20VC: Inside Accel's $4BN Growth Investing Machine | Cursor is Dead is Total BS: Here is Why | What Missing Rippling and ElevenLabs Taught Us | Are $2BN-$10BN IPOs Dead | Why Now is a Great Time to be Thoma Bravo with Miles Clements

sometimes getting overly fixated on the financial metrics in this environment can leave you just like with an unsatisfying taste in your mouth. Growth can obscure and blind you to a lot of underlying ills in the business. I think you can actually be successful in this market investing in consensus. Investing is an art in a science. The science is understanding how to properly value a company and the art is understanding when to break the rules. Focus on hitting singles and doubles and let the home runs take care of themselves. This is 20 of you see with me Harry Stabbings now stay and thrilled to welcome a dear friend to the show. Miles Clamonds. Miles helps lead Excel's gross investing practice where he's back some of the best in the business, including Atlassian, linear, cursor and many more incredible companies. Now Miles is an old friend and so this was a very. how do I put it? No holds barred discussion. I think he put up with a lot of very pressing and prying questions and I don't think you've ever heard an Excel partner. Be quite as open and honest as this which was just fantastic. Miles really was very special to have on. But before we dive into the show today, over 80% of Fortune 100 companies are running their businesses with AirTable. AirTable combines AI with the scale of an award winning infinitely flexible no-code system, a platform where you can see all of your data in one place and use it to make really big picture decisions. Think of it like mission control for your company. AirTable goes beyond organization and automating repetitive tasks. It lets you use your data to inform strategy, monitor progress and take action. Every cell is capable of performing hundreds of AI powered tasks like web research or localisation and using those results to inform and update hundreds or thousands of other cells and workflows in real time. 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They build realistic RL environments, their generation data quality systems built from real-world operational traces and coding data sets that stress models under conditions where failures matter, state changes, workflow branching, brittle tool cools and the coding errors that break RL agents but never appear in benchmark reports. In reality, a model may demonstrate correct reasoning in your evaluation setup yet still select the wrong parameter or mishandle a code update in a realistic interface. Turing makes that failure visible and gives teams the signal they need to fix it. For labs advancing agentic systems, Turing provides the structure required to understand why these failures occur. To find out how, visit Turing.com/20VC, that's TURR-I-N-G.com/20VC. You'll have now arrived at your destination. Miles, we are in person. I love it when you're in town. It's so lovely to see you, man, and it makes it so much more special doing it in person. So thank you for joining. Yeah, thanks for having me. It's always fun being here. Now, I want to start with the cool question that I think every investor thinking about, which is how do we ascertain true value in an AI world where technology seems so transient and revenue seems so enjoyable? I think in terms of evaluating these AI categories and companies, there's a pretty useful framework which is basically trying to understand a company's time to value and then the durability of that value. So I think that a number of these companies shine on different dimensions. If I were to look at legal AI, accounting AI, a company like basis that we just invested in, I actually think these companies don't have immediately quick time to value. So when you look at the deployment cycle and getting lawyers and getting accountants sort of sold on the technology, that can take a little while. But once it is hooked, the durability of that value is like transformational to these firms. On the other end in the spectrum, I would take some of like the very early vibe coding companies, right? Very quick time to value. Like you start vibe going all the sudden, you have a weekend where your pickleball app ready to go overnight. You can start using something very quickly, but the bottom just fell out for a lot of these apps because there was no durability of value. The reason that I think coding has become like the vertical in AI is because it shines on both dimensions. Like you can start using cursor in an afternoon and by that evening, your 10 times more productive. The time to value is very short. And then the durability of that value compounds that the team starts using it. So cloud code cursor, all of the great products out there. Like I think this is why coding has become the vertical that is the battleground in AI today. Jerry Madd, I'll come to show you some insight the other day, not me, but like overheard from my portfolio. No one's using cursor anymore. Everyone's using core code. We just saw a chima tweet last night. We're going to have to move off cursor because it's just simply too expensive. And the Twitter sphere seems to have turned against cursor with the cursor as dead meme. But then they hit two billion in AIR. I'm trying to understand what is going on here. I think there's a couple of things that play. You know, I saw the chima tweet. I listened to the Jerry Murdoch show. With all due respect to those guys, I think there's a few things that play. First of all, this market is growing enormously. And I don't think a lot of these companies are actually experiencing success at the expense of the others. Take cloud code as an example. First of all, what an amazing product. Cloud code has absolutely captured the imagination. In part, driven by opus 4.5, opus 4.6. Like I think the success of cloud code is also very much tethered to the success of the underlying model. So it has captured the zikites like that's unmistakable with that said, I think these things are so market expansionary that it's not necessarily coming at cursors expense. And I think their market expansion area on two dimensions. First of all, they're bringing so many new cohorts of users online. So people who would not have been software developers a year ago today can be software developers with these tools. They're also expanding the market in terms of consumption. You hear the AR growth leaked for both companies. A lot of that AR is not like net new companies paying per seat pricing. A lot of that ARR is consumption, which is off the charts for both tools. I think that's one thing that's going on. I think another is this sort of misunderstanding about cursor being tied to the IDE. In some ways, cursor is a victim of its own success. Like they were so disruptive and so innovative around the IDE like a year ago that people can't help but overmake the assumption. What is happening though very clearly is like the world is moving to agents. No one has been more vocal and thoughtful about that than Michael Troll from cursor. I just sort of look at the numbers. According to like Michael's post, which was public on Twitter a few weeks ago, there are two times more people using agents in cursor than using the tab feature. 