20VC: Leading Anthropic's First Ever Round | Will Open Source Threaten Anthropic's Business | Do Margins Matter in a World of AI | Why Triple, Triple, Double, Double is Not Good Enough Today | Why Series A is Hard Today with Matt Murphy @ Menlo

Matt Murphy is a Partner at Menlo Ventures, who just raised $3 billion in fresh capital, its largest pool ever. Matt's portfolio includes Anthropic, Lovable, Legora, OpenRouter, Chai Discovery, Axiom, OpenEvidence and more. AGENDA: 00:00 Why Menlo Broke All Its Investing Rules to Back Anthropic 09:00 Why Ownership Matters Less in an Outlier-Driven Venture Market 13:00 Do We Have an SPV Problem in Venture Today? 20:00 Do Margins Still Matter in AI? 23:00 Why Open Source Won't Derail Anthropic's Growth 26:00 Does Every Model Provider Need to Build Its Own Chips? 29:00 Why Anthropic Is Not a Threat to Legora 32:00 Why Series A Is the Hardest Place to Invest Today 36:00 Why Signalling Is B. S. and Every Fund Is Going Full Stack 42:00 Why Building a Company in Europe Is Hard Mode 47:00 Why Triple-Triple-Double-Double Is No Longer Venture-Scale Growth

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  I think the foundation models, let's say specifically Anthropic, have such special models, performant, intelligent models. It's going to be hard for somebody to just kind of say, I've used open source with my data. It's going to be functional and positive for some amount of what you're doing, but I just don't think it can be powerful enough to really, you know, displace it.

• 0:18Harry Stebbings?

  This is 20 VC with me, Harry Stebbings. Now, joining me in the hot seat today, we have someone I've known for 10 years, Matt Murphy, partner at Menlo. He's the guy that led the deal into Anthropic. I mean, Jesus, if anyone's got brownie points inside a firm for leading a deal, it's the dude that led Anthropic. Come on. He can do anything for years and he's got a hall pass. But then he follows it up with, check this out, investing in Loveable and then investing in Lagora? I mean, this man is just hitting banger after banger. Matt is on a tear right now, almost more than any other venture investor. And so it was an incredible opportunity to sit down with Matt. He's a dear friend, and this is honestly two friends, shooting the shit, if I'm allowed to

• 1:02Harry Stebbings?

  say that, and having a great discussion. But before we dive into the show today, founders face a different set of challenges at every stage of growth. For Sid Shait, co-founder and CEO of Dematrix, JP Morgan delivered the guidance and expertise to help navigate what came next. He credits JP Morgan's high-touch approach with supporting Dematrix as it grew and expanded internationally. Whether you're in the early days or expanding into new markets, JP Morgan helps startups navigate complexity with real confidence, offering personalized guidance and deep sector expertise. Find out how JP Morgan helps founders at jpmorgan.com/growwithoutlimits. JP Morgan is

• 1:47Harry Stebbings?

  the bank of the innovation economy. While JP Morgan supports growth, Corgi protects it. My word, what an arresting first line. Get your ass covered with Corgi Insurance, and I'll tell you why. If you're running a business right now, you already know this pain all too well. Getting insurance, it's really slow, it's confusing, and my word, it's full of paperwork. Well, that's exactly why Corgi is here to change the game. Corgi is the first and only insurance carrier, designed specifically for tech companies, allowing you to get covered in minutes instead of days. Corgi provides essential coverages for all growth stages, such as DNO, EDO liability, cyber, commercial, general liability, and more. Get your ass covered. I love the way we say ass

• 2:30Harry Stebbings?

  with Corgi Insurance alongside thousands of other startups at corgi.com/20vc today. That's corgi.com/20vc. You won't regret it. While Corgi covers risk, Flex gives you room to move. Business owners run their whole financial life on Flex. One platform from business revenue to their personal spend. Float every purchase for 60 days. Tap capital that grows with your revenue and pay vendors in 170 countries across 32 currencies. Plus, the whole back office, bills, expenses, accounting, all in one place. So you spend less time reconciling and more time growing.

• 3:12Harry Stebbings?

  That's why thousands of owners use Flex, named one of Fast Company's most innovative companies of 2026. Visit flex.on, that's F L E X dot O N E, and use the code 20VC. You have now arrived at your destination. Matt, I cannot believe it, dude. It's been like six or seven years since we did our last show, which worries me because I was like 23. I just look back now and I go, Harry, you knew nothing, my dear friend. And Matt was so wise and is so wise. But thank you for joining me once again. It's so good to see you, man.

• 3:49Speaker 00

  Like, it's great to be here. It's taken me seven years to earn my way back onto the show now that you've become so famous.

• 3:55Harry Stebbings?

  I mean, that's super kind of you, one, but hell have you earned your way back. Like, the last few years has just been ripper. And I wanted to start with a relatively obvious one, which is Anthropic. I think it's the cornerstone of Menlo and of the last few years for you investing. Can you actually just tell me, how did it come to be? How did you get introduced? Was it obvious? How did the investment meetings go? Just, just take me to it.

• 4:22Speaker 00

  Yeah, well, he'll be mad if I don't give him a call out, but Angenee Mida was the one who introduced me. So Ange worked for me, with me at Kleiner Perkins when I was there as a young kind of associate. But he has, he was so spiky at the time. So he's always kind of just been in the flow. We were talking about AI and he said, hey, Matt, you got to meet Dario and Tom. This is the one company. I said, let's do it. Got on the phone with Dario and Tom the next day. And I, you know, I personally was like, all right, I'm in. And I'll give you the kind of like the broader story, but there was part of it that was really easy and part of it that was hard, as you can imagine. You know, at the time, you have like a $600 million venture fund. You kind of tried to average 15 million into a company. And along comes a company that's like pre-revenue and wants

• 5:05Speaker 00

  a $4 billion plus valuation. Too early for our growth vehicle. Where does it kind of fit? But, you know, the easy part was, okay, OpenAI is absolutely ripping with ChatGPT taking off. But Dario was the creator of that within OpenAI, as you know. The reason why he left is because basically he's like, OpenAI is doing too many things. This is the one. This is the one big opportunity. So you had that kind of like unique insight, knowledge, conviction around this opportunity. You meet him and he's just like this amazing technical thinker, researcher. A lot of the best researchers want to work for someone like that because it, it kind of mirrors them. It's like, that's the leader they gravitate to. And then, you know, another easy part of it was, you know, they had basically, it was pre-revenue, pre-launch of the model, but all the benchmarks,

• 5:50Speaker 00

  you could see that they were kind of better or at the same level of performance as ChatGPT at the time. And they'd spent like, I don't know, a 50th of the capital. So these compute multipliers, you're like, all right, there's something special under the hood technically. And my partner, Tim Tully, who was the CFO of Splunk, great, thankfully, you know, part of the team we've built out here, I had Tim to kind of dive in with Tom. All right. So that's all kind of like, look, this is a massive market. This, these markets are never dominated by one player. There's going to be an alternative. Who's better positioned to be the number two player than Anthropic? The hard part was what I mentioned, like, you know, wait, why are we doing this? It's like a $4 billion valuation, a venture fund. That's not what we're going to, what we should be doing. What are LPs going to say?

• 6:32Harry Stebbings?

  Did Dario set the price? Did he come into meetings being like, hey, the round is $4 billion?

