The Exchanges

Q Hit me, Cotu. What was the lesson from Cotu?

A So Cotu, again, very, it's very hedge fund style of investing, right? If, if ECV was the private equity Cotu, it was the hedge fund. And it's, you know, there's some aspects of that that are less fun. Like hedge funds are very intense. They're very competitive inside and out. But one of the most eyeopening things that I learned was not just, Hey, we get in and we do work, but we do work in, in markets that matter and after opportunities that matter. And so at Cotu, I learned this idea from, um, Thomas Lafont. Uh, he basically, he called it TAM arbitrage. It's this idea that like you can, you can work and if you can do the work and understand the market better than anyone else and appreciate that it's actually bigger than anybody else gives it credit for, that can help you pay higher prices. Sometimes that can come back to bite you. If you don't, you know, who knows, it's always difficult to predict what, how big markets actually are. But if markets really do turn out to be larger than anybody else gave them credit for, not only can you pay higher prices, you can get more aggressive with burn. You can grow more quickly. You can experiment a lot more. Because you have a more fundamental understanding of the market, and it's kind of the Buffett-ism, right? If a good manager meets a bad business, it's the reputation of the business that remains intact. I think the same way about a …

AI assessment note: “one of the most eyeopening things that I learned was... TAM arbitrage”

Q How did you get involved in the Rome app community? I heard this was one I had to ask.

A Um, I have been an obsessive note taker in my life, and there, I, there's a scripture that I, I jokingly quote, it's, um, whatsoever you record on earth shall be recorded in heaven. Like, I am a dogmatic note taker, And I'd never found something that works the way my brain works. And I was watching this YouTube video with Tiago Forte and he was interviewing Connor. And I felt like I had stumbled on a profit. Uh, like I DM'd him. I had to talk to him. Our first call, very unorthodox. It was, he was, uh, shotgunning whiskey and Red Bull and lighting a cigarette with a blowtorch. Definitely one of a kind founder call. Um, but I, I mean, I went on to do a hundred personal Rome tours because I just love the product so much. And I'm still to this day, an hourly active user.

AI assessment note: “watching this YouTube video with Tiago Forte and he was interviewing Connor”

Q Hit me, Cotu. What was the lesson from Cotu?

A So Cotu, again, very, it's very hedge fund style of investing, right? If, if ECV was the private equity Cotu, it was the hedge fund. And it's, you know, there's some aspects of that that are less fun. Like hedge funds are very intense. They're very competitive inside and out. But one of the most eyeopening things that I learned was not just, Hey, we get in and we do work, but we do work in, in markets that matter and after opportunities that matter. And so at Cotu, I learned this idea from, um, Thomas Lafont. Uh, he basically, he called it TAM arbitrage. It's this idea that like you can, you can work and if you can do the work and understand the market better than anyone else and appreciate that it's actually bigger than anybody else gives it credit for, that can help you pay higher prices. Sometimes that can come back to bite you. If you don't, you know, who knows, it's always difficult to predict what, how big markets actually are. But if markets really do turn out to be larger than anybody else gave them credit for, not only can you pay higher prices, you can get more aggressive with burn. You can grow more quickly. You can experiment a lot more. Because you have a more fundamental understanding of the market, and it's kind of the Buffett-ism, right? If a good manager meets a bad business, it's the reputation of the business that remains intact. I think the same way about a …

AI assessment note: “I learned this idea from, um, Thomas Lafont. Uh, he basically, he called it TAM arbitrage.”

Q Tell me what's your biggest hit so far and how did it change how you think?

A So I think there, I mean, there's certainly, there are investments that I have made, um, that have done really, really well, um, with the, you know, within the firms that I've worked at. For me personally, the biggest impact that of an investment that I have made was a company called TeamShares. Um, and it reminds me of, uh, uh, the quote, I think it was with you, uh, Keith Raboi talking about, yeah, I measure success based on how many of my, my peers think I'm insane or laugh at me. And so when I invested in TeamShares, it was a couple of people with an idea. The idea was to, to basically buy small businesses, turn them into ESOPs and, and scale them almost like a holding company at scale with services and stuff like that. And people thought of it as such a, it was just like a private equity play or whatever, but effectively it was this like FinTech mechanism to be able to make employee ownership of not tech companies, but of, you know, salt of the earth types of businesses and increasing that equity ownership that exists. And there was so much skepticism about that. And, and that has, I mean, financially it's been very rewarding of an investment, but also just seeing this, what felt like to a lot of people, a kind of laughable idea, just execute incredibly well. Like that has, that has reinforced my perspective as an investor to think about like, what are the things I actuall…

AI assessment note: “biggest impact that of an investment that I have made was a company called TeamShares.”