90% of cursor users are daily active users of the agent product. The agent product grew 15x last year. You know, the cloud agent product, which was new as of like October 30. So it's only been in market for three months is now responsible for 35% of merged PRs in cursor. Those are happening by cloud agents. I'll do respect to Jerry Murdoch. I think he said like, well, you know, I thought about this metrics, these metrics and this company needs to pivot. Like I'll do respect. I thought about playing in the NFL, but instead I walked on to a college football team and was the fifth string inside linebacker. You're not looking at any real metrics. Like who are these people to make these judgments? So I get a little bit spun up about it. The thing that's so cool about the team is like they are focused, they are unfazed and they're just building. Do you think they all fundamentally challenged because of their reliance on bluntly anthropic in their models and what that does in terms of cost inflation for end users of cursor? I don't think so. I mean, I think in a number of dimensions, the beauty of cursor is their ability to be multi model. I think it's valuable for a couple of reasons. First of all, we put this survey into the market. You'll have to have me back on the show to like give you the full read out because it's only 90% of the way complete. We just want to ground truth on like what's going on with the mindset of developers today. And one of the things that we're learning is 50% of developers switch model families on a daily basis and 95% of developers switched models on a daily basis. I think the world wants to be multi model and that experience is fundamentally enabled by cursor. The other thing that comes from being multi model is you basically become like an index of AI innovation because you get this compounding product benefit where every new feature, every new enhancement that the cursor team makes that obviously improves the product experience. But every improvement with the underlying models also improves. of the capabilities of cursor. And so you get this like compounding product flywheel that's very unique. - It was cursor wrong to focus on building their own models. - I don't think so. I think what they're gonna be able to achieve is incredible. I also think we need frame in the right context, what their aspirations are with these models. There are generalists and there are specialists. Cursors going to build specialized coding models that are gonna serve specialized coding tasks, especially for a lot of enterprise users. They don't need for their models to be good at poetry or teach you how to make an apple pie. Their models are there for professional coders to do professional work. And I think that that's very powerful and we'll continue to make the product experience really differentiated. - When you were investing at, what was the first round price? - 9.5. - When we're doing like a 9.5 and a 27, what are we under-identity? If I was your partner, I'd be like, totally get it and it's super exciting. But what's the upside here? How did you think about that? There's a couple of ways to frame the upside. One is that you think about like platform companies that are publicly traded that own their domains. There's very few of them out there. So Salesforce historically has been like the go-to-market platform company, CrowdStrike and maybe Palo Alto or like the platform cybersecurity companies. There has never been a platform company for engineering as a vertical. And engineers are like, I mean, this is the fastest growing most dynamic vertical there is and no one has ever owned that. Now you've had companies that have built tremendous value biting off pieces of the stack. At Lassian, hugely valuable company that we love began around issue tracking, data dog around monitoring. These have been like 50 to $100 billion companies built over time addressing like one portion of the engineering product stack. No one has built the platform company to own it all and we think they have that aspiration. So that's one thing. The other is like, we were also joking before the show that I think sometimes getting overly fixated on the financial metrics in this environment can leave you just like with the unsatisfying taste in your mouth. Actually, this company is growing so quickly that on a multiple basis, our first investment was at four times, five times a year and a half. That wasn't like anything that we talked about or part of the underwrite. Because now it's a two billion and you did it not in essentially. The company said, I think a week ago or it was leaked that they passed two billion. So yeah, that's a fair assumption. What was it when you did it? Just because you need to have that mental plasticity. We had a conversation with Michael where we sort of said, where is the business today commercial and he told us and it was, I'm not evading the answer. I don't specifically remember, but maybe it was like a hundred of ARR. - Give him take. - Yeah. We said, what do you think is realistic for the end of the year? He said, I think maybe like our aspiration is, these assumptions go right and these are the products we're gonna launch and then we can get to 500. And Andrew Bratchew, who I was working with, Andrew and I sort of looked at each other and we were like, I think we should haircut and call it 300. Like getting from 100 to 300 would be extraordinary for this kind of a company. You know, they ended last year, somewhere in the billions, I think has been reported. But it really never was about and still is not about financial metrics. The financials in this company to me are purely a reflection of the product market fit and it's unlike anything I've ever seen. When you are so off in your ability to predict revenue at year end, how does that change your go forward and invest in mindset? Do you just place no value on revenue predictions? How do you think about that? - I think revenue predictions are important in that they sort of encode a lot of business assumptions. If we get this product right, if our pricing here is correct, if our penetration of this customer segment works out, we should be at this rough revenue scale. But you know, the idea of having a budget so that you can go hold the founders' feet to the fire quarter after quarter and is just not really relevant. So to me, the less important thing is, if a company finishes, you know, 10% below plan, 10% above plan, like we're not public market investors, we're not managing to earnings calls. We care a lot about the inputs that go into the assumptions, but like the output is a little bit less important. - When we think about that and the revenue numbers that you see there, it makes other things seem quite boring. It does. I mean, this is the sad case. All we in a world were triple, triple, double, double is dead when you can have a company like Kursa going from 100 to a billion. - Absolutely not. I mean, send me all of your triple, triple, double, double companies that you're not interested in investing in. Like, I was thinking this last night, everyone says this on the show, I guarantee you'd be like, nice. - Here's why. And I think you can actually do really well investing in like non-consensus. I think you get hammered sitting in the middle. You know, a company that's not growing 15x year over year, that's fine. There's all these other really important inputs that go into it that I think can make for like a really interesting investment outcome. - I'm sorry, I still don't quite understand. If you have a port of money and you can put it in companies that are growing 15x, to then put it in companies that are growing 3x, 3x, 2x, 2x, the opportunity cost of your cash is real as your partner. I'll be saying, why are we doing that? - Yeah, but this is where, you know, we're ignoring like, all of the other important inputs, right? Like, quality of the founder, what market are they in? What ownership are you getting in the investment? All of these other things factor in two. So I think one thing that's happened in our market is like, investors have tended to just flock to the extremes. Either like, we're AI maximalists, we're gonna buy the basket, ownership valuation, be damned, we want everything. Or like, we hate the valuations, they make no sense. We're gonna sit on our hands and wait until things cool off a little bit. The reality is like, the best funds in the world, the best investors in the world, embrace the nuance. The right answer is always somewhere in the middle, constructing a basket of companies where maybe some, they were undisputed breakout leaders and you didn't get the ownership that you wanted, but you wanted to be a part of that company and you wanted to be partnered with that founder. There's room