E399: How General Catalyst Finds Billion-Dollar Startups

Most investors assume that once a venture firm reaches $43 billion in assets under management, the real opportunities shift toward writing larger checks. Yuri Sagilov believes the opposite. General Catalyst continues to push deeper into seed because that's where investment themes are born, founder relationships are formed, and category-defining companies are first recognized. Rather than optimizing for larger deployments, the firm optimizes for ownership, conviction, and seeing the future before everyone else. It's also why General Catalyst intentionally removed signaling risk from its seed strategy, giving founders confidence that early backing won't become a disadvantage later. Throughout our conversation, Yuri explains why AI-native founders think differently, why the best venture firms remain generalists, and why the next decade of venture may look very different from the last.

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

• 0:00Speaker 00

  The reason AI is a wave today is because of OpenAI. If SpaceX was not successful, there would be no space industry today. The best thing that you can do is meet the best founders early and see the world through their eyes and let them guide you to where the opportunities are.

• 0:16David Weisburd?

  General Catalyst today has $43 billion under management. Why in the world would you guys be investing in the seed stage?

• 0:23Speaker 00

  I think it's a very common question, actually, for a fund our size. But I think that there's two pieces to that question and a little bit of framing that's helpful. At the end of the day, we actually think of ourselves very much as an early-stage fund. I think our DNA, despite our scale at this point, is early-stage. Some of the best, most well-known investments that we've ever done are actually seed investments or started as seed relationships. Stripe, Andro, Merkle, Circle, like every single one of those was a seed investment first. And so we really believe that seed is the heart of the business, regardless of like the capital or the AUM. The reason we think seed is so important, there's actually a multitude of reasons.

• 1:09Speaker 00

  I think the very first reason is that seed is where you form the deepest relationships with founders. It's really the most, like, if you're the first and true believer, they're going to remember that for the rest of their lives. And so whether it's 10 years later, 15 years later, the person that wrote you the very first check is someone that you remember forever. The second thing is we fundamentally think that seed has some of the best returns in venture. It is the lowest entry point from a cost of capital perspective. You can buy up ownership easily at the beginning. And obviously, if you own 10% of a company that's valued $10 billion or $100 billion or more, you're going to have incredible returns, regardless of how many dollars you put to work. And the last reason that I personally care about a lot

• 1:52Speaker 00

  is that you get to work with founders who are truly living in the future. And we can talk about that a little bit more. But when you meet seed founders today, you know, as opposed to a growth founder, you're meeting a founder, for the most part, has never built in a world that AI did not exist. Like, if we compare this to a company that's five years old, which would be a typical growth investment, most of them started pre-ChatGPT. Right? And so the founders who are building today are just building fundamentally in a completely different mindset. And I think for us as investors, it's important to capture that as early as possible and see that as early as possible.

• 2:27David Weisburd?

  Said another way, your seed practice helps inform the rest of your investors.

• 2:31Speaker 00

  A hundred percent.

• 2:32David Weisburd?

  Practical examples of that?

• 2:33Speaker 00

  If you're doing your job well, you're meeting a lot of these things before they become categories or themes. And so I'll use Androl as an example. Defense today is a huge theme, right? There's a ton of capital going into defense companies. YC Demo Day is coming up right now. There's a number of defense companies. There's probably more defense companies in this YC batch than there have ever been before. But I fundamentally think that defense is a theme because of Androl's success. And I think that we were fortunate to meet Androl early and partner with them, not because defense was cool or popular. In fact, defense at the time was the opposite of cool and popular, but because Palmer is such a unique founder. And so I think that by doing that early and seeing firsthand what can be built in

• 3:16Speaker 00

  defense as a startup, that actually informed a lot of the rest of our global resilience team, at which the defense is at the heart of it, and investments like Sironic, Nominal, and so on, came from.

• 3:28David Weisburd?

  By seeing Androl early, you had more of a prepared mind for the next wave?

• 3:32Speaker 00

  By having a front row seed to what they're able to do, it just changed our perspective of what can be done in defense and industrials.

• 3:39David Weisburd?

  Is there something that investor could do in terms of preparing for the next wave? Or is it just knowing where to focus your time and energy?

