The Exchanges

Q And, and are we excited, David, there, there, because there's, there's such great customers or because they're so, they're so underserved because they're, or they're, they're finally transitioning or, or why have we narrowed in on, on that focus as one that we're particularly excited about?

A I mean, look, the, the industry is still massive, right? Like if you, if I look back at, Add even just Goldman Sachs, and I now use them as a, as an example often, but like the, the entire firm was, uh, you know, they call the, the kind of middle and back office, the, the Federation, you know, again, these were, were folks living in Excel, largely not using Excel as a modeling tool, but using Excel to track work. And so there's just such opportunity to build amazing software products to solve everything from, you know, compliance to payments, to treasury management, to Again, all of the kind of, uh, you know, manual work that goes into making the financial services industry tick. Um, and I think AI is, again, creating kind of a new window and wedge opportunity for entrepreneurs to kind of, you know, build software companies that, that couldn't have existed years ago. And, and again, I think the, the appetite, you know, for adopting new products and new software to solve some of those problems is Is more real than ever. Um, because again, the most senior people at these institutions, uh, you know, can intuitively understand the impact that AI is having on their business. And so I think there's just a lot more conversation and momentum happening at the board level. Um, you know, and, and it's making the enterprise sort of sales cycles, you know, for, for many of even our early st…

AI assessment note: “AI is, again, creating kind of a new window and wedge opportunity”

Q And, and are we excited, David, there, there, because there's, there's such great customers or because they're so, they're so underserved because they're, or they're, they're finally transitioning or, or why have we narrowed in on, on that focus as one that we're particularly excited about?

A I mean, look, the, the industry is still massive, right? Like if you, if I look back at, Add even just Goldman Sachs, and I now use them as a, as an example often, but like the, the entire firm was, uh, you know, they call the, the kind of middle and back office, the, the Federation, you know, again, these were, were folks living in Excel, largely not using Excel as a modeling tool, but using Excel to track work. And so there's just such opportunity to build amazing software products to solve everything from, you know, compliance to payments, to treasury management, to Again, all of the kind of, uh, you know, manual work that goes into making the financial services industry tick. Um, and I think AI is, again, creating kind of a new window and wedge opportunity for entrepreneurs to kind of, you know, build software companies that, that couldn't have existed years ago. And, and again, I think the, the appetite, you know, for adopting new products and new software to solve some of those problems is Is more real than ever. Um, because again, the most senior people at these institutions, uh, you know, can intuitively understand the impact that AI is having on their business. And so I think there's just a lot more conversation and momentum happening at the board level. Um, you know, and, and it's making the enterprise sort of sales cycles, you know, for, for many of even our early st…

AI assessment note: “there's just such opportunity to build amazing software products to solve everything from”

Q We've spent a lot of time talking about moats and how moats have evolved and are there still even moats in, in this new era? And so why don't you reflect and share some of the conversations we've been having here, some of your, your perspectives on this broader, broader moat question. Maybe David, we'll, we'll start with you.

A Maybe just to jump right into it with, with a hot take. I think moats still matter. And I think a lot of the moats, um, still matter. Still matter. Exactly. Um, and I think they're largely the same, right? I think, you know, I often think about this between, uh, sort of differentiation and defensibility. I think AI is an incredible tool for differentiation, right? The idea that, you know, a voice agent can speak in 50 languages fully compliantly, 24 seven, Highly differentiated, you know, certainly versus the human. Um, but the source, the AI-ness of that capability, in my opinion, is not a source of defensibility. It, it's largely differentiation. The defensibility of a software product resides, in my opinion, you know, from owning the end-to-end workflow, you know, from the context in which that it's, it's applied. You know, becoming the system of record, having a network effect, you know, deeply embedding yourself within your customer. And I think these were the heuristics that were always You know, things that we would always look for when evaluating software companies. I think the thing that is fundamentally different about this product cycle is that the software itself can actually do the work, right? And therefore, the market opportunity for, for software today is no longer just IT spend, it's, it's largely labor.

