0:00intelligence is going to be bigger as a market than oil. I've been in software for 31 years now and the handful of other moments where I have felt magic. A trillion dollar super cycle followed every single time and it doesn't happen very often. $5.75 billion. That is how much Bessma Venture Partners just raised. Well, I saw this and I thought we've got to have Samir on the show.
0:22Samir is one of the leaders at Bessemer today. He led investments in Mora and Fireworks and he's one of the best growth investors in the market today.
0:30It's a spicy show. Samir was patient. He put up with me and hell did we have a discussion. Not being a giant global platform or an incredible specialist who can add differentiated value and be better at picking because you are a specialist. I think it's a hard world to make money. I absolutely believe capital is a moat.
0:59Sam, last time that we did a show, uh, I was about 12 years old. Uh, you put up with some very, very poor questions then. So, I'm hoping that this will be an improvement. So, thank you for joining me, dude.
1:11Dude, I'm so fired up to see you. As I always say, longtime listener now, second time caller. I'm fired up to be here, man. Thanks for having me. So we were just chatting beforehand and we said ah USV and like 900 million and you know you guys just raised you know size of the US Treasury it would seem. I think it was 1.75 billion seed fund.
1:29We'll get into that dude and seed and early. I'll talk about that later. Go ahead.
1:34Seed and early and and I think like five more in you know growth. Um, and so we we'll get into that, but you said, "Oh, well, for those of us who have seen it before, this is that time, man." When when you're in one of these, I I refer to it as like magic, right?
1:50Like I've been in software for 31 years now, and the handful of other moments where I have felt magic, a trillion dollar super cycle followed every single time. And and and it doesn't happen very often, but like I mean, you talk about lucky. I graduated college in 1995 back in the dark ages, but it was at the birth of the internet and I was graduating in the heart of Silicon Valley and it was magic. You could just see how people could create content and share it with everybody on the planet
2:18and you're like this is magical and oh my gosh, we could actually do commerce on this thing and I don't have to go somewhere to go get something like that was magical, right? And then and then later in my career, so VMware um right created this layer of software that disintermediated the right the hardware from the from the OS and said I can spin up virtual machines. I can put 10 of them on that one box. And by the way, you want to see magic? I can move that running workload from over there on the
2:47on machine number two to machine number eight and shut the other one down on whenever I want and it won't interrupt the workload. Dude, that is magic. And I looked at that and I was like, "Holy cow, I didn't appreciate that the super cycle it would create was called cloud, right?" Because there is no hyperscaler.
3:05There's no public cloud without the ability to do virtualization and motion VMs around up and and spin them up and spin them down. The elasticity of the cloud. And so every time I felt magic, I was like, "Holy cow, this is cool. I got to go jump into that." And uh and then this one I remember I I started um I was actually on my sbatical. I wasn't I was in between Twilio. I thought I might be retiring, got bored. But anyways, I was I was doing some advisory work and this young guy um Dave Robin Mozer over at
3:34Jasper um said, "Hey, can you spend some time with me and what we're building here? Uh it's growing really fast." And I was like, "Yeah, let's I'd love to learn more about it." And he shows me a demo of Jasper that's this AI marketing app sitting on top of GPT3, right? And this is like in the winter of 2021.
3:52And I was like, "Magic. It's again, this is magic. And so and and and sure enough, well, you know, like here we are now five years later and it's been magical. It's uh you just see these transformational technologies and this one is bigger than the last two combined in my humble opinion.
4:10Why do you say that? The analogy I often try to draw is intelligence is going to be bigger as a market than oil because oil powers all the machines. Intelligence powers all the humans. Not some of the humans, all the humans.
4:26Consumers, proumers, SMB, mid-market, enterprise, government, I don't care who you are or what you are doing, you need more intelligence. And when you think about a market of that scale and scope, you understand this is magic and it's going to be really big.
4:41So if we actually go through the stack then you did anthropic. Let's start at the the heartbeat of intelligence that you mentioned there. you did anthropic.
4:51Can you talk to me about the rationale, the underwriting, what you saw, what you didn't see when you look back now?
4:59I mean, yeah, I mean, the most important bit um I'm really proud that um we did it in the series D.
5:06What price was that, dude?
5:08Uh I think it was 15 billion pre, 18 billion post.
5:13Um it was early. It was the round that Menllo led and Lightseed and and Vesmer uh joined. Um and and this is by the way we were talking about my legendary partner Byron Deer. Thank God for him because he and Matt Murphy go back a long ways. And Matt called up his buddy Byron and said, "Hey, we're looking to build the syndicate here for this startup uh named Anthropic and um you should check it out." And Byron said, "Hey, Samir, you want to come look at this thing with me?" And I was like, "Yeah, I'm all in on as I said on all the all the intelligence in the AI
5:42market." And I'll tell you, I think, you know, Byron and I grew up during the our careers probably centered um during those cloud days. And so, you know, of course, we all pattern match like you just kind of you use these mental frameworks. So, for us, I'll say for myself, maybe I won't speak for when I looked at it, I looked at it as look, I think this market, this is going to be a cloud redux was my was my analogy that in the cloud era, you had a handful of hyperscalers, right? You had you have AWS and Azure and GCP. And the reason is
6:11because it's massively capital intensive to build a cloud infrastructure. Well, it turns out that in in the market we were looking at here, it was going to be the same thing. It was massively compute inensive and therefore capital intensive. And so it was going to consolidate to a handful of players. But just like in the cloud era, we believe then I still believe now there would be hundreds of AI application of of apps built on top of them. Just like you had hundreds of SAS apps, you would have hundreds of AI apps um that were purpose-built for for particular things.
6:39And so if you have that mental model, then you say, "Okay, great. If it's really capital intensive, who are the people that have the balance sheet to actually go into the scaling laws that were being talked about?" It's a pretty short list of of players who could actually afford it. And you went across them and you're like, "Okay, Microsoft, yep, they partnered with OpenAI." uh Google, yep, they partner, they're going to go build their own called Gemini. And then you got to AWS. And AWS at the time had an internal model, I think it was
7:09called Nova that was not particularly distinctive. I'll be generous. Uh and and uh and they had just invested uh a very sizable amount of money into um into Anthropic. And by the way, at the time it was very non-obvious that um you know, Enthropic at the time was one of I don't know, there probably half a dozen or more uh other na other labs that were trying to to also build intelligence. Um
7:37was it controversial in Bassimma?
7:41Oh, Harry, you have no idea. That was it was according to Byron, he said it was the lowest voted deal in the history of the firm that of of the time he had been there. But the fact that but but the fact that we were both, you know, there and had conviction. Um, and one of the things I love about Bessemer is it's an empowerment. Empowerment is one of the values of the place and they're like, "Dude, that's where Alpha comes from. If you guys really believe, go do it."
8:06What did you not see that you wish you had seen?
8:10I wish I had um the ability to convince us all to do a bigger check that round.
8:18I I feel like we saw it. We knew it and but there there are so many risks at that stage of the company. Um but we knew that the AWS relationship was pivotal that it would provide both the compute for the training critically and that was like the it was really important and then and then distribution at that early stage and uh I just wish I wish we had written a bigger check that's all you know that's all I wish we knew we knew then that we didn't know now. When we look at concerns today, one
8:47concern is the cost of intelligence shifts to open source because it's simply too expensive in frontier models and we see that in you know a lot of data that's being produced by Vel and GMO who publishes it and you know we're both big investors in fireworks and so we both believe in open models too.
9:06To what to what extent do open models not deprecate the business model for the majority of frontier providers? Look, I'm I'm a I'm a genius of and on this one versus the tyranny of the ore. This it is and not ore here. Uh as I said, I come back to my my comments about just the scale of the market for intelligence. You ju we just can't get our heads around it. I mean, you think about this like Harry, when we invested, I think like my my my bullish bull case was that we could get to, you know, some
9:36some massive valuation. And and I'll just say that I missed the mark on what how big of a of a business could be created at the frontier by factors. And so um when when you're in a market that big, predicting with any precision the mix between closed tokens and open tokens is irrelevant. You just it's going to be big. You're in you, right?