• 3:45Speaker 00

  This is kind of speaking to founders living at the tip of the spear, like living in the future. The best thing that you can do is meet the best founders early and see the world through their eyes and let them guide you to where the opportunities are. You know, I think the reason AI is a wave today is because of OpenAI. And so I think if you were looking at OpenAI in 2017 or 2016 when it was just getting started, it would have looked very weird. But Sam and Ilya and everybody else that was around the table at the time were such exceptional founders that you really wanted to bet on them above anything else, right? I think it's just important to meet those founders as early as possible and just like keep an open mind.

• 4:27David Weisburd?

  Same with SpaceX as well as Space Technologies, these category definers. Do you think there's a world where if OpenAI was not successful or SpaceX wasn't successful, the entire industry would not proliferate?

• 4:38Speaker 00

  If SpaceX was not successful, I think there would be no space industry today. Even the most successful space startups, whether it's Rocket Lab, which is public, or Stoke Space, which is private, and I think they are being built, and to some extent, I would even argue, Blue Origin, which Jeff Bezos funded, are being built on the shoulders of SpaceX. The other example I was gonna use, I actually, it's another Elon company. I think there would be no electric cars without Tesla. I think that Tesla, and like, not only no electric cars, I think there would probably be some self-driving cars, like Waymo's maybe would still exist. But Tesla is so far ahead on personal full self-driving capabilities that I just don't know that anyone would have gotten anywhere near it without them.

• 5:20Speaker 00

  So I actually think that Elon has pushed two industries that would not have existed otherwise.

• 5:25David Weisburd?

  To your point, I've developed this pretty strong conviction that seed done right needs to look like a generalist fund, should not be a sector fund. Why? Because all the returns in seed come from the next generation of startups. So by definition, if you're out there marketing a fund for 24 months, your thesis is already stale.

• 5:42Speaker 00

  This shows up every couple of years. Like, people will do AI funds, or cloud funds, or internet funds. And like, if you think about it, if you project to the future, like, if today somebody pitched you a cloud fund, you would kind of look at them like they're crazy. Or it's like, the idea of an internet-focused fund makes no sense. So I think thematic funds are always just like a point-in-time thing. Like, eventually, everything just becomes a good venture fund, and most great venture funds. I think if you think about the best venture funds, even outside of G C, they're almost all generalists.

• 6:09David Weisburd?

  Why do you think there's such a bias for these sector funds at the seed stage? Why do you think they exist?

• 6:13Speaker 00

  As an emerging manager, which is something that I did before joining G C, you're always trying to differentiate yourself. And one of the easiest ways to differentiate yourself is just say, "I'm gonna pick this one area that maybe is not popular today, and I'm gonna put a stake in the ground and become the expert in that area." And I think if you pick that area well, that will give you maybe like one or two years, or maybe two or three years of breathing room to just like run and own it. There were crypto funds, there were AI funds, there were probably internet and cloud funds before that. But I think that that is an advantage that is not durable. You'll have to get away from it, but it's a good way to start.

• 6:46David Weisburd?

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• 7:29David Weisburd?

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• 8:12David Weisburd?

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• 8:56Speaker 00

  I think that they can work at growth, like the closer you get to real growth, the more it probably starts looking like private. I do think that on the early stage side, it just has to be generalist. And if you're looking at it as an LP, like picking sector specialists at early stage is probably not the right approach. You want to pick people who are exceptionally good at finding exceptional founders.

• 9:18David Weisburd?

  Just to play devil's advocate, what oftentimes founders really fear at the early stage is having a large fund invest and then not follow on the next round. How does general catalyst, how do you solve around this problem?

• 9:31Speaker 00

  It's a great question. So I think what you're referring to is something that we usually call signaling risk. It depends on how the fund positions itself and how the market looks at the fund. There are a lot of peer firms of ours who really treat seed as a feeder towards series A. And what will happen is they'll invest in a bunch of seeds and then they'll cherry pick their best series As and they'll double down on them. And so then I think people will ask, well, like, what's wrong with the other companies? And that is the signaling risk. It's like if you did not lead the A round of your best company, by definition, it feels like you do not believe in that company. What we did is we, and this is unique to GC, because at GC, we have three partners who are running the early stage practice together, particularly focused on seeds. So myself, Jeanette and Niraj.