• 6:36Speaker 00

  I don't remember exactly that part of it. But basically, you know, if there was a mistake, and it's hard to look at this through the lens of having made any mistake, it's basically like, hey, look, the opportunity is there for you to lead. But I'm like, well, you know, we can't really do this out of the growth vehicle. In the venture fund, we can only do so much. So we said, hey, we want, we're all in. We want to be part of the round. And I'm very grateful that I have a set of partners who were just like, look, let's just do this. Let's just get into this. This is one of the biggest waves. We pivoted the firm to be all in AI. Let's jump on this thing and see what happens. And that led to everything from there. But if I had a partnership that was more rigid around, hey, that doesn't fit, then this never would have happened. And we would have never gotten to the point where we led the next round and all of that. But anyway, so that's kind of the quick story of it. Very fortuitous.

• 7:20Harry Stebbings?

  How big a check did you write?

• 7:22Speaker 00

  The first check was a little over 10. So that was kind of the starter check because the average, like I said, you try to kind of, in a venture fund, kind of have this narrow render of what you invest. But then the next round is when we did the 500-plus SPV.

• 7:35Harry Stebbings?

  Let's just go back to that 10. 10 at 4. I would be sitting in your partnership going, well, let's just like, outcome scenario plan this. If it's a $40 billion company or an $80 billion company, as you could do 80, it's a 20x. With dilution, traditional says 50%, it's a 10x. We're going to turn the 10 into 100. Wow. Thanks for returning 12% of the fund, Matt. How did you escape that thinking and get to a yes?

• 8:05Speaker 00

  Well, first of all, I'm glad you weren't in my partners meeting. But seriously, I mean, there, there was that in the room. And at the same time, I had a, you know, a couple other partners. And this is what you want. You want to have partners that debate things, you listen to. But it's like, look, there's never going to be a perfect entry point into this market. If we wanted to be in this market, this was the way in. If we said, hey, look, this, we're just kind of priced out. We can't be in foundation models or Neo Labs of any kind, then, okay, you, you sit on the sidelines. But we were like, we have to be in this market. We're building the firm around AI. And this is absolutely the best company. So just don't overthink it and get in. And honestly, I think that's been really a hallmark of how we've operated. I think other firms can be, and not to throw any shade at anybody because I have such great respect, but,

• 8:50Speaker 00

  you know, you kind of get into these situations where we have to own 15 or 20% ownership, or we don't do this and don't do that. And I think the new Menlo that I'm part of has shown extreme flexibility to just do what makes sense. Let's get in this great company. Because once you're in, hey, if it takes off, there's plenty of opportunity to put more capital in.

• 9:08Harry Stebbings?

  So do we think that ownership today is less relevant than it ever used to be, given outcome scenarios being so much larger than they ever used to be?

• 9:19Speaker 00

  By far. I mean, look, if you can get ownership, it's magical because if you own a lot and the company's worth a lot, that's going to be great. But A, there's a lot more capital coming in. So it's hard to even maintain that kind of ownership. But we're in an outlier business right now, right? Like, I think for a long time, I mean, you know, I've been in the business for 25 years now. You were kind of saying like, hey, great outcomes are 300 million, 500 million, a billion. So you're like, hey, you have to own 20% to get 100 million or whatever. Those are like, and I know you talk about it a lot on your, you know, show with Rory and Jason and all that. That's not how the game is being played anymore. It's, it's like, you have to be in the big outliers to drive great returns. And you're better off being in them at a very small percent than owning a large

• 10:02Speaker 00

  percent of a company that exits for 300 to 500. Those just aren't going to move the needle.

• 10:06Harry Stebbings?

  Is there a stage where price does matter for you?

• 10:09Speaker 00

  Well, you know, we announced our new fund, so we're pretty full stack. We can take big concentrated positions. Fortunately, we've got LPs who like to co-invest with us. But, you know, we don't have a 10 or $20 billion fund, nor do we aspire to have that. So there's some quantum of capital that's like, hey, that's for somebody else, the next, next round. But I don't, I don't know that it's as much of a valuation thing. I think it's more, because I would rather, you know, to be in the most amazing company. I would rather be in than not.

• 10:37Harry Stebbings?

  Before we move to SPVs, new funds, you name it, I do have to ask, in terms of like levels of dilution, with the increased outcome scenarios and increased outcome sizes, do you think we're just normalizing an entirely new level of dilution that's inherent within these companies? Or is that exclusively for the frontier model companies?

• 10:57Speaker 00

  I think it's pretty rare, as you know, to find companies these days that don't end up raising a lot of capital that way outside of the frontier companies and look anywhere in the AI stack, even the application companies. I mean, there's, there's part of it, the companies are growing faster than ever. So they want the, the capital to, you know, really be able to play offense. And there's also kind of a part of this dynamic in the market right now where there's this signaling effect that every X months or a year, you know, you raise capital, that's, you know, employees want to hear that to keep up with the labs and some of the retention, you know, you have to do more secondary. So there's just, the landscape is just very, very different than what I grew up with.

• 11:36Harry Stebbings?

  And what I grew up with, you're forgetting, I have been doing this for 11 years now, my friend. I remember the days.

• 11:41Speaker 00

  And now.

• 11:42Harry Stebbings?

  I know, it's terrifying. On the second round that you mentioned there, where you're like, okay, we really sized up. How did you think about that one? And how did that come to be?

• 11:52Speaker 00

  I mean, like, if there was a playbook that I would love to repeat, it was this. I mean, so we basically built a relationship, got into the company and said, look, we need to go all in Menlo style, you know, our recruiting team, our BD team, and just get close to the founding team, build relationships, see how we can have value. And there's a lot of examples of that that we probably don't have time to go into, but we got to know them and we got to see them operate. Let's say that we in the round closed in something like March, the model was launched in April. So you start at zero and then sometime, you know, through the year, you know, you'd see them adding 10 this month, eight the next. So the, the revenue started to build in parallel with that, you had Amazon and Google come in,

• 12:34Speaker 00

  both with the big investments as well as technical partnerships around Bedrock, Vertex, and then distribution relationships. So you're like, okay, so let's, let's take a look from when we invested to now, they've got a capital partner, a distribution partner, a technical partner, two of the biggest in the world, their alternative to OpenAI, who's kind of tied to one cloud with Azure. So it's like, hey, this is the multi-cloud provider. And then you just saw this kind of revenue drumbeat start. But the seminal event was, uh, we held our LP meeting in November and we had an Anthropic executive named Nirav. It was kind of a, a jack of all trades at a very valuable one at Anthropic Come and Present. And he blew everyone away. Like after the meeting, our LPs were like, this is crazy. Like this company is amazing. Even my partners were like, this is so amazing that we're in this company.

• 13:20Speaker 00

  It was just the description of like the power of the models and how it was impacting so many applications already, human behavior, all that. And we had had a bunch of inbound leading up to that. So we literally came out of that meeting and said, all right, we've got to do this. We've got to figure out a way to lead the round. And two weeks later, we signed a term sheet. We aggregated all the demand from our LPs and folks we knew. And, you know, the rest is kind of history.

• 13:42Harry Stebbings?

  Are we in a new venture world of SPV usage? We do them for very late stage opportunities too. How do you think about that and when to go aggressive on the SPV strategy and when it moves out of fund strategy?

• 13:54Speaker 00

  Yeah. I mean, I think it's really like what guardrails or kind of parameters have you set on your fund in terms of how much you want to put in, in a fund? So if, you know, you've got a billion dollar fund, you might say, hey, we only want a hundred million dollars max in a company. But look, we, maybe we did 50 in the first round and we want to do a hundred in the next round. So we can't put it all in the main vehicle. So let's do an SPV. So I don't think you have to do it. I think oftentimes it's valuable to be able to do it because you can play offense if you need to write more capital to win a round. And obviously it can be helpful to a company that you come with more strength. You know, I mean, there, there's a side of it where you could say like, well, look, it's kind of a extra economics at times to go outside your fund mandate

• 14:35Speaker 00

  and, and be more full stack and not let somebody else take it. But I think for the most part for us, it's just like, let's kind of keep our fund size at a level that we think makes sense for the environment. And if a amount of capital per company goes outside that, then let's bring in our LPs.

