(ENG) Techstars’ CEO: The Venn Diagram Of Billion Dollar Ideas (How To Create Unicorns)

You found the textures 20 years ago. Last year, you came back. What it's been like to be back on the field. And it felt to me like a few things had drifted that the founder is the center of our universe and nobody else is our customer. David Cohen is the founder and CEO of Techstars, one of the world's largest accelerators behind companies like Sengrit, Glasspass, Peelback, Chanalysis and Remedely. Over 4,000 companies have gone through their program, raised over 30 billion dollars in funding and produced 22 unicorns. Separately, as an angel, David has been an early investor in multiple unicorns, including Uber and Twilio. How do you think AI will shape venture capital? I think you'll have AI agents that do venture capital, that frankly, I think that can be better than what a lot of investors see. On average, the finance industry just subtracts value from society. That's all it really does. So I think that there will be successful models like that in the future. AI is supposed to democratize some recreation of anyone can build, even less technical people can start building, at least in MVP. How do you think about the role of AI in all of these? Creating a prototype is now a zero-tell and free thing. So that becomes a bit less valuable. What becomes a bit more valuable is what insight I have into a market, what vision I have real in that market. When you look back at Demesis, that went on to be huge companies, huge successes, do you find a pattern? The commonality in them is that they were just bad ideas. Somebody somewhere along my career drew this Ben diagram that I still remember. Seems like a bad idea actually is a good idea, and the tiny little overlap there in the middle is where people make just tons of money. David, welcome to the show. Thanks. It's exciting to hang out with you that thanks for doing this. And I want to start a bit on the present by asking you. You found the textures 20 years ago, then stepped away from the CEO role, served as chairman for some time. And last year, you came back, right? I'm curious what it's been like to be back on the field. Yeah, well, generally it's been awesome. It's my baby, right? You know how it is when you found a company and create something, and this one took off and really helped a lot of people, a lot of founders. And coming back and jumping back in, I had the energy for it because as you mentioned, I was chairman for four years or so. And so I wasn't working in the business, but I was speaking to the team and trying to help with strategy. And it's very different to be running it. So I think during the pandemic, I had a nice break. I got to spend time with my family at an interesting moment in our universe. And that gave me the ability to see it from the outside because I wasn't so involved day to day. And gave me a lot of energy and motivation to come back and take it to the next level. So it's been a lot of fun. We've made some great changes. We've gone back to some of the things that really work core values and worked for us well in the early days and it's a mix. And so it's exciting and new all the time. Now, it may experience when a founder returns after many years away, it's usually because one of two things, either there was a change in the market, like a big change and it requires like a different, something different. A or the company drifted away from what made it special. So I'm curious, like, what was that for you? Like take us to the moment when you decide to step back keen, you feel like it was the right time. - Sure, so I was still serving on the board and I was chairman. So I was generally involved. I just wasn't operating day to day. And from my perspective as founder of course, when there's another CEO running the company, of course they're gonna do things differently to make different decisions, that doesn't mean it's bad or good. It's just different. And I felt like in the moment where that opportunity arrived, as I mentioned, I had the energy for it and I had the excitement around it. And it felt to me like a few things had drifted. So I think it's more of that one. The focus on our core values give first notably, which my co-founder Brad Feld has written a lot about as a real core value and really living that every day was the thing that I felt maybe had drifted a little bit. The strategy was a little different than maybe what I would have done, but you support that as chairman and that's the role you have. And so there were some things I wanted to change. Some things I wanted to make better. And I felt in that moment it was important because the other piece of it was really, I came back with this idea of the three recommitments, right? That I wanted to make. And they were one that the founder is the center of our universe and our customer and nobody else is our customer. And we have a lot of partners, but we only have one customer. And I think that was getting lost a little bit. I also recommitted to the idea of embracing startup communities that textors works because of the startup communities that it operates in and partnership with. It's a cast of many thousands, not just a few hundred of us that are employees that support these startups and we really wanted to embrace the startup communities. And third was more of a cultural thing, which was bigger isn't better, better is better, right? And I think the company had gotten very focused on how do we do more investments and how do we be in more places? And I've introduced things like the improved investment offer, refocused us on quality and just having great founders that we work with versus just quantity and really measuring growth as the value of our portfolio and anything else. And I remember saying to