The Exchanges

Q I've been shocked by how much focus LPs still place on TVPI. Like, you know, I speak to a lot of LPs, and I thought, given the last few years, they would reduce the importance of TVPI and just focus on TVPI. No, that's still like, oh, wow. I'm like, really? You still give a shit about that?

A No, they should actually. In this, you know, I had this tweet and back and forth with Ibrahim Ajami of Mubalala, you know, that the DPI is what matters. And that's true. If you didn't take money off the table during, you know, the ZERP era, there's something wrong. Let's just be clear about that. But TVP actually matters because I had this conversation with one of our LPs at our, at our annual meeting, which is if the thing is compounding at a high rate and keeps going, that's not a bad thing. And I can kind of think through if I kind of, uh, wait another two or three years that this will be worth a significantly larger amount of money. The question is one level beneath TVPI, which is how real is it and how sustainable is it? People in the venture business, and this goes back to the previous competition in conversation about competitive, uh, markets versus non-competitive markets underestimate, um, Moats on businesses, the value of moats and competitive advantage on business. There is insufficient time spent on how do I deepen competitive advantage in this business. To take a financial rendering of this, multiple is my expectation for future cash flows. So the question of future cash flows is not just how much cash it is per year, but how many years this goes on for. How many years this goes on for is a function of competitive advantage. So you need to think through how deep my…

AI assessment note: “No, they should actually. In this, you know, I had this tweet”

Q Can I just ask, when you say called up, what does being called up and being in reserve mean? Does it mean literally kind of Ready and waiting to go at home? Does it mean they have to leave home? And can you talk about your son? I hope it's okay for me to ask, but you mentioned your son before we started.

A So on Saturday, uh, morning in Jerusalem at eight something, the air raid sirens went off. Uh, we all went back and turned on our phones because as a Sabbath observer, I actually don't keep my phone on, uh, on the Sabbath, but we went home and turned on our phones and our boys, uh, one who's in, uh, standing military service, uh, And another one was in reserve duty, got immediate messages, one to be on standby, and one to get his gear together and come. Um, and so, uh, we drove my, the younger one, that morning, uh, to meet his unit and to meet the buses, and he was taken, uh, to the border. Actually, he was first taken north to get his gear, and then taken to the border, uh, to go there, all his fighting gear. And then my second son, another son, was, was called up later in the day. He drove from here to his home, because he doesn't live at home. He said goodbye to his pregnant wife, gave her a hug, then went to his base to meet his unit. Uh, his reserve unit, um, and they've been getting all their gear together, and that's, that's what it means to go to reserve duty, and I was, I was down south yesterday for a bunch of hours, and I saw people actually haven't seen, well, I generally see a lot, I haven't seen in a long time, and we're all giving each other big smelly hugs. I get to shower because I'm at home, but these guys have been on the front lines for days, and when I was…

AI assessment note: “and that's, that's what it means to go to reserve duty”

Q mentioned that your parents meeting in the army. I do kind of want to just end on a note of almost resilience in some way. I think it'd be nice to you. And you mentioned to me a story that I didn't know before, which was about a couple, um, Uh, kind of coming together at these times. Can you share that story about this couple, um, and what happened?

A There was a couple that was meant to get married yesterday, and the, the future husband, the fiance was called to reserve duty on the Gaza border. They decided not to cancel the wedding. Uh, the wedding was held on the Gaza border. He was in his army uniform with his gear. She was in a white dress. The groom's father is a rabbi. And they performed the ceremony surrounded by all the soldiers who were there dancing in uniform. They carried the bride and the groom on their shoulders. There's incredible pictures of the dancing there, literally on, on the border among You know, the jeeps, the tanks, the soldiers, the guns. Uh, they got married. They tied the knot and, and got married. By the way, on, on the first day of the war, I actually know of the guy. I don't know him. Father left on Saturday. In the Jewish tradition, we circumcised, uh, newborn males at eight days. His son's circumcision, called a bris, uh, was supposed to be Sunday. He wasn't gonna make it. He joined by Zoom from the border of Gaza, uh, to celebrate, and there was giant singing. Uh, there too. And that's a happy time. The circumcision is a happy time. And so we're trying as much as possible, uh, to have as many, uh, happy occasions. I met somebody, uh, who was also called a woman who was called to reserve duty. Her wedding is supposed to be today. Actually, her fiance is, uh, is not around either. She's also …

AI assessment note: “There was a couple that was meant to get married yesterday, and the, the future husband”

Q Can I just ask, when you say called up, what does being called up and being in reserve mean? Does it mean literally kind of Ready and waiting to go at home? Does it mean they have to leave home? And can you talk about your son? I hope it's okay for me to ask, but you mentioned your son before we started.