• 10:14Speaker 00

  And each one of us actually had our own seed funds before joining GC. So I had a fund called Wayfinder, Jeanette had a fund called La Familia, focused on Europe. Niraj had a fund called Venture Highway, focused on India, and they're all seed venture funds. And so we acutely feel like what it looks like on the other side of a large venture fund coming in and participating. And the decision that we made, pretty consciously, is we blanket said that we will not cherry pick any of our best companies at series A. We will buy ownership upfront at seed. We want to get around 10%. We'll invest, we'll partner, we'll do our parada at the A, but we actually will skip leading any of our seed companies rounds at series A.

• 10:57Speaker 00

  Because we just want to get rid of signaling risk. We don't want anyone to think that we're picking the best ones. And we've been messaging this in the market for the past year. We have this on our blog, on our website. We tell this to founders upfront. We tell this to co-investors. We tell this to LPs. And I think that that has really helped. It gives founders confidence that they're not going to have to explain to anyone what's GC doing because they can show it in black and white. It also helps when we work with peer firms that they know that when we're referring deal flow to them, there's no adverse selection in that deal flow. And I don't know that anybody else has done that. It takes a lot of confidence in partnering early to do that. And it forces you to not do any option checks early,

• 11:41Speaker 00

  which I think a lot of firms just haven't been willing or able to do.

• 11:46David Weisburd?

  A lot of people think this idea of signaling risk is overblown. I strongly disagree. And the reason for that is nobody has more information on a company than the existing investor. And to your point, especially if you have $43 billion and you're not following on to your company and you have that option, it's quite a bad sign.

• 12:04Speaker 00

  The way to think about it as a founder is if things are going exceptionally well, no one's going to care. If things are going exceptionally poorly, no one's going to care. But there is a big 80% in the middle where things are going fine. And it's not super obvious, but they're going reasonably well. And in those cases, I think people do care. And that is where we just want to completely kill all signaling risk. We don't want anyone to feel that we're cherry picking. We will support all of our companies to the extent possible. And so far, we've been doing this now for about a year, a year and a half, and it's worked super well.

• 12:37David Weisburd?

  A lot of top founders love to hire former top founders. General Callis has made the decision to bring in three people that had their own fund versus just worked at another firm. Was that a conscious decision?

• 12:47Speaker 00

  It was very much a conscious decision. And it's a better conversation for Hamad, who had made that conscious decision. But I think that stepping back, actually, GC fundamentally is a very entrepreneurial place. Beyond the fact that we have three managers who each run their fund, there's actually other companies that were incubating aside the management company. In service of the founders. And so I think that there's a lot of desire for an entrepreneurial mindset. And I think that if you had built your own firm before, then that is part of that mindset. The reason we did this specifically around seed and acquired three seed firms is SGC grew, a lot of the gravity because of the assets and the check sizes went towards growth.

• 13:31Speaker 00

  And I think there was a real desire to, on Haman's part and the team's part, to pull back the gravity towards early stage. And it felt that the best way to do that was to actually bring firm builders who wanted to build seed firms inside of the company and let them build the seed practice from, nearly from scratch, like reboot the seed practice inside of the company. And I think the best way to do that is bring people who are entrepreneurially minded.

• 13:55David Weisburd?

  So you guys are looking to do roughly 200 seed checks in your seed portfolio. How do you go about investing in 200 companies?

• 14:03Speaker 00

  The unique thing about GC is that we really operate as one global firm. Like there's no GC Europe or GC India, there's just GC. And so across GC, we have teammates who are in San Francisco, in New York, in London, in Berlin, in Bangalore. And all of us operate together. We're one team. We meet together every Monday morning as a single team. We're in one WhatsApp. We all collaborate on deals. And so we think that over the next like three years, we'll probably do around 200 seed deals, which I think averages out to about one and a half seed deals a week globally, right? And to give you context on that, that's about 15 people globally who are investing at seed.

• 14:46Speaker 00

  And so I think that from a cadence perspective and a relationship perspective and a management perspective, it actually is like a very reasonable amount of deals to do over a three-year period of time. And it actually is in line, we looked at the math on this. Like in Fund 12, we did, I think, right around 200 deals. So that's actually already what we've been doing.

• 15:03David Weisburd?

  You've already done it.

• 15:04Speaker 00

  We did this last time. And I don't know the exact number on Fund 11, but I think it's like right around there as well.