people, because I live here and that was like the obvious answer and I want to live here. And I love it here and I even used to say, literally, I imagine myself still being in Boulder 20 years from now. And now it's been 19 years. And I don't plan on moving in the next year. And so part of the ethos and part of the belief system is that you can build a great company anywhere you want to. I think you need some startup community, some connectivity, some capital, some experience. But to me, it's always been pure mythology that you must be in a particular place to build an interesting company. And for a while there, I think it's pretty obvious that, okay, now clearly you're right. You don't have to be, these great companies are being created everywhere all the time. And it's much more distributed than it used to be in terms of where they start. Now we're seeing another trend to, okay, I'm going to move it to the Bay Area, which by the way, most companies that are in the Bay Area didn't start there, they moved there. Yes, even our well-known competitor didn't start there. They moved there, right? And so you have a thing that works. You move there to get more leverage and that's a natural thing. But to then say you must start there is kind of silly, right? So we still believe that. Certainly there's a lot of density around certain topics like AI in the Bay Area, which of course I just call software. It's software, it's just better software. And of course you're going to have people flock together and moments like this that are in flexion points. Like when the internet was created, right? Or like when mobile was a thing or now with the amazing things that are happening with AI, people are going to come together. But they'll do that in New York and they'll do that in Boulder and they'll do that in London. And not everyone will be in one place. And many great companies will be born in many great places. Looking back, what advantage the Boulder gave you that being in San Francisco? I don't know because I've never lived in San Francisco, right? And I don't mean to imply any negativity at all. I know it's the best startup community in the world, the most vibrant ecosystem, et cetera. And I have connectivity there and it's been time there. But I think Boulder had an underdog mentality. It had a, it was relatively small still is. We're still only around 100,000 people. But we're always ranked in the top of the venture capital, top 10 of the venture capital charts, five, six, eight, depends on chart you read, which is amazing for what started as really a Boulder-centric thing. And now Denver is very much active and included in that and the rest of Colorado. But it has an open-door mentality. It has a give-first mentality. I was like to say, Techstars didn't create the idea of give-first. It just adopted it and it spouses it. But I think the community and the way the community helped each other in such a small place was a model for how to build a growing and thriving startup community anywhere in the world. And the fact that people understood that, wow, you're in this small place and you've built something that has changed the world. And there's other companies starting there that have IPO'd or have changed the world for such a small place. How do we do that? Because what they can't do is just become San Francisco, right? But they might be able to follow the playbook of a place like Boulder. And so Brad, Phil, my co-founder started writing about startup communities. And this has become a thing that people look to us as one of the leaders in believing that you can do this anywhere. And I think that inspires people. And so I think that was an advantage in building our network around the world. Today in the A.I. boom, I think just as you were saying, we're seeing a lot of people moving to San Francisco. Some people even moving back to left, went to Miami for instance. That's right, that's right. Even YC, your competitor, as you were saying, is telling a lot of founders move to San Francisco. Sure. It's very convenient if you're there to tell a lot of people. So I guess what is your advice? What do you want to fund for a model? So Paolo or Chicago or Jakarta to do some in the Eastern side of the world asks you, hey, do we need to be in a set to build a world class? Say I company, what's usually your response? I think if you want to be in San Francisco, you should be in San Francisco. I think one of the beautiful things about software and the internet is that you can publish something now. And it can be used by anyone in the world now. And if you want to be in a place, you can build a world changing company. And it's very clear in the data. It's hard to be in denial of the fact that great companies are being created all over the world anymore are more of them being created in the Bay Area probably. It's a great startup community. And so it depends what matters to you as a human being. If the only thing that matters is being around the highest density and concentration of people, doing this one, I think that that might be the right choice for you, if you live in a world where you have family or you love a place, you have Topofelia, right? Love of the place you are, then it's a balance. Maybe I gotta get on a plane and go to London or New York or a big center of San Francisco because people in Amsterdam will hear the same thing. You gotta move to London, right? It's just different levels of the same type of statement. And what I object to is that you have to part of that. You don't have a choice. You can't possibly do it. Well, that is clearly not true, right? Do your chances go up a little bit? Yeah, maybe. I mean, I don't know that there's been great data on that because again, a lot of the companies that are there move there at a point where they