for that in Portfolio, but there's also bootstrap companies and Little Rock, Arkansas, where you can have a different ownership threshold and work with a really special founder and build the company in a different way. And you can do very well that way too. We don't really run from the nuance like we embrace the nuance. And there's a lot of benefit to being a multi-stage multi-strategy firm. That's wonderful, but your funds are too big to embrace nuance, dude. How so? Sorry, you need to have $50 billion or the plus companies to return your fund sizes. I think we will. I mean, think about this. Like a decade ago, how many trillion dollar companies were there in the world? No, and you're right, I use this stat too and like the expansion of outcome sizes, but like, dude, they're very, very rare and they take 17 to 20 years when you look at the majority of them. But this is the cycle repeating itself. They're like to answer my own rhetorical, which nobody asked me to do. (laughing) A decade ago, there were zero companies worth a trillion dollars. Five years later, there were six public companies worth a trillion dollars. Today, there's a dozen companies worth a trillion dollars in the public market. Plus, you have the labs, you have SpaceX and companies in the private market. So the sizes of the outcomes are enormously bigger. And I absolutely think that firms can make substantial returns in the late stage of business given those outcomes. And I will say, it's really hard if that's the only thing you do. If all you're doing is buying late stage momentum companies, I do think that's hard. There are people that do it well, but it's hard. I think being a multi-stage, multi-strategy fund, where you also have a really focused, early stage effort and a growth effort, I think you can absolutely continue to support companies in every phase of growth and make a lot of money. - But can you do vertical SaaS or intriple triple double double? - I wouldn't write off a company purely because that's the growth profile. Now, I see the point. You have to focus on large outcomes and I agree with you there. I'm like to the team, we need to do two things. One, we need to replace seats, we're replacing labor. And then two, I need to see a billion in revenue. Before it was like a hundred million and we can sell it for a billion or I pay a billion or I say it doesn't do shit for us now. - Yeah, I agree with you. As much as I enjoy sparring with you, I agree with you on this point. If you can't articulate the big outcome and if the founder can't articulate the big outcome, that is probably a sign that you don't want to be so you don't involve with the company. But I think that what you're describing is basically the mistake that we made on a company like Service Titan. We had fond of love with R&VA. We were chasing this round. It was gonna happen in the $250 or $300 million range. And we had these rigid rules about like, you definitely can't pay more than six to eight times forward for vertical SaaS and you definitely can't pay more than 10 times forward for vertical SaaS. We lost it because we sort of got cute on price. And then that went on to be a nine billion dollar company. If you really understood the depth of the market, then if you really understood what they were disrupting in that era, you would have done it even though it was a vertical SaaS where you might have otherwise historically thought it was constrained. - When we said about Curse, I liked your description of like the platform company for engineers and I see it and I see that ground play. But then it kind of goes again to something that we kind of noted down before you said, who will win as a now reminded framing of the market? Are they not paradoxical? Like if you think about Curse being that engineering platform company, totally got that. And I believe in that view of the world. But I don't believe the who will win as now reminded for you. - I think Curse are well-wimped. - I think there's huge value to being the winner in these markets. But the reason I think the conversation is like the framing is overly simplified is people forget we don't operate monopoly markets in this country. Like the forces of capitalism don't permit it. And if they did, then the federal government wouldn't permit it. So like I think the best software company in the world is AWS. AWS has like 35% market share. Everyone aspires to win and you get into business with these founders because you believe that they can win. But I also think the way that a number of these verticals are going to play out in a number of the AI categories, there's going to be a couple of really big companies and several of them. - Do you know what I think we deal legitimately operating monopoly markets? I mean, that's a good, like Nvidia. That's a good apple for consumers. to Yamaha, Salesforce for CRR, and Salesforce is a 250 billion dollar business. - Yeah, but I think it's different when you get into the mega cap companies, like there are monopoly conversations, and that is what the federal government is there for, somewhat are you, not are you, but that's what the federal government tends to do these days. You know, I think in the private markets at the scale of companies that we're talking about, I just don't think so. And like I'll give you one framing for the winning conversation. We've talked about, and you talk on the show a lot about deal. People say like, deal is one, the market, Alex is phenomenal, deal is one. We're not investors in the company. I think it was published that they passed like a billion dollars of AR. It's incredible. It's like, welcome to the big leagues, ADP has 20 billion dollars of AR. Like you are 120 at the size of ADP. And by the way, in this market, you've got like paychecks is a 60 billion dollar company and paycom and paylocity. And I think the venture framing of this company one is not always, you know, I think it can be a little bit oversimplified. Do you reflect on those two? You're not in deal or ripening? - Stepper conversations, we're not in deal 'cause we're in remote and I'm thrilled that we're in remote. I think Yobin Marcello are like very special. I think their product vision is very different and unique. The rippling one, yeah, I think about this one a lot. I mean, this one's things. Why? I think a lot about like the physics of these businesses and like the product mechanics behind a lot of these companies. And what I mean by that is, I think a lot of investors tend to look at like, what's the product, what's the growth rate, et cetera, et cetera. No one really has an appropriate appreciation for what I think of as like the marginal ease of ARR accumulation. What are the downstream levers that you're putting into place that you can pull on in the future that will allow you to grow at these crazy growth rates in year 4567? And, you know, how do you build this growth mechanism that is better than like I put in a marketing dollar and I get out a dollar and 20 cents of revenue? I think nobody in the world does that better than Parker Conrad. So, you know, the first time he's sort of outlined the vision, I was like, this is really compelling. I think that's what he does. He has this innate sense for pockets of margin that other people wouldn't go build companies around, like laptop provisioning and physical IT leasing. That would be a tough standalone business, but like as a revenue line item for a company like the Rippling, it's really interesting. I just think that Parker is a generational founder and we don't get it right all the time, but he's certainly someone I wish we were in business with. Why are you not? Do I, because of the remote and situation, or price or? I think it was a couple of things. Parker previously had a reputation. I'm not going to opine on whether it was deserved or not, but he had a reputation that I like to think he's now totally overcome. That just came up in the conversation and in a market where like, Mammune was moving very quickly and other people were moving quickly, like it probably