20VC: Max Altman on The New Seed War: Can Anyone Compete with Sequoia and a16z | Leaving $2BN on the Table with Reddit | Lessons from Backing Rippling at $25M Post | Why Climate Tech is a Mirage and Disaster

This is 20VC with me Harry, stepping into joining me in the hot seat today we have Max Altman. Max is the co-founder and managing partner at Saga Ventures, a $125 million early stage fund. And before Saga, Max was an investor with Apollo projects, Hydrazine Capital and Altman Capital, where he deployed over $500 million into breakout names like Ripling and Reddit to name a few. But before we dive into the show today, Secure Frame Empower's businesses to build trust with customers by simplifying information security and compliance through AI and automation. Thousands of fast-grown businesses including Nasdaq, Angel List, Doodle and Coda trust Secure Frame to expedite their compliance journey for global security and privacy standards such as Sokto and ISO 27001, CMMC, NIST standards and more. But by top tier investors and corporations like Google and Client Perkins, the company is among Forbes' list of the top 100 startup employers for 2024. 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And it's completely free to start. Ready to design? Iterate and publish all in one tool? Start creating for free at framer.com/design and use the code Storytime for a free month of Framer Pro. That's framer.com/design and use the promo code Storytime. Framer.com/design use the promo code Storytime. Rules and restrictions may apply. You have now arrived at your destination. Max, dude, you're the final Altman left to interview. And I actually spoke to Jack last night, and he told me that I saved the best till last. So no pressure, dude. But welcome to the show. Yeah, thanks for having me. I definitely think I'm the most fun of the three, maybe the most media shy, but the most fun. I heard the most intellectual and charming, so I'll totally take that. I want to start though on a little bit earlier. You grew up in the Midwest, which for me is a Brit. We know New York, we know SF, and then there's the middle. So this is the middle, correct? Yeah. So grew up in St. Louis, now live in Austin, spent a few years in San Francisco, but then bounced back to near home. How does that impact how you think about investing as an investor? The culture in the Midwest is very different. It's very humble. It's very communal. And then I remember I got out to San Francisco, and I'm like, everyone is so aggressive and individualistic. So I think it helps a ton, one in that you build a lot more real relationships, and a lot more like close friendships, because that's how we grew up. The flip side is we're a little less aggressive than some of the earlier mistakes I made was just being a little bit less pushy than some of the people that might have grown up in Natherton. Do you think there are many real relationships in Manchester? There are still some. There are less. I think when I got there, San Francisco in 2013, it looked a little more like a smaller town, maybe Austin or St. Louis, where everyone really trusted everybody, and had deep connection. And naturally it's grown, 10-100X, the number of VC funds, the number of startups out there. So I think it looks more like a New York, where just generally trust in society, I think breaks down a little bit as you grow. Well, this is like pre-Turist venture. Yeah. I mean, most of people in Venture stay at TURRUS, like they like going to events. They like telling people at private members clubs that they're VCs, and they have single digits like use. Yes. Some of them. I think though to be fair, there's a lot of wonderful people in the industry, and I'm at least fortunate enough that there's dozens of people who I think I have real relationships with. Single smartest friend who's a VC. Not a family member. Keith Rahaboy. I mean, whatever people want to say about him, I think he's extremely smart. I love Keith. Yeah, phenomenal. What do you think the world doesn't see about Keith, the ED? I mean, he's rough around the edges. He's honest. He probably doesn't agree politically with a lot of people in San Francisco, but that's not taken away from how smart he is, how good an investor he is. And frankly, the first board I served on was T-Spring, and he was also on that board. And people can say like, "Oh, he's kind of a dick or anything, but I mean, my experience was, I was a 27-year-old, and he was like, "Hey, call me whenever. He was taking half an hour, hour calls, to help me understand how to do the job." So that's my experience with him. God, I remember T-Spring. These are back in the day. That's like a blast from the past. It's a throwback. This is like Savage Garden being played, and you're like, "Oh, it's my eyes, you were a school disco." That was the Silicon Valley I grew up with. It was nice at times. It was a blast. Everyone was just winning and making t-shirts and hanging out, and you know, it all was good for a little bit. I totally, it's funny. I spoke to Parker before from, obviously, Ripling. And I remember being an SF when I was like, 18, and Xanifits was just like the hottest thing in the world. Oh, it was a blast. That was my foray. I was a quant trader after college because I wanted to go to Chicago as a midwesterner. He did that, came out, and joined as the first product manager at Xanifits and got to work for Parker directly for-- It was that amazing. It was amazing. He's crazy, but he's the best salesperson and the best productperson that I've ever met in my life. How is he crazy first? He's that person that, on, you know, a Sunday night at 9 p.m. we'll just call you and just say, "I have this new idea. You need to get it done before tomorrow." Or if someone screwed up, he would just email them, "WTF." Question mark. Not any context. Like, if anything went wrong, if there was a customer case that looked bad, which just means fix this right now. I absolutely love that. What did you learn from the Xanifits experience? Because that was a pretty transmacial time in your career as well. It's like the first time in tech as well. Yeah. What I learned first and foremost is you need, especially then, to build an absolutely amazing product and customers don't know what they want. So I remember one of the first times, my first week on the job, we would do customer discovery calls and we'd listen in and the customers, "Okay, I want you to build this thing for payroll and this thing for HR tech." And we would leave the call. I'm like, "Okay, great. I'm going to write some specs for, you know, we're going to build that." And Parker's like, "No, no, no. They say that. They don't actually want that. This is what they want to build and we'd go build it and the customers would love it." So I think I learned the founder needs to have intuition of what they want. The customers aren't going to know. And then two, sales and growth cure everything. And in Zendipheritz case, maybe two, it's a detriment a little bit, but we were killing it. The culture was amazing. Sales were off the chart. The salespeople were partying. We were just having a great time and everyone was happy and everyone was loving it. The flip side is, if sales, you know, cure all ailments, sometimes you might not be paying attention to other things that are going on. I'm fortunate to know Nick from Ravalloud and interviewed him a couple of times and he always says, "Culture is kind of bullshit." The only thing you should focus on is the leader is winning because the single biggest determinant of human happiness is personal development. And when you are winning, you are growing personally, skills, in like, personal. And then also you're financially winning. And so just focus on winning and everything else follows. I fully agree with you. I mean, first off, when any of my friends are like, "I want to join tech, what should I do?" And I say, "Don't care about the product. "Don't care about anything. "Just go work at the fastest growing company "because winning feels great." It feels amazing. And I think we sort of maybe lost our way a little bit in like the late teens in tech where everyone was, you know, they were making it about their mission and saving the world and we're doing on-demand, dry cleaning and on-demand dog walking but it's going to help the world this way and you should feel good about yourself. And I'm like, "Just go build a great business "and like winning's the most fun thing here." And I think we really lost our way for a little bit. In terms of losing the way and this is unfair of me, but I am intrigued. I take it you're on the palk aside on the palk of us as sacks. - I am. And I think I've been quiet for a while and I'm really loyal to him. Both in he's the one that gave me a chance. He taught me how to do venture. He sort of set the bar for what I want to be investing in and frankly, you know, let me be one of the earliest investors in Ripley. So I'm very loyal to him, but yeah. I think there were some small mistakes made but they were company-wide. They were under all departments. not just his. Everyone knew about it. They weren't ethical mistakes and he sort of, you know, took the fall. Maybe the CEO has to always do that though. Funny when I spoke to him, he said it was all Max's fault. And he just said all those mistakes, which just might. So I've, I've built a wonderful product. I mean, no mistakes. What price did you do at playing at? 25. Us, I had a fund that I was leading that Sam was helping out with a little bit in 2016 called Hyderzene. We were able to put in a pretty good check, co-lead it with initialized gear in Alexis, who also had a great fund that vintage. I always find it interesting to understand a little bit about the person in terms of motivations. I also think that elephants in the room are always good to be cooled out. With a brother like Hyderz, I find these nice two questions interesting. And there's wonderful as Jack is I'm obviously reference to Jack. To me fair. Jack is in the gym. Like, he's a jeep. Like, no fancy. No, but I also remember talking to Jack one time. And he's like, yo, I built a multi-billion dollar business. And he's crushed in one of the most successful early