were already successful. And so there's bias in the data. Okay, right. But it's again, certainly a great startup community. Certainly no reason not to do that. But the you have to part of it, I think, bothers me. Do you think there's a wide of that statement? Do you think it's, I guess, overweight it in when founders make decisions about moving. That it's just magical, right? I can, I don't need anything but to be there, right? And suddenly I get the magic aura and suddenly I'll be able to raise my. Actually, it's probably more competitive there to raise money than in a lot of markets, not less. But if you do raise money, maybe you're going to get a higher valuation. Okay, maybe that's a thing that matters to you for some reason. That might be true, right? And so I think the the the biasing principle is everyone thinks they're in the top 5%, right? And I think the other dynamic is everyone thinks that they can identify who's in the top 5%. And this is the core of it for me, right? Like we're finding and backing a lot of founders that conventional wisdom might not say are obviously a top 5% founder. But it turns out they are, right? And so you don't know that in the beginning and that sort of assessment, if you're the top founders are going to be here and we're only backing the top founders. Well, you don't actually know who the top founders are until they do their thing, and 10 or 20 years goes by. Begin off of ecosystem, startup communities. AI out of going to be on the macro picture of how AI shifts or changes ecosystems, because on one side, AI is supposed to democratize over creation. Anyone can build even less technical people can start building, at least an MVP. But at the same time, we see tied to this conversation, a lot of resources concentrating right into some areas, right? And they can be research labs, I mean, computer talent, capital, and most of that in the US always around the Bay Area. But then you also have the other extreme, which is China. How do you think about the role of AI in all of this? Does AI level the playing field in emerging ecosystems? Or does it actually reinforce the dominance of those ecosystems that are already strong? Well, ironically, it might do both. It might mean that I'll tell you what, we see in our role, because we operate all over the world. It is creating a prototype is now a zero-talent, free face. And so you used to be able to assess people, how quickly could they actually go and build a prototype of something? And that front end is done. There's no talent signal there, right? There's just like awareness that that person has, that they can go do that. And so I think it is democratizing in the sense that it's much easier to get going and to convey an idea. That creates a lot of noise, too. If that idea is actually interesting, it's much easier to show a little bit of traction, a little bit of momentum, right? Then it used to be. But now if you're building a thing that is literally part of the infrastructure, if you're building the actual LLM technology, or you're building something very core, being in a place where there's so much innovation, being a month ahead is like, it used to be like 10 years, was, right? Like if you were 10 years ahead, wow, that was meaningful. Now it's like a month, right? And so a month can really matter to a thing that is scaling and changing the world in some really powerful way. And so I think it's kind of a barbell effect, right? At the beginning, and as you're scaling, I think it matters a lot. And it makes a lot of change in the middle. You still have to prove customers want to use it. And if it's not right, it's not right. And you've got to pivot and figure those things out. You mentioned building an MVP no longer being such a strong signal of talent when you assess a founder since AI came out. How have you seen the profile of botanical or promising founders that you are looking for? Yeah, I think it shifts a bit towards what is their insight in the market, what is their network in the market, and a bit away from what is their early technical talent? You can recruit technical talent if you prove product market fit, and you have excitement around your business. So that becomes a bit less valuable, design skills, become a bit less valuable in the beginning. What becomes a bit more valuable is what I know, who I know, what insight I have into a market, what vision I have around that market. So the storytelling, the excitement, generation, ability to recruit a team, those things become more valuable. They've always been valuable, but again, it's just shifting. The weights, and it shifts to earlier, right? They become more valuable earlier than they used to be. And so we're looking for a technical founder that can build and eventually you can hire those sort of things. I used to say, look, if you were going to invest in an auto repair shop, you wouldn't invest in one that didn't have any mechanics. Yes. But now that the robots fix all the cars, you can do that more, right? And it's still going to matter, but it matters more what the experience of the auto repair shop owner is. That's a great idea. And what they can do to attract customers to their shop and what insight they have on how to do it better, because the robots are the robots. And it's not an overnight shift, but it's moving in that direction pretty quickly so that the technology is just a bit less important and the people are a bit more important. Like if you think about in 20 years, what is AI not disrupted? It's the networks that people have. It's the artistic creativity that people have. I believe you to sell. How has that influenced the way in which you at TechSource assess founders have? Curious if there has been any tactical or specific change? Well, sure. That change in founder