made us a step slow. I think this is also one where like, we stuck to our knitting on the investment framework, the ownership thresholds, the opportunity to get involved is going to be at a high valuation. And maybe there was, I don't remember the specifics, but there was like a mechanism where you can invest more over time and it would have required us to break a lot of rules. And I think like, I don't regret not breaking the rules in general, but you know, this would have been a time when it could have been worthwhile. Exciting. Confused right now as to whether we should break the rules on series days. The prices have gone from 20 on 100 to 20 to 40 on 200 to 400. And I'm forced every day to question, should we break the rules on ownership for these incredibly fast growing HOT AI companies? And we go back and forth on it. We're friends sitting in a coffee shop. What would you say to me if I was debating that? - Yeah, I'm chocolate because there's this funny quote that comes to mind. I've been very lucky and excel to learn from a lot of really great people. One of them was Jim Breyer. Jim used to say this thing, which I think he was paraphrasing from somebody else, but it was basically that like investing is an art in a science, the science is understanding how to properly value a company and the art is understanding when to break the rules. I just think in this market, like you gotta do that constantly. Generally speaking, sticking to your rules is a good place to be. Now I do think, you know, the vocabulary around what a series A is in this market is just very different. And so I would actually, you know, I think there's like multiple subcategories of investing that goes on in series A land. And you just have to decide what you wanna participate in and what you don't. It's okay to say no. Like you don't have to be in every single round. So I think that like breaking the rules is something you should do very, very rarely. You said that kind of brilliantly wonky phrase. The marginal ease of ARR accumulation. I'm gonna give you five tequila, and then ask him to say that again. Sounds wonderful. Where did you think that was marginal ease of ARR accumulation? Where there maybe wasn't. And what did you not see? I think as the market has gotten more competitive, the pressure to be right to pick correctly has never been greater. It causes you to extrapolate. You have to extrapolate from early data points. There have been investments where a company went from they had a million dollars of ARR and then in the period before they fundraise, they had like a four million dollar quarter. And it's like they've got it. Like the product market fit snapped. Like this is it. This is the time to forward invest and you can extrapolate these trends. And then it turns out sometimes they just had an anomaly quarter. I have fallen into that trap before. You have that more and more now when we see companies being maimed by others so significantly. Yeah, yeah, definitely. I agree with this. I mean, I think this is why the benchmarks that used to give us all comfort are largely obsolete now. And so like you have to be really clued into the usage intensity of your product and really understand how people are using it. Because growth can obscure and blind you to a lot of underlying eels in the business. So I do think that being clued into like how people are engaging with the product, whether you're an enterprise company or a consumer app, it's more important than ever. Do you find it hard, the binary nature of this world? Honestly, we come into what sometimes and we're like, what the fuck are we doing? I'm being serious. You know, I was going to my different Jason Lamkin the other day and he's like, fuck this. I've had enough of this. I just want to do an anthropic SPV and go home. I don't want to pick the winner and a SaaS company that, oh my god. We feel so unimpulsant. I have to be honest with you. No, like I fucking love it to be really honest. Like I'm so lucky to be in this industry and the competitive thrill of chasing down these founders and chasing these deals. It's awesome. How lucky are we to get to do this? So no, like I understand where you're coming from but I love it. When we look at the big exes, they say you've got data breaks, you've got anthropic, you've got open AI and you've got SpaceX. How's the partnership? Do you guys lament that you know in and? Of course. I mean, we are in some of those companies but we, yeah, absolutely. Nobody is harder on us than we are. We want to know where we went wrong. We also though, we do that in the interest of getting it right going forward. And when we looked at the future, there's a lot of things that were really excited about a lot of companies where we are sort of the investor record. We intersected them very early, continued to buy up all the way through the growth stages and we're excited about those. But absolutely, we hold ourselves accountable when we miss companies. I spoke to one of your LPs before and they said, "Help me understand why we're not in any of the foundation model companies. Why are we not in anthropic and open AI as an Excel LP?" Was that just like a missile? Was that a belief that they wouldn't be good companies? A lot of firms miss the model companies early and we're guilty of it. Nobody has looked in the mirror harder than we did and course corrected. Can I ask, when you did, is it like your like partnership meeting? Hmm, have we fucked up? Or is it like an unspoken rule like the British people when it rains and we just pretend it doesn't rain and we walk any way? No, it's the most important conversation there is. So it's a global offsite where every partner at Excel sits at a room together and we say, how did we not get this right? And how do we fix it going forward? What are the 50 best private companies in the world right now? And for how many of those companies are we not just a passive shareholder but like the investor of record? And what is our score? And then what do we think is the next set of 50 companies and how many of those are we gonna win? And like if we're not getting better, no one will be to stop more than we will ourselves. So that's what the conversation is. I mean, it's the most important thing for the entire partnership globally. Are you playing a coverage game? You know, when we had a niche from Andreessen on the show, he was at 100% way up playing a coverage game. We got split up fiefdoms and we got split up stages and split up categories. And you are expected to see 100% of yours. And if you miss, it is not acceptable. For me, for example, we play a different game. I don't have to see 100%. But I need to hit one of the big ones. Yeah, we're organized a little bit differently, but of course we hold ourselves to the same standards of coverage. I mean, the aspiration is 100% coverage, 100% win rate, right? No one in the industry does 100% of both. But if we're failing on one dimension or the other, we're gonna talk about it and understand where we need to be better. What was your win rate today? How would you measure it? When you go for a deal with a time sheet put down. Mine individually or as firm? Because it's, I think a healthy win rate would be like 80%. And the reason it's not 100% is because-- No one's gonna have 100%. Some people have come on this show and said that they have 100% win rate. And I've did it in Andreessen. Well, I wasn't trying to call him out specifically, but I've just heard it said before. What did I find? If I said I never lost a deal, I'd be happy if someone said it. Yeah, dude. My, I don't mean to be combative about it. I think my, like, my polite and professional response would be, I think if you're not putting yourself out there in losing sometimes, you're not chasing competitive enough things. I really like sticking my nose in a competitive fight. Like, then I have no right to win. I really like doing that. But I also really find a lot of joy in finding these founders who are just doing things a little bit differently. Maybe they've bootstrapped