10:01Do you understand what I'm saying? like when it's that large of a market, um the ratio is is uh is is actually not not not a concern. And and I really do believe that there are all those different use cases from pro from consumers up through enterprise and government. Um and they're all going to want intelligence of different types and different flavors. And that is why we're both we're investors in both on anthropic and uh and in fireworks and the closed tokens and the open tokens.
10:28We'll get we'll have exposure as a as a fund and as a firm to both. Um but I think both are going to be huge.
10:35Do you think US enterprises are willing to use open-source Chinese models?
10:40Uh I think that there are once that Chinese model is hosted by fireworks is no longer a Chinese model first. Um do you think they see it like that? Me me me me me me me me me me me me me me me and you both know that to be true, but when you speak to CIOS, they go, I don't want it. If the provenence is China, I don't want it. And you're like, it's downloaded code on your local drives, and I still don't want it.
11:06Yeah. No, I listen, I've talked to some CIOS who who share that opinion for sure. There's no question that is out there. And by the way, um uh I I do uh think that we should have a great openweight model um that is is US-based. And I think that would be awesome. I think there's a big hole in the model um in that market um invested in that's it can be for sure it can be. Yeah.
11:31But if you look at like a thinking you know if you look at the thinking machines at a $40 billion price today is there a $500 billion open model US to be built or is just open a much harder business model to monetize and therefore it won't be that large? Oh no. I I I believe it absolutely can build a big business. Whether it's at that particular scale, I don't know. But you can build a very large business and get venture returns. Um if you are the leading provider of a open- source solution, I mean just look at history across, you know, all these other
12:01categories, whether you're going from Red Hat to, you know, fill in the blank in the database market. I mean, you can build you can build a very you find ways to monetize it. Um for sure. Uh and and you know, most enterprises don't want to be responsible for the open the open source. They're going to want some provider with the right talent behind it. All the reasons that open source businesses have been great businesses for for decades now.
12:23Totally get that. Can I ask you if you were to present a bare case for Frontier models, what would it be?
12:31Do I think there's a bare case for the Frontier Labs? uh I really don't because I believe that the at the frontier intelligence solving problems that were hereto for unsolvable or solving them at a pace that was um hereto for unimaginable I just think uh there's no shortage humans have so many problems to solve Harry we got a lot of problems in this world we have a lot of them and and
13:00we we're we're nowhere it's not like we're at the 90 we're on the you know 99th percentile of problem solved and we're just trying to get to the last one. We have a lot of problems to go solve and that's what these things will help us solve.
13:11The majority of people on the pod come on and say we'll see 99% of token traffic flow through open models but we'll see 99% of dollars flow through closed models. Do you think that's apt or do you think that's kind of a [ __ ] throwaway comment?
13:24I I think that I think that ratio is wrong. I really do. I don't think that's quite the mix. But but to my previous comment, I don't think we have to get the mix precise. Um, I think everybody just has to understand that that um uh you just have to look at the size of them of the TAM.
13:4015 billion it seems now ridiculously cheap. How could you? That's amazing. 15 billion at the time was freaking wild. I got brought open. Yeah, I got brought open AI at 30 billion and to my stupidity I said oh my god if this is 100 billion I like just 3x it not including dilution. Oh my god, the small-mindedness that I had was just unbelievable. I think it's on my mind, man. It is exactly I went
14:09through the exact same thing and the reason we ended up How did you get over it?
14:13Um was because in the intervening time, right? So you remember that that's that open AI uh opportunity that I also passed on. I had the exact same thought pattern that you did in and that was right after the chat GPT moment, right?
14:26to whatever that was December, you know, no the the conversation was in December and then in that intervening time that little Open AI went from 40 million uh by the to the time that we then looked at that first round of anthropic open AI had gone from like 40 million to about I want to say I'd have to go back and look at the numbers. You could fact check me, but it was something well north of a billion billion and a half maybe approximating two and and clearly we got it wrong. And that is one of the both I think one of the most humbling things
14:56about this job is that you will get them wrong and sometimes you'll get them wrong on really really important decisions and you have the opportunity to fix it. You have the it's it's not a one once in a-lifetime opportunity. You could go back and fix it. And uh and that was when Anthropic came along. the imagination was stretched to your point like we were our imaginations were capped at a certain even if it got to a h 100red billion and and and now obviously you know you could you could
15:25see the growth potential of how big this market could be um because of what OpenI had done in in calendar 23 in a world of $2 trillion assets do you care about price anymore like is LP focus on price misplaced entry price always matters Every venture capitalist has taught me that. I'm by the way, I mean, you know me. I'm four and a half years into this second career of mine. So, I'm still learning. I appreciate that it is a craft like every other. Uh, and so I don't pretend to
15:54have all the answers by any stretch, but I know how important entry price is. And I will say that what matters most is whether or not you believe it can grow at scale for and compound it for a very long time and still make you a venture return. And so I'm just very focused on the on the looking out the as they always say the windshield as opposed to the rearview mirror. Um and and if I look at some of my uh the investments of which I'm most proud they were at
16:23current ARR multiples that would make most venture capitalists throw up. I mean and they were difficult conversations in our in our firm uh IC right in the investment committee. I mean I think like when we invested in a bridge they were at 5 million of ARR and you know we were paying whatever it was 78 $800 million valuation when we invested in Enthropic in Enthropic in that 15 billion round I think they were
16:50at 100 million you know like 150 times current ARR lora you know 20 million of ARR when we invested and led that $ 1.8 8 billion round. That's insane. And and if you're if you're only looking at present and backwards, you'll say, "Samir, do you not understand math?"
17:08Like a hundred times, that's what you're paying to get in. But but if your view, as was mine, in each of those instances was that yeah, but on an NTM basis, and that's what I care about. I'm I'm looking at what do I think in the next 12 months this thing can be, and do I feel like that's this is a reasonable multiple in the next 12 months. So you look at end of year next year. Again, this is me trying to learn. You look at end of year next year. And then you look at gross profit.
17:33Not even end of year.
17:35Not end of year next year. I'll go NTM next 12 months. And yeah, depending on the business, next 12 months only. Um because you know, depending on where you are in the year and that could be that could be more like 18 or 24 months and I won't pay that far forward um because it's really hard to see that far forward in any business. And I've been an operator. I've been a CEO. I know how hard it is to predict that far into the future when you're scaling at these rates, but but next 12 months you should be able to get your arms around. Um, at least at least get closer.
18:02What is exciting enough in that respect then when you look at NTM? What is green versus red?
18:07You know, I think, you know, depending on the business, it'll it'll it'll vary.
18:11But, you know, something something that's in the 10 to 15 times NTM, I don't think is crazy, especially if there are these these businesses that are growing at rates that I that I have never been seen in the history of business. And I've certainly never seen in my career of 31 years. Um I don't feel like paying 10 to 15 times NTM is all that crazy because they're going to blow through it. And I look at, you know, Lorraa, we invested at 1.8 billion leading that round and that seemed insane at the time, you know, but the company just went, you know, 20 to 200.
18:39I know I think we're in that together. I know you know Maxwell, you know, they're they're uh you know, they're on fire and and I feel pretty good about that 1.8 billion.
18:48We're going to get to the Gora and I completely get that. Does your feeling good about that 1.8 billion change depending on customer makeup, um quality of revenue, run rate versus enterprise revenue. We see some quirky ways to calculate revenue today. Does that change?
19:05Uh for sure um quality of revenue matters um deeply uh you know I prefer I'm an old school I've been in enterprise B2B software since 1995. So that is my bias. I prefer the G the gross dollar retention rates, the net dollar retention rates of highly sticky customers that for whom your thing is super strategic and they're going to keep they're going to keep expanding.
