The Ledger
Every statement that passed quotation and attribution checks. Mix any filter with any other: certainty 1/5, debate potential 5/5, or both at once.
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Hyatt: Junior VCs prioritize quick markups from later-stage firms for promotions
“Well, that means if I want to get a promotion and I'm inside of schmooby schmooby VC firm, then I need markups. So if I need markups, how do I quickly get markups? I figure out what the guy one stage after me is interested in. And so my job is not really to go…”
Hyatt: VC principals care about internal promotions, not startup exits
“A principal is not actually waiting for an exit. They just want a promotion, man.”
Hyatt: Founders churn out short-term arbitrage projects just to raise seed
“We are in the industrialization of startups playbook land where everybody's trying to churn out some piece of ridiculous arbitrage every week in order to get through the end of their incubator and raise their seed round.”
Hyatt: Rapid-growth AI startups reaching $10M ARR will die in two years
“That will probably be dead in two years.”
Hyatt: Most AI agent startups are near-term arbitrage risking market collapse
“I think most of them fall into, if you just really think through the second order effects of it, fall into kind of like near-term arbitrage, which might just take that whole market to zero, especially if you are meeting the market where it is today with the mo…”
Hyatt: AI startup founders must build in San Francisco to minimize risk
“And so if that's true, and you're trying to risk mitigate all the things that are going to kill you, and it's the age of AI, I don't know why you're not in San Francisco.”
Hyatt: Investors shouldn't evaluate AI companies by their underlying models
“I don't think you should evaluate any company by the models that are underneath it. Even model companies.”
Hyatt: B2B SaaS investing was about metrics; AI is a mystery
“Greg Treverton uses this phrase of puzzles versus mysteries, which is just like puzzles are this thing that you can like, you know, use that raw horsepower to solve. And mysteries are, you know, there you have to go on the journey. There's like fog of war and …”
Hyatt: Most VC firms are failing to adapt due to LP constraints
“No, I think most, you know this cycle, because the cycle in VC evolution is like horribly, horribly slow, because it also loops back to LPs. They don't get to act on their own.”
Hyatt: High-volume 'Brita filter' deal coverage is ineffective venture investing
“I don't know that the Brita filter version of investing is the right way to evaluate, or at least I'm not executing the way that I want to do my job and the way that I think my partner should do their jobs together in that kind of like trying to get, win the c…”
Hyatt: All VC measurements prior to exit are false profits and packaging
“The reason for that is that all of the measurements before exit are all false profits, right? Until the thing is actually a return back capital, and you see this wonderful, enduring institution, It's all just games and packaging”
Hyatt: Spark Capital's early-stage deal quality dropped during COVID
“I think our quality of investing went down on the early stage team and has since recovered.”
Hyatt: Founders seeking hands-off VCs are settling for mediocrity
“They're setting their bar too low. Like that's the bottom line. Like they're settling for mediocrity because they're afraid of risk.”
Hyatt: Taste will be the main AI differentiator as execution becomes automated
“Especially in the world of AI, only taste is going to matter in the future because execution is just going to happen, right?”
Hyatt: Long-term static moats do not exist for modern AI startups
“But some kind of compounding effect where we think no matter what happens after this year, it's eBay, they just launch a product and 40 years later, the product looked basically exactly the same and it's just fine. Like that, that, those ages are not right now…”
Hyatt: Spark Capital ignores market size when evaluating investment opportunities
“We don't talk about or look at market size at all, unless it's sometimes there's a, you know, a confirmation that it's a small market.”
Hyatt: Most AI startups are adapted products with superficial AI branding
“So we mostly have evolved products that are not good enough, or we have adapted products with a coat of paint on top that says AI.”
Hyatt: AI models must own the direct user interface to stay ahead
“I think you want to own the interface with the customer, and if you own the interface with the customer, you have the chance to iterate on an interface with the customer and stay ahead of everybody else.”
Hyatt: Pure compute-heavy AI labs without consumer applications will fail
“So if I compare that to somebody who's spending a bunch of money on compute for an academic lab for a very large foundational model I don't think those things accrue very well over time. I think you need to be full stack.”
Hyatt: We invested in Anthropic because capital isn't the only AI moat
“If we had believed that only capital was going to win, Then we would not have invested in Anthropic, because you know, surely Sam was telling us and everybody else, like, we're going to win the capital game. The capital game is the only way to win, and so ther…”
Hyatt: AI founders should build for model capabilities six to nine months ahead
“If you are doing something at the very edge, I mean, I definitely am constantly trying to advise founders and encourage founders to think about what the models might do in six months or nine months and start to chart there.”
Hyatt: Disruptive innovation rarely recurs in the exact same industry
“The nature of startups is That you're looking for disruptive innovation, and it is very, very rare that you're going to have disruptive innovation in exactly the same market, exactly the same industry over and over and over again.”
Hyatt: Top-down modeling could never have predicted Oculus
“But that's not something you could have ever modeled your way into before we made that investment, right? Like, virtual reality was dead, and it'd been dead for, like, 15 years plus until, you know, Brendan and Palmer and Nate walk in and give you a demo, and …”
Hyatt: Autonomous Vehicle Startups Must Partner With Major Automakers to Scale
“It, I think was the absolute right thing to do for the company. You know, I think I supported Kyle in decision, and it is a good exit but more importantly, you know, Kyle wants to lead the self-driving revolution, and we knew all along that that would require …”
Hyatt: Venture capital is now run by junior partners and associates
“The industry today is run basically by principals, associates, and junior GPs.”