Q of the biggest bits of bullshit advice I think there is, which is like, oh, don't worry, no one really knows what they're doing. To me, this is complete crap. People do know what they're doing, which is why they're often where they are, and you should learn from them and seek them out. Do you agree, or do you take the ever-changing circumstance and time, you do you style?

A The way that I think about it is that everybody knows, everybody knows what they're doing, right? I think that everybody is, is acting deliberately and trying to do things in a certain way. I think the thing that I don't take for granted, and I think the reason people say stuff like that is that, ah, nobody knows what they're doing. We're all just kind of making stuff up as we go is everyone's trying to soften the blow of being wrong. And so we try and say like, Hey, we're all just doing our best. We're all doing this or that. But there are people who are exceptional at what they do. And there are people that are repeatedly really bad at what they do. And I think the biggest difference between those people is that the people who get really good are the people who learn And grow and pay attention to how they do stuff and then they get better at it. And so those people do know what they're doing, not only what they're doing, what they're trying to accomplish, but they, they know they're capable of their, their craft and their skill because they've studied it. Like, I feel like that makes the biggest difference.

AI assessment note: “everybody knows, everybody knows what they're doing, right?”

Q of three incredible firms there, but from, you know, the, the prior generation bluntly, I want to talk about the current landscape that we have in venture today. And you've said before, uh, and you said in an email, I love this, uh, differentiation is going to kill the long tail of so, so venture firms. It was great cliffhanger, by the way. Um, what did you mean by this?

A So, uh, Josh Wolfe made this Prediction. Um, back in February, he said that, you know, he, in his prediction between 50 and 75% of active investors in the private markets are just going to disappear within the next few years. And for me, the way that I think about that, about the other sort of, what is a so-so venture firm? What is differentiation? Really? People are starting to care more and more about the holistic character, uh, of the, of these institutions that they work with. Right. Um, you know, reputable bank may not be enough to acquire customers anymore. Like people care a lot more about what the identity of this firm is. And I think founders are progressively going to look for more distinct characteristics in the firms that they work with. And I define that as differentiation, right? Is how, how capable is somebody externally able to articulate you as a firm? And if you can't answer that question very clearly, uh, it's going to get harder and harder and harder. And so I think the ways that firms look to differentiate themselves is going to get progressively more interesting.

AI assessment note: “if you can't answer that question very clearly, it's going to get harder”

Q Not everyone agrees, but you know, they're wrong and we don't pay attention to anyone who disagrees with us. Um, uh, final one then. Index. How did that shape your mindset?

A Yeah. So, and again, I mean, I sound like Goldilocks, right? I was, I was jumping around, testing out, just finding what's just right for me. Index, the way that I think about index, it's a little bit different. It's not just the way that it, like, there's not one thing that impacted my way of thinking about investing. For me, I felt like index was like graduate school in venture capital. Like there was so much, and maybe this was my mindset, but even before I joined index, I'd already started, you know, remember I'd started a company before. I didn't know to call it a company. Now I knew what a company looked like, what a startup looked like. And I started to feel this entrepreneurial itch, but I liked investing too much. And so when I think like, well, should I go start a company? Should I go join a company? I really like investing. I don't think I want to leave it. But so I was in this like opportunity canvassing mindset and I sort of like directed that energy at venture. And so while I was at index, I was constantly paying attention to how we did things and studying the way that we did things. So how do we make decisions? How do we incentivize people to take risks and build relationships and stuff like that? And a lot of that study, it comes out in my writing, right? It's the reason that I write about like, what is the art and science of venture? It's because I felt like I …

AI assessment note: “index was like graduate school in venture capital”

Q the frequent side for me, Actually, like, Elizabeth at, um, Hustle Fund, actually, she has scaled quite a following, very sustainably, with a lot of volume, but actually consistently done very well. I think those two, for me, like, three really stand out. Um, I, I'm intrigued. I think venture brands, like, funds brand themselves terribly. Do you agree, and why do you, why do you think yes or no?