19:29Um, so I will I would pay a much lower multiple for like a a proumerry business or a consumer business. Um, you know, churn can can kill you. So what about margins? You look at someone like Eligora, who we both love, their margins are are good. um fennel enterprise I think margins.
19:50So this is where you know again having done this for a while like it depends on your lens. Am I worried about their gross margins in the next 12 months? I am not. I have got a hold period of 5 to 7 years at a at a growth stage check. Um and so when I think of it over the next 5 years, what do I think that's going to grow into and why? You have to be really thoughtful on um if it's if the gross profit picture doesn't look pretty and you're envisioning some like you know fun with math in a spreadsheet that all of a sudden it's going to be magically
20:20hit 60 or 70% in 5 years you sure as hell better defend that. You better know why you think that that is possible. Um but in a lot of businesses economies of scale really matters. um share and position um really matters. And you know I I can remember most of the businesses I invested in gross margins at the time we invested in this AI world were meaningfully lower than they are at scale today. I mean meaningfully lower
20:49and so like factors uh improvement inside of 12 to 24 months. When we look at say Lorra of the world, okay, I'm an investor. I always hold my hands up. a big fan. You did it at 1.8 billion.
21:02Okay. The legal market is 300 billion in the US. If we assume a 20% take for software and that is $60 billion and we assume that it's split up between a couple of different players including your Harvey of the world, you can get to like a a 5 to 10 billion maybe in revenue.
21:24Is that how you thought about it?
21:26How do you get to a 1020x when you enter at 2 billion on a company like Lorra?
21:32Well, I mean uh that that math not not terribly off. I would just say we included the whole world because you and I both know Max and he has global ambitions. Um and when you add in the rest of the world, by the way, you don't grow the tame a little bit. You add another 60%.
21:45You know, it's the US market is only 40% of it. Um but uh but yeah, I think that that math is is is not way off. I do believe you can get after um the labor the labor spend uh that is the services dollars I'll say that go into into the legal market. It is you know the cliche that everybody keeps talking about Jevans paradox. I do believe there's a lot of legal needs that don't get served today because the prices are too high.
22:11So I I just think there's this market when you just have the way we thought about very simplistically I'll say is there's about a trillion dollars of legal services spend in the world and when when you're just thinking about this that size of the TAM I I just I believe that um they they they don't have to take any meaningful share of that to go build a massive business and by the way if they build a 5 to10 billion revenue business that thing is going to be worth you know you put any
22:39multiple on that that is that is reasonable and and you're going to make you're going to make a very good return.
22:45Totally will. The thing that's interesting when you look at all markets today is the competitiveness has changed. Dude, when you were building, you know, 7 grid, uh, you know, and no offense, there weren't that many competitors. There were there were several, but not the depth that we have today. And when we look at like a a Lorra and a Harvey, I'm going to be unpopular. I think both will do very well. When we look at a fireworks, I think base 10 and modal will do well too. I think fireworks will win, which is why my money is there.
23:15Has the competitiveness changed in your mind and does that shape how you think about investing and market outcomes?
23:22I actually don't believe um that the competitive breath has changed. What's changed is the capital intensity behind the competition and therefore it leads to this competitive intensity. Right?
23:36Like if you looked at the the war chest, the amounts of money that take Alora and Harvey have both raised that leads to a competitive intensity that absolutely is different than than what I dealt with in my era. Is capital a moat today? Is that the differentiator?
23:52By the way, I I absolutely believe capital is a moat. Uh that I've always said that markets pick winners and then it becomes a self-fulfilling prophecy, right? Like in our day, you know, Sen Grid and Twilio were the API building blocks to to plug into your application to go send communications and then once developers had decided that it was game over. We had won like that you you you were the default that you became the market winner and and that does happen and we see it in in our in these
24:20markets. Um, if we take that one as a as an example, there are lots of legal tech companies, lots of AI legal providers, but if you ask anybody uh at at a big law firm, who are the major legal AI companies, they would they would name those two. And so, um, I I do believe that the capital creates the both the ability to scale at an extraordinary pace and it also and it creates uh and therefore a brand um for those businesses. talent uh then ends up
24:49flocking and then you just get this reinforced flywheel then they win more customers and then that just you know the virtuous cycle continues.
24:56Do you believe in kingm? I I I do to your point that capital is a moat. If capital is a mode excessive amounts in short amounts of time give inherent advantages. Do you agree in with kingm like I do or not?
25:11Yes and no. Harry I um yes because I believe everything you said which is the capital is a moat um and and it is a signal to the market and having built software companies for a very long time your product has to be exceptional your company leadership has to be ex it's I I would say in in you know in math speak it's necessary but not sufficient it is a necessary condition for you to win the market that you have the the biggest war chest that you will have the most
25:41capital. I really do believe that you are in that kind of a game and it's because the compute is so scarce and therefore the compute is so expensive that if you don't have that you just can't play. So yes, I agree with you at the first part of your statement but it is not sufficient. You have to then deliver an amazing product that your customers rave about, love about, tell their friends about if you want to be the king otherwise you have no chance.
26:04So I agree with you completely there.
26:06Um, and I also agree with what you said earlier, which is like, you know, the 10 to 12x and the the growth rates now are very different to what they were. When you look at what you're seeing today growth rate wise, is the triple triple double double that SAS and me and Jason always talked about, is that is that wrong? Is that not enough anymore?
26:26It is not enough to attract capital from venture capitalists who have opportunities to put them into these hyperrowth companies that are growing much, much much faster. and and you know all of us as venture capital funds, you know, your your capital, as big as these funds are, we just raised $5.75 billion, it's still scarce capital there. There are deals to be done at at crazy hyper growth rates. Now, all that said, um I do still believe in finding companies
26:54that are doing the T2D3 um because the entry prices on those um in this environment can be dramatically different, very different multiple and you can still make a great venture return on those. Um I just think that right now that like do you remember the the kind of I call it the Excel deal.
27:13deals. Remember the Excel growth deals like the one passwords, the Qualrixs where they found these kind of amazing assets in less obvious locations that were maybe more capital efficient. They then juice them up with some growth capital and then it turns into an even better business. Do you believe those will exist in the nextG or actually not?
27:31You have to have that capital to get to the scale. I I think that over time we'll we'll see a bunch of application companies that that can look like what you just described.
27:40Um, I just don't think that that's where the venture dollars are going to flow in the near term. When you have opportunities to invest in things that are 10xing at scale and your opportunity is something that's doubling, of course you're going to go to the 10xing. That's just like an intelligence test.
27:54We call it cake or death. Yeah. You ever seen Eddie Isod? He goes, "Cake or death." And you go, "Cake, please."
28:00Cake. Wow. What a surprise. I wasn't expecting that.
28:04What a tough question. All right. So I I but that all that said like do I think we can make money investing in companies that are T2D3? Absolutely you can. Um and so then it comes a little bit of a of a mixed question like how many how much do you want to have in one versus the other, you know?
28:22So you mentioned the $5.75 billion.
28:26Um it's quite a lot to be honest. Let's just let's just let's start with the $ 1.75 billion seed and early seed and early. Um, seed early.
28:38Do do you need a billion dollars to do seed today? We just saw literally earlier today USV announced their $900 million funds.
28:46Do you need a billion to do seed?
28:48Seeing the prices that I'm seeing, valuations we are seeing for the early stage deals coming in for my teammates on the on the early stage side. If you just think about the number of shots on goal you need to have to find the winner, I I I don't know how um I I don't know how you would have a small seed fund and be successful. I don't what are you seeing in that pricing and ownership level? Well, I think you know um depending on the business if it is a capital compute intensive business and a
29:18lot of these AI businesses are that right. So it also depends a little bit on where you want to play where in the stack do you want to play how capital intensive of a business do you want to invest in? If you're like, hey, I don't need to invest in, I don't know, something that requires hardware, robotics, or I don't want to invest in something that's like training a model for compute or, you know, maybe there are places where where you don't need that capital intensity, but I just think in this era of of intelligence and AI, I just I think a lot of them do. And so if
29:45you assume that that's the case, man, um you're you're going to be paying the math just won't math for the for the entrepreneur or you if you're not paying uh what you know in my day, look, I've been doing this for, you know, I've been in software for 31 years. Like a seed check in the day was like $3 to5 million on a 20 to40 million valuation. Like you know, it's dramatically different time and that just doesn't get it done now. I don't that I don't I I don't have the
30:14specific numbers. Um but but I know that it's factors higher that I know that I know it's it's way more. Um and and when when you're factors higher off of that, you know, you really you you really got to hope that you're a great picker. And this is where I get into my one of my other kind of world views, if you will.