AI assessment note: “I think moats still matter. And I think a lot of the moats”

Q investable universe or sort of divide. Is it, you know, that there's a certain type of form factors and it's, you know, each region is going to have their, their, their new banks, so to speak, or is it, um, you know, by sort of, sort of form factor or value prop to, to the, how do we think about the, the, the universe and how do we map it?

A You know, it, it's been interesting. I mean, I would say from our, from our vantage point, we haven't made as many consumer fintech investments in recent years as, as we have historically. I think, um, part of that's just, it's, it's more expensive to acquire customers and, and hit the kind of scale you need to really be, you know, kind of venture, venture scale outcomes. And I think that's a function of, you know, um, just, you know, consumer acquisition channels getting more expensive and some of these companies starting early and it was easier to acquire, um, And then build massive LTV with their existing customer bases. That, that does change around the world. I think, um, you know, in some markets, people were entering the formal financial economy for the first time, and so offering a fee-free mobile first, you know, bank account and a, and a debit card, you know, literally gave them access to, you know, e-commerce and, and things like Netflix and Spotify and, and Amazon for the, you know, for the very first time. Credit doesn't exist, you know, equally in, in every market around the world, nor do credit bureaus and credit data. Um, so there's, I think, still, you know, tons of interesting kind of macro opportunity from a financial product perspective, I think, especially in emerging economies. Um, I think AI could be an interesting, you know, kind of catalyst for a new re…

AI assessment note: “That, that does change around the world. I think, um, you know, in some markets”

Q Also, ok, so let, let, let's, let's wrap on just, what does twenty-twenty-sixth and the near-term future look like? Uh, David, how, how we're approaching an agency?

A It still feels like we're in early innings, you know, uh, even spring in, in AI land as well. Um, uh, you know, so just incredibly excited and enthusiastic by the momentum we're seeing, you know, for, again, largely software companies selling into financial institutions. That's kind of been our orientation in, in the fintech ecosystem. Um, You know, again, I said on the, on the board of a company called Moment, which we, you know, described earlier, that is, uh, now bringing some of the largest wealth management platforms online. You'll see them, you know, they announced LPL. We have another, a number of other large institutions that we'll be announcing, uh, early next year. Um, you know, companies like ModernFi, which have built, uh, you know, bank to bank deposit marketplaces that are really starting to, to grow and see significant volume in that, in that network. Um, And again, just more, more broadly, um, you know, really excited by the opportunity for AI to actually do the work, you know, within, within these institutions and, and the momentum and excitement, you know, you know, there to adopt, you know, new products.

AI assessment note: “It still feels like we're in early innings, you know, even spring in AI land”

Q One of the questions for defensibility in, in web two companies was, Hey, would Google, you know, would those, will they some someday build this or Facebook or name your incumbent? Um, in, in the AI era, it's, it will open AI or will, will some other, you know, major company, how should company, how should we think about that, that framework in the AI era?

A You know, I mean, it's funny. I feel like 18 months ago, this, uh, you know, GPT wrapper was on everybody's lips, and I think it was, it was largely used as a pejorative, you know. It was like, and I think, you know, to some degree, I think there are some spaces where, like, the model capability and the application capability, if they're very overlapping, I think you're in a, in a risky spot, you know. Um, but the reality is that there's so many, I think one of the remarkable things that's happened is there's so many markets That were never particularly interesting to sell software into. There are now radically interesting spaces to build companies in. Again, in large part because, you know, the market is now labor, not just IT spend. Plaintiff law being an example, you know, uh, you know, Alex says that we have a company called Salient in, uh, applying voice agents to auto loan servicing. Five, six years ago, would it be back to software companies selling to, you know, non-bank auto lenders? Probably not. The company's doing incredibly well. Again, in large part because You know, the capability of being able to, you know, uh, speak in 50 languages, you know, fully compliantly, you know, with, with customers in 50 states working 24 seven, um, you know, it's just so differentiated, you know, uh, versus the individual, and they're finding that their ability to collect is meaningf…

AI assessment note: “if the model capability and the application capability, if they're very overlapping, I think you're”

Q Well, I mean, I think that's clearly such a big and important problem to be solved. David, what about you? Does anything jump out there as, as again, this like grand challenge that you think if solved could really fundamentally change this ecosystem?