A I think that the center of gravity has shifted to your point, to your point, largely to the individual investors. And I think there's very few firms that have, have, have kept up with that shift in the center of gravity. And so firms that are trying to push forward the almost, you know, celebrity, if you will, of the individuals. And that's a powerful dynamic. I think it's one of the reasons why you, you know, anybody with a Reasonably sized Twitter following probably gets a at least job interest, if not a job offer from Andreessen, right? Like they recognize that sort of micro celebrity appeal of being able to hire anybody who has even remotely a sizable following. So I think that they are trying to tack on to that shift. I don't think anybody has done it well because it feels uncomfortable. Like it feels uncomfortable to have this like quote unquote brand. When today, most of the way that people want to interact with institutions is they want to interact with people knowing that the institution has something as, has backing, right? But it's like that person represents the vehicle into that stuff. You don't want to necessarily be interacting with this, uh, faceless monolithic brand, but most firms marketing efforts have not kept up with that shift in gravity.

AI assessment note: “I don't think anybody has done it well because it feels uncomfortable.”

Q I do just want to ask one final thing on the communities that I, I agree on like the YC of the world, but like that's one very distinct. Have we really seen other venture firms try and build communities? And if so, what's the difference between those that have worked and those that haven't?

A The short answer is we've seen them try. We haven't seen very many succeed. Um, some examples of this, even like Andreessen has some of these where they have like, you know, Slack channels where they'll take the CROs of all their companies and dump them into Slack channel. It's not a good community. It's an attempt at trying to like coalesce people into buckets. But it's not a good attempt. And so your question around like, what does it mean to make a successful community in my perspective? And obviously I'm biased, like contrary is this is our, this is just our bread and butter. I mean, before we had a fund, we had a community about a hundred future founders, right? That we had met and we're working with and things like that. So we've, we have always tried to emphasize this people centric community and building that the reality of why it works is just like any product. If the customer is an afterthought, it's not going to hit, like, it's not going to be a very good product if it's secondary to something else, right? Even from a community perspective, you talk about people's scout programs and stuff, those scout programs can be powerful. I think that you're going to see a lot of dilution in the value and quality of those scout networks progressively over time. And I think the biggest reason for that is because it is an afterthought, right? You, you, you, you implant this commun…

AI assessment note: “The short answer is we've seen them try. We haven't seen very many succeed.”

Q you know, the pension funds of the world, Who need to move a hundred million, can't get into Sequoia, struggle to move that much into founders fund for sure. And so where do you go? There's not that many places. And so you have this finite supply of homes for your hundred to two hundred and fifty million. This is where it makes sense. Do you agree with that analysis?

A I agree with, I agree with that. I think that one of the reasons for that is that for a long time there was kind of this arbitrage in, in venture. Where I don't know that people fully, especially, I mean, the internet is sort of the thing that this was the like massive multiplier on all of these outcomes. And so nobody appreciated venture as a place where large amounts of capital could be effectively allocated to maximize returns. I think there was an arbitrage in that, uh, that existed where people could, they had shockingly big outcomes. And over time people have realized how big those outcomes can be. And have paid more and more attention to it, which has attracted more and more capital. One of the reasons I get concerned about, and I understand the, the like fundamental math that people are doing to say, Hey, if I can allocate X amount of capital, if I can expect a certain rate of return, like this is a place where I can park money and that's okay. And I don't disagree with that. Like people are, are welcome to do their best in whatever capital allocation strategy they want. The reason I am worried about the sort of excess capital is because there aren't really like Guardrails are good standards of excellence before, right? It's again, this idea that like enough money can hide a multitude of sins, right? Like we've seen it over and over again of bad products, bad go to mark…

AI assessment note: “I agree with, I agree with that. I think that one of the reasons”

Q Is the growth market better or worse in 12 months and why?

A The growth market is likely to be better in 12 months. Only if you see that shift I talked about with founders, there has still, I think, not been a reality check of what valuations really mean fundamentally. If that reality check continues to occur, like, I think if progressively founders recognize what that means, I think that the growth market can improve. Uh, it's going to come down to earth. Valuations are going to be a lot lower. Um, it's still going to be hard to fundraise, but it's not going to be what it is right now. What it is right now is you have two sides of the party. One still convinced that they can get a billion dollar valuation for, you know, cause it, before it was three to five million of revenue could get you a billion dollar valuation or pre-revenue. Now it's like, but we've got ten million, we've got fifteen million. We want a billion. Like, That mentality. And then you've got a bunch of investors that are again, sort of chickens with their head cut off, running around, having no idea how to price anything. Both of those things I think are going to improve over time. Investors are going to get more thoughtful about valuations. Founders are going to be more thoughtful about what does valuation mean to them and what is success versus what they wish they could get.

AI assessment note: “The growth market is likely to be better in 12 months.”

Q Tell me what's your biggest hit so far and how did it change how you think?