age adventures. He's like, but people still call me saying it's brother. Sam Wilman's brother raises $12 billion dollar fund and also fires to the moon and Kier's cancer and his like Sam Wilman's brother. Yeah. And we have a group chat about this all the time. Where Jack's like, you know, he's in cool Sam Wilman's brother. No, it's not our family group. Chad, it's a three of us, but absolutely Jack and absolutely crushed it. And they're like, but Sam Wilman's brother raised an amazing $275 million dollar fund. What do you think you're running towards? I want to be successful in my own right. Like ego is a real thing in human nature. And I don't think I ever want to say, hey, Max, you know, crushed it on these funds, but you know, Sam was loosely involved. And it's like, it's not really his. So I, you know, I left after doing three funds with some combination of Sam and Jack to build out my own firm just for ego and pride to be completely honest. What you know of us about that. And I don't mean that badly, but it's a little bit like a GP at Excel or Sakura, or you name it, spinning on doing their own. It's like, gosh, I've crushed it with this, but I did have some help. Oh, I absolutely did. I think a few things are like one, it's fun to make it a little harder. Absolutely. It's going to be a little harder if Sam's not involved, but like that's good. It's good to be pushed and have to like work for what you want. I also think I was really fortunate that I kind of grew up with a Sequoia Founders Fund level like training and background. Like we all lived in a house in the mission and all the best people, whether it's like a Peter Teal or a Keith or coming by the house, talking about investing. You know, I think we had about 17 unicorns across the fund because it's just a small world and everyone's coming by. So I'm like, oh, these are the founders of Instacarter, Reddit or Ripley or Boom. And it's like, this is the bar. So I learned the bar and I got my really amazing education. So I felt pretty comfortable going in. And I think my sort of ace in the hole is, dude, Harry, I can't fail. You know how embarrassing it would be if this fund likes to out the bed, I can't fail. And I think it's a great motivator. I totally agree. I would for anyone entering venture, I always say the most important thing is actually just to meet as many fans as possible because establishing the benchmark of what good is is one of the most important things you can do early in your career. Yours is a little bit of a cheat with those founders and like that exposure. But I completely agree with you there. So we're kind of running towards wanting to do it on your own before we get to Sarger. I do just want to touch on Hydrzine. Why was it called Hydrzine? This feels like a chemical plant. All three of us are very bad at branding. You know whether it's chat GPT or the fund Jack and I did together was called Altman Capital. None of us were good at branding. I think one day we were just like sitting at the kitchen table and we had to give it a name and there was like one day to do it. And I think it was maybe Jack which is like call it Hydrzine. There's no real reason for it. And the domain was available and everyone's like, fuck it, the domain's that. How big was the fund? That was 200 million. I was tuned. That's a lot more than I thought, dude. Yeah, I mean I was sort of quietly like did you raise money for it? Not for that one but then the other one that Sam and I did in 2020 called a poll. I raised money for that. Okay, so let's just stick on this one. It's fascinating. So you do that fund and it's the three of you working on it. It's me full time. Sam's helping out a little bit. Jack is fairly involved. You know, helping a tiny bit bringing us some cool deals but he's getting really busy with lattice. He's just fucking around building that $1,000,000. Exactly. What is that? Okay, so we have that. And then you mentioned Ripley at 25. Was that the strategy like lead preseed seed rounds? I would say it was a looser strategy. It was give money to the best people. You know, we did Reddit at a higher evaluation. We did Ripley at 25. That's what makes you do Reddit at 600. Still pretty good. It's pretty good. Yeah. How big a chat is he writing? The Ripley was 1.35 million at 25. Yeah. I just was dumb enough to never beat my chest and talk about things. I grew up more as a Midwestern Irving from St. Louis. You have a 5% position on that on a 25%? Yes, to start. But we weren't great at doing our pro rata and holding it all the way through. But it's still going to be a great return for the fund. Yeah, but even with the heavy dilution you still got a 2% say. Yeah. Wow. In a $20 billion company say that. Yeah. It's pretty good. Did you sell it along the way? We've sold a tiny bit, frankly, just because our LPs have asked for liquidity because they're mostly endowments and have been squeezed. Parkers amazing and I've never been against them. So we still hold a bunch of it. How do you reflect on that time doing hydracing. What are the biggest lessons that you've taken with you? Yeah. I mean, I think first and foremost is really fortunate to work with family because you automatically trust that everyone is doing what is best for the firm and not what's best for them. You can also be radically candid with each other and just like this was a dumb deal. We cannot do this. You screwed up in a way that you might not be able to do with a new partnership. So I think when we were building the firm, we have an equal GP firm. There's no associates right now. Everyone is completely incentivized to do what's best for the firm, not for themselves. And I think we built the firm that way because of what I learned earlier. Do you think most venture firms have fucked up cultures because of the hierarchical structure of them? I don't know if they're fucked up cultures but I don't think they're incentivized to have the best returns. If you're an associate at a firm and you're maybe there for five or six years, your job is to get a deal done that's going to get marked up quickly. So you look good and then can get promoted or get poached to go to another fund. But you have so little carry and you're probably not going to be there the 12 years until you see any liquidity. You're not incentivized the right way. What was the single best deal you did from Hyde Resine and what's your lesson from it? I mean, definitely, Ripley, not not to keep being on the same drum, but the learning was just give money to the best people that you know in your network. I remember. Be price insensitive because I remember that deal was also it was expensive for the time. I think it was actually a 35 entry and 25 pre. 25 pre in Keith's Keith, Roboi famously turned it down and initialized it instead. Yes. And the Keith always tells me it's one of his biggest regrets. Yeah. At the time, this was 2016. That was really pricey. And I remember actually after you know, everything left, Parker and I were both depressed and we were chatting and he came back and we were talking, I guess like a 17th street sight glass in San Francisco in the mission. And he's just like, I don't want to build a laptop leasing company. I want to do something, but I have this fire. I cannot lose the endries and I can't lose the David. And I'm like, yo, this guy like, he's a chip on a shoulder. He can't lose. He's the best founder I've ever met. Like just give him money and the rest will take care of itself. You kind of think like that, which is like, fuck it. Don't worry about price. Don't worry about ownership. If someone great comes, just give them money. I think mostly, I mean, that being said, we do have a portfolio construction in the current saga fund. We do like to own 10%. But rather own 3% of an amazing founder than, you know, hey, we have our 15% ownership in this company that's going to be worth zero. That doesn't help us. If we can even get 2 or 3% of the next door, Dacia, Airbnb, we're in great shape. What was the biggest mistake of that fund? Not following on to our winners. We were a little bit like Lucy Goosey. Dude, Harry, I was running a $200 million fund from my living room in pack heights. Just like kind of casually typing away, doing some deals, meeting people for coffee. And we didn't have a great portfolio construction strategy. So we just, like, great, we have our ownership, let it be. We weren't trying to put more money into companies. And now you're proactive on reserves in a way that's very different. Absolutely. Do you think you're able to predict your winners sufficiently? No, but we're able to tell within six to nine months, it's going to be a winner and I think who's going to beat her out. Do you think so? Yeah. Do not. I actually think it's even quicker than that. Sure. Okay. Yeah. I know. It's two to three months. Yeah. I'm with you. After the first board meeting, first few updates, you're like, they came to the way that they run this. It's the structure, the mindset, the approach, the aggression. I think you see it so quickly. Yeah. I mean, I think that the investment were the most excited about it in saga. We're now profound. Within three months, I was just like, oh, they're building an office. They're hiring the best people. They're working on Saturday nights. And the product looks amazing and they're closing deals. And it was obvious within three months. It's so interesting. And the flip side of that is also obvious when you've got it wrong in three months. Do you tell founders when you've lost faith in them? No, I don't know. An asshole. Do you think that's an asshole thing? No. I think if I've lost faith in you as a person, that's an asshole thing. I think if you say. Do you, if a founder continuously lets you down, I don't think it's bad to lose faith in them. Okay. I think what I will say to founders is, hey, If it's been years and it's not working, I think I'll say there's absolutely no shame in shutting this down, taking a break, returning 10 cents on the dollar to us. Here, we don't care if it's 10 cents on the dollar or 50 cents, it doesn't move the needle, we're not in the game of downside protection. And or just go get acquired, go work in an amazing company. Like, it's not