo for a variety of reasons”

Q Um, what are the big lessons from that?

A When you have founders that are truly committed to a multi decade journey and know a space cold, Um, maybe that's the most important thing of all, right? So the revenue cat is on 30% of all mobile us mobile devices managing subscriptions, and so that they've crushed. Developers love them. The product is great. Have they been too slow to develop the sales led side of the business? Yes, I think Jacob and Miguel would admit that they're a little slow to go. They lean too much onto the PLG, too much on the brand, but it's okay. They're at many tens of millions of revenue. They can, they can do more there today. They've just closed their first million dollar deal, okay? Maybe they could have done it a year earlier, but It doesn't really matter at some level, and so there are times what's fun about a company like revenue cat is there are times when a company or sometimes an executive comes into their own, right? Not everyone can see it, and now everyone can see that this is like the right team for the right problem at the right time and, um, just back them. I never had 1:02 of lack of as you probably we've chatted just for a few times about this company of yours for fun. I've never had 1:02 where I doubted the team, right? I questioned them a few times on different things, Never 1:02, because they understood a problem and were committed to it for 20 years, right? And, uh, don't want …

AI assessment note: “When you have founders that are truly committed to a multi decade journey”

Q investing. And, um, you know, Pat and Alfred had recently taken over the leadership from Roloff. And now Doug is back in an investing capacity, not in a leadership capacity. That's still very much with Pat and with Alfred, but Doug's back in the firm investing. Um, which is very big news given he is one of the OGs. How do we read Doug back and back in the trenches?

A Well, look, I don't know. Rory may have more thoughts. I, I don't know, but, um, from, from, from a distance, it feels like something to calm the LPs. I mean, everyone is raising so much capital, so much change there, um, that, uh, you know, I, I think, I mean, you guys have even more experience than I do. LPs are uncomfortable with change. LPs say that they're looking at the new generation and the Vanguard. But they are comfortable when the old leadership is still actively involved in the fund. It does make LPs more comfortable, um, whether they're writing, investing half the fund or a few deals. So it struck me as that simple is you, you, you bring back someone that makes the LPs comfortable and you get through this crazy amount of fundraising everybody's doing, but I could be wrong. I could be wrong, but I don't think it's just to get somebody on your slack and get a little wisdom. You, you don't need to bring them back to just to To get an hour or two of, of, of insights on, uh, on deals. That you already have.

AI assessment note: “it feels like something to calm the LPs”

Q So how, so how much did you put in them? What was the price?

A Well, that's interesting learning. And again, this is a long time ago, right? So I did only 500 K in the first round and I bought up in the next. I did three and a half million in the A. Um, so I did 500 K in the seed at 12 pre. So it was low ownership, relatively speaking at the time. And there were a bunch of reasons for that. But in a classic YC thing, I got a deal. It was like, you could either do 500 K at 12 or a million at 15. And I didn't know it was my second investment. And I was, I was Very valuation sensitive. In fact, this deal at the, when I was working at a traditional venture fund, it was seen as very expensive at the time, given that they were like a 10 K MRR. And, um, so I chose half the amount at 12 instead of double the amount at 15. And that makes sense if you're optimized around small exits, right? Actually there is a logic to that, right? But now you look back and we laugh today, right? In 22, it's like, well, you could have had, you could have almost doubled your ownership for a modestly higher valuation. Like what a numb nuts. Um, but I was so focused Not only was I learning in my second venture investment, but I was so worried about losing money. Right. And I, that, that's a mistake. You gotta, you gotta. Learn like, you don't want to go too far. You don't want to start off in venture and burn all the money in the first six months, but you gotta realize…

AI assessment note: “I did 500 K in the seed at 12 pre”

Q There's the GLP-one, two-bit, two-company, again, for people who use this as their, like, news on tech, a two-person company. Who uses AI intelligently, scaled to 1.8 billion in revenue selling GLP ones. Interesting. A lot to unpack there. Wix buying back 31.6% of its shares, given its low stock price. Oracle getting rid of 20 to 30,000 employees via a six a.m. email. Jason, any that stand out, baby?