profile. Yeah, well, I mean, you're leveraging the technology, first of all, in the pipeline, right? We don't screen based on what AI thinks, but we probably could. We're getting close to that. We treat it as another voice in the room. We all think this is stupid, but it's saying, hang on a second, there's something interesting here. OK, we take another look. So we're leveraging it around our own selection process and we're tweaking the models that we use and the weights that we have and those things to go more towards the concept, the opening and the market, the background and passion of the people still matters a lot. And a little bit less around, does this look like they've been to school and have a CS sticker, right? That's fascinating. Let's talk a bit. I think that's a great question to segue into how the ecosystem of accelerators and venture capital as a broader asset class has evolved. And when tech started, there was almost no accelerators, only your big competitor was just starting as well, YC. But today the world has changed. There's much, many more funds, many more accelerators, some new emerging, but at the same time, there's more content out there on how to be the company. More online networks like communities and X or Twitter can connect you with a lot of that operators or talent or even annual investors. So there's more ways to get help without giving up equity. So curious how you think about the traditional accelerator model, and if it's still the best way to support founders at the earliest stages? When you ask if it's the best way, it is a way. I think the best way it depends on who the founder is that you're talking about, right? Where the value prop to a founder is to quickly grow their human capital, their network, quickly be put in front of appropriate investors to have a built-in network of customers from the alumni network that has been building for 20 years, and that is very tangible and has a lot of values alignment. It's like picking a school you think about. Carver or Stanford, they're just different. They're both good. They have different vibes around them, different philosophies around them. And so it's being a part of something bigger than yourself. It's the speed at which you can leverage on network that's there for you. That's the value prop of an accelerator like ours. I think a different value prop that I'll give you in this example is a venture studio, right? That's well-build it for you. And you might ask the same question. So well, can AI build it for you? Well, yeah, that's what they're doing, too. But they have more experience on how to build things that really work. And they have talent networks around them. So I think the things that sustain are the things with networks around them. Because again, in the future of everyone outsourcing their intelligence to it, human networks still matter, right? Who's going to trust you? Who's going to do business with you? Who's going to quickly buy something from you? And I think that's the value prop of a lot of these networks. And if you're going to join it online, it might be a great one. But it might not be as broad or it might not be as experienced. And it might not have so many built-in customers or partners. And so fundamentally, the value of tech stars has always been the network. It's less the education. Education can be on demand and ad hoc for what you need. And it doesn't have to be during the accelerator. The accelerator itself is a shared experiences and some embedding of yourself in the network and some basic things that we believe make a difference in fundraising or what have you. But it's much less. I think people sometimes think of it as like going to college or something. And that's not the experience, right? The experience is very bespoke for figuring out what this company needs and what the network can do to fill that. In that context, I want to ask you the questions that founders get asked and hate getting asked to me, which is, what is your appreciation, right? In that context, given what you're describing, why do you think you can win in this? I guess you'll get into the next 10 years, right? How the ecosystem has evolved? Well, we talked about 10 years we think about hitting the trillion dollar portfolio market cap goal. Where are you now? We've got about 350 somewhere in there. It's the opportunity to go faster is not to grow the accelerators necessarily. And to more places, we're in a lot of places. And that's part of our advantages. We're reaching these founders where these companies are actually starting before they might pick up and move as they grow. So that's a differentiation, right? We're in market with a lot of the places like London, or New York, or Boston, or wherever that companies are starting. So we're able to meet them, get to know them early, access them early, follow them earlier because we have the geographic sort of distribution. The network is therefore also distributed. So I think it's a different network, right? It's more of a global network. It's more of a get to them early network. And when you think about the opportunity, it's following on more in the companies that are already in our network. It's reinvesting in the alumni that have been going through our programs over the last 20 years. It's the 5, 6,000 mentors that we work with that's investing in their companies when there's something interesting. 