30:33I'm just a business just a humble business guy, Harry. And I think about the venture industry like any other industry. And so to me I I when I was evaluating coming in and starting it as a second career I looked at the venture capital asset class and I said this looks nothing like what I grew up with in the mid late 90s um where everything was hardware software in Silicon Valley and principally early stage and now it is global every sector you could imagine and everything from a preede check
31:02through up into IPO where you're investing hundreds of millions of dollars every one of the vectors that I just mentioned of location stage and sector are dramatically different and broader.
31:12It's just the professionalization of this asset class. And so if you think of it in that context, you're like, okay, well, in most industries when they professionalize and they get to scale, you either have to be on this end of the spectrum, which is a giant global platform that consolidates a whole bunch over here, or you need to be an extreme specialist over here that is doing fill in the blank. you know, I'm doing AI deals in San Francisco early stage,
31:41right? You got to optimize specialty on all three dimensions. You could be one of those two. And if you're in between, uh, good luck. I think that's a rough place to be. I really do. And it's the reason that Bessemer is going, you know, we have I think Bessemer is a as a big global platform, but man, I tell you like not being a giant global platform or an incredible specialist who can add differentiated value and be better at picking because you are a specialist. I think it's a really hard job. I think it's a hard world to make money.
32:09So, what happens to the billion dollar funds?
32:11I don't know. But I'm glad I'm not at one of them. I'll tell you that. I I think you have to be on either end. I really do. I really do. Uh and and look, you can I mean I'm sure there's a path to success for everybody. Good luck. I I I just I'm just giving you my outside in unvarnished view. Uh just as a business guy looking at an industry, you know, I'm I'm just analyzing it clinically and I'm telling you what that's what I've seen in the history of business is when
32:39markets get big, they consolidate and they have special I mean you take like automotive it doesn't matter what industry you pick. There will be, you know, your big three in the US or, you know, the Toyota Hondas in Japan. Like, you get a handful of giant players on one end and then you can be like, I am a Porsche or a Ferrari or a specialty player on the on on the other side of the spectrum, but being in the middle is a tough place to be. I think it is. I think it's a very tough place
33:07to be. Can I ask you when you look at the two different vehicles today? I had Veni from Manlow on the show, mutual friend of ours, and he Yeah, love Veni.
33:16He Yeah, he got some stick for saying that um early stage in seed investments were option bets and you build a portfolio of option bet. Yeah, it's hard not to have seen that. I think we're at about 5 million views, but he's by definition right. If you have the majority of your dollars at late stage, by nature of doing early stage, unless you said, "I'm deliberately not going to invest in anything that I do early," which would be utterly moronic and
33:45irrational, it by nature has to be an option.
33:49Yeah. Yeah. I look, I I um I think um having been on both sides of the operator and venture thing, I think what people were taking uh umbrage with was the notion that maybe maybe this is what they were I don't know. um was that the I'm an entrepreneur of a small thing. I don't want to just be an option. I don't I know Vinky well. I know him personally. He's a great dude. They're a great firm. That is not what he meant.
34:14But what he meant intellectually is 100% correct, right? It is an option. And if it works, then I'm going to put more capital behind it. I mean, anybody in venture capital, I believe that that listened to that or thought through that understands that to be a truism. And I think there may have been a little bit of of flack on the maybe on the the human entrepreneurs that are doing the hard work of trying to build these things. And I don't want to just be an option, but I actually I would I would challenge those entrepreneurs having been one myself and I would say uh no man like understand that your business
34:43you have to earn the right to keep scaling to earn the right to the next round to get more capital to keep building towards your dream. That is the game. And uh if you if you don't think that is true, you're not understanding the game.
34:57Can you help me understand? I totally agree. When when you have the 1.75, does that have reserves baked in or is the idea that you have no reserves there and then you double down from the 4 billion, which is growth? Uh both uh we we absolutely have reserves baked in uh to the 1.75, but but um we don't want to just be like doing prorata checks like in the companies that we believe are taking off. We want to back up the truck um as we've done like we just announced around with the lease AI where you know
35:25we we're going to be investing near uh nearly $200 million that we just announced and and so like when we see the winners that we think are in big markets are going to build great companies like we're like yep let's go.
35:35What does that look like then that interplay and do you worry about the signaling risk of like Samir jumping all over one company and not another company?
35:47No, I don't. I don't. Um I just at the end of the day, I believe the truth will set you free. Just like if the signaling risk is they haven't backed up at the rock of my company yet, the signaling there is simply, yeah, the business hasn't yet demonstrated that it is going to be going like this. That's okay. I I I led one of those. It takes a while.
36:08It's hard to build businesses, man. Like uh I I don't I don't worry about the optics on stuff like that. Um uh cuz I've been in the seat and I think I think the entrepreneurs and the CEOs, they know the business they have. They know what they're working on. They know what they have to do to take it to the next level. And you know, uh if they're not yet at the next level, I don't think they're uh most CEO entrepreneurs aren't going to want to try to pretend that they're not. So you have $4 billion then in growth going to your segment of the market.
36:38How does that look when you look at the portfolio there? How concentrated is that? What does the check size look like? What does the reserves look like?
36:47I'm just fascinated how you construct a $4 billion portfolio.
36:51Yeah, it's it's incredible because the numbers are obviously kind of are staggering. They're they're they're large. Uh but but I I don't think that the the fundamentals are are perhaps not all that crazily different in that we still want to have concentrated bets.
37:05We're we're and but and so what that means is a concentrated bet means shoot we may write you know $200 to $400 million into a given opportunity into a given company be if we have that much conviction and it'll probably be over a couple different rounds couple few rounds but but but you're still looking for a a relative concentration you know of whatever it is what percent of the fund would you be happy to go up to for a single company up to 10 if on a 5 to 10% is sort of
37:33what I think our average checks size will be um and uh for late stage growth to be clear for our for our late growth funds um early growth is a little bit different but but late late growth um 5 to 10% feels fine and I'll just tell you our last growth fund our our Century 2 um I think we had 20% into one name the name was anthropic I feel pretty good about it so we will flex it up if we believe it is a generational company you have an early growth and a late
38:01growth we do Yeah. Yeah. Yeah.
38:06[ __ ] hell. [ __ ] hell. What the [ __ ] What? How?
38:11Early growth is very different than late growth.
38:15Why? Okay. Tell me. Tell me. Tell me. Go ahead.
38:17They're both growth.
38:19That no mid growth. Why don't we do an early growth, a mid growth, a not so late growth, a late growth, a preo?
38:29You got to draw. I will concede Harry that there is a arbitrary distinction cutoff line somewhere but I will tell you qualitatively there is a big difference between investing in a company that is in there in the 20 to 40 million of revenue range or is between you know call it I don't know half a billion to a billion dollar valuation versus I'm coming into uh a fireworks at 15 billion that's a I mean you're talking about a very different stage of
38:57company you know what you know about the business is different, the risk profile is different, the uh the the check size is going to be different, all the things are going to be different.
39:07I get all of that, but I think what matters is your multiple oninvested cash. And actually I think if you look at say a fireworks um I think the the upside is just freaking enormous if and I adore and I adore Lorraa but by nature I think the upside is just less because it's a vertical market. It's not intelligence for the world. I mean I think Max would agree with that. It is it is law and even if
39:36it's tax and compliance as well it is still relatively verticalized. And so I think your multiple uninvested cash is what you should be looking at which I would argue would be the same. Actually I would agree I agree with you that many of the opportunities that we are investing in cuz we are only trying to invest in the very best in both of those stages of early growth and late growth.