the company. Maybe they're located in some geography that's like far away from Silicon Valley. in having these non-consensus ideas that other people might think are silly or they might not really have their heads wrapped around. I think that's great too. But part of it kind of growth that could be like technology venture, not inherently the most fucked in this AI world. I think that business has gotten harder. And I think that was like, frankly, that was the core of our early growth strategy. I'm leaving the bootstrapped like one password, Qualtrics. Totally. And Scott, no, amazing. I love this. Absolutely. And that is still out there. And we still do a lot of it. And we aspire to be the best in the world at it. Is it still out there in a world of this? It is. This is the funniest thing. Every time we have an off-site or a strategy conversation, we keep saying like, there's no more bootstrapped. There's no more bootstrapped. And then like you find a Laravel. Like they are still there. They're really hard to find. And I think we're like the best in the world at finding them. It makes sense from opportunity cost of capital to put your money there versus just putting another hundred million into cursor. nuance and portfolio theory. A part of our business will always be doing that. It's very difficult. At the moment we have a $1.4 billion growth fund and we have a larger sort of later stage pool of capital. No, 100% is like 1.4 and then you've got leaders, which is like three or four. It's a growth fund subscale then because David George has got six or seven to play with. And Josh has got nine to play with. Is that subscale or should we think of leaders as the growth fund in the same way? In many ways, the market today is like what the venture market was in 2000 but inverted. So the idea was like, I'll do my series A. I'll get 30% ownership. I'll take a bunch of delusion and when the company goes public, I'll own 20% of it. That was like roughly the math. Today you have to back into 20% in the other way. You do what the market will allow and the earliest possible investment. You sponsor a tender. You do a growth round. You do an IPO round and you can ladder your way up to 20% ownership. Or you have to be a multi stage fund to do that. Or you hope and pray that the expansion or like the multiple or the size of the exit. It's so much bigger than it was. It's a whole billion, five billion. It's 50 to 100. That actually having five percent is actually just as meaningful as having 20% of the prior. Sure. I think you won't be surprised to find that like I don't think hoping and praying is a great strategy. Dude, we are all fucking hoping and praying right now. I'm sorry. That is an absolute like a figma is an 11 billion dollar company. The unbelievable unwaveringly brilliant founder of Dylan and this was the swan song of software is 11 billion which is incredible and incredible and incredible. But you know, it doesn't return your growth fund. But we're arguing two separate points and I agree with you on the figma case study and all these like fundamentally incredible businesses out there that have gotten beat up. That's a separate point that we should circle back to. The other point is like, do you have to swing for the fences? You know, I go back to Arthur Patterson co founder of Excel always says this thing. And what he means by that is if you're just constantly stepping to the plate and trying to I can see at the series a that this is going to be a hundred billion dollar exit. You will just over swing and you will fail. No, but isn't that what I'm deliberately being. I'm not actually I'm actually just fundamentally disagreeing with that. That is like not what Venture is about, especially at the series a you want to have a diversify portfolio enough that you have one or two of them hit. But you want 30 swing fuck out of this and it could be a hundred billion. We're not here to do the singles and doubles. I think different ways to practice the craft. I do think the market has evolved a little bit and a single one double today might look different than it did in the years 2000. I think what he means is like know what you're good at. Focus on founder relationships stick to whatever your particular strategy is and just try to do that really well. Don't just go sling it into things that are momentum chasing opportunities where you're not going to be any better than the next investor. I think that advice is fair. Do you know what I think we're momentum chasing? I mean like if we look at the AI entry for you guys and then the defense entry with Helsing like we're all slightly momentum chasing. I would go back to nuance subtlety portfolio theory like there are absolutely companies where it is justified to chase momentum. We don't like to use that vocabulary but we see a company like anthropic and how valuable they are as technology partner to like every other company in our portfolio. The momentum is very obvious but the business logic and sort of the business and transics are also very obvious. So does it make sense to have a relationship with the anthropic? Absolutely. So guilty of that. You did the 180 round? We're leaving the lesson in a few rounds of anthropic. It was the first round you did. 180. When you were doing that as a team, how did you think about outcome planning that and like sizing that? I think that company in a small handful of companies in the private market today are operating on a different plane. I think it is not bombastic to say that some of those businesses could be trillion dollar companies. People who are underwriting these rounds believe that. I think that is a different category but the danger in this business is ascribing the characteristics of an anthropic or an anderal or an open AI or a stripe to like the things that don't really fit the paradigm of the series. But when you're doing an anthropic round at 180, are you saying we fundamentally think this can be a two trillion dollar company in a 10X? Implicitly, yeah. We're not. What do you need to see to run the jack? It's like, you know, three to five X is enough on growth. There's never a partnership conversation where we sort of say, hey, we've built a model and squinted our way to a three X outcome. Like that's just not exciting. The reality is that I do think like a lot of these funds revert to the mean. If you can generate three X net funds, that's a pretty good business to be in. But if all you do is aim for three X investments, like of course, that's not really the math that gets you there. If we can have a conversation about this company is special, its reach is unprecedented. Its founders are very, very different. The comms for this business would be platform companies like Google and Microsoft and Amazon. Then of course you want to participate in those companies in the private markets. You said about spice. Do you feel better or worse to be an anthropic shareholder post anthropic versus the Pentagon? You were definitely going to give me some spicy ones. I can feel your compliance team just shit. I just crawl. Look, I don't want to answer this question. How can you not admire the founders for sticking to their knitting on and sticking to their conviction and sticking to their principles? Now, I have no idea how this is going to shake out. Did you know what right Dario is meant by a fool? Definitely not intelligent enough to go straight anything for Dario. I think this is an opportunity for a lot of these companies, they signal virtue. They believe in a world where AI is going to be a force for good. Then there are commercial opportunities where that gets put to the test. Can you really blame a founder for saying I'm sticking to the mission? I get it and I respect it. I think it's not just a big deal. The greatest companies of three, four, five years ago, many have gotten totally beat up in the public markets. I believe many are oversold. I think this is where it comes back to this being a human business. Who is the founder that you've gone into business with? What is that