A So on Saturday, uh, morning in Jerusalem at eight something, the air raid sirens went off. Uh, we all went back and turned on our phones because as a Sabbath observer, I actually don't keep my phone on, uh, on the Sabbath, but we went home and turned on our phones and our boys, uh, one who's in, uh, standing military service, uh, And another one was in reserve duty, got immediate messages, one to be on standby, and one to get his gear together and come. Um, and so, uh, we drove my, the younger one, that morning, uh, to meet his unit and to meet the buses, and he was taken, uh, to the border. Actually, he was first taken north to get his gear, and then taken to the border, uh, to go there, all his fighting gear. And then my second son, another son, was, was called up later in the day. He drove from here to his home, because he doesn't live at home. He said goodbye to his pregnant wife, gave her a hug, then went to his base to meet his unit. Uh, his reserve unit, um, and they've been getting all their gear together, and that's, that's what it means to go to reserve duty, and I was, I was down south yesterday for a bunch of hours, and I saw people actually haven't seen, well, I generally see a lot, I haven't seen in a long time, and we're all giving each other big smelly hugs. I get to shower because I'm at home, but these guys have been on the front lines for days, and when I was…

AI assessment note: “and that's, that's what it means to go to reserve duty”

Q ask, you mentioned the deal dynamics and like, that was an expensive round one would call it for first round of any company. How do you think about price sensitivity today? It's one where I'm constantly looking at prices going, it's what? And today more than ever, I'm questioning my own price sensitivity. What advice would you have for me and how do you think about price sensitivity for yourself?

A My benchmark partner, Peter Fenton used to be firmly of the view. It doesn't matter what price you get in that matters, what price you get out at. And I hear that for what it's worth. So I've come with a different heuristic to it, which is if the founder wants my money based on price, I'm not doing the deal. And so that may sound obnoxious, but I actually think it's become a view of how the founder thinks about the world. Eventually, if this works out, everyone gets paid and we make a big impact. You want founders who optimize For the help and network that they can get from their investors rather than who are optimizing on the price. And so Daniel and Shai could have gotten a much higher price probably than they got from me. I said to them, what's the right and fair price you think? And I'm going to tell you yes or no. And they said it and I hit it. Was it high? I don't know. It doesn't matter. We weren't optimizing for price. They could have gotten a higher price. That's how I think about the problem.

AI assessment note: “if the founder wants my money based on price, I'm not doing the deal.”

Q now, and We have one side of the table that says, no, this is the most transformational technology that we've seen in 20 years, and we have another side of the table that says this is completely nuts, the valuations are crazy, the amount of cash that's being burnt is crazy, this is peak. How do you just think about that from a starting point before we do a comparison?

A One of the hardest things to do in the venture business is hold, and in life, by the way, is to hold two truths in your head at the same time. I think both of those things are true. This is the most transformational technology I think I will ever see in my lifetime. Um, and at the same time, uh, there is like happens with many transformational technologies. It's just an incredible gold rush that brings in a lot of people. Both of these things are true. You know, when the internet came on, uh, and I was starting my venture career, this is in. It was, it was incredible. I mentioned to you before we came on air. The first deal I did was called picture vision and it was an online photo sharing when there were still cameras with film and negatives. You have to actually scan the negatives, uh, in order to send the pictures, you upload them, it looked like paint drying. Uh, upload, upload the pictures. And then there was pets.com and pets.com.com and pets.com.com.com because there's an incredible gold rush, but the internet, eBay, Amazon, et cetera, turned out to be incredible companies. And I think the same will be true about AI, which is by the way, a giant bucket that we need to kind of break apart. And then, you know, right after the .com thing, people have forgotten, but there was like a fiber optic craze. Everyone's forgotten because it's called the .com crash, but there was a f…

AI assessment note: “I think both of those things are true. This is the most transformational technology”

Q Do you think these are even businesses though for venture? They are so cash consumptive. We also have, um, Irrational financial buyers and investors, who are obviously large corporates, who have different motives to venture investors. Do you think validation models are even an asset class that venture investors can make money in?

A Yes. I don't think we should think about anything in the venture or startup business as an asset class. There are asset classes out there like commercial real estate. You can make money in a class. The venture business is completely sui generis. It's not a class. There is a small number of people in this craft who make money, and there's a small number of startups. You know, the S&P. 500 has kind of kept going up on the back of four companies who are venture backed. And these are incredible generational companies that have pushed forward. The rest of them are kind of, you know, trailing behind. And we just need to focus on the question of are all of these just incredible companies that will land their themselves into some index and some fortune, uh, some S and P 500 that works. I think the answer is no. And so this is not a class of companies foundation models. There is, there are one or two companies. In there that will make their venture investors a lot of money and the rest of them will cost their LPs and GPs a lot of money. It's just life. It's what it is in this business.