• 15:09David Weisburd?

  There's this heuristic in venture capital, which for the record, I don't subscribe to, which is every single investment has to return the fund. Does General Catalyst subscribe to this idea?

• 15:18Speaker 00

  So I don't know that it has to return the fund, but we definitely think of investments in the context of can they return the fund? And I think if you think of it in the context of like a four and a half billion dollar fund, right, if you own 10% of a company, you probably want to see like a 40, 50 billion dollar outcome to be able to return the fund, which sounds crazy. It's a very large number.

• 15:37David Weisburd?

  Especially at the seed.

• 15:39Speaker 00

  Well, I mean, 10% is 10%, but thinking about like a 50 billion dollar outcome for sure. It's very difficult to project. And so I do think that, and we have this conversation internally all the time around, like can a C check really move the needle? I don't think the money in matters. What matters is the ownership. And if you own 10% of a generational company, first of all, of course, you would love to own it at a lower cost of entry. And second of all, I think like we have the proof points that those businesses can materially impact and even return the fund. Not every deal has to do it, but I think that in every fund vintage, there's usually, whether it's G C or for other funds, there's usually like one deal that truly drives the fund.

• 16:22Speaker 00

  And sometimes even like if you could do crossover investing from fund to fund, it might drive multiple fund cycles.

• 16:28David Weisburd?

  I had a former partner at Founder's Fund. Say quite a counterintuitive thing, which is that the real power law outcomes don't necessarily look like power laws from the beginning, but you see a way to five to 10x and then they just start compounding. They find something out and they just start scaling. You've seen now thousands of investments as a venture capitalist. Do you look at power law outcomes as something that can be seen at the very start? Or is it just a matter of just constant compounding into great founders?

• 16:59Speaker 00

  It's a great question. I mean, I definitely think that you can never really like try and project out to a 50 to 100 billion dollar outcome. I think you can justify some crazy decision making if you do that. I usually try to imagine like what does the world need to look like for it to be a 100x investment. So if I invest like a $20 million valuation, I try to think of like, what does it need to be to be a $2 billion company? Or maybe after dilution, like a $4 or $5 billion company? I think that the reality is that the markets are so big now, and I think that's maybe one thing that we underestimated like 14, 15 years back, is that when these businesses are compounding, they can compound for a very, very long period of time. And so the businesses that 15, 16

• 17:43Speaker 00

  years ago, we thought would be billion dollar businesses, became $5 billion businesses. The businesses that we thought maybe could stretch to be $10 billion businesses ended up being $100 billion publicly traded companies. And that was unfathomable 15 years back. And so I don't think you need to underwrite to that, but you do want to find these founders who, you know, they'll get to the next phase and then they'll unlock the phase after that, and they'll just keep building these enduring businesses year after year after year and compounding at 30, 40% a year for a long period of time. At scale, ends up being a very impressive number.

• 18:18David Weisburd?

  Before we started recording, we were talking about the second order effects of everything going on the market. SpaceX going IPO, trading at a couple trillion dollars as of today. And what does that lead to? I recently had Matt Wiltire, who runs Growth at Wellington, talk about this disparity between the public and the private markets. So in the public markets, there's only four tech companies that are underwriting more than 30% annual growth in the entire world. So if you wanted to own Growth, you had to own one of these four companies. Now with SpaceX, there's five. In the private markets, even though people see these large rounds happening and these mass evaluations, there's still only about $350 billion being deployed on a yearly basis.

• 19:03David Weisburd?

  And if you start thinking about the second order effects, you have Anthropic, OpenAI, and other companies start to go public at a trillion dollars. You have ventures start to outperform the public markets, which for the last five to 10 years, actually, QQQ has outperformed most venture firms. But if you have this return to normal, where the top companies are staying private, they continue to outperform.

• 19:24David Weisburd?