• 14:50Harry Stebbings?

  Along the way, how do you think about when is the right time to take money off the table?

• 14:55Speaker 00

  It's tough because in this environment, the markups are happening so quickly. You know, you're like, well, relative to when we invested, this multiple is amazing, but it's complicated, right? Like I, I think A, if you're a believer, I think more than ever, we're in an environment where your outliers, your winners will compound and drive fund returns. So those are certainly not the ones you want to sell from. Now, you can argue you might have some LPs, some, you know, if it's an older fund, some dynamics like that where you want to give liquidity, but that would be like, maybe you take 10, 20% off the table. But for the most part, if we're in a winter, we want it to run, we want to put in more capital. And then at some point, you know, you feel like the company is maturing or maybe they're waiting a super long time to go public.

• 15:37Speaker 00

  And you'd like to say, take some, you know, chips off the table, but it's not something we spent a lot of time on.

• 15:43Harry Stebbings?

  When was the most nervous time along the last 18 months for you as an Anthropic shareholder? It looks, it's amazing today. It's a great state of play today. When were you like, oh.

• 15:54Speaker 00

  Maybe I'll go back even, I'll expand your window to 24 months. When we did the SPV, Anthropic wasn't a household name yet. Like we saw everything going on and like how amazing this company was, but from the outside, it wasn't quite as obvious. So, you know, even to get, you know, the whole syndicate that we pulled together. And I had to give my friend Ravi and Byron a call to bring them into the round as well, which all worked out. But it wasn't, it was just, that was very nerve wracking because Menlo had never done an SPV before.

• 16:23Harry Stebbings?

  This was your first SPV?

• 16:25Speaker 00

  Just happened to be over 500 million. So you can imagine like, and by the way, it gives me great empathy for entrepreneurs, which I have anyway, because I understand how hard this is. But like being on the front lines, having to be the person kind of, you know, capital raising, talking to these investors, getting an occasional turn down, having to answer second and third order questions, sometimes annoying, no offense to anybody. Um, that's tough, man. That's really tough. So that was my most nerve wracking. But at the same time, coming out the other side of it, the most exhilarating, and obviously all that work was very worth it. I'll run through a couple other, the deep, the deep seek moment, you know, that was like, oh my God, what's happened? And now you can't even remember that. Then there was the, the Dow moment.

• 17:06Speaker 00

  And, uh, you know, it's just like, this environment is so dynamic, right? Like everything's moving so quickly that there's just like a new challenge and opportunity, both crisis and opportunity seemingly every six months or so.

• 17:18Harry Stebbings?

  It's a weird thing, you know, Mark Andreessen says, you know, often ventures about the VC firm lending their brand to legitimize the company. And then there's a strange moment when the company and founder lend their brand to legitimize the VC firm. And it's that weird transition of power between them. When there were like the SPV stuff and then like, you know, Dario constraining, was that a nerve wracking time? I imagine like Dario cranking the whip on SPVs and who can move what? I'd slightly shit myself if I'm honest, Matt.

• 17:52Speaker 00

  Oh, you mean the thing that came out recently around people doing SPVs, not my SPV?

• 17:56Harry Stebbings?

  Yeah.

• 17:56Speaker 00

  Yeah. Cause that was fully supported in partnership with the company, just to be clear. I think the problem is it's secondary markets, SPVs, they've just become too annoying and aggravating in the market to founders. And someone else is basically like, I don't want you marketing my stock. I want to be the one who's figuring out who's in the cap table, who's an investor. And, you know, I think that there were a lot of people claiming they had access, who would kind of round up people to invest in their SPV. And then they would try to go get access. So there's just a lot of bad actors out there. And, and so I think it needed a bit of a, you know, a salvo across the bow to just kind of be like, hey, settle down everybody. Because if you're not directly in partnership with us, you shouldn't believe this is real.

• 18:37Harry Stebbings?

  Oh my God, dude, I saw like SPVs for SpaceX on Instagram reels. And at that point, I knew that it was a heated market. I always normally say when you're a taxi driver, we call them cabbies. When your cab driver in London starts talking about the price of Bitcoin, you know, it's time to sell. Anthropic has been incredible for Menlo and for you. And it's been a massive brand builder in AI, positioning you as one of the leading firms. Another that you've done is lovable. You know, we've spoken about it at length, you know, off show. You did the round at 6.2. Can I ask, when you do a check like that, in this specific case, what do you like underwrite lovable to? How do you think about what it can be?

• 19:17Speaker 00

  Yeah. Well, I mean, you know, that was another wild story where you see a company go from zero to something like 300 million in a year. I think we intercepted them around, well, we kind of tried to get in when they were around 30, 30 of era. But the round we did was around 150. So you're kind of looking at, this is a phenomenon. So there's numbers and then there's the market. And then there's the founder, right? So the numbers were just like ripping and you're like, all right. So this company is going to go from zero to 300 in a year, even if you assume it decelerates to whatever, a three X growth rate. That's 300 to a billion. And I'm talking about when we first made the investment. And then, you know, you compound out from there and you're like, certainly in the first, let's say 23 years of my venture career, you never saw anything like that. Now there's a few more examples, but clearly this was an outlier, even amongst outliers.

• 20:02Speaker 00

  I think the thing that we also really gravitated to here, aside from like Anton, he's very visionary. He's kind of the voice of the category. I think he's got some very unique and distinctive plans about why this kind of 99% of people, as they like to call it, everybody who was never a coder and programmer, but making everyone become creators. So he had like this massive vision. We felt like an iconic entrepreneur. And then like crazy numbers that you could do whatever model you wanted. And you're like, look, if this thing keeps compounding and this is really the company that we believe, this will be one of the most valuable companies of all time.

• 20:35Harry Stebbings?

  Do margins matter anymore?

• 20:37Speaker 00

  They do a lot. And, and you know, we're, we're in this kind of like tricky period as investors where right now, a lot of great companies have low margins, 20 to 30% margins. And, you know, they all probably have a path to get to 60 or 70. You know, a lot of companies, just because the cost of computing inference, it's harder to say you're going to be an 80, 90% gross margin company anymore. But, you know, great companies are, you know, 60, 70% gross margin. But, you know, the path to get there is like, hey, I'm going to do some optimizations. I'm not completely tied to inference around, you know, my cost structure. And I'm probably going to do something complimentary to the leading labs with my own data and build a model that kind of gets my gross margin up.

• 21:18Speaker 00

  So you're intercepting a lot of these hypergrowth companies with margins that are atypical for what we usually invest in. And you're trying to figure out which ones actually have a credible plan to get to a great margin structure. And for what it's worth, I think Lovable is one of those.

• 21:31Harry Stebbings?

  The margin structure of Lovable will be changed greatly with the utilization of open source, which is obviously much cheaper. That goes against one of the other investments being in Anthropic. Do you, do you see them as like hedges against each other? Do you worry about the progression of open source, given how much can be done now with open source? I'm intrigued how you think about that.

• 21:52Speaker 00

  Yeah, I mean, first of all, Anthropic is a fantastic partner to Lovable and vice versa. But like this market is so big, so there's really two dimensions to that. One, some people worry about Lovable and Anthropic tripping over each other. I think love Anthropic always comes to things a little more like the technical user. And Lovable comes at it more from the, the lay user. I'm sure there's probably some overlap in the middle, but I think there's plenty of big space for each one to do extremely well. And, you know, look, Cursor was about as in the crosshairs of Anthropic as possible. And they, I think they still had a pretty darn good outcome. But the whole open source topic, look, it's like any market. When you start off in a certain way, and it's just like, look, I want to get something running. I, I want to get it out there and just prove I've got, you know, a, a cool product. And so you just default to the simplest thing.