AI assessment note: “one or two companies. In there that will make their venture investors a lot”

Q Listen, I want to move into a quick fire, so I say a short statement. What have you changed your mind on most in the last 12 months, Michael?

A I was concerned about younger people being too absorbed in TikTok and Instagram, and watching what happened in Israel over the last 12 months, and how the younger people went out to fight for what mattered, fight for their brothers and sisters, and fight for women who were raped. I think younger people, uh, particularly in Israel, but maybe elsewhere, are going to surprise us, and this is going to be an incredible generation who's going to be forced to stand up and fight, because, you know, Israel's one place, but there's Ukraine, And there's more of this going on around the world right now. We saw what happened in Germany last week. Um, and so I think younger people are going to surprise us.

AI assessment note: “I was concerned about younger people being too absorbed in TikTok and Instagram”

Q Three components of venture, just saying. Um, where do you think you're best and worst? So Keith Raboy on the show said he's worst at sourcing, and as time, relevance, and that sourcing is his biggest challenge. How do you think about sourcing?

A I've stopped sourcing. I, I, I get all my deals right now through referrals of 30 years of being in this business. And so I actually don't do proactive sourcing anymore. I don't know if I was good at it or bad at it, but I don't do it anymore. Uh, I need to do two or three deals a year. There's enough that come my way that I think are super interesting that I don't do that anymore. I don't think I provided enough kind of management help to companies cause I don't know how to manage my way out of a paper bag. Um, I think where I, uh, do better on average is networking. I, I have large global network and I think that it's valuable. I think if you're, If you have good chutzpah, and are not bashful, and you know enough people, you can reach anyone in the world, and I think that's valuable. I get, I had to get the CEO of a Fortune 10 company in the last four to eight hours. It took two hops.

AI assessment note: “I've stopped sourcing. I, I, I get all my deals right now through referrals”

Q Do you think these are even businesses though for venture? They are so cash consumptive. We also have, um, Irrational financial buyers and investors, who are obviously large corporates, who have different motives to venture investors. Do you think validation models are even an asset class that venture investors can make money in?

A Yes. I don't think we should think about anything in the venture or startup business as an asset class. There are asset classes out there like commercial real estate. You can make money in a class. The venture business is completely sui generis. It's not a class. There is a small number of people in this craft who make money, and there's a small number of startups. You know, the S&P. 500 has kind of kept going up on the back of four companies who are venture backed. And these are incredible generational companies that have pushed forward. The rest of them are kind of, you know, trailing behind. And we just need to focus on the question of are all of these just incredible companies that will land their themselves into some index and some fortune, uh, some S and P 500 that works. I think the answer is no. And so this is not a class of companies foundation models. There is, there are one or two companies. In there that will make their venture investors a lot of money and the rest of them will cost their LPs and GPs a lot of money. It's just life. It's what it is in this business.

AI assessment note: “There are one or two companies. In there that will make their venture investors a lot”

Q So listen, we have Mark Souster on the show and he said, listen, PE will be the primary buyers for the next generation of software companies. I just want to touch on a couple of different components that you mentioned that you said about the cost of capital. How does that impact how they think about buying? For people that don't know.

A It drives prices down. Increased cost of capital drives multiples down. Just what it does. When interest rates go up, multiples go down. It's the laws of physics. And so they'll pay a lower multiple because their cost of capital is higher. And, you know, people are just not going to get liquid the way they think they are. And the top part of the capital, this happened by the way, in, oh, 2000, oh one, oh two, oh three, oh four. The top part of the cap table got his Lickpref back. People have forgotten the Lickprefs matter. And they got their Lickpref back. In some cases, there used to be an eight percent coupon on these things. Many cases now there isn't. They took an eight percent coupon, and then what was left went to the rest of the cap table.

AI assessment note: “It drives prices down. Increased cost of capital drives multiples down.”

Q The kind of canonical advice is, wow, sell 33% at a time in increments. Um, selling all of a position is respectfully a strange take. Like, I would never sell all of the position, Michael. I would sell 80%, maybe, even when I Didn't believe, but I would still want to ride the upside on 20% in case I was wrong. How did you think about that a hundred percent?