A So I think there, I mean, there's certainly, there are investments that I have made, um, that have done really, really well, um, with the, you know, within the firms that I've worked at. For me personally, the biggest impact that of an investment that I have made was a company called TeamShares. Um, and it reminds me of, uh, uh, the quote, I think it was with you, uh, Keith Raboi talking about, yeah, I measure success based on how many of my, my peers think I'm insane or laugh at me. And so when I invested in TeamShares, it was a couple of people with an idea. The idea was to, to basically buy small businesses, turn them into ESOPs and, and scale them almost like a holding company at scale with services and stuff like that. And people thought of it as such a, it was just like a private equity play or whatever, but effectively it was this like FinTech mechanism to be able to make employee ownership of not tech companies, but of, you know, salt of the earth types of businesses and increasing that equity ownership that exists. And there was so much skepticism about that. And, and that has, I mean, financially it's been very rewarding of an investment, but also just seeing this, what felt like to a lot of people, a kind of laughable idea, just execute incredibly well. Like that has, that has reinforced my perspective as an investor to think about like, what are the things I actuall…

AI assessment note: “reinforced my perspective as an investor to think about like, what are the things I actually believe in”

Q is like the biggest sign of strength from YC, and I, I was worried about them for a while. Now I'm like, fucking buy YC long hold. Are you with me? And like, do you think they've just completely regained all power from the unbundling, because we did see this kind of splattering of the unbundling of accelerators, uh, which I think now Power retained, concentrated, centralized. Do you agree?

A Yeah. I mean, I think YC has built something again, like I use this word. I try not to throw it around, even though it's one of these, these buzzy venture words, but like I talk about having built a generational community because it is, is this sort of once in a generation thing that people have built and have a affiliation with, I think there's nothing like it. And I think that the other thing that even, I don't even know that I would have ever said I was, um, worried about YC per se. I think that the like drive to access and having more and more people, it dilutes the experience on the micro for sure. Like individuals experience can be more negative, but I still think it's getting them exposure and, and closeness to really high quality people. But I think the biggest thing is that it's a compounding effect, like no firm compounds the way that YC does because it's so expansive and so involved in all these different aspects and can bring people into the, in these different ways. That I think, like, that compounding effect on YC is not going anywhere.

AI assessment note: “that compounding effect on YC is not going anywhere.”

Q of the biggest bits of bullshit advice I think there is, which is like, oh, don't worry, no one really knows what they're doing. To me, this is complete crap. People do know what they're doing, which is why they're often where they are, and you should learn from them and seek them out. Do you agree, or do you take the ever-changing circumstance and time, you do you style?

A The way that I think about it is that everybody knows, everybody knows what they're doing, right? I think that everybody is, is acting deliberately and trying to do things in a certain way. I think the thing that I don't take for granted, and I think the reason people say stuff like that is that, ah, nobody knows what they're doing. We're all just kind of making stuff up as we go is everyone's trying to soften the blow of being wrong. And so we try and say like, Hey, we're all just doing our best. We're all doing this or that. But there are people who are exceptional at what they do. And there are people that are repeatedly really bad at what they do. And I think the biggest difference between those people is that the people who get really good are the people who learn And grow and pay attention to how they do stuff and then they get better at it. And so those people do know what they're doing, not only what they're doing, what they're trying to accomplish, but they, they know they're capable of their, their craft and their skill because they've studied it. Like, I feel like that makes the biggest difference.

AI assessment note: “everybody knows what they're doing, right? I think that everybody is, is acting deliberately”

Q I do just want to ask one final thing on the communities that I, I agree on like the YC of the world, but like that's one very distinct. Have we really seen other venture firms try and build communities? And if so, what's the difference between those that have worked and those that haven't?

A The short answer is we've seen them try. We haven't seen very many succeed. Um, some examples of this, even like Andreessen has some of these where they have like, you know, Slack channels where they'll take the CROs of all their companies and dump them into Slack channel. It's not a good community. It's an attempt at trying to like coalesce people into buckets. But it's not a good attempt. And so your question around like, what does it mean to make a successful community in my perspective? And obviously I'm biased, like contrary is this is our, this is just our bread and butter. I mean, before we had a fund, we had a community about a hundred future founders, right? That we had met and we're working with and things like that. So we've, we have always tried to emphasize this people centric community and building that the reality of why it works is just like any product. If the customer is an afterthought, it's not going to hit, like, it's not going to be a very good product if it's secondary to something else, right? Even from a community perspective, you talk about people's scout programs and stuff, those scout programs can be powerful. I think that you're going to see a lot of dilution in the value and quality of those scout networks progressively over time. And I think the biggest reason for that is because it is an afterthought, right? You, you, you, you implant this commun…

AI assessment note: “The short answer is we've seen them try. We haven't seen very many succeed.”