A Obviously, at some level, people are so excited about the one or two person billion dollar company factor. Facts were glossed over, points were missed, and all that, right? Oversimplified. Um, And they use deep fakes. They made representations about doctors. They shouldn't, they did all the wrong things. They did all the crappy affiliate marketing stuff people have been doing for 20 years, and they did it at scale with AI and built a big business on it, right? Um, I get it. Um, but what is interesting about it is if you, let's not over glamorize this company that maybe is at the edge of fraud in many ways in its marketing tactics. The fact that they could use AI to scale this with two people and maybe some consultants and stuff on the side, It is, it is, we are seeing the future. Why? And, um, AI is completely changing marketing. Marketing has not gone away. Dario and Sam, to Rory's point, Dario and Sam are everywhere because marketing matters as much now as ever. And this is a different version of how marketing is changing. And if you don't adapt, right, maybe buying TBM is a bad idea, but you got to adapt to the new world of marketing when, and, and, and, and, you know, there's a lot of, There's a number of startups that have tried to automate all this marketing at scale with AI. Most of them are terrible, right? They don't quite work. They create boring assets. They look lik…

AI assessment note: “people are so excited about the one or two person billion dollar company factor”

Q in terms of layoffs, Atlassian announcing 1600 people, and then Meta reportedly a speculative 20% workforce reduction, which would be 16,000 of 79,000. We've spoken about layoffs before. Is this really just the start of the dominoes falling? Is this a sign of overhiring from 20 21 and beyond, and actually we're just relabeling it AI? How do we think about these very large scale layoffs from the biggest players?

A Well, look, I don't know that much has changed from our prior conversations. Other than that, you know, everything we've said has come true. Um, this is every conversation at scale. Here's the thing. It's not Atlassian and Meta are both interesting, I think, because, I mean, I guess they're all the same. It's not really about layoffs. Neither of these companies has to lay off anybody. Okay. Atlassian has substantial free cashflow, um, meta. I don't know. They're in the, their free cashflow is dip, but it's still like in the mid forties, right? They don't have to do this. This is not a unicorn trying to figure out what to do with the last twenty million that Saster scale and 20 VC gave it. Okay. This is a decision. This is a purposeful decision. And what's happening in board meetings and in management teams is everyone's looking at the teams they have. And saying, I just don't know what to do with half of these. I don't need half of these people. I don't need them. I do need people. I need people. I need different people. And I don't, you know, there was a great LinkedIn post today, this morning from the ex VP of engineering of ping identity. And, um, who said, this is going to be a sad post. I don't know if anyone's going to see it, but, but my, what I learned is over the craft art of creating code. Creating modules, testing it, being creative, figuring out how to do something …

AI assessment note: “This is a purposeful decision. And what's happening in board meetings”

Q Right team, before we do a quick fire, are there any final topics that we need to discuss that I've missed?

A You know, just one, since we have Tom here, um, uh, I don't want to go over, but I, I just wrote it up today on Saster. You know, we're not ending the year with a great IPO market. We're not. We start, when we started this show, 30 something shows together, uh, IPOs were just coming back and it looked like 20, 25 would be a pretty good year. Now in some senses it's a good year, right? Um, but we're well off our peaks and the number of deals is not what we thought. Um, StubHub is, is a mess. Right? Um, we have some deals that are a mess. Navon's a mess, even though it's a great company. We're, we're, we're ending the year with an IPO whimper. It's kind of a bummer, despite, you know, cursor hitting a thirty billion in 22 months. It's kind of a bummer.

AI assessment note: “we're not ending the year with a great IPO market.”

Q We're going to dive into kind of the application layer, and two that Jason is passionate about, and I'm really excited for this actually, is one is Higgsfield and the other is Ratplit. Jason, which one do you want to start with there?