founder going to do when they're back is against the wall? How long have you looked at a snake? I'm in Guy's new company. What do you do? It's 300 millionaire all growing 15% and the last price was seven. I think this is in some regards, like as the founder of the company, we lose sight of this. That's not a great setup for people who might have invested at $17 billion. But it's a great business with a great product, with a great customer base. There will be an outcome for that company. It is humbling relative to the valuations of the 2021 era. But again, who is the team that you're in business with and how are they behaving? Are you behaving more importantly as an investor when the team's back is collectively against the wall? What happens? Do these businesses go public? Do they get taken up by M&A? What do you think is the root for them? I think it's probably a good time to be in the LBO business. I think it's probably a good time to be in the Toma Bravo, this Blackstone KKR business. There will be homes for a lot of those companies who get themselves to a sustainable place and they will find homes. These homes for a lot of companies will be different than what the aspiration was when the founder started the company. That's just a reality of this market. I totally agree. Are you with me in the camp of when the founder goes, my conversion goes? When Andre is at Miro, I'm like, Andre is still batting. If Andre is still batting, I'm still there. There is unmistakably something special about a founder-led company. Might be in it at last, and when I interview him, I'm like, I still feel that you've been his passion. It's still there. Never bet against Mike Cannonbrook's. Absolutely. I'll see you guys there. - Yeah, I'm like, it's not that it can't work. There are incredible professional CEOs. Like if I could have, if I could have Frank Slutman come be the CEO of a number of companies I work with, I bet the founders would say, yeah, that's a great trade. I mean, there are incredible professional CEOs. What if you changed your mind almost in the last 12 months as an investor? - I believe this thing a year ago that in hindsight I feel very stupid for having said. I believe that like all of the generational investments in AI had been made. I looked at my partner, Dan Levine, incubating, scale AI, building a relationship with Alex Wang in 2016 in making that investment. The early investments in the labs, I sort of thought, listen, the bets were made eight years ago and it's too late and now we're all sort of fighting for what's left over. I was a really stupid thing to say and I no longer believe it. That's probably the thing that I've fundamentally changed my mind on both because those companies will be bigger than the outcomes that I probably envisioned a year ago and there is still time to be a part of some of them. And because the innovation flywheel is just getting started, we are barely scratching the surface. - When you had the scale, I said, for context 14.9 billion dollars, amazing, I said, down was like unwaveringly the first investor there from the dormant style moment, epic. When you had that, so the company's gotten off of the 14.9 billion. - Is that like high fives and this is awesome around the table? - No, there is an appropriate congratulations and acknowledgement to Dan. There is a huge, loud, full-throated thank you to Alex and then everybody gets the fuck back to work. It's a humbling industry and you are only as good as the next thing that you do. - How do you analyze that market stakes? Is one like, I really struggled to get my head around in the way that not cynically not pound what I just don't know. There's so many different providers that are all very meaningful revenue scales. - Yeah. - The scale, Mercworn markets? - Yeah, as we said with your Mercours, with your Turing's, with your, I mean, there's 10 or 12 of them, micro ones. - I probably struggle with services, businesses in general getting valued on like extreme, extreme ARR multiples. You said about kind of the value of different revenue multiples and we've spoken a lot about, Michael and Lassian before. There are clearly things that Mike is not able to do because he's public that private company founders like the Colossans are able to do. How do you think about the benefits of public versus private today? And given liquidity so inherent within secondary markets, like we're seeing with, even as early as your linear's, where you're doing tenders for them clay, has tenders and then stripes on bigger scales. That's obviously much more liquid markets. - Why would anyone go public? - Well, the reverse is true too. There are things that Mike can do as a public CEO and the public companies can do, the private companies cannot. But I think you're asking the right question. I mean, I think there's a reason a lot of these founders are staying private longer. What are the things that you typically needed to access the public markets in order to do liquidity for employees? You can certainly do that now as a private company. M&A currency and just increasing your valuation, benchmarks or your evaluation mark, you can totally do that as a private company. So I think that is all true. With that said, I think that applies to like the 10 best private companies in the world. Like Databricks can do those things. Stripe can do those things. There's a lot of companies that just do need to get public. The trouble is those companies need to get public. But they're in the like $2.10 billion range. Does anyone care about the $2.10 billion range? - I think you've seen this phenomenon where I would actually peg the range a little bit lower. These companies that have gotten public in the like two to four, $5 billion range and then they never really break out. I think that's a difficult, that has been a difficult threshold for a lot of these companies to break through. And I do think this is why you see a lot of good companies waiting people say, oh, it's because the investors will be underwater. I don't think that's actually the reason. I think it's because generally speaking, you want to go public and you want to be able to have like fairly clear line of sight to hitting the $5 billion threshold and trading beyond that. 'Cause it's murky below that. - Is this South Pokolips and overreaction? Or is it actually the fact that we would just bluntly valuing them far too highly on actually relatively mediocre 18 to 20% growth rates and this is a realization of that? - Fundamentally, people are valuing the future cash flows and the future terminal value of these companies differently. And I don't think that's wrong, but I do think this has been an over rotation. - What is the most oversold stuff? - We are not a part of Figma, but have a lot of respect for that company. But I know that Dylan is a generational founder and it's a very important company with an incredible financial profile and it just feels for a lot of ways for a lot of reasons oversold. - We mentioned the liquidity inherent within kind of companies now as it goes later on the stage. How do you think about when is the right time to take ships off the table? - I think you have to operate from the first principle of what is best for the company. Now if the company is saying, hey, we're gonna do a big tender in a secondary round that it's okay if investors want to sell, I think in those circumstances it's generally wise to diversify. But I think that it's gotta be the right thing for the company and for the founders first and foremost. - Can I ask you, I'm sorry to be so nice. You should have done the show five years ago when I was a sweet little boy. You did, that's just not true. When you look at, say, a wee work, benchmark with fantastically smart to get out of it. When you look at a light speed in Jeremy, do you sell in with Snap? They were very wise to get out of it. We're seeing prices so far ahead of company traction now. It's not in their interest for the investor to sell. Jesus, we're paying four years out of time. - Totally, it's in our