• 22:36Speaker 00

  Over time, you do more optimizations, right? And so I'm also on the board of Open Router, a company that you all talk about quite a bit, and I love hearing you guys mention them. And, and, you know, that's kind of like the North Star there is like, hey, you want to have some intelligent layer that intercepts an API call from any application and basically says, what's the best model for me? Like across whatever efficiency frontier I'm trying to optimize for. Is it price? Is it reasoning? Or is it performance, you know, latency, things like that? And it's scale, like that's the kind of stuff you need as a company to manage and optimize your business. And so wave one of AI is like, let's just get it going. Wave two is like, let's get a lot more sophisticated about what we use and when and how.

• 23:18Harry Stebbings?

  If you're getting sophisticated about what you use, when and how cost optimization comes into it. So I do just wonder, like, if open source can do 96% of enterprise workflows, does that not dramatically reduce the TAM of frontier model companies? And maybe we're so early that it's still $10 trillion for a TAM. But like, maybe Anthropic and OpenAI solve cancer and climate change, and your email tagging is done by open source. Is that how you think?

• 23:43Speaker 00

  No, I think the foundation models, let's say specifically Anthropic, have such special models, performant, intelligent models. It's going to be hard for somebody to just kind of say, I've used open source with my data. It's going to be functional and positive for some amount of what you're doing. But I just don't think it can be powerful enough to really, you know, displace it. So I'm, my mindset generally would be like, you're going to use multiple models. Let's say if you're someone, pick a company that maybe you use 50% Anthropic and 50% open source in your own model. I don't think it goes to that, well, you were talking more cost, but I don't think it goes to that 96% because what's happening is companies see this, like, yes, I can get lower cost, but if I use Anthropic, it actually increases my customer retention. I generate more revenue.

• 24:28Speaker 00

  I get users to engage with the platform more. And that is what the data is suggesting now with a lot of application companies. But there's certain API calls that just don't need that level of functionality. And frankly, it's good for everybody. It keeps Anthropic on their toes to keep innovating, most innovative company around. So they'll keep innovating, not stay still. And, and then startups innovate in their own way with open source.

• 24:50Harry Stebbings?

  Do you think the costs have to come down for AI? Sam Altman said very clearly that they are doing cheaper and cheaper kind of tokens and, and reducing the cost significantly. Does AI have to get significantly cheaper? And will we see this cost curve come down massively?

• 25:05Speaker 00

  Well, I mean, I think it's like any product, you know, the, you can argue that the cheaper it is, the more it kind of opens up the market because you can do more for less than that all, you know, those economic curves always spark activity. But, you know, and look, even in within the Anthropic family, right? Like you, you've got Sonnet, you've got Opus, you've got Fable. So even the la, even Anthropic itself is innovating around, you know, hey, it's not one size fits all. So I think you're going to have the combination of something like that, a family of models from Anthropic, and then a set of open source models and things that you train with your own data. And you're going to look across that whole tapestry and say, hey, I'm, I'm using 50% this, 30% that, 20% this. And that's, those are the kind of optimizations that happen at scale.

• 25:48Speaker 00

  And that's the stage of market that I think we're just entering into, which makes it a lot more fascinating, frankly, because there's going to be so many kind of second and third order companies that spike and take off versus, you know, the whole market being concentrated.

• 26:00Harry Stebbings?

  I'm incredibly naive. And so I didn't understand something, which is like, we see, obviously OpenAI have Jalapeno, reportedly Anthropic working with Samsung to create their own chips, DeepSeek creating their own chips, Meta creating their own chips. Do you have to be full stack today, do you think? And is that why we're seeing everyone move into the chip layer?

• 26:24Speaker 00

  I think it goes back to what I said about optimizations. I mean, you know, Google with their TPUs a long time ago, Amazon with their trainiums. I mean, just at some scale, you look at your bill and you're like, I'm paying somebody way too much, you know? And you say, well, I'm willing to pay that for some part of, you know, my COGS, because that's just so much better and different, and I can't compete with that. But maybe there's some other types of activities they're doing that I can really leverage my own technology and bring my cost structure down. And, you know, I mean, the chip business is hard. Good luck wading into that, right? You know, it takes a special team, especially if you're going to compete with Jensen and a lot of other options out there right now. But, you know, these companies are smart and they're looking at like, hey, look, there's

• 27:08Speaker 00

  some very specific thing that we do in our model, that if we had a chip that just behaved like this from a memory cache, whatever, like it would make us so much better. And I'm sure for some percentage of the workload, whether it's in training or inference, that could be a big deal. So that's probably worth the swing if you're a $100 billion revenue company.

• 27:25Harry Stebbings?

  When we think about kind of full stack versus not being full stack, you know, I've had the founders of Nebius on the show. I just had Lynn from Fireworks on the show today. And Nebius said they were moving into the Open Router business and would actively take it. And then I asked Lynn this morning, is there value in it? And she was like, no.

• 27:44Speaker 00

  In the routing business?

• 27:45Harry Stebbings?

  Yeah. Why do you think there is? What, what am I missing?

• 27:49Speaker 00

  Well, first of all, what Open Router has is like, they've just got this groundswell of organic activity with developers who come to them because they trust them, they know it's a great inference marketplace, they love their intelligence. Like, I don't think a ton of developers flock to Nebius. Like, if I'm a developer, I don't wake up and be like, hey, you know, so they're kind of in the wrong part of the conversation. But if you're on Nebius and they're your underlying provider and they provide routing, okay, fine, you know? But if you're a company that's building and thinking about multiple cloud platforms and you want to kind of even obfuscate that, then Open Router is a great solution.

• 28:28Harry Stebbings?

  How big is the routing business going to be, do you think? Like, how big could Open Router be? Is that, is that a $50 billion business?

• 28:35Speaker 00

  I mean, their trajectory is insane. I mean, I forget what they've publicly announced, so I better not say anything. This company wildly profitable at a scale that would probably shock most people before this whole open source model, alternative model, model optimization market really takes off. I feel like we're just on the cusp of it, and this company is already a beast. So I have massive and very high hopes.

• 29:00Harry Stebbings?

  We mentioned Lovable earlier. In terms of like other application layer companies that you are in and are very meaningful, another that we have together is Ligora. I love Max, think the world of him. What an absolute beast. Remind me, what, what round did you do for Ligora? You did the?

• 29:17Speaker 00

  The round that just happened, you know, about six months ago.

• 29:20Harry Stebbings?

  Okay. And what size chat did you do?

• 29:22Speaker 00

  It was kind of sub 50, but in that range.

• 29:25Harry Stebbings?

  Okay. And so you're like, great, let's get a foothold in here and we can put more in with time and partner more closely with this business.

• 29:32Speaker 00

  Exactly.

• 29:32Harry Stebbings?

  Everyone tells me, and again, you can be like, Harry, for goodness sake, it's like Friday morning, I wanted a chilled interview, you can put me back down. But everyone tells me, oh, Anthropic's the real threat. And I'm like, are you kidding me? This is like a heavy GTM business focused on building relationships with lawyers, doing legal deployments with G, I mean, it's, it's completely different. How do you answer that statement when everyone's like, well, Anthropic Legal is going to beat them?