A You asked me before we got on the show, what was the biggest mistake I made during ZERP? One of them was not selling a hundred percent of one or two positions when the prices were, were high. I'm actually in the opposite camp generally, which is ride your winners. That's my, the general camp I'm in. I think the question you need to ask yourself if you're a venture capitalist and you sit on the board is, do I have An information advantage or a unique insight that somebody else does not have. And if I think I have that, I should act on it. And if I should act on it, I should act on it with conviction. It's like when I go into companies, I don't want to have position. If I have conviction, I'm going to take a whole position. This business is out an outlier business. It's just the nature of it. So take the whole position. And if you think you've hit a good return, take the money off the table. I don't think you average into positions in the venture capital business. You do it right in the public market, so you kind of average into a position and then average out of a position. I, I don't think this is like this. This is a binary industry. Very, very binary, uh, investments, and I'm, I'm in that binary camp.

AI assessment note: “This is a binary industry. Very, very binary, uh, investments, and I'm, I'm in that binary camp.”

Q I've been shocked by how much focus LPs still place on TVPI. Like, you know, I speak to a lot of LPs, and I thought, given the last few years, they would reduce the importance of TVPI and just focus on TVPI. No, that's still like, oh, wow. I'm like, really? You still give a shit about that?

A No, they should actually. In this, you know, I had this tweet and back and forth with Ibrahim Ajami of Mubalala, you know, that the DPI is what matters. And that's true. If you didn't take money off the table during, you know, the ZERP era, there's something wrong. Let's just be clear about that. But TVP actually matters because I had this conversation with one of our LPs at our, at our annual meeting, which is if the thing is compounding at a high rate and keeps going, that's not a bad thing. And I can kind of think through if I kind of, uh, wait another two or three years that this will be worth a significantly larger amount of money. The question is one level beneath TVPI, which is how real is it and how sustainable is it? People in the venture business, and this goes back to the previous competition in conversation about competitive, uh, markets versus non-competitive markets underestimate, um, Moats on businesses, the value of moats and competitive advantage on business. There is insufficient time spent on how do I deepen competitive advantage in this business. To take a financial rendering of this, multiple is my expectation for future cash flows. So the question of future cash flows is not just how much cash it is per year, but how many years this goes on for. How many years this goes on for is a function of competitive advantage. So you need to think through how deep my…

AI assessment note: “No, they should actually... But TVP actually matters because”

Q For boards that are done in 45 minutes, what is the prep that is done? Is it a Google Doc with three core questions that people think about ahead of time?

A It's generally a letter and not a presentation. It's rich in data, but it up front identifies these are my core one, two, or three strategic issues that I gotta get board input on. And, ah, you prep for it, you do calls beforehand, and then the conversation is super concentrated. And because you're attacking the question, I find that people don't, kind of, don't expand. All these boards, they show endless amounts of numbers, and people, you know, want to dig in on the margins, and they show a product plan, and everyone wants to be the product manager on the board. It's like, just no. I'm getting cranky about this, and I probably should moderate my behavior, so there's another area for, for, for improvement.

AI assessment note: “It's generally a letter and not a presentation. It's rich in data”

Q Listen, I want to move into a quick fire, so I say a short statement. What have you changed your mind on most in the last 12 months, Michael?

A I was concerned about younger people being too absorbed in TikTok and Instagram, and watching what happened in Israel over the last 12 months, and how the younger people went out to fight for what mattered, fight for their brothers and sisters, and fight for women who were raped. I think younger people, uh, particularly in Israel, but maybe elsewhere, are going to surprise us, and this is going to be an incredible generation who's going to be forced to stand up and fight, because, you know, Israel's one place, but there's Ukraine, And there's more of this going on around the world right now. We saw what happened in Germany last week. Um, and so I think younger people are going to surprise us.

AI assessment note: “I was concerned about younger people... I think younger people... are going to surprise us”

Q What were your big lessons specifically on reserves management that you'd advise others when it comes to reserve allocations thinking with bust in mind?

A So there's a few elements you need to kind of unpack here. One is reserves is an art and not a science. It's impossible to know what kind of comes in and out of favor, what people want to invest, et cetera. So I think it's more art than science. The second part of this is it informs our investment strategy in general at Olive, which is a lot along the lines of benchmark, which is we like to work with partners. And that means we are a single stage, basically seed and a fund. We're not doing the big, big fund with the multi-stage thing where I think you have a lot more risks around reserves and around signaling risk when times go get bad. And so we end up with a larger and broader partner network that we always play nice in the sandbox with because in bad times you need them there too. And in good times, and specifically if you're kind of piling money into companies early stage and not leaving room for other people, When times go bad, they're not there to help you either, and when times go bad, you actually need that help, and so that's informed strategy as well from the fund, and then I think the third element, which is perhaps very nuanced, is busts are psychologically impactful far more than they're financially impactful. It takes people a long time to realize you're in a bust, and then even longer time to come out the other side, and that's true of founders. It's true of most…

AI assessment note: “reserves is an art and not a science”

Q lemonade and I spoke to Bruce Dunleavy before this And he said many wonderful things, and then I also spoke to Bill Gurley actually, and this is a quote from Bill. He said, you're the most dogged board member he's ever had the joy of working with. And so I'd love to hear, how do you think about your own board management style, and how has it evolved over time?

