The Exchanges

Q I'd love to spend a minute on Anthropic. Um, could you tell the story of how you all made the decision to invest there?

A Yes. So, uh, we were very close to cloud wave one, uh, saw the hyperscaler market play out, which really wasn't a venture capital game. Obviously, um, the winners, Amazon, Microsoft, Google, there could have been a case that one of the independent challengers emerged there, but, um, there was no one that's willing to fund the capital for those on the private markets, and we all missed it. Um, we didn't want to miss that again. Our belief is that the foundation models are going to be the new hyperscalers. And we don't do competitive investments, so we could only make one bet. And so we were very much looking for, um, who do we think was going to pull ahead several years out? But, uh, the better in Anthropic was that they would be one of those companies and that they had the chance to compete at the one slot, which we very much still think they do. And credit to, to co-investors there, uh, Matt Murphy at Menlo and Ravi at Lightspeed and some folks that, um, We're coming into the same round, and we're great collaborators and thought partners, and, and there's less of that venture these days, but, um, we would not have gotten there and, and without the ability to actually, you know, lock arms with a syndicate there and, and have real discussions, and, um, and thrilled we did, and very appreciative of Dario and Daniella and that team for being so bold to go all in and do it the righ…

AI assessment note: “Our belief is that the foundation models are going to be the new hyperscalers.”

Q What was that one year like for you? Tough.

A Um, IBM is a great big company and a great big company. And, uh, there were meeting after meeting after meeting that's overlapped. I could have been meetings all day. And interestingly, I could have ignored all the meetings and no one would have noticed because they would have assumed I was in another meeting. Um, and that was just so painful for me at, in, as a type a person who's aggressive, who wants to get there and do it. Like the, the idea of resting investing for me was, was just Mind numbing. And so, uh, and, uh, my senior execs felt the same way. And so I, I loved IBM. I wanted them to be happy. I wanted this to carry through, but, um, I, I need it out.

AI assessment note: “the idea of resting investing for me was, was just Mind numbing”

Q It still takes a lot of good ego to acknowledge where you're not strong, to bring in people who are incredibly capable of things you are not, whether you are replacing yourself as CEO, or building out your, your leadership, What's the signal that you're looking for from founders when you're considering investing as to whether they, they have that trait?

A Yeah. Two things that in some ways may be at odds, but it's, um, intense conviction and coachability. And, um, and the way that they're at odds is you want someone who, um, when they will listen, gather all the facts, take input from their team, including us, but we're just one voice on a service prior ultimately. And then make decisive action, but also be willing to revisit it and carry it on. And so, um, one of the signals that, that I think turns us off is when, when tension builds, people turn inward and they try to, they force themselves to come up with the answers and they, they shut off communication. They shut off input, et cetera. I think the best leaders are the ones who are brilliant, who are convicted, and yet they're reaching outbound when intensity mounts and they need more input and they seek it out and then they make a more informed decision. And I think that's the, the mark of a Mature, um, confident leader who's going to work through problems and wrong answers to get to the best answers.

AI assessment note: “Two things that in some ways may be at odds, but it's intense conviction and coachability.”

Q What were some of the most important lessons from your early days at Pesmer?

A Um, the big swings, like the, the, the crimes of omission are the ones that hurt more. So, um, it's so easy to talk yourself out of investments. And unfortunately, just by its nature, we say no, 99.9% of the time anyway. But, um, there are, there are so many ways things can fail, and especially the most bold entrepreneurs and the most bold visions, um, have a lot of ways to fail spectacularly. And I keep pushing myself to think about the what can be, what can go right, what can really work with this. Uh, and quite sincerely, the things that I, I regret the most are the, the ones that I pulled back on because I, I could see the big vision and just saw all the probabilities of, of the what can go wrong and, and just couldn't quite get there. And, uh, and I regret those the most.

AI assessment note: “the crimes of omission are the ones that hurt more”

Q How did, um, their commitment to ethical AI inform the investment decision?

A It was a big part of it. Because, um, as you think about first the people, the people element, the talent attraction we spoke about before, but also, um, the geopolitical, um, and the, uh, And the uncertainties around AI, and the impact, and, and I'm gonna answer it first just from the business side, which is, you, you want to know that your customers are gonna go on a journey with you, that enterprise are gonna trust you, um, and so there's an ROI to it. But I'll also say just back to the qualitative, and the life's too short, and the human side of it, like, we just, we wanna work with great people, and we wanna do great things, and so, um, you know, our, our dinner with Dario, um, closing the deal, like, he previewed a lot of the healthcare stuff that they're just now releasing, And that was so cool to think about, um, and you read his, uh, you know, Machines of Love and Grace that came out, uh, after that, but he had also, he previewed with us, um, and the, the impact on humanity for this will save lives. This will change outcomes, um, when you apply AI technology to healthcare or education or some of these fields, and they're deeply authentically committed to that. They're giving away the vast majority of their economics. They've said that, Um, like they're doing it the right way. In some ways, like I think of Melanie and Cliff at Canva, who set some of these principles. An…

AI assessment note: “It was a big part of it. Because, um, as you think about”

Q It's pretty unusual for a customer to call and say, I really want to get on stage and give you a testimonial. How did, how did that come to happen?

A So one of the things I carry through now as an investor trying to coach our companies is it's somewhat counterintuitive, but you actually want to seek out the hardest, smartest customers and have them beat the crap Eddie. Because Others will follow their peers in the industry, know how good they are and learn from them. So take on the hard first and work with them as design partners, go through it. Feedback's a gift. And when you don't get hard feedback is when you actually need to worry. It was all about, we need you to make a great product. And the expectation is then that you will share it. This is non-proprietary. It's, it's important, but not proprietary and go talk about it. And so setting those rules and engagement upfront. And one of the things that, you know, we ask our sales execs now across our portfolio If you can't get a reference out of that customer, you know, what are the issues? And, uh, among the early contract terms, that's something front and center, because we do believe that it's one of the lowest cost customer acquisition methods when employed correctly.

AI assessment note: “And the expectation is then that you will share it... setting those rules and engagement upfront.”