• 30:01Speaker 00

  Yeah. Well, first of all, Max, Max is special, as you know, part of my diligence was watching, you know, your, your interview with him, but he's just an execution machine and just a lovely person to be with. I think, you know, there's always, for a while here, we're in this period of, for a long time, it felt cleaner, like, hey, there's a model and there's an API, and then there's application companies. And, and obviously, that's kind of gotten blurrier and blurrier. And there was a period a couple of months ago, it's like SaaS apocalypse, you know, everything's going away. And I think some of, a lot of that has kind of faded. And now we're kind of sorting out like, okay, well, which, which applications really deserve to live and why? And I think, you know, not speaking for Anthropic, but my, my view is they're kind of like, look, if the model just kind of does something and your application isn't distinctive

• 30:45Speaker 00

  enough, the workflow, the value you built on top of it, and the model takes that market away, well, then it probably wasn't that, you know, defensible. Anyway, I think in the case of Max and Legora, you know, they have lawyers and FDEs getting in there and understanding these workflows, it's kind of like crosses organizational boundaries. Like, I think it's very hard for a model just to come in and be like, oh, there's multiple constituents here because you've got corporate lawyers, law firms, and when you're on a case, you've got a client, you know, multiple law firms. So it's, it's just in, it's not quite an N squared problem, but it's complicated. And you need workflows that understand that. You need context, even within the own law firm. So I think there's just a lot of, I know there's a lot of value to build and create on top of all that and love the way they're executing.

• 31:26Harry Stebbings?

  Does Legora have to succeed outside of legal for it to justify the valuations that it will want to raise up? You see Harvey talk about moving into compliance and tax and duh, duh, duh, duh. And I, I think Legora will too. But it's because if you want to raise it 10 billion, cool. But like, there's a price at which you need more than just legal.

• 31:47Speaker 00

  Yeah. I mean, I look, Max, I guess maybe he hasn't been as public about it, but absolutely, that's part of the strategy, you know, when we got to know each other and we were thinking about the round and justifying not only the current round and hopefully, you know, participation in the future round and working the company. The vision is much bigger than that. It's not have to, it's just, it's just, you know, you've built this base platform that happens to be really, really good at understanding complicated, sophisticated service teams, you know, legal, tax, you know, accounting, all this. Why wouldn't you expand into that? And then there's probably another leg of the stool out there yet that we haven't even seen that we'll be talking about maybe next time I'm on.

• 32:22Harry Stebbings?

  I think Series A is the worst place to be today. And my partners always hate me for this because all Series A founders like, great, we won't go and see them. But it's the worst place to be. You have like 1 to 3 million in revenue and you're a 200x ARR, 2 to 400 million with little PMF. Do you agree that right now, insertion point wise, Series A is the hardest? And that's why we're seeing everyone flock to growth and pre-seed? And how do you think about that, having seen so many cycles?

• 32:51Speaker 00

  It's tough. I mean, you nailed it. But I mean, what we're doing is a barbell strategy right now, right? So it's like, hey, when is a certain company in a category establish themselves as a leader? Because, you know, in that kind of 1 to 3, you may not even know who the competitors are yet, right? And you're going to pay as if they're going to be the winner, because that's just the way the valuations are in that kind of, let's say, 1 to 10 range. So we've moved our, you know, we have a fund called Inflection Fund, and we always called it early growth. Early growth to us meant like 3 to 10 million of ARR. Reality is like, for the good companies, that window used to last like a year, year and a half. Now it lasts like a week, or in the case of Max and Legora, that's what they do in a day. So, uh, you know, like, it's just, that was a

• 33:33Speaker 00

  hard strategy to keep pursuing. So that's kind of like the Menlo Inflection classic kind of investment. But really, it's been more to these outliers where they've completely, you know, broken out somewhere above 10 or, and that's kind of like market specific, where you feel like they've been anointed the winner, or you believe they will be. But to your specific question around Series A, that's the other side of the barbell. And so what we've done is gone much earlier. So spending more time, we've had the specific seed strategy where three partners can write up to an $8 million check, like on the spot. That number used to be three. So we've kind of expanded the aperture and the flexibility for the team to move quickly. But the hard part

• 34:13Speaker 00

  in A right now is that seed A, the time between those two things is really compressed. And if you really look at like the, the data points between those two rounds, like, okay, so they kind of built more of the product. They kind of have like five POCs, or maybe they had five POCs, and now they have a million of ARR. And you're like, I know anybody can do that. Not anybody. I don't want to oversimplify. But it's not really that much of a signal. And yet, the valuation goes from 50 to, you know, to 200 or something like that. So that's, so that's the hard part. So we, we've really moved earlier, you know, kind of the, I wouldn't say pre-seed, but more like that seed motion has become much more prominent for us getting early, especially, you know, to a lot of these technical projects. We have a very specific strategy around Neo Labs

• 34:54Speaker 00

  too. We're in about seven of them. But we're not going in with like 200 million. We're going in where we can get ownership early or be part of something that we think ultimately could be a winner and pile in. So we've adapted to the environment with a bunch of strategies that allows us to pursue this barbell on the later stage and getting even earlier on the seed stage.

• 35:14Harry Stebbings?

  I think one of the worst performing groups in terms of venture in this vintage will actually be the small boutique seed funds, which is what every single LP that you speak to today, Matt, wants. Every LP, this is the funniest thing. Every LP wants San Francisco-specific seed fund only, under 100 million. And I think this will be the worst performing category of venture in this vintage, because firms like you and Founders Fund and Benchmark and Sequoia and Excel, and the list goes on and on, are so effective with a very good seed product, that it, if you're a $50 million seed fund and you're writing $2 million checks, dude, I'm

• 35:59Harry Stebbings?

  too big to be friendly and I'm too small to lead. Do you agree, or would you say I'm wrong?

• 36:05Speaker 00

  Yeah, no, I mean, look, I think the biggest thing that's changed from the time, you know, my, my early days in the business, but for a long time is people used to have their swim lanes. And now more and more, everyone's full stack, including our good friends now at Benchmark, adding a growth vehicle, right? And then everyone used to make this argument in the seed world, like, oh, there's negative signaling if you let an institution in there. And I think that's kind of out the window as well. Because for the right companies, like, everybody's getting preempted and the rounds are bigger. Maybe we're back to, you know, more collaborative rounds because they're bigger. Everyone used to be like, well, I have to have the whole round. And now you see a lot more syndication. But this whole notion of swim lanes is gone. And that's just the, the times we're in.

• 36:45Harry Stebbings?

  The syndication element's actually nicer, I find. It's nicer to be able to be more collaborative. I like that a lot more.

• 36:51Speaker 00

  I mean, believe me, for the first 10, 15 years of my career, every Series A you led, you would bring in another kind of top tier firm alongside you. And the view was like, look, we're going to work more effectively together. We're going to be better helping this entrepreneur grow in scale. And then for 10 years, it became, no, no, everything has to be one investor. And some of that's obviously a function of, of ownership. But I like the syndication part.

• 37:12Harry Stebbings?

  When we talk about seed funds of that size being challenging, Series A being a difficult insertion point today, and the barbell approach, the $3 billion fund size, we talked about it in the show with Rory and Jason, and we didn't really get it in the nicest way. You've got Anthropic, you've got Loveable, you've got Legora, you've got OpenRuder, you've got Fireworks, you've got, the list goes on and on and on of great companies. You could raise way more. Why did you raise three? And is the future of venture not much bigger platforms like GC and Lightspeed and all the big names we know so well?

• 37:46Speaker 00

  Well, when you take on more capital, there's implications of that in terms of how you run the firm, culture, how many people you have. And we love to be a relatively small and mighty machine with, you know, roughly, let's say, 12 partners and a great set of, you know, principals, associates, things like that, that make us better and stronger. But like, when you go full, full stack and you have like five different teams, you start doing sector, like, everybody's kind of out for a pass. And sometimes I've seen this in other places where you feel like, well, I could do great things, but I can't really index on this small group of people. There's too many of the, if one group doesn't do as well, then they kind of drag down, you know, how this, this other group. So it kind of leads to a bit of less feeling of like

• 38:30Speaker 00

  alignment, agency, collaboration together. And that's what we've really wanted to keep at Menlo. And despite having two funds and kind of two ICs, we have a very fluid amount of work across those two groups where partners from the venture fund can lead investments in our growth fund, et cetera. So it's really more like, how do we want Menlo to meet the market? How do we want to run internally? How do we want to keep our team relatively small with great people and not feel like we're more a company, but we still really are a firm?