39:57Um I do believe that on both sides of those you can find 10 and 20x companies. Um we want nothing less than a five. Uh and that's a really high bar in growth.
40:07What did you do from your early growth that's not in your late growth that you r not putting in your late growth?
40:15Oo, that's a good question. Uh, I'm really excited about um one of my vert another vertical AI company called Field Guide that is in uh it's AI for auditors, right? So, we've done AI for doctors with a bridge and AI for lawyers with Evenup and um Lora and Field Guide is AI for auditors and uh I did that one early. They were I think they were sub 10 million of ARR at the time we invested is probably about a little
40:44under a $200 million entry price. Um and they are just ripping. They're growing really fast. I'm really excited for for them and and um and proud of them. and we haven't yet been able to back up the truck. Um, their inflection has been extraordinary. I think like a lot of companies post this January February magical time when the models took a leap forward, all of a sudden their solution became wildly more compelling and and the uptake is is showing it.
41:14I'm going to push you, but is that really a generational company? Like, no offense. Yeah, it's fascinating. But no, no, but like fireworks is I think cognition or factory could be like like and again I mean it with zero disrespect to feel good. It can be a phenomenal business a 10 20 billion business but to be in the late growth as Excel calls it like the leaders fund for Excel. Is this really the generational?
41:42Well, it depends on on your view of the of uh what how where you would define generational. If generational now is you got to get to a hundred billion dollar market cap, then then yeah, I agree with you. It's probably not that um and and some of those others um certainly can be. But I think it's an extraordinary business and and that's one I wish I had backed up the truck on more.
42:03And if the price is right, then to the point that we said earlier, the multiple on invested cash can actually be the same. So I totally get you there. That's f. Do you have separate teams for early to late growth?
42:15No, same same group. Uh we've got four great GPS, you know, an amazing team of uh VPs and associates that are going after this thing. We've been working on it. Man, I'll tell you, I Harry, I am so fired up about our growth team uh and and the the practice we have built over the last few years. I'd put our growth portfolio up against any growth team in the world. I really do. I think we're going to have the one of the best um portfolios in in all of growth, in all of venture capital. I spoke to many people on your team beforehand and they
42:45said the the real focus you have on culture and I thought oh gosh how boring. Um come on man it's the most important topic.
42:56Oh for every CEO is like I want to talk about culture and then you speak to you know their team and it's different. Um and you're you know it's just like every marketing team is like talk about culture talk about culture. Um, I I did hear something though that I would like to ask. Talia told me to ask you about teammates and friends beat colleagues and co-workers every day. Every day.
43:23Twice on Sunday. That's right, man. I I have used that line repeatedly for a decade now. Um, and I How does that impact how you build a venture firm today, then? Well, look, I I um first I'll explain the genesis of the of the of the line and then and then I'll talk about why I think it's so important even even in in firm building.
43:43Um as much as it was it came from when I was leading uh and serving at Senrid and and I have just always believed like building businesses the hardest thing to do is to align masses of humans, so many people to work in a coordinated and orchestrated way towards a singular goal. That is really effing hard to do, man. And every every CEO listening is like, "Yep, they they hear that. They know that. That is the hard bit." And um and I have found it was a strategic
44:13competitive advantage if your team, if your humans actually liked each other, if they actually cared about each other and they thought of each other as teammates and not colleagues. Teammates, and the reason, Harry, is that teammates work harder for each other. They're not working for themselves. They're working for their teammates and they're working for their team. And you never want to effing let down your teammates.
44:38Okay, I get you. I obviously agree. You can't disagree. But then how do I teach me? How do I then um put that into practice to turn co-workers and colleagues into teammates? What can be done?
44:55I'm going to start with the very the the most important basics. You have to be aligned on culture and values. Like how we do our work has to be super clear and um and everybody aligns up to it.
45:06There's no changing of the standard. You can't have the [ __ ] that's a great performer that doesn't abide by the rules. If you say or whatever it is, whatever your culture and values are, they you have to get everybody working in the same way. You got to protect that and everybody has to be empowered on the team to be like, "Nope, I'm going to call that out if you are deviating from our culture and values." So culture matters I think a good value is something that could be argued for for or against. Um what what what is the
45:34culture? No the value isolated from the organization. Sure anybody could agree or disagree but you have to have a set of them that you're like this is our way this is the you know this was the srid way of doing things. We had our four H's. Happy, hungry, humble, and honest. Four H's.
45:51Happy, hungry, humble, honest. And and those were our four. And everything we did had to reinforce those four. If you deviated. And so you can't argue that you shouldn't be happy. You shouldn't be hungry. We we want unhappy, unambitious liars.
46:09I'll push back. I'll push back. Give me here's the example. Um I always said that and I loved Senrid, our culture. I thought it was amazing. I think our teammates, if you could go track down any gritter out there and say, "Hey, did you enjoy working at Sang Grid, was it a special team?" I am I I know to my bone that a hundred out of a hundred of them will say yes, it was. But um the the and the reason for that though is like take the humble age our but it was it would have been seventh hell as a place to work for a certain group of humans,
46:38right? Like our humble age was we not I. It was about you know we would ask people in interviews you know Harry tell me about a professional accomplishment of which you are most proud and then we would sit back and do a pronoun count.
46:50How often does Harry say we? How often does Harry say I? I want the people that say we. Now that was just that was our value. That was Sen's value. That doesn't mean it's the right value to your point. You could argue either side of that. I don't care. But for our company, our team, the way we work together is this way. And if you're not that way, that's fine. It's a big labor market. Go find another place to work.
47:11That's great. No harm, no foul. But but man, like it matters that the people you bring in want to work together in a certain way. And that's how you build a team and not colleagues and co-workers. And by the way, so that's number one. But number two, I I get to number two.
47:27Number two, which is also equally important um to get teammates and not just colleagues, is you go spend time together not doing work. I know this sounds so crazy. Like when I was leading Synrid, we took we flew the entire company every January down to Mexico for an annual kickoff. The whole effing company, not like a sales team, you know, uh uh president's club. I mean, the whole company. And we'd lock them in a room for a day and we would get lined
47:55up on here's the vision, here's the mission, this is why we're doing what we're doing, here are the goals for the year, blah blah blah. We and then they would have the whole second day was go find somebody from another office and go kayaking together, go mountain biking together, go sit by the pool and have a drink together. I don't care what you do, just do it together. Cuz you and the reason this matters, Harry, is that for all the CEOs listening out there, they will understand what I say this. [ __ ] goes wrong when you're building businesses, it's hard. And when you have
48:24a group of colleagues and co-workers, you know what? You know what they do first? When [ __ ] goes wrong? They either go like this and for those listening I'm pointing my fingers as if you're pointing at each other, right? They they it's blame placing sales isn't responding to the leads fast enough.
48:40Marketing isn't generating enough pipe for me, right? When things aren't going well, you they point fingers or worse, they just head for the doors cuz they're just like, well, I go to the next company because I'm just a colleague.
48:51This is just a job. But a teammate, teammates and friends in hard moments when you're building a business, and believe me, there are many those that group of people in a team are going to come together. They don't they don't start pointing fingers. They come together and they go across and be like, "Harry, dude, I spent time with you mountain biking or kayaking or sitting by the pool having a beverage. You're a good dude. We got to figure this out for our team." That's how you solve problems. And when times are hard, and I'm just telling you, man, teammates and
49:19friends will beat colleagues and co-workers every day and twice on Sunday.
49:23No, I totally get that. I do. I I I completely agree with that headline. I think I'm very trained and strongly believed in the values being differentiated and arguable. So like we believe that hard work, like hardest of work leads to better results. I don't buy the rest days.