working out and that's okay. I think we tell them that. - Did you have any zeros in that fund? - Yeah, with a lot. Any reflections on those? - The things that failed were things that were built for the market of maybe, San Francisco and Manhattan. And the example I might use is on demand dry clean app. I love paying extra money to have this nice shirt going and get dry clean myself and I get to stay in my apartment. But people in Austin and people in St. Louis aren't gonna want that. It's like clearly not a real scalable VC business. Like, right the hell are we investing in that? - My favorite is I'm a Shasta on stage. I'm a Shasta. I'm not picking on them, but Shasta. (laughing) That's so brutal of me. They once did a frozen yogurt maker with like sashes that had to be that. And I'm like, it's hardware tough, broadly. And then frozen yoghours with the Chusero style you need our sashes. And I'm like, this feels very demographic specific. - Yeah, and I do believe that the majority of the best companies are gonna be built from San Francisco, but the people need to be a little bit outward looking in what they're building 'cause your market better be the entire United States at a minimum to be able to succeed. I mean, I think that's why Ripley is doing great as partners like, hey, our main target demographic is a really nice HR woman in Nebraska. So we're gonna build a product that she's gonna love. - So you enter Reddit at 600 and then you sell out. - After the IPO. - After the IPO. And you sell out at what price you in? - I was about nine billion when the lock up ended. - What's the reflections on that? - That was tough. I think the market caps about 39 billion now. I think it's pretty public the fund owned just about 7%. You can do the math. That's about maybe two billion of gains that could have been. It's a lot, but we're in the business of saying after the lock up, we're not public market investors. And, you know, LPs are like, thank you, you did your job. We would like you to distribute it back. And I think that's reasonable. We aren't public market investors. So you would do that again. - I think that has changed my thinking. And I think from here it's gonna become a discussion on a one-off basis 'cause that's the difference between a five X fund and a 15 X fund. - Because what I've learned is actually quite a lot of LPs on the institutional side have like auto sales, which is like the minute you distribute, they sell, even if they don't particularly want to. And so actually you can do them a favor by holding it because they're not allowed to hold it. - Yeah, I believe that. And I think again, moving forward, it's just gonna be call your anchor LPs and say let's talk through how we wanna handle the situation. Obviously, though the other direction, but there's a world where they could all get hundreds and millions of dollars back more. - Yeah, that's helpful. - Yeah, well, Polar, how big was a Polar? - That was also 200 million. - State was the 200, same strategy. Same strategy, we wanted to add a little more hard tech. So we sort of branded it as we're doing a little bit more robotics, manufacturing, climate tech. Maybe we can get into that later too. Because we had less deal flow there and we had a great deal flow in the past. - Why mate, that transition, I always worry a lot when we see a generation of venture investors move into hard tech, climate, manufacturing, defense. And suddenly it's not connect to LTV and payback periods on like channels that we all understand. It's bomb costs and manufacturing bills that are like, what the hell? - Yeah, I think I mostly agree with you. I do think there are clear winners, maybe an Andral or a Hadrian that were in that are clearly gonna help the fund. But I do think it's more fun, maybe, maybe because we were getting a little bored and it's more fun to do that stuff. And frankly, we maybe branded ourselves that way, but we were doing volunteer, we were doing other good things. - You did volunteer? - Yeah, a little bit. - What price? - High, about four billion. - Well, I mean, what's the price now? - 300, but again, we sold on exit. - Whoa, which was like 40? - Yeah, we did well, but my heart's not bleeding for you throughout any of this. - Out to be honest, my accent. - I did help you find. But I do think most VCs have the position to say once things become liquid and the lockup ends at their job is to distribute. It's not just us. - The hard thing is you hear shows like this and you're like, God, hold, hold. And then what you don't see is that the monstrous amount of companies to this like, and then it's in the dumps. - Yep. - 10 years later, it's still a, you know, it's been the same for 10 years. - Any lessons from the Apollo? - Stay focused. I think we got a little bit like you just said, or we're doing this and we're touching climate tech because we're curious and like, didn't have a ton of success there. - Was climate a disaster? - Yeah, of course there was a disaster. I think it's gonna be a disaster. Like, hey, climate change is real. The government should deal with that. I don't think. - What makes you say that? - I agree with you totally, by the way. And I always say, climate's not a category in itself. - We're completely dependent on the price of carbon. And when the economy starts to do less well and you are a mega company and you need to say we're spending billions of dollars a year on carbon credits. At the end of the day, it's like, great. So if you spend your money there, you're gonna have to lay off people and tell them, hey, by the way, you're unemployed and can't feed your family because we really wanted to buy some carbon credits. 'Cause the money's the same about a money. And I don't think that feels good for anyone. That's not how businesses are gonna work moving forward. - Do you think climate is a luxury concern? And what I mean by that is, you know, - Of course it is. - I think it's very real. But yeah. - And so your regret is doing climate? - Yeah, I think we wanted to be somewhat involved with it and there were a lot of amazing founders building in it. And they're gonna build great things but they're not gonna get us great VC returns. - Any others? - Yeah, I think it's sort of stay in your lane and this is really set how we've built in saga of like, look. I think I'm a very good seed investor. I think I have a great network and people like me. I think I can slip, you know, medium sized checks into a lot of great deals, but I don't think I can go out and win series A's at this point in my career. - Why? - It's a knife fight and founders from Insecoya and Index and Kosovo, like, they're amazing firms that have sort of locked it up. I went to go lead a series A or try to lead a series A one time and I remember the other term sheet came from Sequoia and I saw the email that the founder got. It was from Mike Vernell and they basically said, hey, Sequoia is on the board of the six most valuable private tech companies in the world and the six of the 10 largest IPOs of the last 12 months. And by the way, feel free to talk to any of these people about their experience working with Sequoia and it was like the callacins, it was like, you know, Dylan at Field, it was the guys at DoorDash and I'm like, dude, I'm not gonna win this deal. Like, why the hell would they take my money against that? So don't try to do that. I'm clearly gonna lose the deals that I wanna lose and if I win them, it's probably not the ones that I want. - So the takeaway is then that you have to get in before them? - You have to get in before them or partner with them. - Do you not find that they are there so much earlier now? They're there from pre-season seed, a Sequoia have square art for fuck's sake. - I don't, I mean, if they did, you and I wouldn't have a job, frankly. - I don't think we do. - We do what? - We do have a good job. I honestly, why am I in Europe? I'm in Europe because they're not here. I'm in Europe because I can absolutely beat them in Europe at seed, aren't I? With a very high win rate. I'm not in the US because why the fuck would they take me when you've got Andreson or Founders Fund or Benchmark who do the large, large kind of first rounds or any of the great firms with a super low cost of capital so they're less pro-sensitive than me with the brands that they have and that net worth out. Why didn't they me? I think seed in our staff is for suckers. - I really don't agree with you. I also think the data points of like the funds I've done will also disagree with you. We've built the model. Saga's $125 million fund. If we have one winner and we start with 10% of it and we can't cover the whole market, we only cover a portion of it, the fund's great. If we start with 10% end up at 7% of IPO, it goes for 10 billion, return 700 million. We just need one. We don't need to be Andreson where we lead 10 or 20 seed deals and I also disagree with you that they have them all locked up. I think there was a stat that came out recently of post transformer world in the last four to five years of all the AI companies that have started that are now worth over a billion of the first 40 of them. Only one person had two lead checks and that was Andreson and no one else had two. And if you look through the smattering, there are green oaks is in there, a lot of gills in there, but there's a lot of other random people. And there's really not something where Sequoia and Andreson is taking up half of those lead checks at the seed. You're totally right. I'm totally wrong. And your breakout company is profound that you would say. Yeah. Yeah. Okay. Well, it's profound. Profound's in New York. Oh, right. That we fucking go. Yeah. No. We gotta be everywhere. We need to be in general. I know. But I think we have some good companies in San Francisco as well. But yeah, profound was in New York. And we were able to start with a really large position there. And they've obviously had tremendous success. And if that works, the funds great. And that's our model. We don't need to cover everything. need to have a few people who love us enough to take our money early on. Do you think the multi-stage players are doing seed well? No, I don't think they can. And obviously I'm biased saying