• 38:59Harry Stebbings?

  Dude, I'm just a humble British podcaster. We don't talk about scale here. Okay, we're just, we're everyone's friend.

• 39:05Speaker 00

  One's not so tiny, my friend.

• 39:08Harry Stebbings?

  But my question there actually is, you know, I know Josh and Thrive very well, dear friend. And he's always said to me that, you know, people have a lot more plasticity investing across the stage than than one thinks. Do you think people are like, oh, they're a growth investor? Or do you think people do have that plasticity to move across stage and a great seed investor can be a great growth investor?

• 39:29Speaker 00

  I think you're best off if people pick a, I'll use the word swim lane again, meaning like, hey, you, it's just hard to cover everything, right? Especially in seed, like, how am I supposed to be wandering around, you know, Stanford Labs, meeting with researchers? And also chasing the 20 best growth potential investments in the world? It's just, it's just too much. And I think the pattern recognition, the density of the work that you apply to a certain area makes you better. And so that's roughly how we've split our team is, you know, early stage team, outlier, growth kind of companies. And everybody really focused, but if something comes up that's a great fit for somebody across the fund vehicles, then fine, there's fluidity.

• 40:11Speaker 00

  But I really do feel like you're best off by being super, super focused with, let's say, 80% of your time. Think about sector wise, too. All of a sudden processors, TPU's, GPUs are hot, right? And then you've got defense tech, it's hot and everybody's kind of rushing in. You can't go in there and just kind of spearfish one investment that you run into and feel like you've got the expertise. You need to understand that landscape. You need to understand the entrepreneurs, you need to understand the buy side. And if you haven't really worked in a semiconductor company before, which I did, that's where I started, you know, my, my career to start up before I joined Panda Perkins. It's so hard, you know, it can take two, three years to get the right chip out. You think you got a design win, it evaporates, very, very hard.

• 40:52Harry Stebbings?

  What about Ari Vishri and Steve Vesalo with Zeroprous? I mean, they directly did a spearfish on this one company.

• 40:58Speaker 00

  Oh, well, I've, I've talked to Eric about this. And by the way, you had Bruce Dunleavy, like one, you know, epic semiconductor investor. And he's like, all my partners, maybe even said this on your show, but like, you know, all his partners told him not to do it. But like, I would, every once in a while as a firm, you can do something that's a little bit like, there's something really special here. We might get a zero, but if this works, wow. And I'll, that's, you know, I'll take you back to our investment in Anthropic, like same thing. It's like, this doesn't really fit. This isn't what we normally do, but wow, if this works, I mean, you've got such a special founder in Dario and an amazing market. And if these guys become the two, and that was the goal at the time, this is going to be wildly successful. Now, did we ever realise they were going to be the normal number one?

• 41:41Speaker 00

  That was like a little twinkle in the eye, but that's the upside you get by getting yourself in these companies.

• 41:46Harry Stebbings?

  Can I ask you, just on geography, we've spoken about lovable, we've spoken about Legora, two companies based in obviously Sweden. And then you have Anthropic and you sitting on the West Coast. How do you think about the centrality of power with AI moving back to San Francisco? All the brightest minds, all the best researchers are there being the common theory with also a portfolio that's very global in terms of winners?

• 42:10Speaker 00

  Yeah, San Francisco was a weird place for a few years, you know, like all the cool kids wanted to be in New York. And San Francisco felt a little bit like a ghost town, very concentrated in SaaS, not like that much interesting stuff going on. And I love seeing it have its mojo back, right? That's like, when these waves come, the Bay Area usually leads. And so it's just giving so much more energy and people who are like lifetime New Yorkers who would never think about leaving, you know, living in the Bay are now coming out here. And more college grads are saying, yeah, New York's cool, but I got to get out there and be part of this AI thing. So I think it's great for the Bay Area. And I think the, the concentration of that talent is what has always made the Bay special.

• 42:49Speaker 00

  You know, you're just kind of, you're just constantly talking and meeting entrepreneurs and understanding how everyone's pushing in themselves, not just like their work ethic, but more like technically what they're working on. Your context that you have by living in the Bay Area is probably like 10 or 100x if you're just some really great company somewhere else. Now, kudos to you and not, you know, just you personally, but like, you know, what's going on in Europe right now? Like that whole deep mind diaspora, you know, you mentioned a couple of companies like lovable and Legora that we're in and Ryan, a couple more. Like that's new for us. We would always be like, oh, we can't, you know, go to Europe. It's kind of a, more of a cottage industry there. And where does the talent really spike? But the one thing I'll have always thought about Europe is if you're an entrepreneur there, it was harder.

• 43:32Speaker 00

  So there's kind of more grit to be a great entrepreneur in Europe than let's say in the Bay Area where it's not incredibly hard to get into YC and just be a founder. I think in Europe, it's always been a lot harder. So if you have the grit to get off the ground in Europe, to be a global company, that says a lot about you. So I wouldn't say we're putting boots on the ground there, but we're spending a lot more time and definitely interested in doing more there.

• 43:56Harry Stebbings?

  Anton at lovable always says building in Europe's like, you know, hard mode. Can I ask you, when you lose a deal, is there a commonality as to why you lose?

• 44:05Speaker 00

  The thing that's most often is that you were late to the party, right? Like, you know, you were not intentional enough that this was a company that you wanted to be tracking and building a relationship. So you're coming in a couple of weeks or a month before the round and somebody else has a year long relationship. That's usually a death knell.

• 44:23Harry Stebbings?

  The biggest death knell always for me is like, when it's like, oh, I worked with them at my previous, I worked with Matt on my previous company for seven years. And I'm like, okay, I'm done.

• 44:32Speaker 00

  So I mean, and relationships mean so much in this business because it's, it is, high trust matters so much. And both within a venture firm and with the companies we work with. And so it's hard to establish that in some, you know, shotgun wedding, some sprint. So we try to be very intentional about getting out ahead of things. You know, I'd say for the best companies, they're always going to be this like kind of jump ball. And it's incredibly important to know someone who's associated with the company, who can kind of help guide you in, land the plane a little bit. If you don't have that and another investor does, like, hey, this person has worked with this board member for 10 years and they had a great experience in some big outcome. You know, it's more things like that. It's rarely just like straight up, you know, valuation, stuff like that.

• 45:15Speaker 00

  Yes, valuation can be painful, but for the right companies, you know, you do what it takes to be in.

• 45:20Harry Stebbings?

  The single biggest mistake for me is always actually focused around ownership. There've been several companies where we've had like 1% offered to us, deal 11 labs, Star Cloud, where we were like 1%. We can't be doing that. And now I look back and all of them would have returned huge amounts of money.

• 45:38Speaker 00

  That's the way I was trained and I learned that for most of my career. So it took me a lot to kind of shed that and.

• 45:43Harry Stebbings?

  Do you think LPs understand that? Cause LPs always like high ownership portfolio, you know, constrained portfolio sizes, concentration, benchmark. Do you think they get that the game has changed?