49:44Like I don't buy rest days in the gym. You train a different body part. You do cardio, not weights. Phelps won because he No, but a lot of people don't agree with that. I'm chastised for it in Europe. I'm the spawn of Satan. No, we should. Like seriously, dude. Like I It's not popular. Like I will get booed on stage by labor conferences.
50:05No kidding. Well, listen. I'll tell you this, man. I couldn't agree with you more. I think um you know I'm the son of two immigrants. Work ethic is everything. That hungry H like my line was always I want to work with people who are going to run through effing walls to be successful who will not relent. Like we like we'd quote the Eminem song like you know success is you know uh what is it? It's um uh success is my my mo is my only mother effing
50:33option. failure is not like that is I want people like that to work with.
50:39Number number two for us, feelings are expensive in investment committees. Sam, if me and you are in an investment committee, I want to say you're an idiot for thinking that we should pay that price for X company and why is that? I don't want to have to tread around it like Samir, thank you for bringing this. I appreciate the time you spent with the entrepreneur, but I think we should consider I'm sorry we're both big enough.
51:01So yeah, sure. I mean, you know, and again that so that like that can be your that can be great for your team and culture and people that are going to opt into that are going to be awesome together and they're going to appreciate the directness. If I would say, you know, the intellectual honesty in the IC is actually what matters most. My point is actually it's great that you can debate cuz I'm not right. It's just our way. But what I don't understand is the values like Zoom which is like I think
51:31happiness like no no one's advocating for unhappiness.
51:35Yeah. Yeah. Yeah. No, I I hear that. I hear that. I'll just say on the happiness one by the way at at at Sidrid our happiness um I I did find when I um at Sangid I had to write down what do we mean by each of these uh each of these four H's. And the happy for me um was of course you want employees to be happy but that's not what I meant by the h like the happy age at Sangid was um I want people who are going to see the world and our business as half full the glass is half full not half empty and there were just people who are going to
52:05be negative man who are going to be who are going to be like you know uh Eeyore and Winnie the Pooh are just going to be downers I'm like no man I I want people who are optimists who are fired up to go tackle problems and that's what I meant by happy Not like I'm, you know, joyful.
52:20Uh, that's great, too. I hope you're joyful. But I want you to be a positively disposed person who when things go go bad or are hard, you're not going to go negative and bring the team down with you.
52:32Totally agree with that. Can I ask if if we go back to venture, we're seeing some of the most incredible value accumulation from these businesses. We've mentioned Lorra, we've mentioned Fireworks, I think you're in foul as well. Um, yeah.
52:49How do you think about when's the right time to sell and with IPOs being continuously pushed, maybe there's many more stripes? How do you think about liquidity events?
53:02No, look, I I I joke about being new to the business four and a half years into venture, but but I do know that DPI matters. I'm not that new. I know that liquidity matters. DPI matters. Our LPs are not in the business of handing us the money for perpetuity. So, we got to get it back to them in multiples. And uh and I get that. Um right now, I think because we're still so early in this AI wave, it's not a it's not a principal concern, but I would say because I think these businesses are going to keep compounding and keep compounding at
53:31scale. Um but um but I do think that we should look for opportunities um just just practically just being, you know, um uh prudent riskaware business people. you should take some chips off the table along the journey to make sure that you're getting um some some DPI and and and uh and locking in gains for for your LPS and your funds. You should. It's crazy not to.
53:58Do you find that you're a this is a backhanded compliment? Do you find that you're able to given the brand of Bassima is often a very premium brand in around?
54:08Yeah. Yeah. No, I I appreciate that and I do think we have a great a great brand. Um, I think it's I think that when you're when we're looking for a little bit of liquidity to de, you know, to take some chips off the table and bring DPI back, it tends to be at very late stages of the of the journey and and most people see it for what it is, which is, yeah, they've they've got an enormous position here. they're going to make lots and lots of money and the whole thing is going to continue to compound. But to take a little bit off
54:37the table to to get back to LPs, I I just find people are more matterof fact about that now. And this is back to the whole professionalization of the asset class. What used to feel like a personal decision? Um, and like do you not believe in me anymore? Do you don't believe in my business anymore? people.
54:54I I just think that that uh at the scale of the businesses that that we're we're building, the size of the checks that we are now writing, at the valuations that we're writing them, I think people get it. I think I think I do. I think CEOs are very I've been on the other side like they're they're sophisticated business people. They understand they understand the math.
55:12I totally agree with you there. And I think people oscillate too much on the oh, they'd be so upset if you sold. I think founders are actually very rational and and smart about it.
55:20Super rational. Look, I mean, you tell me how what percentage of the founders that when you that you're working with that get to crazy late stage don't take any uh in secondary themselves as the rounds of financing go through. Most of mine are and and they're doing the right thing for their families, right? And I tell them to I'm like, "Shoot, you should you should probably sell a little bit here, bud, to make sure that you you know you're financially secure for your family." And I think that's great. No problem.
55:46I think it makes better founders. I completely agree with you. you think with a much longer term and then they're willing to swing for the fences, right?
55:53Completely agree with you. Can I ask, do you think we see the number of IPOs drastically reduce as Stripe shows that public markets can be harder than private markets if done well? How do you think about that?
56:08I will say a few comments here. One, I believe that it is a permanent structural shift that companies will stay private longer. the the asset class of private venture capital is just that much bigger. There are that many more dollars in the market and that many more firms that many it's just so that will h that will they will stay private longer.
56:30Um and I think that is a given and I think you'll see crossovers that are spending more time here. I think LPs are allocating more to the asset class because they get that they can't reap the rewards of this generational boom if they're waiting for them in the public markets. most of that uh runup will have already happened in the private markets.
56:50So I so I absolutely believe that is true. Um I also believe that we will see an unlock in the IPO markets next year, later next year and in 2028. I think a lot of companies will go public. Um and and I just think we've had this you know the windows been shut for so long. What can I ask you why will that unlock happen? What what will cause it? I believe in, you know, I'm an economist by training, man. And so supply and demand is a thing. It's just a thing.
57:20And so what's going to happen in my humble opinion is you'll see a bunch of great businesses go public um that uh will have a lot of success in the market, but there will be an obvious appetite from investors in the public markets to get pure play AI exposure.
57:38And they don't want it from just a few companies. they're going to want it in dozens or hundreds of companies that are pure play AI exposed and and I just think the supply and demand the demand will be so incredible that they will be willing to pay prices and then supply and demand works prices move and I think we'll see um a lot of companies that that the window will be open a lot of people will come out I'll say one last point on the IPO thing which is having done it myself um I believe it makes for
58:07a better company deeply believe like you you run a tighter ship when you are a public company. I always used to say at Sid I was I said I I we need to be IPO worthy before when we were building up to our IPO. I was like we got to be IPO worthy. What does that mean? I mean it is a high bar to be to withstand the scrutiny of the public eye. That is hard to like quarter in, quarter out, predictably deliver on what you say you will do. Um is hard, but you build a
58:37really rigorous and operationally disciplined machine and um and I hope a lot of companies um will will take take advantage of that. I do.
58:47Do you do you still buy that? And what I mean by that is like you know when you look at a lot of Canva release their numbers and when they release their numbers or the great numbers you have similar kind of reactions like the expectations have just shifted and these companies have those expectations anyway and I would argue that actually Stripe is able to do a lot of things because of their private nature that Aden is not able to do which make them structurally advantaged. I think you are forced you
59:16are enabled to be better because you're private rather than the discipline.
59:21Yeah, I look I I hear that. I think there's there are pros and cons to anything. I think um you're right. You do you have latitude to make, you know, partic like big product investments. You can go, you know, deep in the um in the red for periods of time. If you think you need a shift, I got to take a big hit, whatever. Like um but on the flip side, there are things that you can do as a public company. Like I have a currency. I can go do M&A. I can There are lots of there. There are pros and cons on both sides.
59:47I get you. But Stripe doing M&A for Open Roo for $8 billion. I mean, they they wanted to buy obviously um PayPal for $55 million. Like you have that now. You have liquidity for employees and investors. I'm just wondering actually, are we seeing really the winnowing of that IPO attractiveness?