A Yeah. I mean, we've, we've talked a lot about, you know, provider issues and, and obviously challenges that, that patients have. I think we've talked less about the payers. Um, and one of the big kind of initiatives that we have focused on, certainly on the, on the FinTech side that Julie and I have been beginning to work on, on kind of this intersection is just building deeper connectivity to all the incumbent institutions. In, in FinTech for too long, kind of the technology FinTech ecosystem and the kind of large incumbent traditional financial services ecosystem were kind of parallel universes. And I think that was really a mistake because I certainly saw this inside of Goldman. The culture of these institutions are changing very quickly, right? Their, their recognition that they're not going to build everything in house or that they can't, and their willingness to adopt third party technologies is just accelerating. And yet so much of the workflows of these institutions, even in a place like Goldman, which is probably one of the more progressive kind of tech forward large financial institutions in the world. Are still like human driven processes. I mean, thousands and thousands of folks sitting in Salt Lake City or Dallas or Bangalore processing trades. And you can imagine that the healthcare system is in a similar place or, or likely even further behind. And one of the opp…

AI assessment note: “just building deeper connectivity to all the incumbent institutions.”

Q Also, ok, so let, let, let's, let's wrap on just, what does twenty-twenty-sixth and the near-term future look like? Uh, David, how, how we're approaching an agency?

A It still feels like we're in early innings, you know, uh, even spring in, in AI land as well. Um, uh, you know, so just incredibly excited and enthusiastic by the momentum we're seeing, you know, for, again, largely software companies selling into financial institutions. That's kind of been our orientation in, in the fintech ecosystem. Um, You know, again, I said on the, on the board of a company called Moment, which we, you know, described earlier, that is, uh, now bringing some of the largest wealth management platforms online. You'll see them, you know, they announced LPL. We have another, a number of other large institutions that we'll be announcing, uh, early next year. Um, you know, companies like ModernFi, which have built, uh, you know, bank to bank deposit marketplaces that are really starting to, to grow and see significant volume in that, in that network. Um, And again, just more, more broadly, um, you know, really excited by the opportunity for AI to actually do the work, you know, within, within these institutions and, and the momentum and excitement, you know, you know, there to adopt, you know, new products.

AI assessment note: “a number of other large institutions that we'll be announcing, uh, early next year.”

Q The, so we're talking about how moats still matter and in, in many ways they look pretty similar. Let's steal man the other side for a second. Where, where are we even having this conversation where some people say, Hey, you know, brand is the, is, is, is the motor shipping velocity or because this era is different. Where are the, what's the steel man of their argument?

A Look, I, I think this market is noisier than ever, right? And so I think finding ways to sort of, you know, stand out from the crowd probably matters more today than it has, you know, in the past, I would argue. I think the other thing is that the underlying technology is changing so quickly. And so, you know, as a founder, you want to be living on the frontier and understanding kind of what model capabilities look like because it can dramatically change the, the efficacy or the, the, um, you know, the capability of your underlying product. Um, and so I think, you know, um, You know, one of the things that's changed, I think that's been really interesting in this sort of, um, you know, current wave of, especially vertical applications that we've seen is, is the type of founder. You know, I think founders today are often younger and more technical than we've seen in, in prior generations. Um, you know, and, and, and so they're less often native to the particular industry, but they're fluent in the tool set. Right. And I think that's really important because, you know, to the same point, you, you gotta, you gotta stay on the frontier and understand what's coming. At the same time, you know, I wrote this piece that I call Context is King. You know, while it is important to understand, you know, model capabilities and, and what's happening in the frontier, you still need to figure …

AI assessment note: “finding ways to sort of, you know, stand out from the crowd probably matters more”

Q investable universe or sort of divide. Is it, you know, that there's a certain type of form factors and it's, you know, each region is going to have their, their, their new banks, so to speak, or is it, um, you know, by sort of, sort of form factor or value prop to, to the, how do we think about the, the, the universe and how do we map it?