'Cause we have an advantage. We know them that trust us. Again, all these human things in the age of AI that we can leverage. And so that's why we think we can go faster, not by needing to have more and more more, but by simply taking advantage of what we already have in front of us. There's 5,000 portfolio companies that's 15,000 founders. They're all experienced now. Dozens of them have Bill Unicorns, right? They're starting new companies. Hundreds of them have Bill Sunicorns. They're building new companies. That's the opportunity for us to be network investors around this network that we build. What have you learned about scaling networks? And I asked this in the context that, for instance, during 2020-2021, we had a lot of companies trying to build businesses on top of online networks from the online bootcams up to literally paid communities that I feel like struggled because they tried to grow way too fast for how an online network grows. Like a high college is not an infinite, like you cannot just poor money into it and grow it as a maybe software or as can. And at the same time, as we're discussing, if you're going forward, networks are going to be much more of an advantage or a mode. As AI takes much more of our data life. And I'm starting to see companies doing, going more into, for instance, like offline marketing or sales, leveraging that much more because the data world is so saturated. So I feel like there's, I think one of my physicists that we're gonna start seeing like a new discipline of offline marketing or offline go-to-market or in real life, you could say. - Yeah, I mean, the core thing that I would say that I've learned is it's really hard. And we haven't done it perfectly by any means. I think our network has historically been more silo than we would like, but that is one of the things that makes it work because the New York network or the London network don't feel quite as big as the global network and scale can be the enemy of a network that feels personal and tangible, right? Because if you go on the WhatsApp group or whatever in your posting message and like a ton of people are responding and seeing it's just noise, right? Versus, oh, I wanna go to the vertical network, subnetwork of Fintech or Marketplace and have this conversation. Or I only wanna talk to founders that have raised at least a hundred million dollars 'cause that's what I'm dealing with. And so I think the trick is you've gotta segment it and ways they're useful. And then you've gotta stoke those fires. You've gotta have leaders in the context of, I have a group of just the unicorns, right? They like to talk to each other 'cause they've all built unicorn companies before. That's a valuable subgroup in the network to those people. They're sharing deals. They've built in trust 'cause they have a shared experience versus like a different channel which is people that went through the accelerator in London. They like to talk to each other. There's also the global network if you just have a very generic need. I think you have to segment it and water and feed it carefully in lots of different subnetworks we call them vertical networks. - It was a very interesting, speaking of network, network's venture has become much more institutionalized in the last years. There's more players, more capital, more talent going into it. And so I'm sure the people, like what I mean with this, you're competing with even better people to track the best founders. How has it felt for you to compete for best founders today? And maybe what are things that have changed to compare 20 years ago when you were starting out? - Yeah, I like that there's more capital and I like that there's more smart people in the industry and that's how the industry grows and evolves. And I like that there's more capital and that has obviously come and gone. It was pretty hard there for a while and now there's this new thing that's feeling a lot of capital. I think it's generally a good dynamic. But again, I think when you, it's an oversimplification to say the best founders because you're walking into a grocery store and there's a hundred apples and you can see that the five apples that are the best. You know, because they don't have bruises and I don't have chips in them. And so you're going to pick those apples. You just don't know. And there are a lot of people who are networked or underestimated or undiscovered and they're in places that would surprise you. We're playing a particular role which is to provide opportunity where maybe there isn't as much opportunity. Still there's competition in those markets but again, not necessarily at the stage, we're at, right? We're not looking to put $5 million into a thing. We're looking to put $220,000 into a thing. We're specialized, we're focused, we know who we are. And I think that's become important in this age of institutionalization of the asset class. If you have a focus and you stick to it, you build a craft and you get really good at it and it's hard for somebody to beat you at that thing. But it's easy to beat you at a very broad thing, like find the best founder. The founders, people think are the best founders, right? And that's not necessarily the game that we're playing in the same way as many others. So I think you have to have a game. You have to play it and you have to get good at it. Speaking of that, of the founders that may, most people don't think, don't think are the best founders or don't agree are the best founders. What do you think tech starts has built or developed as a unique skill set? Like what are the specific technical things that you guys do that allow you to see that talent? Well, there's a willingness to take a chance on people who will figure out the right thing over time. Like we've learned that what market they care about is way more important than their idea. Again, the stage we're investing in is two people in a dog and an idea, right? It's very early. I think giving somebody that opportunity to go explore is there a thing there? You get a disproportionate reward especially today when suddenly that thing can scale at a control very quickly. And now you're able to look for a 10 person