The Exchanges

Q So Rex is all about spending smarter, moving faster performance. I'm really, really curious about this question because Thrive is like such a stealth fund, a huge fund, and you do a lot of different things from incubations to funding very large rounds of companies. How do you think about performance as a team? And like, how do you think about performance as an investor on a very small team?

A We think about decision processes a lot more than near-term outcomes. I think when I worked at Bridgewater early in my career, Ray Dalio had this very famous line of, you know, focus on the swing, not where the ball goes. And I actually think that's very much how we operate, which is that we want to have the shot on goal with the most exciting companies. We want to have the right conversations around those companies. We want to be, as my partner, Miles likes to say, paranoid, but patient. Always thinking about what could be, but not necessarily rushing into things. But I think that structure is really what we anchor to. We have seen plenty of companies that didn't like, look like they went anywhere for the first few years. You know, if you were an investor in OpenAI and when it was a nonprofit in 2017 and 2018, and even sort of a, uh, capped, uh, nonprofit with profit like shares in 2019 and 20 20, you might've thought, oh my gosh, what, what is this thing gonna do? Is it gonna go anywhere? Um, and of course now, One of the most valuable companies in the world. By contrast, I'm sure we can think of plenty of companies that looked hot coming out of the gates at first, and at some point, uh, looked less good thereafter, which is all to say when we make decisions as a team is that, you know, no matter what performance looks like for this company in the next one to two years, we're…

AI assessment note: “We think about decision processes a lot more than near-term outcomes.”

Q I definitely have a bunch of questions off of this, but what was mentioned in the Colossus piece was that no other investor would fly there at the time. So was this a highly competitive round and you felt you needed to go there to close the deal?

A Yeah, I think it's a great question, and I would frame it a little bit differently, which is certainly, I think, our philosophy at Thrive that Josh taught me is that the people who win deals are the people who want to win deals the most, and so we always have a leave it all in the field mentality. At the same time, when we're partnering with companies or we're discussing with companies whether we're the right partner, we don't really do it thinking about other players on the field. You know, you play against yourself, you don't play against others. If our founders were going to be in Israel during what was a trying time, We wanted to be in Israel and show them that that mattered to us too. And so I think it was much more a statement around the types of partner we wanted to be to the whiz team versus, you know, the competitiveness of the deal.

AI assessment note: “it was much more a statement around the types of partner we wanted to be”

Q Where do you stand in the AI bubble debate?

A I think this is one where being concentrated allows us to feel a little bit better about no matter how the world works out, you're going to be in the right circumstances. It turned out that if you invested in Google in 1999, in 2001, in 2004, in 2005, and you were a long-term investor at Google, you might have had some variability in returns. It was a pretty great investment. Likewise with Amazon, likewise with Netflix, likewise with Microsoft. And so, I think we really just think about what are going to be the enduring companies versus trying to time the market cycles. Um, so that's my honest thought, you know, I think there's a lot of value will be created out of AI. Uh, I actually think in a lot of the rounds we participated in, they felt eminently rational to us. Um, but I think the most important thing is be in the right companies and trust that if you've picked the right companies and want to be the multi-decade holders of those companies, the rest will wash out.

AI assessment note: “think about what are going to be the enduring companies versus trying to time”

Q What comes after open AI? That's the question for you.

A I think the beauty is one, hopefully open AI is going to be an enduring technology. And so I'd be very surprised if in the near term we were talking about an after open AI, you know, is there an after meta or an after Google? I think the, the better framing of the question, if I could tweak it, would be something like, um, what are the companies that can now be built as a result of open AI? I think there is a, what comes after SaaS? That is a more interesting way of thinking about this. You know, we had an old way of building software. There are these cloud primitives. We build these great digital apps on top of them. A lot of really amazing companies that we had the privilege to invest in. Now there's a new substrate for technology, which is what if you could productize intelligence and call it via API or fine tune a model with it? And I think that it engenders an entirely new breed of software companies. So I don't think it's an after open AI. I think it's an after SAS that we're going to see. And so You know, we're seeing the early signs of this, something like cursor, where we're actually thinking about products that can work with you as a, as a sort of collaborator in order to creating work. Um, we're seeing this with products like Harvey on the legal side, where they are doing work, as well as just acting as an assistant. We're seeing this with products, uh, that are even…

AI assessment note: “the better framing of the question, if I could tweak it, would be”

Q this chart that showed spray and pray versus highly concentrated funds. Turns out highly concentrated funds, typically like 20 companies per portfolio. Outperforms spray and pray, but spray and pray looks pretty good. Um, cause you have lots of potential bets. So I'm curious with rumored and reported, maybe it's not reported. Maybe it's rumored, twenty-five billion in AUM. How do you guys think about where to concentrate your bets?

A Yeah, I think there are two aspects that really matter to this, which is one, you have to pick a strategy that is authentic to how you want to operate as an investor. My partner Kareem often has the line that Mathematically, there are probably a lot of ways we can make money as a venture firm. The question is what feels really aligned to the founders we partner with? And I think above all else, I can talk about why concentration we think is a really great financial strategy and I will, but the most important thing is it allows us to be really deeply aligned with the founders we work with. If you are working with a life's work founder, this is a portfolio of one for them. And we may have a portfolio of a few, but we really shouldn't have a portfolio of that many because All the wins should really feel great and all the losses should really hurt. And we should have real skin in the game. And so I think the way we'd like to set ourselves up with is that if we're gonna invest in someone, they should really believe that the success and failure of the company really matters to us as investors. And so I think there's actually an emotional and ideological aspect to this. Now, there's also just a reality of the power law, which is that, uh, I don't need to document this for you. It is very clear that a small number of companies drives a disproportionate amount of the economic and social…

AI assessment note: “I can talk about why concentration we think is a really great financial strategy”

Q Okay. All right. Well, we'll cover the whole stack. Cause I, I definitely want to get your take on where the value accrues in AI, but before we get there, let's talk about your portfolio and your thesis around that. So what companies are in your portfolio and what board positions do you have?

A Totally. I'm pretty lucky to work with a few really, really exciting companies. I think one of the great privileges of this job is that you don't just get to work on one really exciting problem. You get to work on a few with Several founders of the potential or are generational. Um, few companies that I work very closely with cursor, uh, automating, uh, a lot of the drudgery associated with coding and being the ultimate AI pair programmer for a lot of developers. I think when we invested, there were a couple tens of thousands of users and, uh, you know, low single digits, million air are fast forward to today. I don't think the company publicly publishes revenue, but call it on the Many, many hundreds of millions of run rate revenue and many millions of developers using the product. Uh, and that has just been an incredible growth story in the span of just 18 months. I think one of the really wild and exciting things about the AI era is that the timelines are getting compressed in a really radical way. Um, I had the privilege of speaking to Michael Dell actually a few weeks ago, and as one of the great CEOs out there who has lived through both the internet era and the AI era and played a big role in each, I asked him, How he thought about the difference between these two. And his line to me was, you know, in some ways feel very similar in magnitude of impact, but whereas the int…

AI assessment note: “few companies that I work very closely with cursor”