Q you know, the pension funds of the world, Who need to move a hundred million, can't get into Sequoia, struggle to move that much into founders fund for sure. And so where do you go? There's not that many places. And so you have this finite supply of homes for your hundred to two hundred and fifty million. This is where it makes sense. Do you agree with that analysis?

A I agree with, I agree with that. I think that one of the reasons for that is that for a long time there was kind of this arbitrage in, in venture. Where I don't know that people fully, especially, I mean, the internet is sort of the thing that this was the like massive multiplier on all of these outcomes. And so nobody appreciated venture as a place where large amounts of capital could be effectively allocated to maximize returns. I think there was an arbitrage in that, uh, that existed where people could, they had shockingly big outcomes. And over time people have realized how big those outcomes can be. And have paid more and more attention to it, which has attracted more and more capital. One of the reasons I get concerned about, and I understand the, the like fundamental math that people are doing to say, Hey, if I can allocate X amount of capital, if I can expect a certain rate of return, like this is a place where I can park money and that's okay. And I don't disagree with that. Like people are, are welcome to do their best in whatever capital allocation strategy they want. The reason I am worried about the sort of excess capital is because there aren't really like Guardrails are good standards of excellence before, right? It's again, this idea that like enough money can hide a multitude of sins, right? Like we've seen it over and over again of bad products, bad go to mark…

AI assessment note: “I agree with, I agree with that. I think that one of the reasons”

Q Tell me, what's your biggest miss and how did it change how you think?

A Back in the day, we passed on Coinbase at 1.5 billion and still absent, you know, you look at the market cap, it's definitely a big up and down. But for me, the reason I think about that pass specifically in that, that missed opportunity is because I, I, the failure was a failure to imagine a colossal shift in user behavior, like how, how big those shifts can be when they happen. And there's still a question to be had about, like, what is going to happen? You know, we went through this crazy bull market. There was a lot of, you know, speculation. I think that it's still around to stay. For me now, when I think about my, like, what do you have to believe equation? I just wrote an article about this. I, I try frequently to ask myself, what's something that I strongly believe right now that I'm probably wrong about? And to try and constantly call into question those activities, because I had such a strong belief in the consumer shift not happening for Coinbase. And I think it has.

AI assessment note: “Back in the day, we passed on Coinbase at 1.5 billion”

Q Is the growth market better or worse in 12 months and why?

A The growth market is likely to be better in 12 months. Only if you see that shift I talked about with founders, there has still, I think, not been a reality check of what valuations really mean fundamentally. If that reality check continues to occur, like, I think if progressively founders recognize what that means, I think that the growth market can improve. Uh, it's going to come down to earth. Valuations are going to be a lot lower. Um, it's still going to be hard to fundraise, but it's not going to be what it is right now. What it is right now is you have two sides of the party. One still convinced that they can get a billion dollar valuation for, you know, cause it, before it was three to five million of revenue could get you a billion dollar valuation or pre-revenue. Now it's like, but we've got ten million, we've got fifteen million. We want a billion. Like, That mentality. And then you've got a bunch of investors that are again, sort of chickens with their head cut off, running around, having no idea how to price anything. Both of those things I think are going to improve over time. Investors are going to get more thoughtful about valuations. Founders are going to be more thoughtful about what does valuation mean to them and what is success versus what they wish they could get.

AI assessment note: “The growth market is likely to be better in 12 months.”

Q How did you get involved in the Rome app community? I heard this was one I had to ask.

A Um, I have been an obsessive note taker in my life, and there, I, there's a scripture that I, I jokingly quote, it's, um, whatsoever you record on earth shall be recorded in heaven. Like, I am a dogmatic note taker, And I'd never found something that works the way my brain works. And I was watching this YouTube video with Tiago Forte and he was interviewing Connor. And I felt like I had stumbled on a profit. Uh, like I DM'd him. I had to talk to him. Our first call, very unorthodox. It was, he was, uh, shotgunning whiskey and Red Bull and lighting a cigarette with a blowtorch. Definitely one of a kind founder call. Um, but I, I mean, I went on to do a hundred personal Rome tours because I just love the product so much. And I'm still to this day, an hourly active user.

AI assessment note: “I was watching this YouTube video with Tiago Forte and he was interviewing Connor.”