interest. But it's so situational. So as a principle, do I think it's good to get liquidity back when it's available? I do, but it's so situational. You use the wee work example. We were not a part of wee work, but had I been a shareholder in that company when it was worth like $50 billion, I don't know a whole lot about the commercial real estate market in the office space market, but I probably would have been seeking liquidity. That just feels rational. But you know-- - It didn't notice he was seen rational to seek liquidity at mirror at $17 billion. - I think that was, we didn't take liquidity out of mirror at $17 billion, but again, what was Andre doing? What was the founder doing? What did he, what was the course that he wanted for the company? And that's the only thing that matters. The example I would point to is crowd strike, Samir Gandhi and John Locke intersected crowd strike when it was, there was like a million dollars of software revenue, and there was a nine million dollar consulting business, and that was the company. And I think they invested in 2011 at 160 posts. Now there have been non-stop opportunities to diversify and sell crowd strike stocks. It's a public company, you can do that today. But Samir and John led the next round, they led the next round, they bought the IPO, and you know, it's a hundred billion dollar company today. We're sure glad we didn't take chips off the table. - The question there is like, you mentioned obviously buying the IPO and kind of the decision to hold that after. You know, obviously, so the core, I have the evergreen vehicle, which has been a lot of talk about. Do you think that venture firms should have the responsibility of managing the book into the publics, or do you think it should be a distributor or a business discussed from that? - Yeah, I think fundamentally, we're in the business of identifying outlier founders. If you're a multi-stage fund that gives you the flexibility to stick with some of those founders for the long run, you should definitely do it. I think in the George Kurtz case, absolutely worth doing. In the Mike Cannon Brook Scott Farcourt, Park case, absolutely worth doing. But not every company has the mechanics to compound for a long time. You can't just do it as a blanket rule. - I don't like public markets right now. And I think it's just a bad place to be 'cause you're seeing the casinoization of public markets where a Citrini report can wipe billions of dollars off and throttling doing a security release, impacts crowd strike. - I think the public markets are no longer rational. - Yeah, to me, it's not good or bad. It's just a different asset class. And it's stick to what you're good at. And I don't think we would be excellent stock pickers, but I think we're pretty good at what we do in terms of early-stage technology investing. So I just think it's an asset class that I'm never going to be best in the world at understanding public stocks. And I think that's okay. - Who's the best solser inside Excel? - Solser is finding great companies. - Christine Esterman, really, really good eye for companies. And she is relentless in getting in front of founders. She's great. - Who's the best picker? Andrew Braccio, by far. Andrew is wise. Andrew has seen success at incredible scale. He's our best picker. - When it comes to winning, cool part, we don't talk about it enough, I didn't think. Who's the one you're like, okay, we need to win the deal. We need to bring in. - I think Samir Gandhi is incredibly compelling and hits it off with founders in a very special way. Do you think the best founders need your help? I was going through the pillars of venture there in terms of sourcing, selecting security and servicing. And I was like, do you think the best founders actually need your help? - I think need our help is an overstatement. I think of the role of a good investor. There's basically these like bumper decisions that come up a couple of times a year. Like if you're a founder, your life is a bunch of little decisions and then a couple really big decisions. The little decisions are like, you know, design decisions about the product and pricing and should we dial up CAC and should we make this higher. You don't need an investor micromanaging you through all the little decisions. I do think every year, there's probably a couple of like big decisions where having a good sounding board can be really useful. Should we do this partnership? Should we make this acquisition? Do we need to pivot? And there, yeah, I think having a good investor or just a good partner to the business can be really useful. It's all about strikes. making the right balance. - He loved being a bullman. - Yeah, I love it. - He's the best bullman he said I don't know bull with. - The best board member I've ever seen in action. My friend, Ravietsikoya, is a very good board member. He was at Sequoia now he's doing his own company. He's done a lot of different things. He's been an operator, he's been a buyout guy, he's been a growth equity investor, but I think it's more about his demeanor and the humility with which he delivers feedback. He has this way of sort of saying, let me politely make an observation and you can sort of choose to accept it or reject it. There's just sort of like wisdom and humility and how he communicates, which I appreciate. If you're a founder listening to this, what advice would you give them on how to observe a potentially not helpful behavior from a board? - There's a lot of bad board members. - I think there's generally an inverse correlation between how vocal somebody is and how helpful they actually are. So the person who just has to get the first and last word in and shows up at the board meeting and has to teach you something that you didn't already know. Like I don't actually think that is the model for wisdom as a board member. - Is it brilliant one? The coin box that rattles loudest has the least in it. (laughing) And another one that I found to tell me the other day I thought was helpful. It's like my lesson from boards is VC is a great identifying when to hire someone and they're awful at identifying who to hire. Your buddy is probably like the CRO of Atlassian. That's not great for my 10s in an air. - That's not a good thing. - That's exactly right. - So yes, dude, I'd love to do a quick fire with you. - I'd love it. - So seed firm, series A firm and growth firm that you have to invest in. And it can't obviously be, obviously you put all your money in Excel. - Yeah. - Yeah, of course. - Seed fund, I really like the guys at Liquid2, Nate and Matt Mulvey. Those guys are prolific. They have an incredible network. They have great tasting companies and they are kind enjoyable people to work with. So when they send me something, I take it very seriously. - Seriously. - The vocabulary on what a series A is these days has evolved. So I'm not sure how you would bucket these guys. I really like the team at Maritech. I think they have very good tasting companies. They do some series B and later stage things also, but great tasting companies and they are gritty and they hustle. I would say it's not coincidental that Max and Alex were also trained at Summit Partners. I really respect that part of their pedigree, but I really like those guys. - Good. - How can you not acknowledge how successful Josh has been at Thrive? I really admire the way that they have scaled a business that not only can initiate investments and invest across funds, but really reflect their conviction at the late stages. So we compete with them fiercely. We also work with them. I've gotten to work with Miles Grimshaw through the cursor board, which has been a great experience. - Miles is amazing. - He's great. He is my much more articulate intelligent VC, alter ego, the other Miles. But we have a lot of competitive respect for those guys. - He's also like a math and runner in like two hours, 10 minutes. - It's like, yeah. - It's like, yeah. - Yeah, I mean, I could finish it. - I could finish it marathon in two hours and 