Hyatt: Treating venture capital as a packaging industry is a losing strategy
“I hate that analogy deeply. Well, I to a certain extent- I understand it. I don't think it's good for startups and I don't think it's good for founders. And I also, maybe more importantly than just some kind of value judgment, I think it's a losing strategy wh…”
Hyatt: Venture capital is defined by exceptions, not playbooks
“This industry is all about exceptions. That's literally the industry we're in. And so, why are we building a bunch of playbooks if the whole thing is about exceptions?”
Hyatt: I wrote only two checks during the COVID remote investing boom
“I wrote the fewest checks I've ever written in my career. I think I wrote like two checks in a year and a half.”
Hyatt: One-hour intro calls are the worst VC meeting format
“I think the one hour call is the worst call anywhere, because it's like too long to get a real read, and yet, you know, it's like, sorry, too short to get a real read, and too long to get the kind of speed dating version of the world.”
Hyatt: Spark Capital won Wordware deal despite higher competing term sheets
“The last investment I did was a company called Wordware, and that was a very, very fast, very, very competitive. They had term sheets for quite a bit higher, but you know, I'm getting dinner with the founders. I'm going for walks in the morning. Like, I met wi…”
Hyatt: I passed on pre-launch Figma due to high valuation and check size
“Mine is Figma. It was quite a while ago now. It was still pre-launch, so it was trying to write like a very large check pre-launch.”
Hyatt: Frontier AI companies must build vertical products, not API-only tools
“I think when you're at the front end of innovation, when you're moving really fast, I think you want to be vertical. I think you want to have as much connectivity layer between the model you're trying to build and The thing that the consumer is trying to wrest…”
Hyatt: VCs should focus on analyzing successes rather than studying losses
“I don't know that you should look at your losses. I mean, maybe if you felt like the decision that you made at the time, if you look back on it and like you just were in a bad place when you made the choice and you should try to not be in the bad place the nex…”
Hyatt: Founders default to financial numbers when they lack a real story
“And I think people default back to numbers when they have no other story to tell.”
Hyatt: A job protection mindset leads to the biggest VC investment mistakes
“And so I came in with a nothing to lose mentality, which allows you to sit on the front end of creative risk and being willing to take that extra risk, which of course, that's what this business is about. Versus this kind of protection is like, I just want to …”
Hyatt: Most VCs prioritize market modeling over team and product
“I think VCs generally, despite whatever they say on their websites, are market-first investors. So they want a market that they can model, you know, that they can give to an associate, and an associate can say, this is a one billion dollar market or a one tril…”
Hyatt: Spark's Biggest Wins Like Twitter Were Impossible to Model Initially
“If you look at all of our big wins from Oculus to Twitter to Tumblr to Cruise, like all of these companies were, at the day that we invested, were very hard to actually model the exact market size of that company,”
Hyatt: Cruise Built Tesla-Style Autopilot Long Before Tesla Did
“So the kind of autopilot that we now see in Tesla, only they had produced it, you know long before Tesla had produced it.”
Hyatt: New consumer self-driving car startups will get crushed
“If you're today trying to start a company that is a consumer self-driving car, you're probably going to get crushed.”
Hyatt in 2016: VR Will Reach Mass Market Adoption Within a Year
“Post six months to a year, I think we'll see it going mass market as the right amount of content comes into the market.”
Hyatt: The AI era demands rampant organizational creativity over optimization
“We were kind of like in late stage capitalism for startups. Everything was red ocean. And so it was all about optimization and speed and like minor arbitrages. We are now in the, in a world where like you need rampant creativity inside of an org.”
Hyatt: AI founders need board members who actively use AI products
“And they need a sounding board of board members that are actually, actually using their products and actually have a curiosity to use the rest of AI products and get more native.”
Hyatt: Spark Capital chose not to raise $5B during the SaaS boom
“We could have very easily raised five billion dollars. We could have very easily You know, tripled or quadrupled the size of the team. We didn't do that. We stayed seven people, six people partnership.”
Hyatt: I passed on Discord twice before eventually investing
“Discord, Jason, I knew for seven years. We were founders together before, before investing in Discord, and also smartly passed I was twice on Discord before investing.”
Hyatt: OpenAI pays PhDs to manually solve math problems for model training
“OpenAI and lots of other companies are paying a bunch of PhDs to, like, by hand go, you know, figure out PhD math equations so they can internalize the model.”
Hyatt: Web 2.0 was the wisdom of crowds; AI is the wisdom of experts
“I think web two point now was very much the kind of wisdom of crowds, and we're at an age where it's the wisdom of experts.”
Hyatt: Expert data exhaust improves both AI products and underlying models
“If you are running a next gen product with AI deeply embedded, and you have the best users using that product, that will inform you to make better products for those users and inform the models that you're building.”
Hyatt: I outline the next round's pitch deck immediately after investing
“About 20% of the time, 25% of the time, founders are down for it. After we invest, I immediately try and have a conversation and get a pitch deck together for the next round. Like, what would the next, just a glossary, just a table of contents. What would you …”