Q quick fire at the end, But you've worked it, as you said, TCV Index Co. Two, um, in quite a short amount of time, Kyle. So my question to you is, uh, we're gonna go through each one, and just go for one lesson from each, and how it changed your mind in a quick fire. So if we start with TCV, lesson, and how did it shape your mindset?

A Yeah. So, uh, yeah, I mean, TCV, then KOTU, then index. It's a very different, it's a, it's a real smattering of opportunities. And TCV, I credit a lot where I learned a significant amount. I mean, I, I was very drinking from the fire hose, you know, baptism by fire kind of stuff. And TCV has changed a lot since I was there. When I was there, it was, uh, very much like a private equity style of investing. It was, it was really looking for diamonds in the rough. And the people at TCV were never afraid to get their hands dirty. Um, and for me, that really changed my perspective of what it means to be an investor. Like the way that I think about it is it's actually funny. I've really never resonated. I never really liked the like meme-ification of venture. Um, because my whole career I've had this, like, we do the work attitude that I learned at TCV. Um, and so I, I, I don't ever feel like I would passively say, Hey, let me know how I can be helpful. You know, I just started doing stuff. And then I go to the founder and I say, hey, I did this and that, and is that your top priority? If not redirect me, what else can I do? And that was definitely a big part of TCV.

AI assessment note: “we do the work attitude that I learned at TCV”

Q Chapeau, my friend. Um, uh, I want to talk about so-so venture firms. I, I, people think I'm like this Charlie and the Chocolate Factory on venture. I'm not. I'm like the most cynical on venture. I think most venture firms are actually really, really substandard and poor. I want to understand what do you define as so-so venture firms? What makes them average to you?

A Yeah, I joke. It's kind of the, you know, the line where they say, we know that half of our marketing budget is wasted. We just don't know which half. Uh, it's kind of the same thing with venture funds. Probably 80% plus of venture funds are not great. We just don't always know which ones they are, right? When, when I think about, and I think that a lot of those, a lot of firms are, are trying to be, um, those good firms. I think it's just, it's had this sort of cottage, cottage industry vibe for so long that it's allowed people to just be very, you know, substandard and just doing their own thing. In my mind, the characteristics that I look at when I think about like, what does it mean to be so-so? The three buckets that kind of come to mind for me. I mean, one is, I mean, it's, it's pretty straightforward, right? It's economic performance. And, and Doug Leone said this, uh, with you last September, it's a quote that I use a lot. Um, where he talks about the two most important things are number one performance and number two teamwork. But if we don't have number one, nothing else matters. It doesn't matter what three or four or whatever is performance is critical. And, and there are firms out there and, and, you know, it definitely, it takes a long time for these things to sort of catch up with you. But there are firms out there that even in this massive bull market that we've…

AI assessment note: “one is, I mean, it's, it's pretty straightforward, right? It's economic performance.”

Q Tell me, what's your biggest miss and how did it change how you think?

A Back in the day, we passed on Coinbase at 1.5 billion and still absent, you know, you look at the market cap, it's definitely a big up and down. But for me, the reason I think about that pass specifically in that, that missed opportunity is because I, I, the failure was a failure to imagine a colossal shift in user behavior, like how, how big those shifts can be when they happen. And there's still a question to be had about, like, what is going to happen? You know, we went through this crazy bull market. There was a lot of, you know, speculation. I think that it's still around to stay. For me now, when I think about my, like, what do you have to believe equation? I just wrote an article about this. I, I try frequently to ask myself, what's something that I strongly believe right now that I'm probably wrong about? And to try and constantly call into question those activities, because I had such a strong belief in the consumer shift not happening for Coinbase. And I think it has.

AI assessment note: “passed on Coinbase at 1.5 billion and still absent, you know, you look at”

Q quick fire at the end, But you've worked it, as you said, TCV Index Co. Two, um, in quite a short amount of time, Kyle. So my question to you is, uh, we're gonna go through each one, and just go for one lesson from each, and how it changed your mind in a quick fire. So if we start with TCV, lesson, and how did it shape your mindset?

A Yeah. So, uh, yeah, I mean, TCV, then KOTU, then index. It's a very different, it's a, it's a real smattering of opportunities. And TCV, I credit a lot where I learned a significant amount. I mean, I, I was very drinking from the fire hose, you know, baptism by fire kind of stuff. And TCV has changed a lot since I was there. When I was there, it was, uh, very much like a private equity style of investing. It was, it was really looking for diamonds in the rough. And the people at TCV were never afraid to get their hands dirty. Um, and for me, that really changed my perspective of what it means to be an investor. Like the way that I think about it is it's actually funny. I've really never resonated. I never really liked the like meme-ification of venture. Um, because my whole career I've had this, like, we do the work attitude that I learned at TCV. Um, and so I, I, I don't ever feel like I would passively say, Hey, let me know how I can be helpful. You know, I just started doing stuff. And then I go to the founder and I say, hey, I did this and that, and is that your top priority? If not redirect me, what else can I do? And that was definitely a big part of TCV.