unicorn. We're gonna get five person unicorn. We're gonna get one person unicorn. We're probably gonna get zero person unicorn someday. But you're in more of a position to be the big winner by being willing to take that chance early. And we see the numbers. It's like looking at the matrix, right? When you invest in 100 companies, you can almost predict how many of them are gonna become big companies with the system that you have. And then you just start doing math against it. Say this works as long as we don't scale it out of control. It works as a system. Again, it's having a game and getting really good at that game and playing it. There's, yes, we were talking about before how the profile of founder has evolved. I'm just, how the, if at any level, the advice you give during the program or afterwards has evolved because of Faya. Oh, yeah. Sure. And it has always evolved just because of this. I can remember it used to be, should we be a mobile first company? Do we just do mobile? You've got to develop a set of beliefs around what's gonna happen in the space. You do both. It's just another way people engage. And right now it's a lot of like, that's what software is. Like we're, the meme we have at Techstars internally is just replace the word AI with software, right? You're gonna need to be using AI. You can't just use the way software used to be five years ago. We use the way it is now. And clearly founders want to be doing things that are more core and differentiated in their leverage of AI versus just recurgitating what an L&M says in some context, which plenty of people are doing. You've got to help them figure out ways to use it that is truly differentiated or truly infrastructural, not just saying, hey, we're an AI company, that doesn't work. That's what everybody does, right? Try to get in front of the capital that's out there. What does that look like? I wonder if things you look for, steer your founder's towards. Well, you've got to have proprietary data. You've got to have something somebody else doesn't have proprietary relationships, proprietary data. Which of those things are you leveraging with your AI? You don't own the data. You don't have data that nobody else has. That's gonna be free. Everybody's gonna be able to do that. That give you a specific example. We have a thing that can search your database using natural language, yeah, okay. Who doesn't, right? That's not a business. That is a fundamental search in the new world, right? Or a way to engage with some data set. Oh, we have data that we've collected from these sources that no one else has. And we have these relationships and these channels that no one else has. We're gonna put those things together. That's actually foundational use of some form of AI. So you have to be really honest with them that they think that just 'cause they're doing something cool, that's gonna be a business any year. And I'll just use the search example again. I'm gonna be able to go to Gemini or ChatGPD or whatever and ask at the same question and that's just what it does, right? If the data's out there, it's gonna give me the answer. So you don't have anything special now or any year. And so you've got to figure out how it's really going to be valuable, not just cool today. It's interesting to say that because we're talking about how the profile of the founder, and that's particularly where I personally struggle more as an investor, which is I find this founder that maybe have, as you would say, like proprietary relationships, proprietary insights very deep into a market. But then the founders that can identify or understand what the last thing you're describing are usually the ones that are closest to a technology. But by not necessarily have that other side of the equation, which is that industry knowledge. - Yeah. So where's the marriage of the insight, the know-how, the unfair advantage, right? That we always use to talk about as investors with the sustainable advantage, not just the temporary coolness of what you can do with AI today. And that is the difficulty in filtering out. - See a lot of those founders that are, like they might be, I mean, they might have a lot of experience or in construction, or logistics, they long time executives, and they have, we've pretty specific insights and say, okay, I've used, and they probably haven't even tested Gemini or chat GPT, like a simple BP, and actually find out the way to solve the problem at a small scale. By then, you think, "Okay, but actually, "this might become a commodity or part of the models." - One existing company that releases one feature is killing 1,000 startups right now. Like, oh, they added AI to their mailing list, the software that everybody uses, and suddenly 1,000 companies are dead overnight. That's the dynamic, and that's why there's talk of the bubble and all these things. A lot of investment is gonna get wiped out really quickly in a lot of areas. And you see it in our top level economy. The seven, eight biggest companies are driving the whole economy because they're buying stuff from each other. David, there's this, at least for me, a cement contradiction in the market right now, which is that on one hand, people say, AI means startups will need less capital because smaller teams are able to do much more, faster, burn less capital. But then on the other hand, you see like, actually a lot of the successful AI companies raising a shit out of money, like raising nervous rounds, even the application companies beyond the models which always have a capex need, right? Which is more tight to their business model. How do you reconcile both things? And how, one step further, how do you think AI will shift a venture copy as I mentioned last? - I think that's a different question. The first question, it is interesting