• 45:56Speaker 00

  I think they see the results, right? So like maybe not upfront, but we're pretty explicit with them that we kind of have like, hey, here's a core position in a fund. And then here we call like tracker checks or starter checks. Or frankly, even look like, look at our anthology fund, right? Like that's over 50 companies, somewhere between 100K and 1 million, where you kind of get in a seed round. And the companies that have graduated out of that have been Open Router, Whisper, Axiom, Math. So there's a couple of things, one that gives us a bit of proprietary quote deal flow, but it gives you the opportunity to be in the cap table, get to know the entrepreneur and then pounce when you see something's working. And I would say if you get even a wedge into a company, you're 10x more likely to be able to participate significantly in the next round or lead.

• 46:40Speaker 00

  And I think LPs get that or they are getting it.

• 46:42Harry Stebbings?

  I totally agree with you and you do those checks so you can concentrate capital more with the progression of the company. I went viral on VC Brags. Matt, when you did our last show, I was very amenable and sweet and nice little kind of Harry Potter adventure. Now I'm quite binary and apparently a lot of people don't always like what I say. And VC Brags in particular took real problem with me because I said, basically, I turned down a company the other day because they were going from like one and a half to five to 15. And there's an opportunity cost of capital state that's very real and the growth expectations are just very different. In other words, triple, triple, double, double. It's just not exciting enough anymore. And so I got chastised for this.

• 47:25Harry Stebbings?

  Are you with me that fundamentally, if I bring you a one to five and then a five to 15? Again, it's great, I'm not belittling it, but that's just not the venture game today.

• 47:36Speaker 00

  It's not, it's not, and it's hard to say, and it's hard to change, you know, the context, the 20 plus years of context around what good and great was. But that's the reality, the environment has changed. And so if you look around and you're like, well, that used to be top 5% and now it looks more like top 50%. Well, we're not trying to be in top 50%, right? So that's just the reality. I mean, it's not controllable by us as investors when we look around and see these companies doing zero to 100 in, in a year. Never seen anything like it. And there's more examples of that than I can probably count right now.

• 48:12Harry Stebbings?

  What company are you not in that you would most like to be in?

• 48:16Speaker 00

  There are several, one company that I've really admired and as the kind of like outlier entrepreneurs in my history going back. Like you look at the companies that became great, you know, when I was early days of Clanners, like, you know, Jeff Bezos and later on Daniel Ak and the Collison brothers. And like somehow or another, these amazing founders end up manifesting the company. I don't necessarily think it was that they chose the right market or, I mean, somewhat they did, but it was really just the force of nature, the creativity, the vision, the execution, their ability to raise capital, hire the best talent, all that. So anyway, I think an example of that in Europe, just because it's close to home for you would be someone like Matty at 11 Labs, very big respect for him.

• 48:59Speaker 00

  So, you know, I don't want to give everyone on the podcast my whole pipeline, but just because that's when you know, well, I'll, I'll throw that out there.

• 49:05Harry Stebbings?

  What was the most controversial deal inside Menlo that you remember?

• 49:10Speaker 00

  The obvious answer is Anthropic in some ways, but I'm, I'm trying to think about. And, and by the way, there was two controversial points around that. One was, you know, the first just like, is this really what a venture fund does? And the second was like, we've never done an SPV before, are we really going to go down this path? I can't really remember offhand anything like that was that profound and felt like, wow, we're kind of putting the reputation of the firm, especially the bigger SPV on the line to kind of pull this off and, you know, breaking new ground. I think we know the great thing about our partners, we've got a very technical group, we're small enough to have high alignment. We respect each other a lot. It's easy to make, you know, we listen to each other, make good decisions. So I don't find things that controversial.

• 49:50Speaker 00

  I don't really ascribe to this point of view where you need like a bunch of no's and there's one person who's a yes, and that leads to an outlier. I know there are examples of that, but that's not really been my experience in the firms I've been part of or with our team.

• 50:04Harry Stebbings?

  Final one before we move into a quick fire. I am not great at maths, but if I do like a little bit of a back of a napkin on Anthropic and distributions, it'll distribute around $10 billion in carry. It's quite a lot of monopoly money, Matt.

• 50:19Speaker 00

  Not in carry, right? No, our position is north of that. You can do the math on what carry usually is. So it's not quite that on carry, but our, yeah.

• 50:28Harry Stebbings?

  Totally understand. I'm up two to three billion. It's a very big number. How do you think about firm sustenance when there is such a big win? We have seen firms candidly struggle to maintain dominance when everyone made so much money bluntly. How do you think about sustenance post such success?

• 50:47Speaker 00

  I think Menlo has always had a challenger mentality since myself and Venky came over a little over 10 years ago and kind of Sean Carrollan came back and you know, Mark Siegel was the partner who was there who kind of put the band together. And ever since that moment, about 11 years ago, it's just been a grind, a fight, a build exhilarating to kind of get to this point. And I feel like everyone we've brought along has kind of felt Menlo move up that stack and be more and more successful. So I think what's driving us is what you would expect, less about that monetary outcome and holy shit, we've put ourselves in a place to be one of the hopefully leading firms in AI and how do we really compound and double down on that advantage? And that's the energy I feel every day, certainly from myself and all my partners. I just can't see that going away.

• 51:32Speaker 00

  It's kind of like, it's kind of like, we arrived, we're here. What do we do with that? And the money's great, but that's not why we did all this.

• 51:38Harry Stebbings?

  I think richer investors make better investors because you do not worry about downside mitigation, but you focus on upside optimization. How big can this be? What happens if this works? You're not worried about LPs not re-upping. You're not focused on risk mitigation. Do you agree with me in thinking that?

• 51:59Speaker 00

  Of course I do. And I think it's, it's at a firm level and it's at an individual level. And there's been times in my career, you know, where you, where you feel some, some doubt either from yourself or those, those around you. And it makes you dramatically worse, right? And so what we try to do is have a high trust environment, build people up and everyone is going to fail in this business, right? It's just kind of recognizing that sooner and kind of landing the plane or doing the right thing. The worst thing in the world is to kind of hold on and just go to try to act like the reality is not the reality. And oftentimes you're doing a founder a favor by even helping them, you know, kind of, kind of land the plane. So yeah, I, I think it's an important point and an important thing to manage in this business.

• 52:41Harry Stebbings?

  I would love to move into a quick fire round. I have pushed and prodded around many different areas, so I appreciate the patience.

• 52:47Speaker 00

  This is where the really off putting stuff comes, or I'm ready.

• 52:51Harry Stebbings?

  Dude, you were born ready for this. What have you changed your mind on in the last 12 months?

• 52:56Speaker 00

  Oh, I mean, certainly just how big companies can be and how bold Menlo should be in pursuing those, that we need people who are free thinkers and willing to take those kinds of risks. And that's more true than ever. Like just how big a company can be.

• 53:12Harry Stebbings?

  Biggest miss and what was your lesson from it?

• 53:15Speaker 00

  The things that I would look back on at the time as the biggest, biggest miss, no longer feel that way. So that's like, like, I'll, I'll give you one. You know, we were at the one inch line winning Plaid back in the day. And I have the utmost respect for Zach and the company and what they've done. But the point in time, I felt like when I lost that, that that was like existential to my career and ability to win. And, and you know, they're a great company. But I guess what that did is just more conditioned me around like, one loss doesn't define anyone. Now, okay, if you didn't win Anthropic, that would have been extra painful. But the point is like, you just got to keep going and finding that next big one. And if you focus on the right big trends, like we did around AI and get out ahead of it, that these cycles come along. And that's what I've been more

• 54:00Speaker 00

  focused on than worried about a loss.

• 54:02Harry Stebbings?

  You can invest in one seed fund, one series A fund and one growth fund. Which fund you invest in, and they can't be your own.