A Either one, man. I mean, depends what you want to talk about, I think. There's like a, there is one thread, there's like this Higgsfield Gamma thread, right? And I just think it's somewhat interesting, um, that both are slightly under the radar. I mean, the, the, the, the CEO of Higgs field was not quite complaining, but sort of shouting this week, right? When he did around, um, that, Hey, he's gotten in revenue and certainly in users gotten there even faster than lovable and friends, right? Doing quick video for, I mean, I've been, I I'm a small investor. I've been a user since it launched. I mean, I love Higgs field. Um, And Gamma, it's Gamma at sixty million this year. Gamma at sixty million, from like zero to sixty million this year. That's pretty good for, for slides.

AI assessment note: “Either one, man. I mean, depends what you want to talk about”

Q Sorry. Jason, you've mentioned clearly a couple of times. We have to talk about this company. Um, Jason, why are you a fan boy? I have thoughts, but I want to hear yours first.

A I'm a fanboy, um, if we look at AI for coding, okay, if we look at Replit, 10 to a hundred million in 5.5 months, right, announced yesterday, crazy, right, if we look at lovable, not far behind, you know, on and on and on, right, cursor, and like, what kind of bums me out is that on the GTM side, on the sales side, I know everyone's made investments in there, they're not as good. They're not as good. They're slow to release features. They don't work that well. They're just not like the sales tools for AI are not as good as the developer tools for AI. So what I'm looking for is who's approaching this from a consumer level that has a consumer grade experience that could work for GTM. And I, you know, there's no one, listen, I love my old sales team. Everyone I work with is great, but overall the sales reps I talked to for all the products I buy, they're terrible. They don't know their product. They know nothing. They add no value. So they all need to cheat. All sales reps need to cheat because they don't know anything and they all need something like Cluely. And I've used, there's a limited number of tools that do this in sales, but they're either not real time, right? Like I'm using Cluely right now, right? Or they're, they have an enterprise niche or they're glorified note takers. This is what every sales team needs. And at will it be clearly? Maybe not, but once in a while, li…

AI assessment note: “they all need something like Cluely.”

Q Final one before we do a quickfire. We mentioned old guard competing with new. Glean is a 7.2 billion dollar company today, moving very fast. Dropbox is still working to get Dash out, which I'm sure is a good product, but it's separate to their core product and core business. Can the old guard compete with a very, very fast, well-funded new guard?

A I'm starting to lose confidence in the old guard. I wanted to believe I, listen, I, I think because the LLMs are open, anyone can use the, the API and most of the work is done by third parties. Okay. Most of it is not. Yes, you can build, you can, you can use an open source framework for your chat and then you can use an LLM and then you can, it's pretty simple to, to rag a bunch of data and stick it in. And I like, I just figured that the, at the software level, the, the big guys would, would catch up. Right. Um, but I'm just, In my ecosystem, they're too, they're still too slow. I just don't see it. I don't see it. I'm worried.

AI assessment note: “I'm starting to lose confidence in the old guard.”

Q So once, once you can, what does that mean for everyone listening just to put option?

A Well, look, my understanding, having read it, it's discussed, but under discussed is the last round investors. Obviously they weren't fully aligned on the price, right? And so there's structure and I don't think this is a bad thing. It's okay for late stage investors to be more conservative on price than founders. Like, and so they agreed on a deal. Look, if we don't trade up 70% from the IPO in two years, you have to buy all our stock back. You have to buy all our stock back. And on paper, that might make sense to a late stage investor. It's not like they're making a profit, right? It's not like getting your Money back is any profit for the VC. But the problem is, what tends to happen if the company isn't generating mass cash flow, where are they going to get two billion? And CoreWeave doesn't have the two billion per se, right? I think they'll probably get it. I would imagine OpenAI or Microsoft would give it to them. But if it doesn't, what happens is, And Andrew, I, I think it puts massive pressure on the stock price when people don't think it's going to happen. It sets you up to have your head cut off in two years, right? Because the shorts come in hard. They come in hard. Um, I, I just worry about it. It's stressful.

AI assessment note: “it puts massive pressure on the stock price when people don't think it's going to happen”