AI assessment note: “my whole career I've had this, like, we do the work attitude that I learned at TCV.”

Q of three incredible firms there, but from, you know, the, the prior generation bluntly, I want to talk about the current landscape that we have in venture today. And you've said before, uh, and you said in an email, I love this, uh, differentiation is going to kill the long tail of so, so venture firms. It was great cliffhanger, by the way. Um, what did you mean by this?

A So, uh, Josh Wolfe made this Prediction. Um, back in February, he said that, you know, he, in his prediction between 50 and 75% of active investors in the private markets are just going to disappear within the next few years. And for me, the way that I think about that, about the other sort of, what is a so-so venture firm? What is differentiation? Really? People are starting to care more and more about the holistic character, uh, of the, of these institutions that they work with. Right. Um, you know, reputable bank may not be enough to acquire customers anymore. Like people care a lot more about what the identity of this firm is. And I think founders are progressively going to look for more distinct characteristics in the firms that they work with. And I define that as differentiation, right? Is how, how capable is somebody externally able to articulate you as a firm? And if you can't answer that question very clearly, uh, it's going to get harder and harder and harder. And so I think the ways that firms look to differentiate themselves is going to get progressively more interesting.

AI assessment note: “I define that as differentiation, right? Is how, how capable is somebody externally”

Q Not everyone agrees, but you know, they're wrong and we don't pay attention to anyone who disagrees with us. Um, uh, final one then. Index. How did that shape your mindset?

A Yeah. So, and again, I mean, I sound like Goldilocks, right? I was, I was jumping around, testing out, just finding what's just right for me. Index, the way that I think about index, it's a little bit different. It's not just the way that it, like, there's not one thing that impacted my way of thinking about investing. For me, I felt like index was like graduate school in venture capital. Like there was so much, and maybe this was my mindset, but even before I joined index, I'd already started, you know, remember I'd started a company before. I didn't know to call it a company. Now I knew what a company looked like, what a startup looked like. And I started to feel this entrepreneurial itch, but I liked investing too much. And so when I think like, well, should I go start a company? Should I go join a company? I really like investing. I don't think I want to leave it. But so I was in this like opportunity canvassing mindset and I sort of like directed that energy at venture. And so while I was at index, I was constantly paying attention to how we did things and studying the way that we did things. So how do we make decisions? How do we incentivize people to take risks and build relationships and stuff like that? And a lot of that study, it comes out in my writing, right? It's the reason that I write about like, what is the art and science of venture? It's because I felt like I …

AI assessment note: “For me, I felt like index was like graduate school in venture capital.”

Q Who do you think has done that best?

A I'm not going to toot your horn. You're doing pretty good. You're doing pretty good yourself. The move into TikTok was, was spades. That was pretty good. I think that when I think about, cause there, there's also this element of like community, right? We've talked about community. I think that there are people who do community really well, right? I look at, I look at Y Combinator and there's no question that they've built a generational community. I think that, and, you know, folks like Gary and stuff stepping into that role, like, I think that they're going to continue to just be amazing. But I think the opportunity that exists right now is to create a really, um, like an ongoing relevance in the relationship that you have with somebody. It's not a one and done kind of thing, right? Even YC, most people talk about it like, yeah, I was in the summer, 20, 20 cohort or whatever, right? The summer, 20, 20 badge. Um, but to, to stay relevant, like that's a relationship to be part of a program. It's sort of you're in it and then you're out of it. And, uh, what fond memories we have to stay relevant throughout someone's life. That's having a relationship with them because you continue to be relevant to them. Um, candidly, I don't, I don't know that anybody is doing that well.

AI assessment note: “candidly, I don't, I don't know that anybody is doing that well.”

Q Yeah, no, listen, I totally agree. Speaking of, kind of, compounding effects and power, there was something that we, kind of, went back and forth on before on emails, and it was your concern about the blackstone of innovation, and I thought it was really interesting, kind of, phrasing. What did you mean by the blackstone of innovation, and why are you concerned about it?