this. Because obviously, I don't know if you saw the graph, but it actually outlined how many investments I'm slightly butchering numbers. But I think it was Andrewson's 70 seed investments over the last two years. And Sequoia was seconded with 26. It's a very active strategy from both. Sure. And I think if there is a seed that we're competing against, and Mark Andrewson is doing the deal, he's like, I'm going to join your board. We're probably going to lose, but I don't think that's what's happening. And like not to be an asshole, but usually it's, you know, a partner at Andrewson. And we can sell against that. We can just say, hey, you are not going to get the time of the day with the GPs. We have a three GP only firm. You're going to get the time with us. When you go to your series A, we will be the conduit. Because I agree with you, they need to have a thrive or a Sequoia or a client brand at some point to succeed. But work with us now. And we will make sure that you graduate and get in that sort of branded tier one firm by the series A or the series B. And you're going to be successful. I think it works a lot of the time. The one thing I do say to them really does resonate is the price alignment. And it's like fundamentally you want people who are priced aligned to optimize for the net surround. And if you get Andrewson at seed, they're not being like, hey, you should totally go and raise the best price possible net surround because they want to do it. Yeah. And if they don't do it, you're screwed. Exactly. And I know everyone says this, but like the risk of them not following on is massive. Like I fully believe if they're like, hey, Sequoia led our seed and they're like, hey, are they doing your A? And they're like, well, they're doing their prorata. I'm like, this is not a good company. Like objectively is not a good company. So you think signaling is very real. Signaling is extremely real. Or at least it's like a good way for us to sell, but it's real. I know I tell it, Lergar. I know the other thing that I think founders don't realize is it's also not always indicative of company quality. And what I mean by that is like people leave firms and then you're orphaned. And when you're orphaned, no one's internally pushing to lead your A because they don't really know you. I just took Vernal's place in managing the position, but I don't really know you. Sure, but they also have like $8 billion and they can't spare like 10 or 20 to put into the A. And like, to be honest, almost none of the best deals I've ever done have been sent by another fund because like, why would they? They're like, hey, there's this great deal. You should really get in. I'm like, if it was a great deal, you wouldn't be sending it to me. You'd be doing everything. And Harry the same with us. If we have a great deal like profound, we are putting in all the money we possibly can. We're obviously fighting with Cliner and Sequoia, which is challenging because they also want us much as they can. But there's not room to bring in other people. So if a VCsian sends us a deal like it's, we're not normally excited. The best deals we have come from founders referring to their friends, which founder when they refer a deal? Do you take it most seriously? Also far has been the best deal refer. It's a great question. We've had a lot of luck from a lot of actually the CTOs to be totally honest. The CTOs in the companies that we are in because they're a little bit less like flashy and they're connected to really deep technical people. We've had a lot of success of them sending us their buddies. Love that. VC-wise when they send you a deal, who are you like? Okay, I'm on it right now. I think Box Group is great because I remember growing up around SV Angel and going to the Giants Games with Tofer and these guys were just awesome. And they're like, "Hey, our model is to do a little bit here and there. We don't need to lead anything." There's a reason why there's leftovers when they send them to us. And I think Box Group has actually succeeded in building the same model. I remember everyone's like, "Hey, for those buns, this is not going to work. You don't have enough ownership. You need to hit 10 unicorns." And SV Angel was like, "Okay, we will." And they did. I really take seriously what they two of them send us. But you didn't decide that was the structure that you were going to go for. Actually when you look at yours, you are an ship's ant-stiff. You're not an index fund. Why did you decide not to be the "Hey? We're going to be in everything and we're going to hit 10 winners." And why did you decide for more concentrated? I think one of it is plain to my strength. I'm not everywhere. I live in Austin. My two partners live in San Francisco. We cover a lot, but we don't cover the entire thing. We historically have not, I've done basically no PR, which we probably didn't do later. We're not covering the whole universe, so I don't think that we're set up to have a smattering of 10 to 12 unicorns in this fund. And frankly, I enjoy spending a little bit more time with the founders. So what we're doing 20 to 25 checks in this first fund. We'll get to the construction. I just have to ask you mentioned about being in Austin. Do you not think that you will be in Austin negatively impacts your ability to get deals? No. I think there are actually some really strong companies in Austin, whether it's base power or Seronic. There's significantly less than San Francisco. But I've found that when I'm in New York or San Francisco, I make a lot of decisions and a lot of hectic decisions, but I don't make a lot of great decisions. I make the best decisions when I'm in my backyard meditating by the pool, calling the founder and really thinking through it. And I found in San Francisco, I couldn't have that level of clarity of mind. OK, so let's go to the first fund where we're like, OK, we're going to do saga. I love band, by the way. It's such a good deal. Great. And so we decide this is the team. How did we come to the number one 25 for the first fund? We were a new partnership. We built a model where we said, hey, we are going to do 20. To 25 lead seed checks. And then we'll probably spend 10% of the fun doing what we're calling these opportunistic deals. Jack and I had invested in owner.com before this. Adam I think is an absolute killer. So when he was raising a little bit more, I texted him. I'm like, yo, can you help us add a little bit? Obviously, we went on to do a pretty nice ice check in there. And we'd be stupid not to. But the construction was around 20 to 25 lead seed checks around $2.5 million. Entry price, the mass mass then was 30% reserves to about $125 million. And I think it was actually great to prove out that the three of us could work together. Obviously, we're going to size up from here. But I don't think it would have been great to start with 300 million. It's $2.5 million or $2 million. Is that enough as an entry ticket? I find now that seed rounds are 5 plus. 18 months ago, it was. The deals were at 20 or 25. I was not seeing these 50 or 60 million valuation deals even in last year. How do you think about this? I think add some cool, some like the water malnzeeds or whatever, the malnzeeds or whatever we're going to cool it a line to a fruit. But like the great person who leaves stripe and they're raising 10 on 50, 20 on 100, how do you think about those deals? That's what's keeping me up at night. If I'm not sleeping for the last six months, I'm extremely price sensitive. I'm just like, hey, we get 25 bullets per fund. And if you paid twice the price, you get half as many bullets. And that's a really tough way to invest. That being said, like we can't fully set out and at least right now. It doesn't mean you get half as many bullets. You can just do the same check and have less ownership. Yeah, that's another way to think about it. My biggest mistake on the prior fund, it was a $33 million seed fund and a $107 million series A fund that was deliberately meant to be kind of more collaborative. We could have done 11 labs at a 25 and put in 200 to 50 and it was 1%. And I was like, we can't do a 1% deal. That would obviously have returned the fund many times over. And very stupidly, I was too tied to ownership. Yeah, and that's been me kind of forever. And I think my partners now are luckily pushing me in the opposite direction. And I'm really warming up to it. Though you have to believe if you're coming in at 50 or even 100 for a seed, that there's a way that this thing exits for 50 or 100 or 200 billion. It can no longer exit for 5 billion and have that be a good investment. So you have to believe that's possible. And I kind of think that is the direction where things are going. Like not to be on the AI hype train, but I do think we're going to have a lot of exits eight years from now around the 100 billion dollar mark. I have a framework for like the three things that I would need in a deal. If it's kind of slightly off strategy, like a 1% of 11 labs in this way or like a situation here with the stripe. And it's one financial, do I think that we're going to make a 10X plus? If you're going to make a 10X plus, just do the fucking deal anyway. I agree. Two, does it give us brand halo effects? So both building firms, if you're investing with Sequoia, Client, the best of the best, you do get a brand halo from being associated. And then third, do we get network benefits from being close to Mattie? He will share super cool deals from the best in AI in Europe. And we will get a network that we didn't have before. And I think if you have those three, if it doesn't tie to the 10%, I'll still do it. Yeah, absolutely. And I love that you mentioned the last two of just having the brand Cache and being around the best people. We've done that. I've done that for the last eight years. It's absolutely the right way to invest. You go to people's websites, other funds, and they're like, we've invested in all these amazing companies. And you're like, well, I do that too because it really helps. And founders don't care if you did a 25K check or a million dollar check at the seed. They just think that you've invested in the best companies. We absolutely should