10 minutes like out of motorcycle, but it's different. - Honestly, I see a problem. - I mean, to be better is a human being. - To be straight. - I totally agree with that. - I could win in an arm wrestling match. - If you could add one person to your team, who would you add? This can be completely hypothetical. It can be packed, right? It can be Josh Krishnan. It can be Ela Gilles. They are going to most move the Nevelin or ability to win. - I'd probably try my very hardest to talk Mike Kinne and Brooks into retiring from operating and to being an investor. He would never do it. If I could like go to war side by side every day with somebody like it would be Mike. I never, never bet against Mike. - What about other VCs? - I agree with you. It might be amazing. I'll probably take Neil later. I don't know anyone who has the investor breath at Neil has. From doing wind surfs first around and sticking with them throughout many Pivers to jump call owner in the public markets and having that breath of aperture. - This is actually a really fucking good question. - Or Mickey Malca. Mickey Malca's ability to see trends so early is just exceptional. - I'm gonna answer this one, but it's a really good question I hadn't thought about. Do you ask this one a lot? - This is a really good one. - Thank you, I saved it for you. - Thank you for that. - This is great. Jetlag discombobulated and I didn't prepare for this. - I think somebody who, I not only have a lot of professional respect for, but somebody who I personally dislike a lot. It's actually Matt Borinstein at Andreessen. You know Matt? He works with Martin. He's deeply technical and very thoughtful with his instrumental in there finding the cursor investment. Matt doesn't like admitting that he also has an MBA from Harvard, but we sat next to each other for a semester at school. I really like him. I enjoy spending time around him. I think he's really, really smart. - What advice would you give to someone starting that career in Venture Today? - I would give the same advice that Arthur Patterson gave me and says all the time to us as a firm, which is it's just about professionalism. Arthur says this thing that anybody, any firm can be professional over short periods of time. But his aspiration in starting Excel with Jim was to maintain a standard of professionalism over long extended periods of time. That means respecting the process, respecting the partner meeting, respecting the portfolio review, respecting the rituals of the firm, and going about the job in a professional way. I would give that same advice, tell me, what deal did you not do that you wish had done in the last 12 months? - I think 11 Labs is a clear company that we wish we had been a part of. We haven't spent enough time with the founder, which is our loss. I think we really regret that one. It's huge. - We didn't do the 11 billion round. - We didn't. You know, as I said, nobody has a perfect success rate. Like this is one that at the next off site, we will beat ourselves up over. But as I understand it, very special founder, very clearly an important part of the modern AI stack. So that one stinks. - What's worse, losing or not seeing it? 'Cause losing, the evidence has not seen or seen, but losing really sucks. - They're equally bad, but losing stings more. Having had the opportunity and failed stings. - And I don't know which loss hurts the most. - I don't know that I would characterize it as we lost, but the company that I really, really loved, the founder and we didn't get there was Shiv and a bridge. We actually hosted this AI dinner a couple of weeks ago and I was like, I'm going to manipulate the seating chart and get to sit next to Shiv 'cause I think he's generational and very good. And I regret that we didn't get to work with him. - What when feels the best, that moment of jubilation? - There was one where I was going through some personal things and happened to be able to compete for and ultimately when the opportunity to work with linear. - That one on a personal level was maybe the best week. It had been the worst couple of months that I'd experienced in a long time. There was this very surreal week where it felt like Kari might decide to raise capital. I basically decided that I was going to go park myself in Southern California, you know, he lives in Del Mar outside of San Diego until he basically decided, you know, whether or not he was going to raise money. - I mean, you say politics yourself, I didn't mean it's bound to be like, you should have thought of a thought of his appalteness. - No, I like got a hotel room somewhere and I would like get up and go for runs and see if he wanted to hang out and try not to bother him. But in the event that he said, yeah, I'd love to get lunch like I just wanted to be nearby. It's a little bit creepy as I say it out loud, but at the time, you know, it seemed right. And I had a lot of stuff going on at home. It was my best friend, my best friend Craig's birthday. Craig, by the way, is the only reason I got into this industry to begin with. He got me my first job and then my second job. And, you know, I was flying back and forth. I would go home, see my kids, go to San Diego, sit there, try to hang out with Kari, go home, attend Craig's birthday, which he wouldn't have cared about, but he's my best friend and I needed to do it. Go back down to San Diego and there is just a lot coming to a boil in my personal life. And when Kari called and said that, you know, he wanted to work together, like, it was pretty euphoric. I will always remember that week and it's been a special company to work with. But on a personal level, that one felt pretty good. - The two companies that I've never had more requests for interest to is that I had just carry every growth investor wanted to meet him. But before that round, it was like, it was annoying, to be honest. - And then lovable was really annoying. That was really annoying. But pretty the round that Janya did, 'cause we were in the round before. It was just embarrassing. I mean, like five to ten a day. And it is very awkward, because who else are you getting bothered about right now? I should go see them, I'm here. - Yeah, there's two or three. And it's so funny, you see the investor wins where it's just like, you don't bother to send it to the founders, 'cause it's like, I'll send you a list of names of people who want to. - Yeah. - And it's even worse for me, 'cause I often have them on the show. And so people assume that you're great friends. - Yeah, yeah. - No, I know I just met like, you know. - Right. - Whoever it is, when I mean did the show. - I just assumed you were best friends with everyone who comes on the show. - Hey! - Best friends. Final one for you, dude. What are you most excited about when you look forward? I think it's really important to be optimistic. Optimist, mate, money, pessimist, or right. - Yeah. - What are you most excited about? - Honestly, the thing that I'm the most excited about is watching the younger team at Excel Flourish. I'm not smart enough to predict where the world is gonna be a decade from now, but I can tell you that Christine Asserman and Ben Quazzo and Josh and Rohan and a bunch of folks of the team, Gonzo and everyone who's gonna be mad that I'm leaving them out. Like, we have such a talented team. They are the unsung heroes of the firm that don't get necessarily the attention that they deserve. I'm so excited to see what they're doing a decade from now and like I'm proud to know them. - Dude, it's such a pleasure to have you on it. It's so nice to see you in person. Thank you so much for joining me, Dave. This is a blast, thanks, Harry. (air whooshing) - But before we leave you today, over 80% of Fortune 100 companies are running their businesses with AirTable. AirTable combines AI with the scale of an award-winning infinitely flexible no-code system, a platform where you can see all of your data in one place and use it to make really big picture decisions. 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