A You know, it, it's been interesting. I mean, I would say from our, from our vantage point, we haven't made as many consumer fintech investments in recent years as, as we have historically. I think, um, part of that's just, it's, it's more expensive to acquire customers and, and hit the kind of scale you need to really be, you know, kind of venture, venture scale outcomes. And I think that's a function of, you know, um, just, you know, consumer acquisition channels getting more expensive and some of these companies starting early and it was easier to acquire, um, And then build massive LTV with their existing customer bases. That, that does change around the world. I think, um, you know, in some markets, people were entering the formal financial economy for the first time, and so offering a fee-free mobile first, you know, bank account and a, and a debit card, you know, literally gave them access to, you know, e-commerce and, and things like Netflix and Spotify and, and Amazon for the, you know, for the very first time. Credit doesn't exist, you know, equally in, in every market around the world, nor do credit bureaus and credit data. Um, so there's, I think, still, you know, tons of interesting kind of macro opportunity from a financial product perspective, I think, especially in emerging economies. Um, I think AI could be an interesting, you know, kind of catalyst for a new re…

AI assessment note: “That, that does change around the world. I think, um, you know, in some markets”

Q Well, I mean, I think that's clearly such a big and important problem to be solved. David, what about you? Does anything jump out there as, as again, this like grand challenge that you think if solved could really fundamentally change this ecosystem?

A Yeah. I mean, we've, we've talked a lot about, you know, provider issues and, and obviously challenges that, that patients have. I think we've talked less about the payers. Um, and one of the big kind of initiatives that we have focused on, certainly on the, on the FinTech side that Julie and I have been beginning to work on, on kind of this intersection is just building deeper connectivity to all the incumbent institutions. In, in FinTech for too long, kind of the technology FinTech ecosystem and the kind of large incumbent traditional financial services ecosystem were kind of parallel universes. And I think that was really a mistake because I certainly saw this inside of Goldman. The culture of these institutions are changing very quickly, right? Their, their recognition that they're not going to build everything in house or that they can't, and their willingness to adopt third party technologies is just accelerating. And yet so much of the workflows of these institutions, even in a place like Goldman, which is probably one of the more progressive kind of tech forward large financial institutions in the world. Are still like human driven processes. I mean, thousands and thousands of folks sitting in Salt Lake City or Dallas or Bangalore processing trades. And you can imagine that the healthcare system is in a similar place or, or likely even further behind. And one of the opp…

AI assessment note: “one of the opportunities that we see here at Andreessen is just being a bridge”

Q The, so we're talking about how moats still matter and in, in many ways they look pretty similar. Let's steal man the other side for a second. Where, where are we even having this conversation where some people say, Hey, you know, brand is the, is, is, is the motor shipping velocity or because this era is different. Where are the, what's the steel man of their argument?

A Look, I, I think this market is noisier than ever, right? And so I think finding ways to sort of, you know, stand out from the crowd probably matters more today than it has, you know, in the past, I would argue. I think the other thing is that the underlying technology is changing so quickly. And so, you know, as a founder, you want to be living on the frontier and understanding kind of what model capabilities look like because it can dramatically change the, the efficacy or the, the, um, you know, the capability of your underlying product. Um, and so I think, you know, um, You know, one of the things that's changed, I think that's been really interesting in this sort of, um, you know, current wave of, especially vertical applications that we've seen is, is the type of founder. You know, I think founders today are often younger and more technical than we've seen in, in prior generations. Um, you know, and, and, and so they're less often native to the particular industry, but they're fluent in the tool set. Right. And I think that's really important because, you know, to the same point, you, you gotta, you gotta stay on the frontier and understand what's coming. At the same time, you know, I wrote this piece that I call Context is King. You know, while it is important to understand, you know, model capabilities and, and what's happening in the frontier, you still need to figure …

AI assessment note: “this market is noisier than ever... underlying technology is changing so quickly”