be doing that. Maybe you would say to do brown checks because a lot of managers like, oh, I don't know, it's not pure. Absolutely. And also like you just said, it gets you around the right people. It is always a good thing to have a CEO of a multi-billion dollar company that you're texting with on a weekly basis. Never gonna be. bad for the firm. Totally agree with you that. Okay, so we have 125. How is the fundraise process? It was pretty easy, relatively speaking, but it was harder than I was maybe expecting. How long did it take? Five to six months. Pretty good. Pretty good, but I don't know if it felt longer when I was there. Why was it harder than you thought? We were three partners who had not had traditional VC backgrounds, and it was a new partnership, and I think the biggest reason we got knows was everyone's like, you haven't worked together. You're not living in the same city. So we want to hold out and see how these things go and feel it out for fun too. Also, we went right to Institutionals. I was fortunate enough to like not be a maybe traditional emerging manager because of the prior fund track record. So we went right to Endowment's foundations, and some of them love that. We ended up with I think six Endowments in the first fund, but a lot of the Endowments don't love new partnerships in first funds, and we were sort of elephant hunting rather than going to some smaller family offices. Was that a mistake in hindsight? No, it was amazing because now we have really sticky, amazing capital for the rest of our careers as long as we like perform. Exactly. And then going into fun too, like what would you advise managers on anchor hunting? This was the advice. I mean, I will give him credit that Sam gave me that I did not listen to, which is don't talk to other LPs until you have your really high quality anchors locked in. And then of course we went and talked to everyone and everyone's like, do you have much capital of your rates? And like, we're about to raise, you know, 20 from this person. They're like, okay, so you've raised zero. But we had a few people that I had worked with before in Hyderstead Apollo. They took a little bit of time, but we got them across the finish line. They came in with some pretty nice checks. And then we went back to the other LPs and they're like, oh, okay, we're automatically in these Endowments that have worked with you before or in. Clearly you must be good. So I think wait until you have your anchors locked up. Did you notice that different LPs wanted different things? Endowments, foundations, pensions, corporates, family offices? Did you notice a disparate communication requirement? Of course, they're all incentivized completely different. A fund of funds or someone that works at a family office is incentivized to get the best returns possible because they're paid out on the upside. An endowment or a foundation for the most part just wants to keep their brand intact, have a nice relationship with you. Make sure you don't do anything dumb. But like, why do they care if you're a 7x fund or a 2x fund, at least financially? So we absolutely saw that as like for the more traditional institutional capital, like give them a story and a product that feels good for what they're investing in for a family office or a fund of funds. Tell them how much money they're going to make if they invest with you. What's the largest check you have in a 125 fund? 15. I don't really want more than 15% from anyone LP. So we have then like six core endowments. Did we do the brand as well or were we just getting a load of founders to put in community tickets or not really? No, and I don't have a good reason to why not. We just sort of said, okay, great, we have this. We had our number we're done. I think in the future, we might spend a little more time getting that in. What was the biggest surprise about the fund raise? That the goal was not to tell the LP's how much money you're going to make them even though they're financially, you know, my job is to get LP's the most money back. And I thought that's what they wanted to hear. But I think what they want to hear is you have a strategy that fits exactly what their portfolio was. I think it's also a way to show naivety with respect, which is like, if you come out with these big numbers of, oh, we're going to, I have so many young GPs and I sound so fucking old despite being quite young, but I've been doing this 11 years this and yeah. And they're like, oh, you know, if we really fuck up, we'll be like a seven eight X and you know, if we really hit it out. And you're like, do you know how hard it is to do a five X? Like, it's hard. And so I think you can show your immaturity and naivety if you throw out numbers. Absolutely. I was fortunate enough to have data from the earlier phones to say, we have absolutely crushed it. And we're now at like about four X DPI. I think we can get to five or six and we knocked it out of the park. 10 is insane. Like our goal here is to get you four or five. And that's amazing. Like if someone comes in and says we're going to get you an eight X, I would kind of walk out of the room. Totally agree with you there. And so we have 20, 25 positions, three million each reserves a little bit, but you're not doing much reserves. We have a third for the reserves. Not really, mate. Do you think you sub fees? You're a hundred and then you're two and a half, 30, you're 75. Yeah. So we have like 25% realistically. Here's a question for you. Do you think Pro Rada is a real legal right? No. But I think it's a moral obligation that you earn, which is like, I don't think anyone should have a right to in the future. Bullshit. I think you earn the right to step up and write another check. Yeah. I hundred percent agree with you and you have to earn the right for doing your Pro Rada in the series A and the series B in the series C. But I think we've gotten to a point where Sequoia or Kleiner or someone leads you around. Like you're not often getting your full Pro Rada. And I think you have to be honest with yourself on that. So I think a lot of the times that I've learned is like, hey, model in the Pro Rada, but you're only going to get 70 or 80% of it. We've never had a hundred percent of ours taken away, but we've definitely had cases in a really great deal. No one's the worst. They're doing their job. Like what am I supposed to say? Number one rule of an interview. And that voice goes up a notch in terms of tone. No one's the worst. You're like, okay. But I mean like realistically, we're in a place. He's the most collaborative large fund. I've had a great time working with Kostla in this fund. We've had two deals where we've ended up at the seed with 10% and they've ended up with 10% and we've just had like a great time working together. Who's the least collaborative? So Kostla is tough, man. And I don't blame them. Like they're the best of the best. That's very funny. So I don't think it's like a legal right. I think it's something you earn the right to. And I think good founders understand that and we'll fight for you to have it. Yeah. And in our cases, the founders that we've spent the most time with, they always go to bat. We get 70, 80% of our Pro Rada, even in the best deal. But often they say, "Hey, can you step back a little tiny bit?" We're seeing incredible preemption on rounds like never before. You've obviously mentioned profound a lot. There's this incredible preemption on rounds. Do you tell founders the money's there? Take it you have to. Or do you worry that actually too much money too quickly will distort the company? It'll absolutely distort the company. Like getting fat and happy early on is not great. People used to say like, "Hey, be ramen profitable." And like maybe we're not in the days anymore of like sleeping on a mattress in the ground eating ramen. But I don't think it's good to say, "Hey, we can just burn through money trying tons of different things. There's no rush." Like let's throw big parties. Like you need to have like a lot of fear that you're going to kind of run out of money every day to be pushed to work harder. So do you tell them not to raise that round? Yeah. How often do they listen? They didn't listen once in this fun, but for the most part, they listen. And I think what we tell them is I think Mark Andrewsson said really well on my brother Jack's podcast is like VCs job is to be a brand for the company until the company can build its own brand long term. So I'm like, well, then our job as a new fund is to make sure we get them the best brand, whether it's the thrive or Sequoia or Cliner to lead their A. So we're like, "Hey, hold tight. Please listen to us and run a really clean series A process and get one of those best people on your cap table and then hiring will be easier, selling will be easier, raising capital will be easier." Super interesting. You said that you say, "Hey, don't. It can distort you. It can also king make you." And what you see with a Harvey or a bridge or any of these kind of king-made companies or a Rillit even, I don't know if you saw a Rillit, but it raised from Sequoia and an iconic, very quick succession, it makes everyone else scared to enter the space. And so if you tell companies, and this is where I don't have the answer, I'm kind of oscillating with you on this, if you tell them not to because I share your concern, then someone else can king make in that time. And that makes it very hard to get the Austrian back in the room. Oh, absolutely. One of my biggest fears for companies that we've invested in is Andreessen coming out and putting $100 million right off the bat into one of their competitors. That's absolutely terrifying. So I do believe, yes, we need to get all of the gravity behind our best companies. We need all of the best investors. They need to get $100 million to build out their vote and have their war chest against any of their competitors. I just don't think that should maybe happen right at the seed, like maybe wait until after the A to do that. Do you think profound rise too much to see? No, they didn't raise that much. Inquakes, succession. I think it's really hard if you get Sequoia to offer you money and be on your cap table