because I think you can do a lot more with less. And then you can generate wealth quicker. I built the thing that I own almost all of it and it's worth $15 million and I can do that. You see people doing that in six months. For companies that sort of build something that wows a market, they can do it really quickly. They can do it without a lot of capital and they can change a market really quickly because that market hasn't become AI native yet. And so it takes a little bit of capital, do it quickly, have an exit that changes your life, but you're not raising tons of capital because you don't need to. On the other end of the spectrum, you're doing something foundational in core with AI. And so you've got your own LLM and you're training it and you require enormous infrastructure and power and compute to do that thing at that kind of scale and that is incredibly expensive. You couple that with what's generally going on which is the world is becoming AI native, but it's not yet. When it is, I think that'll balance to the middle and it's probably one of the reasons why we're gonna see some kind of correction. These companies that raise enormous amounts of money many of them are gonna fail anyway and they just need to do that to find out if they can provide that LLM, train it, build it, use all that power, right? And so you're kind of forced into pick one of those two. Take advantage of the market quickly because it's so new and I can build value and sell quickly versus like now I'm trying to change the world in some way, eat a lot of money and everything in the middle kind of gets stuck. We can create some value, but maybe get stuck and having a cap table that's crowded, doesn't generate as much value as they thought they would and the exit. (indistinct) SaaS unicorns of tough stop growing and are in this meal of nowhere stage, right? They're not IPOable, they're not acquireable. - People invested a higher valuation than it's worth because they thought it would keep going. That's the risk in this type of market as well as a general correction. How do you think going one step forward, AI shape venture capital over the next decade to companies raise less money, will it continue being the same? - Yeah, I think you'll have AI agents that do venture capital, I already have seen a few. Here's the fund and here's the AI agent that frankly I think that can be better than what a lot of investors see because a lot of investors, I mean, I'll just give you an easy example at the angel stage to go in, they make seven investments and that didn't work, I lost money, I'm gonna stop doing that. And the AI would never try that if it had any sense. You've got to be more diversified than that to have any kind of success in angel investing, unless you're just incredibly lucky. So I think there are probably some AI agents that could be booked pretty quickly that will be a chunk of the market. Then it gets to become the question of what's valuable. The future like we talked about before is the human relationship valuable. You can take money from a bot and it's money and you can spend it at the grocery store which you don't also get the human network behind that necessarily. You might, maybe people are gonna couple those things together, public stocks. And I think he saw something before a lot of people did that the fees are what kill you, right? And venture capital has high fees and so if you can automate it with technology and not pay those fees, that's kind of interesting. The question is can you do as well as the average or better than the market? Can you beat the VC market in general? - Yep, that feels like a relatively low bar to me. I think that you need to be, you just need to be, average and no fees, that's better. - That's right, you could just do what it does and charge very low fee. - Like an index one, right? - That's right. And so Jack Bogle figured that out at Vanguard and I think the diversification matters, the fees matter. He always said on average the finance industry just subtracts value from society, right? It subtracts value that's actually being created by the value creators. And so I think that there will be successful models like that in the future. That's fascinating. David, you've seen thousands of companies go through textures, probably reviewed tens of thousands of applications, your salt. When you look back at the Mises, that went on to be huge companies, huge successes. Do you find a pattern? Like, is there a type of founder or market that you probably consistently underestimated? - I would say that the commonality in them is that they were just bad ideas. Like I was just like, that's a bad idea. And somebody somewhere along my career drew this Venn diagram that I still remember. Seems like a bad idea actually is a good idea and the tiny little overlap there in the middle is where people make just tons of money. Because nobody thinks it's a good idea. And a classic example would be Uber or being an Uber. And nobody's gonna ride around in a car with a stranger. Nobody's gonna stay at a stranger's house. Those are just bad ideas. And I'll give you my fortune to be an investor in Uber. But I was not in lift. I was an angel investor in Uber, but I had the opportunity to be an angel investor on lift. Mad Van Horn was mentoring, had textures and still friends today. But back then, I just was like, this is a dumb idea. And in fact, it was a dumb idea. It was called Zemride. And it was intercity transport. Like college kids going home for the summer and then coming back to a different city. Like, yeah, I don't get it. Like it's just a tiny market. And of course, what they did is they were a great team that pivoted in fast-followed Uber and built their own meaningful platform. It's stuff like that where you're just