The Exchanges

Q the iconic perspective? How are you guys thinking? We, we, Doug and I talked right when things went We're starting to get tight. We did it. We did one of the first interviews that things were somewhat bullish, right? I think you were anything sub 500 was still a good valuation X months ago. Is that where we're at today? Where, where, where are we on both one to tens?

A Yeah, I think it's tough. Um, I agree with Alex long, long term. Uh, I, I'm still very bullish, but I think you're asking about today. And I think it's, I think it's really tough. I mean, it's hard to be bullish when the very best companies, the very best, In the public markets are down 60 to 80%. Um, that's painful, but I think you're asking more about how are the companies actually doing. And in that respect, I'd still go closer to Arun with a five or a six because of how it's deteriorating. We look at all the data and we have data on lots of companies. 2021 was like the best year ever in my career. Almost every company hit a hundred percent of their plan for net new ARR. Those numbers were deteriorating fast. Q one, the medium was 99% hit their plan. I've never, uh, Q two, yeah, 87%, Q three, median, 69%. And so companies are starting to really miss their plans, both public and private. You're seeing much fewer public companies raise their guidance now dramatically down Q one, Q two. We don't know all of the Q threes, but there's very few raises in the public market for full year guidance now, which is a huge change. From before, and those companies, as you know, have significant buffer built, and so we are seeing in the private and public a significant deterioration in their attainment versus plan. You want to talk about growth rates. The median growth rate was about 83% la…

AI assessment note: “I'd still go closer to Arun with a five or a six”

Q growing at rates that honestly, when, when, uh, when I met Alex or Doug, we, I didn't even think these growth rates were possible or as I didn't think we can grow at these rates north of a billion, right? And so I wonder if it's so bad or our expectations and our worldviews got warped for two years, right? Did this go on for too long, the good times?

A Yeah, I think we, I think we were drunk. I do think we were drunk last year. Um, and, and I think that the, the hangover is, is going to be real, but, but you're right. There are those incredible public billion dollar revenue companies that are growing well. You know, they've proven that they are standards. They are platforms. Uh, they're kind of like IBM was back in the eighties. You don't get fired for buying IBM. Um, and, and clearly they've proven they have insane product market fit and ROI. So it stands to reason that they might be the ones that continue growing the fastest. What I think all of us on this call are worried about. Are the thousands of companies that were funded in the last three to five years. Uh, that aren't those companies and and I think that group. Is the one where there's going to be real differentiation, like Alex said, between the must have the nice to have the core products that deliver real ROI. And that's where the rubber meets the road and not everybody's going to win. I think the drunkenness last year was we, we made two fundamental errors. I think one, we thought everything would work. Every, every company looked like it was going to work. And by the way, for a while, In a free money economy with no, no focus on budgets, almost anything could sell. And I think those days are over the must have nice to have line. It's very bright now, and it's pr…

AI assessment note: “Yeah, I think we, I think we were drunk. I do think we were drunk”

Q now they're telling you to, to, to, to cinch the belt and tighten it. Um, when they are investing at a hundred X ARR deals single digit months ago, like how do you, how can you take that sort of a back and forth feedback from, From VCs as a founder. What do you do with it? It seems, I mean, were you, which year were we brilliant as investors?

A I think it's a very good point. Uh, and I, I can see that whipsaw effect feeling, uh, on the part of entrepreneurs. And we try to avoid that. I do think consistency, uh, is important in the venture business. And we all got away from this, by the way, consistency of investing over years for time-based diversification, You know, is a good thing, but also consistency of advice, and the truth is that we're not giving all companies the same advice, and I think it would be incorrect for a VC to go to every one of their portfolio companies And say, cinch the belt, uh, right. There's going to be some that are market leaders that are performing really well, that have three years of capital that you say, let's hit the gas and separate from competitors. There might be others that are having a tougher time that don't have two years of cash where you're saying, Hey, let's be mindful of this. Let's cinch the belt and live to fight another day. And so I think, uh, one size does not fit all right now, but I, but I agree with entrepreneurs that would say, Hey, it feels like things have changed. And the reality is they've changed for all of us, uh, very quickly, so it stands to reason that some of the advice would change too.

AI assessment note: “the reality is they've changed for all of us, uh, very quickly”

Q Well, yeah, Tableau plummeted, right, and ended up being sold to Salesforce for almost twenty billion, right?

A They all plummeted, and it was scary, and I was in the front row of Sastr that year, and I think we were all certainly concerned. Listen, you know, I, I have been fortunately or unfortunately here for many of the downturns, 2002 1008, 2016, 2020, and today, um, you know, they're, they're all different. And I actually think it's impossible to draw exact parallels to any specific moment in the past. And you could find a smart investor today who thinks it's the bottom and another one, uh, who thinks that we have a long way to go down. Uh, I think was different in the sense that those companies Dropped because their guidance was weak. The business, but that specific moment in time were underperforming relative to expectations just for a moment. And they went down by 50%. Maybe the markets aren't as big as we thought. Who knows?

AI assessment note: “They all plummeted, and it was scary, and I was in the front row”