and have that amazing brand halo effect to not take it. And I think someone always should. You said about raising it a clean series, a interesting description. How do you advise founders on raising a clean series? What does that mean? I think it looks a lot better and feels a lot better. If someone's raising 30 million and someone has a lead check that comes in with 20 and then they fill in the rest after that, people do these wonky things, whether like we raise five from this person and we have this thing saw a store gold and then you get to your lead. And they're like, there's only room for us to do under half of this deal. We're out. And I'm like, don't do that. I promise you they're going to set out if you filled up two thirds behind it. And I think a clean series A also looks like a nice process. The metaphor I always give them is it's like a big horse race where all the VCs are chasing you. what you wanna do is maybe have one horse start first, so you maybe talk to a potential lead like a week or two before, then you send the deck out to everyone, but you want all eight horses chasing after you at the same time. You don't wanna have this as like a random sloppy process. - I totally agree. I think the biggest mistake they make is they speak kind of sporadically, and what they forget is, and I don't think people know this, but like the WhatsApp, especially in Europe, WhatsApp, I don't know what you have in the US, but the WhatsApp group channels with associates with junior partners, and I'm not being to roll with you, but just curious. Where they're like, "Ah, Matt, my, "honesty company not growing as fast as I thought, "easy pass for us." That can be seriously detrimental when there's 20 other funds on it. - Absolutely, like why would you not say, we're about to start this race, work with your lead seed investor, get the deck ready, and when you're ready, open the gates, aka, have me and my partners introduce you to one of the GPs at all of the firms, and then have the fundraise process start. They have to do it that, they should do it that way. It's the biggest way that they fuck up and actually, it really frustrates me when that happens. So I also so annoyingly, they kind of, I don't know if they just want to be independent, but you'll speak to them and they'll be like, "Oh, I reached out to all these people." I'm like, "Why?" I know my moon at Cliner. Why reach out to someone else on the team who's more junior and who doesn't know the space as well, who's the wrong partner. - I think there's two things to that. One is it's really hard if like a more junior partner from an Andri sin or someone like that reaches out or an associate another firm reaches out from a branded firm and they're like, "We want to talk to you." It's, you're like, "Oh, I feel great about myself. Oh my God, I can't control myself." - I've often done work on a space. They've mind mapped it and that like the one who's covering insurance. - Yeah, and they go talk or, you know, Harry, like there are a lot of people in this industry that say they know, you know, it's sort of like name drop, they know everybody and then we're gonna make this introduction to like you said, I'm a moon or Alfred Lynn and they can't. And I think there's a few seed funders. I think both of us in this room can just like text those people directly and I think some of the founders don't believe that, you know, we can necessarily do that. And it'll be as easy as it is for us to do it. - Do you find there's more and more low dilution rounds? This is another thing I'm finding, which is like, before it was like generally rounds were like 20% dilution, you'd have 15% for a lead and 5% for angels and pro-rata. Now more and more I'm seeing just the 10%. - Yeah, I mean, I think it's just economics to be honest. There's now like hundreds of billions of capital chasing slightly more companies. I think the experiment we're going through right now and went through in 2020 is like, hey, if we put 10 times as much capital into the market, there better be 10 times as much good equity to be sold and 10 times as many amazing companies being built. And there's definitely more, but there's like two or three more. So now we have this system where there's just so much capital, chasing not that many great deals. So the founders have all of the sway and all of the decision making of how they want to run their process. - Are you enjoying this time? - I like it, it's fun. People are building really cool things. And that's what's getting me excited is during that low I was talking about when it was on demand dry cleaning. Like, that's not fun. I can't get out of bed to like go invest in that, but now we're seeing people that are really swinging for the fences. Like, it's fun to think about, you know, androlar, Hadrian, manufacturing, or, you know, Seronic and Austin. Or it's fun to just be investing in these really cool companies that wasn't the case before. - Do you think Trump has done more for US tech to help auto-hersen? - Help. I'm generally someone that less regulations a good thing. It is opening up the M&A market, having people feel like we have a hot IPO market is wonderful 'cause it gets money back to the LPs and the VCs get that money back and just everything is healthier. And I think it's clearly better. - On the H1B, where did you sit on that? I sit in the UK where it seems like an obviously maronic decision. - Terrible. Like maybe the worst decision related to tech that this administration has had. Like, first off, why would you not want an amazing engineer immigrating to your country? Just like straight off, we want all of the best smartest people going to work in our country. And then also, it's really bad for the small guy. Like cool, Amazon and Google, they're like, "Well, we got this really great engineer who graduated from IIT, we want him 100K no big deal." But if you're a Cedar series, a company, it's completely hamstringing you. I was really frustrated to see that. - But I mean, I actually went on to the NBC and I said it's like the biggest opportunity for Europe. - It's great that we're all Canada, it's great for you guys. - Phenomenal. Sadly, we continue to put on a suicide vest and shoot ourselves. - Well, when we were doing my companies that you liked, this was beforehand. You said about a sphere of influence of AI labs and how that builds off framework for investment thesis. I put, what the fuck does that mean? - Okay, that means I could not explain it well enough. - Terrible. - He's in writing, I'm like a sphere of influence of AI labs. Help me out. - I was a CS and math guy. I was not an English guy. I think what I mean is when open AI and Anthropics started getting popular, everyone's like, we're gonna build things that are adjacent to that. And they are AI voice or AI video gen. Because right now, open AI is worth $30 billion and is offering chat. And I was like, look, it's not 'cause they're inside information. It's not 'cause I know that he's one of the most ambitious people in the world, but they're trying to be a multi trillion dollar public company and so anthropic. And that means they're gonna have to try everything. Amazon tried making a freaking phone. You know what I mean? They're gonna try everything. So if you have the night of the day to think you're gonna build something that's really close to what open AI is building and they're not gonna build it, you're crazy. Like you know what I mean? So I think we've really stayed away from things that open AI will encroach on and just offer a better product. Everyone's like, oh my God, they had this DevDay thing and it's gonna kill a couple dozen companies, you know, in San Francisco. - How do you think they actually do kill them? And that's what I mean. Like, yeah, if you look at like an 11 labs, I know one would touch that because like, oh, that's kind of a voice. I mean, San's gonna come thought, well, it turns out he didn't. - Yeah, and I think there are a few examples where they just have got a Shopify and Stripe partnership of the decade. - Yeah, but I think you're forgetting the ones that are like, hey, we whipped this up in a weekend and it's sort of some API thing that open AI is gonna build. I think 11 labs is the exception to the rule. So this kind of led us to leading in what we're calling like second order effect AI companies that are further away from what open AI looks like when it's a $3 trillion company. - How do you determine whether it's further away? - Like, it's a little bit of an art, not a science. I think I just try to visualize, I meditate, and I visualize like what they're gonna offer when it's a $3 trillion company. - I sit in the pool and I think, will they do this or not? - Yeah, but I think the two real things that I think about, one, what are these world class engineers that are sitting in downtown San Francisco going to build and what do they not want to touch? So when we're looking at companies, we did a company called Fleetworks that we're pretty excited about and they are doing, while it's in the AI voice space, it is for supply chain trucking logistics and they're helping them match things better for shipping. And I don't think the people there are gonna want to be calling and dealing with a shipment of oranges from Miami to New York that are late. I think they wanna stay sort of in their ivory castle a little bit. - If you have the chance to use every advantage to your benefit and it's not public information but it's like allowed. - You're both private companies, it's not insider information. Can you not just call your bro up and say, hey, are you gonna go into trucking and logistics? He goes, nah, or are you gonna go into, it profound, a lot of people with profound or peak were like, oh well, open AI will do it. Like, can you just call them up and say, hey dude, are you gonna do it? Like he would with me or Parker? - I think I could. I don't, I think for a lot of reasons is, first and foremost, like the companies under, scrutiny, like obviously, I don't want to put him in a weird position where he's leaking anything. It just, it doesn't seem like good for opening high and it doesn't feel good. Like I kinda want, and you might say, this is stupid, like earn