A So I'd credit Gabby Goldberg is the one who first she and I riffed on this idea back and forth. And I thought it was, is, is super interesting. And so I read the biography of Steven Schwartzman, the founder of Blackstone a couple of years ago. And there's this quote that really struck me where he talks about how they build businesses. And the idea was basically like, if we come across the right person to scale a business in a great investment class, Why not? We can apply our strengths, our network, our resources, whatever. And like, they're so focused not on being like a very, we're not just a private equity firm, we're not this, we're not that, we're everything. And now they're effectively a holding company for financial asset class, right? And like, eight hundred billion of AUM, they've got private equity, real estate, hedge funds, credit funds, whatever. They're constantly just, they think of it almost like exposure. And I feel like, so somebody, I don't remember who, but somebody said this idea that building a business Like, 80% or something of building a business is kind of the same thing across the board. It's that 20% that's super unique to the company and the market and the circumstances that is kind of the secret sauce. And if that is true, I feel like Blackstone has done a really good job of figuring out what the 80% is, is they've just built this, like, infrastructur…

AI assessment note: “Blackstone has done a really good job of figuring out what the 80% is”

Q What are the biggest changes that you've seen post the correction that we've had over the last six months? I tweeted the other day about some trends I've observed. What are some big changes you've seen?

A The first one that comes to mind is what I would describe as almost like a, a suspension of your own criticism. Like, I think like we went through such a phase of people just pumping everything they possibly could rampant intellectual dishonesty, all these different things. And I'm surprised. I thought that it would be more humbling for more people I think that there's been this sort of, like, suspension of criticism. Like, people are desperately trying to avoid having to come to grips with what they did, basically, like, with what a lot of people did over the last couple years. That worries me a lot, because I think that, like, this is a great opportunity to sit back and reflect on what should we have done differently, what could you have done differently, whatever. Um, so I, I think I expected a little bit more of the, like, you know, mea culpa. Um, and there's not been Much of that at all. So that's, that's certainly a trend of like people just trying to move on to the next thing or whatever. The second thing I think is that companies are more thoughtful about, about like what matters most in the way that they build their business from a storytelling perspective. Like, I think that before it was just this idea that like, Hey, like if you almost, if you have a pulse and you have some indication of an interesting market or whatever, there's going to be enough people that get j…

AI assessment note: “The first one that comes to mind is what I would describe as”

Q Who do you think has done that best?

A I'm not going to toot your horn. You're doing pretty good. You're doing pretty good yourself. The move into TikTok was, was spades. That was pretty good. I think that when I think about, cause there, there's also this element of like community, right? We've talked about community. I think that there are people who do community really well, right? I look at, I look at Y Combinator and there's no question that they've built a generational community. I think that, and, you know, folks like Gary and stuff stepping into that role, like, I think that they're going to continue to just be amazing. But I think the opportunity that exists right now is to create a really, um, like an ongoing relevance in the relationship that you have with somebody. It's not a one and done kind of thing, right? Even YC, most people talk about it like, yeah, I was in the summer, 20, 20 cohort or whatever, right? The summer, 20, 20 badge. Um, but to, to stay relevant, like that's a relationship to be part of a program. It's sort of you're in it and then you're out of it. And, uh, what fond memories we have to stay relevant throughout someone's life. That's having a relationship with them because you continue to be relevant to them. Um, candidly, I don't, I don't know that anybody is doing that well.

AI assessment note: “candidly, I don't, I don't know that anybody is doing that well.”

Q Question. Did you invest too fast in this boom period? And did you lose price sensitivity? I lost both.

A I think at different points in time, I invested too fast. Price sensitivity, I think is the thing. I would say that my bigger mea culpa that I look at is like appreciating the The, uh, weight of gravity of what it means to build a massive company. So the way that I think about this is like the number of, again, I'm, I'm investing sort of at the later stages, the number of models that we built to be able to justify certain valuations, uh, the number of them scaling to over a billion dollars of revenue over the course of four or five years to say, well, if they scale to over a billion in revenue, Then this is the return and it can be a very healthy return. And that's our base case, you know, and it's like, that's an insane base case. Like when I step back and think about how many companies in the, in the literally hundreds of thousands of startups in the world that exist, that have existed, how many of them have scaled to over a billion dollars of revenue, like 203 hundred or something, right? Like it's a tiny fraction of companies that have truly gotten to that massive Scale. And so when you, when you step back and think about that, I think that was the thing that like I used too easily to just say, well, if we can paint the most optimistic financial picture, sure. Anything makes sense. And now I often find myself reflecting on that and thinking like, I want to go compare this t…

AI assessment note: “I think at different points in time, I invested too fast.”