A Really good question. So you mentioned Bruce. The guy is the biggest gentleman and mensch in this business by a long shot, and has unbelievable wisdom. And one of the things he taught me earlier in my career, he used a basketball analogy, where He said, you know, if you're constantly pushing up against the center, so he's pushing back at you and it's hard to push him out. If sometimes you take a step back and let him fall on his own weight, that's a better approach. And one of the things you learn from that is you have to let people come to their own conclusions over time. And a big difference between my early board membership and my later board membership is do you push back hard all the time? Or is this kind of a slow evolve where you enable people to come to what are their own conclusions that are maybe influenced by yours? He often says it's an influence business. And he's the smartest board member I've probably worked with. And so I think there's a view of venture capitalists in many cases that they don't work that hard around the board table. I've always had the belief that one, if you want to work with the best entrepreneurs, you need to work hard and you need to kind of stay in the game and be as knowledgeable or more so than anybody else around the table. I don't know if I'm dogged, but I think a big job of the board member is to have a network that's not necessarily a…

AI assessment note: “a big difference between my early board membership and my later board membership is”

Q It's always my favorite chat. So I, I get you and I, I agree in many respects. I do just want to break down then when you look at AI, you said that we put it in a bucket and like, what does that actually even mean? How should we break down that bucket and how do you break down that bucket when you think about investing in it today?

A So look, we invest only in Israel and we've had a theory You know, we should back up one step, which is AI, AI, AI. The real moment is the LLM moment, which is, AI has been around for a while. Like, in 2013, we invested in a company called Windward, which is now traded in London, which does maritime AI. That's just since 2013. 2015, I invested in Lemonade, which was AI for insurance. We said bots, not brokers, before bots were fancy. Ok, what's happened the last two years or so is the emergence of the LLM, which is yet another leg up, uh, or A different way to kind of prosecute, uh, AI. AI itself is not new. When you think about that for a second, the bucket we look at, we invest only in Israel. We asked, can Israel do foundation models? We said, no. And we've said that for a very long time. Why? Because a lot of this comes out of academia, comes out of a lot of these very large companies. We didn't think there was a talent density in Israel specifically for foundation models. Uh, because a lot of the Israeli technology comes out of the military and not academia. You know, why is France so good all of a sudden at AI? Because of academia. And what we said was, what we want to do is applied AI. And what we want to do is kind of full stack stringing through the system of AI.

AI assessment note: “We asked, can Israel do foundation models? We said, no... what we want to do is applied AI.”

Q Oh, thank you so much, and that means the world to me, but I do want to start with a little bit on you, because you have a few more years in this business And so I want to start with that, and so how did you make your way into the world of venture, and then how did Aleph come to be?

A So I don't have the typical career path, I would call it. I graduated in 1993 with a degree in political science, kind of barely getting my way through college, because I was editing the college newspaper at the same time, and I moved to Israel and got married right after I graduated, and so within eight weeks, you know, I got a new job, which was in political consulting, and got married and moved to Israel from New York, where I grew up, Started my career in political consulting for a year and a half, and I like to say I repented from that experience, because no one told me that actually politicians come and go from office, and the people we were working for would stop paying us. And I found myself summarily fired, but not knowing it, because the firm was in Boston, and I was in Israel, and it wasn't this kind of internet era. An email barely worked in my apartment in Jerusalem at the time. And I found myself unemployed and couldn't figure out what to do, and I couldn't get a job. That's the truth. And I was unemployed for months, and my previous employer still to this day owes me a fair amount of money. So I ended up starting something, and it was the early days of I was a tech and venture capital in Israel, and I persuaded a firm that people you already don't even know who they are anymore named Montgomery Securities. Okay, open a paragraph. This is important about the histo…

AI assessment note: “I somehow persuaded them through endless calling to hire me”

Q Oh, thank you so much, and that means the world to me, but I do want to start with a little bit on you, because you have a few more years in this business And so I want to start with that, and so how did you make your way into the world of venture, and then how did Aleph come to be?