like, this is a dumb idea. And you don't look closely enough at the people. Those are the ones that I think back on. So it's usually that, I guess, when you hear that idea, it's quote unquote, so bad that it prevents you from going deeper into the people. I just like, I can't invest in that, that's dumb. And then the team figures out that it's dumb. And the team is not dumb. The team is really great. But you judge the people based on the quality of that idea. Yeah, you overjudge that because the right people will figure out a thing that works. And that thing might be huge. And so do you love the team? And I'll give you the counter example. I never met Travis and Garrett of Uber. I never met them. I don't know if I wouldn't have messed it if I had met them. I have no idea. I don't know if they would have let me invest if they had met me. But I met Ryan Graves, who came and mentored at Techstars. And I really clicked with him. And I got him. And he was like the first employee. He's the only person I ever met. And he was on the board until the IPO didn't let stuff. And big early player in the company. But it's like, you're a bit lucky. Because it does depend a lot on the people that you meet. But it also depends on the idea. And I think you can talk yourself out of investing in a great team at the early stage because you don't like the idea. Do you like the market? Because they're probably going to stand at that market. That's a great insight. Is there a pass that still has you? Would that be a lift? Probably a lift. That's the biggest one that I know of. I think also-- it was pretty big at one point. It was rap genius. It's always one that I think-- that was pretty good. But I don't think that was nearly as big. And I'm sure there's others. But lift is the one I always think about. That's an awesome example. Looking back at 20 years of doing this, how has your investing philosophy changed the most? Maybe what's something that you believed earlier about founders, companies, whatever it takes to build a great company, it has changed. I think I used to really think about it as I've got to be in all the best deals. I've got to be in all the good deals. And that leads to a group thing and living mentality. And now I think I just have to make sure the deals I'm in are good. And that's really different. I don't have to be in all the best deals out to make sure all the deals I'm in are good, ideally great. And of course, they're not going to be. That's more the filter. And then I have much more of a life is too short mentality. I have to want to work with the people. I don't want to work with people that I don't respect or enjoy or like being around because life is too short. And I think there's magic in that because you help more. And they work with you more closely. And you're able to help them more if you kind of click. Now, of course, the people can change. And that's hard. But I think today as an investor, I'm much more drawn to what I'm interested in versus just like, oh, that's a hot deal. I got to be a part of it. And how do you think about those cases where maybe the founders are great, but you don't click? Well, I don't have to be in all the good deals. There's another good deal to go do, right? I can't be in all the good deals. There's no way to be in every good deal. There's no way to be in 75% of every good deal. So is this a good deal? And do I have that other filter that I'm looking for? Yes, I want to be in. I don't have to talk myself into something just because I think it's good. I love that. And that's happy that I've struggled a lot with, personally. It's hard because sometimes you feel like someone is great, but you might not really like them, right? I'm saying, OK, because I don't click. We're not going to be super helpful. And then I've done those type of deals. And he's like, yeah, maybe great investment that we don't really buy. And you want to spend your energy and your time on things that you believe in and things that you love, ideally love, right? And not just like, just in life, I'm just a big believer. Like if you're building your startup because you built a spreadsheet called Fantasy XLS, that's wrong by definition. And you're doing it because you're going to get rich doing it. And you don't have a why. You're probably going to fail. And I'm going to fail as an investor unless I have a why. Totally squirts out. David, one final question to close. If you had to thank one person for pushing you to think beer, who would it be? And why? You make me pick one. Geez. I'll sneak the word Bradfeld in there. But then I'll say Jack Bogle, who I mentioned earlier. I never met him. But he wrote prolifically. And he changed the financial industry. And I think I like to think that we're doing that in some little way for people who want to be involved in this crazy world of startups. But don't really know how to do it. Whether they're investors or founders, and whenever I read his stuff, he always made me think big. That's awesome. If you compare Dexter's and Bungard, there's the notification. We're seeing the maturity of the venture capital asset class play out over decades. It's still immature. But it'll go wherever asset class goes eventually. People will understand the power of diversification and low fee and take the returns the market is giving you, which are pretty good versus trying to beat it. David, thank you so much for the time. This was awesome. I really appreciate and always admire your career as an investor and the impact of what you've built with textures as someone from Peru. Then who lived in Mexico, I really appreciate what you do. What Dexter has done is to put the world's startup in our places of the world beyond the US. I think that's great to spend time with you across yes, Portola. (laughs) See ya.