this on my own right. - I get it, if it was your buddy, like if it was a Jason company to do rippling, you're probably tax-parking, be like, hey dude, is this on the product roadmap? - Yeah, sure, and that was super busy, dude. - Do you know what I mean? It's not actually that different. - Yeah, I think I just want to be really sensitive as my brother is that like he is not putting himself on a compromised position at all share and information he shouldn't. - Has it, his fame made you a life harder or easier? - Both. - I mean like, hey, let's be honest, like clearly, it allows me to have more success in investing, where it's just like, I have, 'cause of him, some brand halo effect, and people are like, oh, it makes you invest in AI, and I'm like, I can't, you know what I mean? There's something around that it definitely helps, it helps a little bit with the old flow. I think it makes it worse. So like, dude, I'm in San Francisco, and you're out at like a party on a Saturday night, someone will ask about it. My friend wants to go work at OpenAI, can you help him get a job? I'm a little bit flustered. - You get it? - Yeah, San Francisco, of course, and Austin, I don't. San Francisco, I get that all the time. - Oh, gosh. - Gross, right? - Oh. - I love a lot of the people there, and the culture can be challenging for us. - You know, just find it transactional, it's like, also like, it's like with me, it sounds awful, but people will be really nice to me. And I think, oh, they like me. No, they just wanna get on the show. - And it's like, they just wanna meet your brother or ask you a favor with your brother, and they'll wait 'til three coffees down, and they're like, by the way. - Yeah, and you're like, oh, no, it's coming. It's coming. - Yeah, of course, and I think I've been fortunate enough to know who's like that, and have my sort of crew there, That's not. like that, but I do think it gives me more motivation to sort of prove that I can be an amazing investor myself and build out a huge brand for saga. And I think that will take some of the pressure off of that to be honest. It's definitely a driving factor for me. And frankly, like we have not done the PR, but that's part of the reason that I'm doing it now to show that I'm a really good investor myself. Why not doing the PL? It was a mistake. So in 2015, 2016, when I started doing this, it was very much just hang out with great people, like, be a manch for a decade. You like a lot of favors, be really likable and you're going to get into the good deals. There's now too many VC funds and too many companies. And I think right now you do have to do PR and build your brand. I think it just took me a little bit longer, frankly, to be able to come to that realization. But yeah, moving forward and you are the first, I think the PR train's going to start a little bit. What do you want? It's all good. I want to build, I think what like a first round capital looked like when I grew up. I want to have something where 10 or 15 years from now we are maybe a quiet luxury brand, a lot like a thrive or a USB where everyone's like, Hey, they are the premiere early stage brand. They're not as loud as everyone, but we think of them as excellence where so you don't want to get bigger and bigger and bigger. A little bigger. I think we'd like to be five or six GPs, two or three associates. So we have the incentives, you know, cap out on maybe three, four hundred million per fund. How do you feel about the prior generation of seed firms in the valley? Because I think there's a really hard chasm to be in transparently, which is you have seen the movement earlier from large multi stage funds with large costs of capital and bigger and bigger teams so they can actually equip them to do seed. And they've done that pretty well. You're found as funds to your secures. And then you have this new generation, which is your convictions, your use and many new great firms. And then there's kind of the firms found it in 2008, 2016. Why are you in a bit of a messy middle? Oh, for sure. I think it's really challenging to be like a seven hundred million dollar fund. Now I think you're either a really massive, powerful platform like in the Andreessen or a GC or use have the legacy cashier like a Sequoia recliner or you have to be a boutique firm that has a very specific offering and stays small. And you kind of, I know you're. Do you think like a first round or a floodgate or an uncork or a boutique seed fund that stayed boutique in a Felicia's? I would actually put differently because I think they're cleverly scaled AUM into a multi stage very efficiently. But I think that boutique seed firm of olders is in a tough spot. I think so, but I also think it's sort of just like every generation has a refresh. I mean, you mentioned Sarah, I think conviction is going to be a great firm. I think there's room to have a new set of firms maybe every decade. And to be honest, like I kind of think that on top of the old though, no replacing. Yeah, I think they have to replace. There's not room for most. And so they are replacing the floodgate, the uncorks, the first rounds because the multi stage players have come in so efficiently. You can't have your bro, you Sarah, me come in and not have a displacement. Yeah. And I think you have to. And I think I was fortunate enough actually interned for Stevie Anderson at baseline when I was in 2009, who I think was one of the most amazing investors and taught me a time. And then he got, you know, rode off into the sunset after hitting Twitter and Instagram. And it's like an almond farmer or something now like living a great life. And those guys were absolutely amazing and really set the stage for what seed investing looks like. But I kind of think, yeah, we have to compete with them. We have to do better than them. There's not room for all of us. And frankly, I kind of think here you were younger when you started. So you might have a little more time. I got like 15 years of this until I'm really good. And then I'm kind of over all of it. And a new set of seed funds will replace me. What did you learn from Steve Anderson? He's one of the O-Cheers. Yeah, it was crazy. I mean, I think I like Paul Graham connected me to Ron Conway and then Ron's like, oh, you should meet this guy, Steve Anderson. I was like 20 years old and I was like, okay, cool. Like VC job sounds great. He was, I think, really focused on just doing a few things well and not covering the whole market. And he sort of stayed in his lane. He was liked by a lot of people. And he just didn't try to cover everything. He's like, I got a fund of his size. He just needed to have one or two good wins per fund. I think he had more than that. And I think it's kind of guiding how I build it as fun. How do you think about selling and when to sell? You know, we see this extension in private markets where companies take much longer to get public obviously and secondaries are a much more active thought process for managers. I think trading sadly has become a lot more prominent part of our job actually as investors. It has, and I think historically I've held longer. We've also had some, frankly, that, you know, had their 5, 10 billion dollar valuations in 2022. And what did you hold when you should have sold? It might not have hurt to sell gusto. I think gusto is a great business. But I think, you know, they were valued at 10 billion at one point. And I think they're still going to be a strong business. I don't know if they're going to have explosive growth from there. Great guys, but couldn't have hurt to take a little bit off the table. I think our job has definitely changed now. We need to spot when the market is inefficient. And there's too much hype. And some things just get overvalued. And especially as a seed investor, not a growth stage investor. If we can show that we're a 100x or get money off the table at 100x, we don't need to wait for that two or three hundred x. So we have to sort of make our own. Again, it's almost like a gut instinct when we think it's overpriced. This all being said, some of the best advice I've got is that last double or that last triple comes really fast where, you know, things grow quickly. And then they're around, you know, 500 million to a two billion dollar valuation. And they sputter in a little bit. And then at the very end, they just go. And people are like, hey, hold andro, hold more Ripley. And hold more SpaceX is gonna double. And it's the difference between your three X firm and your six X firm. It's really hard to let these things go, Harry. There's two points. So the one on duration is like when you actually look at the numbers, when you have like a four X DPI fund and it takes 17 years. That's great. It's actually the same as like a two point six X fund in 10 years. Yeah. And that really struck me because you're like four X, amazing, but actually the power of duration and time and the importance of time really has an impact on your material returns. Yeah. Oh, if you hold for 15 years, it needs to be seven eight X to make it worth it. And then on the last double, I completely agree again. It was Brian Singerman who taught me about the last double. And how, as you said on your Andruels, going from 18 to 36 is not actually that fundamentally more new mental movement of company. It can go there just with progressing as planned. But the 18 billion in value, you're probably not going to see in the rest of your entire portfolio. I know. And you risk losing it, which is really scary. Do you think it gets better when you're just rich already? And I think, so I actually have a theory on this. Yeah. Which is like when you're secure, you have a let it ride mentality. Because honestly, you're not about, shit, I've got to return money to L.P. so I can get my next fund. You don't need more money personally. So it's not going to move the needle for you there. It's a let it ride mentality. Absolutely. I mean, there's something to be said of like if you're still early in your career and making money and you're like, okay, I can get out. I can sell this for a few hundred million. Not to you, but you know, back to the L.P.'s and you take a nice chunk yourself. Or I can wait and see if