A So I don't have the typical career path, I would call it. I graduated in 1993 with a degree in political science, kind of barely getting my way through college, because I was editing the college newspaper at the same time, and I moved to Israel and got married right after I graduated, and so within eight weeks, you know, I got a new job, which was in political consulting, and got married and moved to Israel from New York, where I grew up, Started my career in political consulting for a year and a half, and I like to say I repented from that experience, because no one told me that actually politicians come and go from office, and the people we were working for would stop paying us. And I found myself summarily fired, but not knowing it, because the firm was in Boston, and I was in Israel, and it wasn't this kind of internet era. An email barely worked in my apartment in Jerusalem at the time. And I found myself unemployed and couldn't figure out what to do, and I couldn't get a job. That's the truth. And I was unemployed for months, and my previous employer still to this day owes me a fair amount of money. So I ended up starting something, and it was the early days of I was a tech and venture capital in Israel, and I persuaded a firm that people you already don't even know who they are anymore named Montgomery Securities. Okay, open a paragraph. This is important about the histo…

AI assessment note: “I persuaded a firm that people you already don't even know who they are anymore”

Q The kind of canonical advice is, wow, sell 33% at a time in increments. Um, selling all of a position is respectfully a strange take. Like, I would never sell all of the position, Michael. I would sell 80%, maybe, even when I Didn't believe, but I would still want to ride the upside on 20% in case I was wrong. How did you think about that a hundred percent?

A You asked me before we got on the show, what was the biggest mistake I made during ZERP? One of them was not selling a hundred percent of one or two positions when the prices were, were high. I'm actually in the opposite camp generally, which is ride your winners. That's my, the general camp I'm in. I think the question you need to ask yourself if you're a venture capitalist and you sit on the board is, do I have An information advantage or a unique insight that somebody else does not have. And if I think I have that, I should act on it. And if I should act on it, I should act on it with conviction. It's like when I go into companies, I don't want to have position. If I have conviction, I'm going to take a whole position. This business is out an outlier business. It's just the nature of it. So take the whole position. And if you think you've hit a good return, take the money off the table. I don't think you average into positions in the venture capital business. You do it right in the public market, so you kind of average into a position and then average out of a position. I, I don't think this is like this. This is a binary industry. Very, very binary, uh, investments, and I'm, I'm in that binary camp.

AI assessment note: “if you think you've hit a good return, take the money off the table.”

Q or nation can hold and leverage in a, in a case of war, and we should have closed systems as a result, open systems. Would mean that our biggest enemies, Russia, China, are able to access the same levels of technology that we are. We have to close the systems and we have to leverage AI to build AGI to win wars. Do you, do you agree with that perspective?

A I agree with it in part. I think it is true that AI is likely to be a key competitive advantage in wars. Uh, even significant. Look, we're living through a war in Israel right now. And so, uh, kind of closing the kill chain using AI is a thing, not just in Israel, it's all over the world. And there's, there's a big European company now. I was doing a few hundred million dollars of revenue that uses AI to close the kill chain for European armies and housing. Yeah. And so, um, This is, this is a real deal. I said before, if the 20th century was about nuclear countries versus non-nuclear countries, the 21st century is AI countries versus non-AI countries. We shouldn't lose sight of the nuclear ones because there's these terrible people in Iran out there, you know, who are looking to acquire a nuclear weapon. Uh, by the way, not just threaten Israel, threaten Europe. That's the key thing people don't understand. They have missiles long enough to hit Israel. They have new missiles long enough to hit Europe. And Thinking of them as an AI country is quite frightening actually, and they may be, they're very smart people there. And I think What is naive about what Alex said is that you can keep it closed. I just think it's tough. You know, the U.S. put a banner on Nvidia chips going to China. I, I don't sense that it slowed China down in a meaningful way. I think there's enough kind of …

AI assessment note: “I agree with it in part. I think it is true that AI is likely”

Q or nation can hold and leverage in a, in a case of war, and we should have closed systems as a result, open systems. Would mean that our biggest enemies, Russia, China, are able to access the same levels of technology that we are. We have to close the systems and we have to leverage AI to build AGI to win wars. Do you, do you agree with that perspective?

A I agree with it in part. I think it is true that AI is likely to be a key competitive advantage in wars. Uh, even significant. Look, we're living through a war in Israel right now. And so, uh, kind of closing the kill chain using AI is a thing, not just in Israel, it's all over the world. And there's, there's a big European company now. I was doing a few hundred million dollars of revenue that uses AI to close the kill chain for European armies and housing. Yeah. And so, um, This is, this is a real deal. I said before, if the 20th century was about nuclear countries versus non-nuclear countries, the 21st century is AI countries versus non-AI countries. We shouldn't lose sight of the nuclear ones because there's these terrible people in Iran out there, you know, who are looking to acquire a nuclear weapon. Uh, by the way, not just threaten Israel, threaten Europe. That's the key thing people don't understand. They have missiles long enough to hit Israel. They have new missiles long enough to hit Europe. And Thinking of them as an AI country is quite frightening actually, and they may be, they're very smart people there. And I think What is naive about what Alex said is that you can keep it closed. I just think it's tough. You know, the U.S. put a banner on Nvidia chips going to China. I, I don't sense that it slowed China down in a meaningful way. I think there's enough kind of …

AI assessment note: “I agree with it in part. I think it is true that AI is likely”

Q Now, is there anything that I haven't covered or that we should discuss that we should before we wrap up?