1:00:07Yeah, maybe. Maybe. I I I don't know. I just when I talk to our companies uh that we're invested in, I think a lot of people are still talking about Yeah, they still it is. And by the way, in certain in certain markets, um it's still it's, you know, it's a badge of credibility, right? Like those companies um their customers care. They're like, "Okay, these guys are legit. They're real. They're at scale. They're public."
1:00:29Like, you know, ironically, for things like for things like Aura, I think it also totally makes sense, a consumer brand, one where retail wants to be part of it. Um, do do you think retail should be a much larger part of the LP base of venture funds if we have so much more gains now in private markets?
1:00:49Do you think retail should play a large part in the LP basis of Harry? I I think it's hard to argue in terms of the you know what we would call kind of the democratization of uh access to that. I think it's hard to argue against. I do. Um, you know, do you could argue against it? Sorry, I'm in a really I I'm going for this because like dude, you honestly Bessemer is a very overfunded product. There's so many people that want access to it.
1:01:16If you just had a random people's fund, I don't know if it would beat out the hospitals and pension funds and so then you have adverse selection and then retail just goes into [ __ ] funds would be an argument. Uh by the way I uh retail should only go into back to our earlier part of the conversation either giant global platforms with brand and leverage and and power or super super specialized folks and you know you're taking risk. Um, and you know, and and
1:01:44that's that that and and if that doesn't feel comfortable for the retail investor, they shouldn't play. Um, because it is a high-risisk game and and uh uh and you know, there's a lot of argument in this day, especially when the public markets have been ripping like they are. If you're a retail investor, just put it in the public market and you know, don't take the liquidity hit and just let it compound in the public markets. But but yeah, obviously I believe when I look at our portfolio of companies, I'm like these things are going to continue to grow and compound and deliver gains that are not
1:02:13accessible in the public markets. And so that that's where I would go.
1:02:17Can you paint and one of my favorite companies period is fireworks. I think Lynn is generational. Um can you paint the bullcase for how this is a $250 billion business?
1:02:28Look, I think um and by the way, I couldn't agree more. Uh Lynn is extraordinary and uh and so is George who that just joined her team as president. On the first call with me, I get on, I've never met him before. Okay, first call Lynn gives me to him and and this is before. It's like to determine whether I'll be able to invest. I go, George, I've heard so much from Mark and I'm trying to be charming. He goes, yeah, yeah, cool. So tell me, how are you going to increase the value of this
1:02:59That is my man. That is my man George.
1:03:02I might get right to it.
1:03:05No talk about the weather. Sure, George.
1:03:07Let's go straight into it.
1:03:10I interrupted. You You were saying we worked together at Twilio. He was deeply involved in the diligence to to uh when we were doing the Twilio Senate acquisition, we were in the same exact leadership team room with Jeff Lawson, who's extraordinary, and a bunch of great people. and uh you know in the in that in those trenches together for 18 months and I'll just tell you I've been in doing this for 31 years he is absolutely one of the very best um software executives uh in the industry
1:03:38period full stop and so when you pair brilliant h so first off George he's he's an exceptional thinker he's super strategic he's very analytical he has been doing this for decades and he knows how to run he knows how to build a pl go to market engine Harry like very few people in technology uh in the market today know how to build and so when his his joining Lynn um and fireworks
1:04:07uh I'll just say preceded our investment by about a month or two because George joined and I'm like dude these guys are going to crush because you have the brilliance of Lynn strategic thinker deep technologist unbelievable techn technical team for meta and now George building the go to market engine. I I I mean that that is the pitch right there.
1:04:28You asked me for the bullcase. You take that those two together at the top of that company um leading they're going to build an enormous business. So I I'll leave it there. I will say though in terms of the TAM and the market and what they're doing. Um I think they're I think their general pitch of um enterprises are not going to want to rent intelligence from somebody else. They're going to want to own their own.
1:04:49I just think it's like the simplest um uh and and and really compelling tagline for any enterprise CIO buyer and and personally I think there'll be a healthy healthy amount of both. But but man, they're going to I I I can't it's it's hard to imagine um a business saying, "Yeah, no, I I I don't want to own any of my intelligence." Every business is going to want to own some of their intelligence for sure.
1:05:10Do you buy the sovereign model argument?
1:05:13I do. We uh we're invested in two um we're invested in Saram in India and we are invested in or investing uh in Mistral right now.
1:05:24And so you think that hey countries in kind of geopolitical regions will for obvious geopolitical concerns need to have access to their own is is that it and to what extent then do we just go down the stack of we need our own energy providing we need our own Yeah. Yeah. Yeah. uh I'll say in in certain um in certain markets and for certain use cases right so like and they're different like in India I think you know one of the things that makes India such a ripe uh opportunity for
1:05:54intelligence local to their market is the Indic languages there are so many different languages um and and training the models for their on on their own content and so and that's multimodal it's it's voice it's text it's all the things there's there's a very particular argument there uh and not to mention of course they have some of the best technologists in in in uh it at scale in India who can work on the problem um in in the case of of a Mstral look at the
1:06:23end of the day like you know if you're in trying to determine um my whatever my military strategy for fill in the blank there are certain use cases where if it's a government use case or a regulated industry or whatever that having it be a sovereign model is probably going to feel more comfortable to that buyer. Uh, and again, when you got a market as big as intelligence, it doesn't have to be all the buyers. Some of the buyers decide that they want to use that sovereign model for some of the
1:06:52use cases in some of the industries, and you're going to build a very large business. When you're writing a check, how does the upside requirement change depending on the vehicle that it's in?
1:07:03And so for us it's I'll put it very simply you know from the early fund we need to see a fund returner which means a 50x and from a you know growth fund for us we need to see a 10x doesn't need to be a fun but a 10 how does that upside requirement change for you and look what you said actually is is very consistent with how we think about it uh also like that to get to um you know we want we want 5x plus funds right like um
1:07:32that's that's just really hard to do at any stage. Um, but the math only work, you can only get to that if at the later stage you're putting big dollars behind businesses, some of which may be lower than that, but some of which are going to be way higher than that. And in the early stage, man, you you know, you know, by definition, not your hit rate is going to be so much lower because they are earlier stage. There's just less developed businesses. um you're
1:08:02going to need some 50x's to to account for and pull up all the all the ones that don't work out. Um obviously it's it's derisked when you get to the growth stage a little a lot more and so so the the upper bound doesn't need to be quite that high. Um you don't need 50x's in growth although some of ours I think may may approach that. Um but but it's but that's not that's not the same bar uh in terms of the mo. Um I think the blended gets to the same place. Do you think you can still do a 5x given the fund sizes
1:08:31being as large as they are?
1:08:33100%. No hesitation 100%. Especially in this era because of what is happening in the world right now where I mean you see build when you see businesses scaling at the rates we are scaling them Harry the the value creation and so it's not a hypothetical anymore. I sounded like a crazy person 3 years ago when I would say this stuff but now I don't now everybody just looks at me like yeah that's true. I can I I can think of 10 examples. Um and so like there's no
1:09:02debating um that we're seeing value creation in this era unlike anything we have ever seen. And so absolutely I believe we can generate those kinds of returns.
1:09:11You can only invest in one of those funds early growth or late growth.
1:09:19Which one do you invest in?
1:09:20If I could only if I can only pick one. Yeah. I mean per me personally obviously I'm focused on the growth stage. Um, and and I really do like the the opportunities.
1:09:29I think we'll do better there. I think outcome scenarios are bigger than they've been in a long time, which means the upside and the multiple invested cash is much bigger. Like I think we both did fireworks at like a 15 price. I think there's a 20x in there for us.