it goes to half a billion. It's pretty hard to like not take what's on the table. If you don't need the money, like let it ride all the way up. What was your first big hit personally? Like Financially? Ripley and Reddit. We sold a little bit of Ripley on the way up just because like, our L.P.'s wanted money and you know, did you notice that change in your mindset? Yeah, it's a lot more relaxed. Where you're just like, hey, let's let this thing go. You do have to be careful in our industry though, because it's just we're around a lot of people that have done really well and I think it's hard to not get on the ladder to nowhere. Where you want more and more and more. So I'm pretty careful about that. Do you feel it? You're on that. Like one thing that I was very lucky when I, because I grew up so young in this business, where people were so much richer than me. That almost the competition just wasn't there. Do you know what I mean? Like, they're 20 and how with Doug Leone. Yeah. And I have no money. And Doug's obviously right. It's fine. Yeah, I think I'm unfortunately at a little different position where I'm closer to those people and just around them a lot. And I think for me, it's just very important to say, like for my own happiness and like, ability to succeed at work, to sort of stay off of that like, a tonic treadmill. Do you genuinely think that they are happy in large part? Some of them are, some of them are not. Take every billionaire that you know, you know a lot. I'm sure I know a lot. I would say one is happy. Yeah, I know a few that are. I think it's the ones that have kind of prioritized family and things. I think I would be less happy as a billionaire than I am right now. Why? Because of the things you're talking about, I would want a nicer house than I'd want to boat and I want to constantly just upgrade my life and I don't think I would just be happy with what I had. It's really dangerous because it's like, hey, I bought a $20 million house, but my buddy, you know down the street has a $40 million house and I'm good friends with him and I go over there. It's really challenging, I think, to just say, I don't want that. What single purchase is brought you the most happiness? I got some really sick outdoor speakers for my backyard. I love listening to music, I love sort of meditating and just chilling back there and it was absolutely worth it. Dude, we're going to do a quick fire. So I say a short statement, you give me your immediate thoughts, okay? Yep. Favorite underrated founder of the last five years. So like, Park is amazing, but very much in the mainstream. Who don't people not talk about enough? Who's a killer? I think Lux Sreeni, who was the CTO at Zenefits, went on to build zero down and didn't quite work out but the timing was wrong and then joined leading a special kind of special architectural projects at Ripley and has just been an amazing guy to watch over the last decade. What's the biggest BS about Venture to stay? Oh boy, I think that it is people say it's this sort of chummy collaborative thing where we're all combi-on having fun and then like you know you get to it and someone just like elbows you out of the way and it's not. It's a competitive market, we're all competing for a scarce amount of good equity. But I think we've just seen the complete commoditization of Venture and this is a Sanji Wall Street now. Yeah, absolutely. We look much more like a hedge fund or PE world than we do VC from 10 years ago. What deal do you regret passing on most? Hadrian. I was friends with Chris, just like socially we were hanging out a ton during COVID, weight boarding things and I remember I just like wasn't, maybe I wasn't as aggressive those days so I didn't give them an offer and then like you talked to me like two weeks later and he's like okay like delians leading around and everything you know I was like oh you know why didn't you talk to me? Why didn't you talk to me? We were sitting together for like weeks on end and I was like oh shit maybe I should be a little more aggressive offering terms sheets. What's the biggest lesson you've learned from Sam about how to analyze people? Figure out what someone truly wants and the answer is not always money. It might be title, it might be recognition, it might be the ability to work on what they want so when you're either hiring someone or trying to partner with them in any way, truly understand like what is the most important thing to them? It can't just be compensation. What's the biggest advice you have to an emerging manager raising their first time fund? Be humble and not to stay in your lane. The worst thing you can do is come right out of the gate and say we're going to lead series a's, know what you're good at that might be seed that might be box group strategy that might be coming in but just stay in your lane and be honest with yourself. Did you believe about venture capital that you've since changed your mind on? That you could be what I call like a tech guy where you can kind of just sit at home and text people and build great relationships and fly totally under the radar. I don't think you can do that anymore. I agree and I think that's aligned to the commodity. Of course you don't. Commodalization and venture. That was my theory that 10 years ago every, my maple was always as I look for an inside development in founders. A unique way that you see the world that others don't share. The insight to my 10 years ago was I thought we'd see the Commodalization of venture and that you fundamentally need to show yourself differently as it got more and more crowded. Yeah, I remember when I first got to San Francisco, like in Dresan was more up in coming and I was like, no, it's Sequoia and founders fund in benchmark and there were just these loud, splashy people. I don't see this working. I was clearly wrong and they got it right just like you. I think they will do so well. Absolutely. When you look at also the size of X is expanding so much, I was always like, oh, the rate of return is just expected to be lower and they'll be happy with that. No, no, not necessarily because if Databricks is a two to $500 billion company, the return would be low. Like Josh with his check into OpenAI and I don't want to bring in here. But like at 30 billion, I was like, dude, come on. Well, actually, there could be a 30 X on a billion dollar check. Or more and like absolutely. I think people are like, how is thrive going to deploy all this money well and needs to be these multi-hundred billion dollar X. It's like turns out there are or you know, and it's not just going to be OpenAI. I think it's going to be a lot of them. You know what I like about Mark Andrews? I sort of tweet from him yesterday and it was a newspaper article from like, you know, the early days of the internet and it said, you know, serious concerns about amount of internet users. And I spoke to an LPS today and there's was like, really? Like OpenAI, they've got all the users they could get for AI. And I was like, really? Okay. And it just, I like the optimism. I don't understand people who are negative about the future and do what we do. Yeah. People also just can't wrap their head around the size of some of these markets. Like the example always is like, oh, you're selling software to customer service agents to like improve their efficiency. It's like, well, what if you just like were the whole market cap of all customer service agencies? I think that's like 400 billion of value right now. I spoke to a bank in Europe the other day and they said, oh, you know, about customer service. How much do you spend your own customer service? Just that number. 30 million. So if it's a big bank, I don't know. Is it like Barclays or something? It was 520 million. It's a big bank. So you're not selling software to it. You're selling the whole thing. Oh, 520 million. Not a million of fucking money to go to customer service. And even if you know, the cost of labor goes down and it's like, you can capture 50% of this bank spends 350 million on KYC alone. I think people forget all the time. Just how big these markets are. One of the companies we're really excited about we invested in is stand, which is redoing the insurance market in California as all of the big insurance companies are pulling out there. And they're basically saying we can now use fly drones over and visualize the houses and help underwrite exactly what we think the fire risk is. Because Harry, right now if you're in a fire zone in California, your premiums are like 5%. Like literally 5% of the home. Like if you have a $5 million home, you're spending 250,000 a year on home insurance and fire risk loans. So they're like, great. Other people are modeling this based off the zip codes. We are actually going to be able to have computer vision and model this and we're going to be our own home insurance broker. Harry, if they succeed, the market cap of the big ones in the US are 100 billion. I think all states private. There were 300 billion. So freaking big and people can't get their head around that. Final one for you. What would you do if you weren't scared? I think I would do a lot more to sort of brand myself as a thought leader. I've definitely been a little bit more PR shy. And it wasn't like, you know, I always have like stage fright growing up. I think I would be that guy who's just like, hey, I'm going to host these fireside chats and I'm going to like be the person who is everywhere in their faces everywhere. Dude, I've so enjoyed this. For me, the joys is when it's like a real conversation and when it totally does not follow a structure which this one did not really did not. But thank you so much for doing this with me, man. It's so nice doing person. Yeah, absolutely. But before we leave you today, secure frame empowers businesses to build trust with customers by simplifying information security and compliance through AI and automation. Thousands of fast-grown businesses, including Nasdaq, Angelless, Doodle and Coda, trust secure frame to expedite their compliance journey for global security and privacy standards, such as Sok2 and ISO27001, CMMC, NIST standards and more. 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