  At some level, LPs are going to look at that and say, should I be allocating more into the private markets versus the public markets? If right now I'm 60/40, the most innovative endowments and some other investors are like 95/5, is there going to be more cycle into the private markets? And what will happen as a second order effect if more capital goes into the private markets? Companies could now stay private longer. SpaceX could do the next round as a private company. Anthropic and OpenAI could continue to do that. The reason Anthropic, SpaceX and OpenAI are going public is no secret. It's because they need access to more capital. Why do they want access to more capital? It's because there's not enough capital in the private markets. Already today, Q1 2026, 75% of all venture capital money globally,

• 20:08David Weisburd?

  venture capital has gone into five companies. So another way, if venture capital market was twice the size, each one of these companies could do an extra round. So if you look at it just purely from a capital market standpoint, forget about market size or total addressable market or GDP, take those all to the side and you just look at how long could companies stay private in the future? You're going to have potential for another 2 to 3x return on companies that previously were forced to go public.

• 20:35Speaker 00

  I definitely think that there's more and more money pouring into private markets. And there's a bit of a debate of like a lot of the money is concentrating in a few deals at the growth stage. And somebody actually like asked me recently, it's like, are there still early stage deals happening? I just kind of looked at them like they're crazy because I have, my calendar is just so full of early stage founders. I think that the effect that's really going to happen is obviously like early stage valuations will probably continue creeping up because some of the money will trickle, not just into growth deals, but it will continue coming earlier and earlier. And we already see that. And we saw that in 2021, there was a lot of what I would call tourist capital. So a lot of these growth funds or even in some cases hedge funds showed up and started doing seed investments.

• 21:19Speaker 00

  And there was no discipline around any valuation or pricing or anything like that. And valuations just ballooned and then like the moment the market corrected, they disappeared. And so I think you'll probably see some of that happening again just because of you're seeing these incredible private companies now IPO-ing at equally incredible valuations.

• 21:39Speaker 00

  I think there is a question for founders. Like, there are some founders who never want to run a public company. They don't want to do public earnings reports. They don't want to do like a quarterly report on a phone call. There's also some founders who they're dying to ring the bell. You know, they want to go on TV or like be on NASDAQ or New York Stock Exchange, and they want to celebrate with their team. I have at least one founder in my portfolio who like, for him, being public is the milestone. He just wants to get there. He thinks it's just like such an important milestone for the company. He thinks it will buy credibility to the company. There's like a lot of other things beyond capital that he's actually thinking about, because that company could stay private for as long as it wants. And so I do think that founders will have more optionality here, right?

• 22:23Speaker 00

  I think there are a lot of companies that are now, and maybe not a lot, but there's certainly a number of companies that are now in the $100 billion valuation range or even hundreds of billion dollar valuation range that historically would have been public by now, because there would have been no capital available to them privately. And now there is capital available to them, and we're like laughing at like Sirius, like how many letters are there in their Sirius?

• 22:46David Weisburd?

  That's topical with Sirius H.

• 22:47Speaker 00

  I think SpaceX had an even higher Sirius number. And Databricks has like an equally high Sirius number. But like, the capital is just there for them, right? And so I think that then they can decide when is the right time for them to go public? What is the reason to do it if it's not for capital? And some will decide to stay private forever, and some will decide to go public.

• 23:08David Weisburd?

  I talked to hundreds of people about this topic, about the private markets staying private versus going public. The best steel man on this argument of going private and continuously staying private is if you're acquisitive. If you're a company that needs to make a lot of acquisitions, having public currency do that is extremely efficient. You even saw SpaceX execute this with the cursor essentially with this promise of a public company. All things being equal, it does feel to me that the very best founders, whether Elon, Carlson Brothers, they- Think SpaceX year 24, they went public. They try to avoid the public markets as long as humanly possible in order to align all the organization around long-term thinking versus this quarterly thinking.

• 23:53David Weisburd?

  And I do find that to be a consistent signal alongside the very top founders.

• 23:58Speaker 00

  That's generally true. I also think there's just a lot more scrutiny in the public markets around M and A, not just from like a dollar perspective, but regulatory perspective. And that will probably, like, I think as companies stay private longer, I think the laws and the scrutiny will adjust there as well. There's a real question of like, if Adobe was a private company and they tried acquiring Figma, what would that have looked like a couple of years back? Would it have been the same scrutiny? But I think the laws there will probably catch up quickly. So that will not be a thing for that long. I think the currency question is the real of being able to use your equity dollar, like super, super liquid equity dollars. But at this point, I think a lot of the best private companies I've heard are doing quarterly redemptions for their employees anyway.