• 54:09Speaker 00

  All right, seed fund. I'm less like plugged into the seed fund world for reasons that you and I have already discussed. I don't follow a lot of seed funds around, but I, I've had a great relationship with Chad at Sousa for a long time. You know, Brooke Byers was a, you know, one of the quasi mentors to me when I was at Kleiner and we got to know each other and seen him kind of grow and thrive. And I really appreciate his perspective on things. The series A, you know, Benchmark, I've worked with Jathan and Eric a ton and you know, a great respect. Hard to say not, not say Sequoia as well. But anyway, since you asked for one. And then growth fund's a little trickier. There's so many great full stack firms. So it's like, there used to be a very clear set of growth funds. Like when we were talking about swim lines, it used to be like, okay, well, there's IVP and, and you know, there's Meritac and, and I have high respect for both of those folks. But

• 54:54Speaker 00

  now the reality is the, the growth funds that you look at, it's like, well, it's Lightspeed, you know, Thrive, you know, folks like that, that we partner with a lot and even Sequoia and Andreessen. So it's harder to just kind of pinpoint one growth fund because it's, it's like a blend of a dollar. There's not, there's no way to really index on that market anymore.

• 55:12Harry Stebbings?

  I'd probably say just size of firm. It'd be like, you know, when you reach $5 billion plus, you're probably a growth fund at that point, my friend. That might constitute it, but yeah, I get you. I think also, by the way, everyone who was a boutique growth fund is now just a growth fund. I think you will see all of your IVPs, your Meritacs, just raise large funds. You can't play growth with under a billion.

• 55:37Speaker 00

  I agree. The growth market has changed dramatically.

• 55:39Harry Stebbings?

  Where is overheated right now, do you think?

• 55:42Speaker 00

  Robotics and Neo Labs, maybe defense tech, but just because there's so much going in. But I like all three of those sectors, but like Neo Labs, my partner Dee put out a tweet yesterday on how there's like 60 Neo Labs. I told you we're in seven, but, but you know, some of them are very in a generic, like we're building, we're getting a band together, we're going to build something really cool, researchy, and we'll see what happens. And then others are like Chai, where it's like, hey, we're, we're going to be very focused on creating drugs and antibodies and or Axiom focused on math and things like that. But you know, there's 60 plus of these. And you know, when the dust settles, I don't know what's going to come out. You can't, you can't expect all of these companies to have great aqua hires. And there's no way in hell that, you know, we're going to have

• 56:24Speaker 00

  60 independent model companies in addition to all the open source and everything. So I think that's way too big of rounds they've raised for where they are. Huge concentrated positions for some firms. So I think that's a challenge.

• 56:36Harry Stebbings?

  Where is under invested?

• 56:38Speaker 00

  I think that there was a bit of a false negative on some of the infrastructure stack, you know, whether it's like observability, agent frameworks, you know, all this kind of stuff that started maybe three, four years ago. And a lot of these companies didn't end up panning out, right? And now the problem was, goes back to what you and I talked about earlier, people were very focused on like single models. So you didn't need all this surrounding infrastructure. But now is the kind of the whole ecosystem has gotten so much bigger and you're doing optimizations. You want to manage your, your spend. You need to have much more robust observability solutions. You need something like open router. I just think, oh, we're, we're in this company called Gimlet, which is, you know,

• 57:19Speaker 00

  kind of like this technology layer to kind of obfuscate the underlying chips and technology stacks like CUDA, et cetera. So there's so much more there. And I think we started off investing in that area two, three years ago. Nothing really came out of it. Now these companies are really taking off. So that's what we're excited about. Kind of the developer stack, all the tooling above the foundation model.

• 57:40Harry Stebbings?

  Final one for you, dude. What are you most excited about when you look forward to 10 years? So like for me, you know, my mother's got MS. I'm incredibly excited to think about medical breakthroughs for diseases where we always kind of just accepted that, oh, it's a chronic condition. And you're like, okay, I'll just live a much worse quality of life with that then. I'm excited for breakthroughs there. How do you think about where you're most excited?

• 58:03Speaker 00

  Yeah, I mean, well, I'll just pick on that one and then riff from there. But like, we're totally excited about that. We have about eight of these models. I mentioned Chai, but we have a company called Zera, Villia. I can go down the list of companies building specific models to do drug discovery. So I think, and then we did something like assort health for better healthcare delivery, right? So like the whole medical system, which we all know is kind of broken, even though the US has great healthcare, there's so much more that can happen and come to us from, both from therapeutics as well as just kind of workflows and how the medical system operates. And of course, you know, that's a very near and dear mission to Anthropic and Dario. But aside from that, like the thing I'm most excited about probably goes back to like where Menlo is now and watching how we really lean

• 58:46Speaker 00

  into and take advantage of this opportunity with the team we have now that we've assembled. That to me is probably the most rewarding thing in my career is kind of where the firm is and the people we have to execute going forward. I'd say from like a trend of AI and all that, these things only come around, as you know, every 10 years. And this one feels like the biggest. I've been through four or five in my career. And so I am just completely fascinated to see what this looks like. Cause we kind of know what it looks like now. And we kind of think we know what it's going to look like in a year or two. But given the pace of innovation, what in the world is this going to look like in five or 10 years? Nobody can tell. And I think the, how many things will be transformed over that period of time is going to be more mind boggling than what we've seen in our society and

• 59:31Speaker 00

  in my lifetime and your, and your shorter lifetime. So I'm super excited to be investing in the middle of that and partnering with great partners and people like you who I want to syndicate more with.

• 59:41Harry Stebbings?

  It is the greatest time to do venture. I do feel very lucky to be doing venture in this moment. Like what a privilege.

• 59:48Speaker 00

  Totally. Hundred percent.

• 59:50Harry Stebbings?

  Dude, you are a star. Thank you so much for doing this. I hope that I've improved as an interviewer in, you know, six years. Maybe not, but I will continue to try. But you've been amazing, dude.

• 1:00:00Speaker 00

  Thank you for having me on. You went from great to greater. I hope you'll invite me on before another seven years and always love chatting with you.

• 1:00:10Harry Stebbings?

  But before we leave you today, founders face a different set of challenges at every stage of growth. For Sid Shait, co-founder and CEO of Dematrix, JP Morgan delivered the guidance and expertise to help navigate what came next. He credits JP Morgan's high touch approach with supporting Dematrix as it grew and expanded internationally. Whether you're in the early days or expanding into new markets, JP Morgan helps startups navigate complexity with real confidence, offering personalized guidance and deep sector expertise. Find out how JP Morgan helps founders at jpmorgan.com/growwithoutlimits. JP Morgan is the bank of the innovation economy.

• 1:00:55Harry Stebbings?

  While JP Morgan supports growth, Corgi protects it. My word, what an arresting first line. Get your ass covered with Corgi Insurance. And I'll tell you why. If you're running a business right now, you already know this pain all too well. Getting insurance, it's really slow, it's confusing, and my word, it's full of paperwork. Well, that's exactly why Corgi is here to change the game. Corgi is the first and only insurance carrier designed specifically for tech companies, allowing you to get covered in minutes instead of days. Corgi provides essential coverages for all growth stages such as DNO, EDO liability, cyber, commercial, general liability and more. Get your ass covered. I love the way we say ass with Corgi Insurance alongside thousands of other

• 1:01:38Harry Stebbings?

  startups at corgi.com/20vc today. That's corgi.com/20vc. You won't regret it. While Corgi covers risk, Flex gives you room to move. Business owners run their whole financial life on Flex. One platform from business revenue to their personal spend. Float every purchase for 60 days. Tap capital that grows with your revenue and pay vendors in 170 countries across 32 currencies. Plus the whole back office, bills, expenses, accounting, all in one place. So you spend less time reconciling and more time growing. That's why thousands of owners use Flex. Named

• 1:02:20Harry Stebbings?

  one of Fast Company's most innovative companies of 2026. Visit flex.on, that's F L E X dot O N E, and use the code 20VC.