A I, I just want to thank you, Harry. Uh, I know this is out of your swim lane generally and, and, and not obvious. And you have an incredible media platform that you've built You know, since your mother's kitchen. And I think by the way, uh, one of the reasons that you haven't said it, but you come to this is because of your mom, uh, and everything she's been through in her fight for life and your fight for life alongside of her. And so you're, you're a ray of light, uh, in this world. And I just want to thank you for that and opening up your platform to us. And I'd like to thank all your listeners also for their support. Just thank the people of light in the world.

AI assessment note: “I, I just want to thank you, Harry.”

Q I, I don't know whether this is, but obviously I'm heartbroken, devastated, but I just, I just feel as someone in London who's never been to Israel and who's not Jewish and doesn't know a Palestinian, it almost felt wrong for me to comment. You know, as we said about the Niemöller, you know, quote, is the response what you thought, and is there anything else that could be done?

A Yeah, so maybe I'm, I'm gonna address this for a second. I think the response from the political leadership, uh, of the UK, of France, of Germany, of Austria, of the United States in particular, has been stunning. Incredible. Of the tech leadership, of Satya Nadella, of Sundar at Google, of Zuck, has been astounding, and it's been correct and forceful in condemning, ah, the animalistic barbarian behavior of Hamas and the terror that they've wrought. Incredible. Most of the citizens of the United States Uh, I think have been there. There's been some big fouls out of Harvard and Stanford, uh, and a few other places. I, I'd say that the European community, you know, the, the, the kind of progressive, woke, anti-Semitic left has taken over a lot of American universities. And they don't like Jews, and that's just the truth. In Europe, I think the same has been true, which is, for the most part, it's been support. But I got a call last night. It's about to go up on my Twitter feed as soon as we're done here, from a very senior political figure in Europe. He called me right before I got on the phone with Adi last night. He says, I hope it's not too late, but I want to call you. He said, the enemies of good people Uh, which is the Iranians and the supporters of Hamas ISIS and the supporters of Hezbollah are working overtime in Europe to try to claim that the images of the beheaded babi…

AI assessment note: “I think the response from the political leadership, uh, of the UK, of France”

Q I, I don't know whether this is, but obviously I'm heartbroken, devastated, but I just, I just feel as someone in London who's never been to Israel and who's not Jewish and doesn't know a Palestinian, it almost felt wrong for me to comment. You know, as we said about the Niemöller, you know, quote, is the response what you thought, and is there anything else that could be done?

A Yeah, so maybe I'm, I'm gonna address this for a second. I think the response from the political leadership, uh, of the UK, of France, of Germany, of Austria, of the United States in particular, has been stunning. Incredible. Of the tech leadership, of Satya Nadella, of Sundar at Google, of Zuck, has been astounding, and it's been correct and forceful in condemning, ah, the animalistic barbarian behavior of Hamas and the terror that they've wrought. Incredible. Most of the citizens of the United States Uh, I think have been there. There's been some big fouls out of Harvard and Stanford, uh, and a few other places. I, I'd say that the European community, you know, the, the, the kind of progressive, woke, anti-Semitic left has taken over a lot of American universities. And they don't like Jews, and that's just the truth. In Europe, I think the same has been true, which is, for the most part, it's been support. But I got a call last night. It's about to go up on my Twitter feed as soon as we're done here, from a very senior political figure in Europe. He called me right before I got on the phone with Adi last night. He says, I hope it's not too late, but I want to call you. He said, the enemies of good people Uh, which is the Iranians and the supporters of Hamas ISIS and the supporters of Hezbollah are working overtime in Europe to try to claim that the images of the beheaded babi…

AI assessment note: “the response from the political leadership, uh, of the UK, of France... has been stunning.”

Q So listen, we have Mark Souster on the show and he said, listen, PE will be the primary buyers for the next generation of software companies. I just want to touch on a couple of different components that you mentioned that you said about the cost of capital. How does that impact how they think about buying? For people that don't know.

A It drives prices down. Increased cost of capital drives multiples down. Just what it does. When interest rates go up, multiples go down. It's the laws of physics. And so they'll pay a lower multiple because their cost of capital is higher. And, you know, people are just not going to get liquid the way they think they are. And the top part of the capital, this happened by the way, in, oh, 2000, oh one, oh two, oh three, oh four. The top part of the cap table got his Lickpref back. People have forgotten the Lickprefs matter. And they got their Lickpref back. In some cases, there used to be an eight percent coupon on these things. Many cases now there isn't. They took an eight percent coupon, and then what was left went to the rest of the cap table.