• 24:43Speaker 00

  And so I think that there's enough liquidity in the private markets for the best, best private companies, that that is becoming less of an issue as well, but probably not. You know, there's an entire cohort of these companies that are maybe in like the 10 to $50 billion range, which are very good, but will not have the exact same liquidity as they would have had if they were in the public market. So I think that a lot of that will still continue evolving over the next five, 10 years. I will caveat all of that, that like I spend all my time thinking about seed, where liquidity and public-private conversations are usually like 10 to 15 years away.

• 25:14David Weisburd?

  You've been a founder and VC for your entire career. What's compounded the most for you?

• 25:18Speaker 00

  The thing that compounds the most is relationship.

• 25:22David Weisburd?

  Does that mean?

• 25:23Speaker 00

  The valley is built on paying it forward for people. It's helping people not because you get something in return for it, but just because it's the right thing to do. And if you do that enough and you do it like out of genuine desire to help, and I've been on the receiving end of that help, where like people have helped me, where there was nothing for them in return. I think that builds strong networks and that builds dividends because you start getting deal flow, you start getting opportunities, you start getting introductions. This entire ecosystem is actually a very small ecosystem despite the companies it produces. And so I think that like investing in your relationships and doing that not in a transactional

• 26:08Speaker 00

  manner, but actually like in a deeply meaningful manner is the thing that pays the greatest dividends. There are people who have given me over the years, a lot of opportunities here where there really truly was nothing for them to gain from that other than just like taking a chance on me. Because of that, I've been able to pay it back to them in other ways, whether it's opportunities or introductions or something else. And I try to really like live my own life that way. Like I will take phone calls with people who reach out cold if it's something interesting, not because there's something specific there, but I just think that like this is how this entire ecosystem operates and I try to pay it forward for the next generation as well.

• 26:47David Weisburd?

  What have you changed your mind on the most in the last 12 months?

• 26:51Speaker 00

  I think that I was much more worried about the labs eating all software 12 months ago than I am today. The labs are entering many product areas and directions. Software development is becoming much more commoditized than it's ever been, but I think the reality of it is that there's still so much opportunity to verticalize within a product area or category. And the labs are just not going to do that. Like they'll offer some surface level solution that integrates well with their own chat products or their own APIs, but to really like solve workflows and deliver outcomes for a company

• 27:30Speaker 00

  or for a person, there's a ton of space between what a lab is implementing on their own and what the company or the person needs. And so I was much more worried, like 12 to 18 months ago, I was much more worried of like, what if any of this will be durable? And the thing that we continue seeing is that like these companies, whether they're building in legal or design or any number of coding, right? Like the cursor should not exist. In a lot of ways, in a world where like Codex and Claude Code exist like the and yet it's a $60 billion outcome. It's incredible. It's like, I think the largest private outcome of all time. Right? And so to me, that is validation to the fact that like even in a space where like

• 28:14Speaker 00

  the labs are like coming after it hot and fast and have incredible solutions. There's still, because the markets are so large and people have preferences and taste and preferences in the way that they want their solutions and outcomes delivered. There's room for other players to come in and we see this now in open source. I'm just using coding as an example. And we obviously saw this with Cursor and so on. So I really am like much, much more bullish on standalone companies like versus 12 months ago.

• 28:40David Weisburd?

  It reminds me of the quote that the only thing that has really changed the world is a small group of committed people. If you get a small group of highly intelligent, highly committed people like at a company like Cursor, they could actually head to head compete against maybe a larger group less committed to that specific vertical.

• 28:57Speaker 00

  Absolutely. I mean, I think that the most glaring example here is not even Cursor. It's OpenAI and Anthropic in the sense that the transformer paper was actually created at Google. Right? Google had it. Google had all the resources, all the compute, everything that they needed to win the space. In a lot of ways, like OpenAI and Anthropic had no right to exist in the face of that. And Google missed, right? And instead you had first OpenAI with a tiny team being able to build a product that competed with Google on day one. And then you could have said the exact same thing. It was like, okay, well now OpenAI is one. And then Anthropic comes along and does the exact same thing and does it at an even faster pace. So I think that's absolutely true.

• 29:39David Weisburd?

  Oh, Yuri, this has been absolute masterclass. Thanks so much for jumping on.

• 29:42Speaker 00

  Thank you for having me.