1:09:44I agree 100%. And and so when you can get um early venture return moist on latestage D-risk companies, man, I'm with you. Uh that is that is a great spot. I will say that um you know we have a world-class early stage franchise that's been doing preede seed early you know series A's for a very very long time. Um if you can buy 10 and 20% ownership early for small checks man that's fantastic too. I would love I
1:10:13would I you know we're going to continue to keep doing that all day long but um it's definitely and that's why I love our model as a giant platform right because we're we're the synergy of that practice with our early growth practice with our late practice like it is really really something I I want to do a quick fire where I pepper you with questions and you give me okay who's the best picker in all of Bassimer the picker I think we got a bunch um I think Byron
1:10:41Jeremy uh Adam Fischer in Israel and and David Callen out here has been doing it for three decades. But if I had to pick one, I will say Byron Deer mostly because when we were going public the morning of the IPO, we're in the New York Stock Exchange. Um we brought out every Senritter who had been at the company for more than four or five years. So we had this room full of Sangrid employees. The president of the New York Stock Exchange comes out to welcome and greet us before the bell ringing ceremony. And he says, you know, I just want to welcome all of you
1:11:09Sangrid employees that are here. you should be so proud. Sengid management, so great to to have you all. Um, esteemed board members, thanks for coming and being part of this special moment. Byron, great to see you again.
1:11:21And he just pauses. He's like, Byron, how many times have I seen you here in the last This is by the mind you this is a decade ago. And uh, and Byron sheepishly, cuz he's a very humble guy, says, you know, and I can't remember the number at the time. He flashed up like I don't know, like six. and uh and and you know he just laughed like you know that he had been there for like multiple of these IPOs in the in the recent time and then I was sitting right in front of Byron and I and I just started to count in my head and I could come up with more than what more than the six. I'm like, "No, no, you've done more than six." And
1:11:51I turned back and I was like, "No, it's more than that." And he said, "Six here." NASDAQ was another another big number. He has had so many from early stage all the way through IPO. I mean, it's hard it's hard not to say Byron Deer. Guy's amazing.
1:12:07Okay, Byron is the picker. Who is the winner? And what I mean by that is when you're like, "Oh, Squire around this, founders around this, best benchmark."
1:12:18Who is the who is the one person who closes founders better than anyone else?
1:12:23Oh, that's a good one, too. So, can I revise my answer then? Knowing both of those two, I would go with David Cowan as the picker cuz he finds stuff that everybody thinks is crazy like Rocket Lab that then becomes, you know, an enormous business and nobody knows what he's doing. um you know and then and but but when it comes to closing uh is Byron Deer every time for sure 100%. That guy is he is he is a force of nature. He's charming. He's funny. He's smart as all
1:12:52get out. His experience is ridiculous. Um he knows how to have a good time. He'll host people. Uh whether it's at a 49ers football game or up uh skiing at his house in Montana. I mean the guy is as uh he's an amazing amazing closer.
1:13:07What company is Bassiman not in that universally the firm ru and wishes it was in?
1:13:13Uh so many I would say stripe. I mean think about like we were uh the developer API venture capital firm. We were you know led the seed and and I think in B and Twilio led the series B in and uh Sen Grid. We had Oz Zero that David Cowan led. I mean we were the developer API company and we weren't in Stripe. That hurts. Um, that's probably I'll I'll I'll use that one.
1:13:38You can add one person to the venture partnership that is not there currently.
1:13:44It's a dream ad. It's not like a realist, but who would that be?
1:13:48If I could convince Ravi Matree to come join us, I would love Ravi over here.
1:13:52He's from Lightseed. Ravi is incredible deep thinker, goes deep on the technology and and the markets. uh you know, you look at some of the investments that that he has led and made uh not the least of which was a billion dollar check into Anthropic in the in the $60 billion round. That guy's he's just he's really good and he's willing he's not just really good, but he's willing to take these giant risks that seem almost borderline insane. Um
1:14:21and uh I I I have deep mad respect for both.
1:14:24Billion dollar Jack, that is some serious bulls. You're just like messing around. The finance director like typing those zeros must just be like, "Wow, this is wow."
1:14:38That's that's that's a lot lot of numbers.
1:14:40What have you changed your mind on in the last 12 months?
1:14:43Uh in the last 12 um I would say just my deep appreciation for how big the open token economy is going to be. I didn't I just didn't see it 12 months ago. I didn't appreciate it. Uh it's a big part of the reason we're we're um investing as much as we are behind um fall and fireworks both fall on the gen media side uh uh on the infrastructure side there uh and they're going up and down the stack. They're amazing amazing business, amazing team. Uh and and Fireworks obviously we talked a lot
1:15:12about those two. Um I I just didn't appreciate how big that market was going to be 12 months ago.
1:15:17Final one for you. What are you most genuinely excited about moving forwards?
1:15:22I'll say two. One is um I'm wildly fired up about all things um robotics and embodied AI. Like we invested nearly $200 million into Whimo and I just think that you know autonomy uh and and how what that changes and how that changes the way we work and live I think is awesome.
1:15:41Is that humanoids or is that not humanoids?
1:15:44I think it can be can be uh and and certainly an area that we've been looking at. Um, and I think we're probably in the equivalent in embodied robotics in that sense. I think we're probably at circa 2021 uh relative to the generative AI era.
1:16:00So, I think it's we're still we've got a a couple few years to go, but it's it's on one of these curves, man. It's going to go it's it's happening fast. So, I think we will get there faster than than most people think. And it's an area of deep interest for the you and any of the robotic data companies. We saw Mecca just get done by Sequoia yesterday. You've got MicroAGI in Europe. Are you in them? And how do you see the data market for robotics? We are not yet that I know of. Um or that I can think of offh hand. Um but I know
1:16:29that we have spent a lot of time around robotics and so I'm sure there my early stage partners listening going Samir, come on man. We met with like 20 of these. We're going to make this pick. I I don't actually know offhand. Um but but I know that that I think there's a lot of excitement in the firm around that area. Um, I'm personally looking at the uh autonomy. You know, we did Whimo, but now you're like, "Okay, what about autonomy in construction? What about autonomy in mining? What about autonomy in agriculture?" You know, there's tons of areas.
1:16:58I This is a good quick find. You do Whimmer at 115 and Uber has a market cap of 120 125.
1:17:06Why am I a [ __ ] Because you're looking at the the ride hailing market as the only market.
1:17:15That's not the only market. Harry, think I I have a 16-year-old son that I just bought a car for. Uh if that thing if I could have bought that car with an option to have a Whimo driver on it and pay them a subscription every single month for that car on that car or any car that we bought as a family, it'd be a default purchase. Of course, I would do it just like Tesla and Elon's got it for his FSD on his cars. I think Whimo has the opportunity to do that for every
1:17:43other OEM on the planet. Are they doing that today? That's not it's not their near-term focus. They're focused on ride hailing. They're crushing it. They're rolling out both nationally and globally to every city, and they're going to build an enormous business on that side.
1:17:56they're going to unlock use cases in ride hailing um that that didn't exist before for folks like your mom or for my teenage daughter going to coming back from you know whatever like there's so many more things that will be a very big business but when you take that same technology and capability and apply it to personal car ownership and then apply it to trucking and then apply it to logistics Whimo is going to be an extraordinary I think a trillion dollar business easy
1:18:23okay good one is What was the second one?
1:18:29It it kind of follows your your lead which is therapeutics using AI to as they say drug the undruggable like to figure out cures uh is by far the greatest I think um potential and impact um that we'll see out of this technology and and I believe I mean you're just seeing the pace of things we're going to automate you know the wet labs are going to become automatable and you put an AI brain that
1:18:57can see and reason over mass sums of data sets and uh in ways that a single human simply can't. And and I think we're going to have a pace of discovery in biology and therapeutics and drug development over the next decade that we have that would I really do believe what Daario says on that and in machines of love and grace. I think we're going to see in the next decade what would have taken us half a century. I really believe that.
1:19:23Dude, I I think you've been so patient with me today. I mean, you have been I mean, you're like, I came for a nice chat, dude. And you're just like, I mean, I love this, Harry. You're you always do this. You You're so freaking entertaining and you're smart and you ask great questions. So,