AI assessment note: “Increased cost of capital drives multiples down.”

Q We also mentioned some of the institutions that have been, um, criticized for their responses. In particular, what was so wrong, do you think, about their responses, and, and why do you think they were lambasted in the way that they were?

A I don't know if you saw this, but Mark Rowan wrote, wrote yesterday that he's calling on pen to fire two people, otherwise he's telling people to hold their checkbooks. This is not a political issue. People can have different opinions on the politics. Has Palestinian-Israeli policy been correct or incorrect? We can all have debates about that. I'm not sure I know what the answer is, to be candid. We cannot have debates on barbarism. We cannot have debates on animalistic behavior, and we can't have nuance on it. When you see, for argument's sake, Black Lives Matter, the Harvard, various, 70 Harvard organizations, two leading administrators at Penn come out You can almost justify, and by the way, in case of Black Lives Matter, cheer on. Hamas, ISIS. You just have to say no, and this is not political. This is 100% good and evil, moral and immoral. The equivocation shown by these universities is just disgusting. You probably saw Sarah Table, graduate of Harvard, an incredible investor at my former firm Benchmark, just how disgusted she was With Harvard, and Larry Summers, how disgusted he was with Harvard. This should be a wake-up call. By the way, we've talked about it before, Harry. You're, you're a big advocate, by the way, as am I, for not sending kids to college. It's a waste of time and money. I think it's worse than that. You send kids to these places, they are brainwashed w…

AI assessment note: “The equivocation shown by these universities is just disgusting.”

Q you know, Over-proliferated, too competitive, whatever we want to say on that, but actually we need to move to hard tech. We need to move to, uh, whether that's climate, but much more physical, challenging, I think challenging, uh, style of investing. How do you see that, Michael? Because I think a load of software investors are going to lose their shirts investing in a completely different type of company.

A So I'm unencumbered by any knowledge of technology or, or, or software, nor management experience, by the way. I've never managed anything, and I can't write a line of code. Last line of code I wrote was in seventh grade. This is the venture business. You're going to lose a lot of money. You're going to lose a lot of companies. The question is actually, why does a founder want to take your money if he comes from something else other than software? And I think that'll be interesting and very Darwinian. Some founders, or the great founders, are likely not taking SaaS investors' money. Because the SaaS playbook, as it's become called, doesn't apply to any of these harder technologies. And by the way, you know, we, we've kind of, Dichotomize this. Either you do SAS or you do this like ridiculously hard technology like Annaril. There, there's also in the middle, whether it's, you know, semiconductors or these kind of new emerging fields in, you know, synthetic biology and synthetic chemistry. I've coined this term, you know, when I grew up in this business, uh, fabulous semiconductors became a thing in the late, in the late nineties. I was a early guy around a company called Galileo by Victor Wilenz, which Mellanox came out of and a bunch of others. Fabulous started to be a thing in the nineties. I think we've now, uh, gotten a lab list. So, uh, you can do synthetic biology. You don…

AI assessment note: “SaaS playbook, as it's become called, doesn't apply to any of these harder technologies.”

Q have enemies, and, you know, people have different rights, whatever, whatever, but, like, this is still about closing killchains, And you're, like, talking in your MBA language about margin optimization. It just feels a bit off. How do you feel about, like, this new wave of excitement towards defense, and also being aware of the weight of what that actually means to fund with billions of dollars more efficient killing?

A As a father of four children who have served in Gaza and on the northern border, which Hezbollah has been burning nonstop, uh, In Israel, war is a real thing. It's a very serious thing. It's serious because people get killed. It's serious because it shows what you're fighting for, which is freedom and the values of the West. And there are enemies out there. I've written publicly that I think this generation of Israeli kids is the defining generation. They've stood up and fought for what matters. I think there aren't enough people willing to stand up and fight now. These kids, because they've been in battle, have a level of maturity than your average MBA student does not have, and they understand what it means to hold a weapon. Holding a weapon is a responsibility. You know, Israel has a tiny homicide rate, despite the fact that most of the population is armed, and many of them walk around with automatic machine guns on their back. Like, you can go to a wedding. I was just at one. There are eight girls in wedding dresses of sorts, and they have machine guns slung on their back. But you learn to respect it. You learn to understand that this is a serious matter and that if you're not careful and you're not responsible, then people get killed. And At the same time, I think that there was always a, an alliance between Silicon Valley and the defense industry, and patriotism to use, y…

AI assessment note: “In Israel, war is a real thing. It's a very serious thing.”