General Catalyst's First-Ever Quarterly Review | CEO Hemant Taneja

Hemant Taneja, CEO of General Catalyst, joins Sourcery to unpack GC's first-ever quarterly Review. We cover why he wrote it, the state of GC's $43B ecosystem, why the software buyout model is broken, Anthropic's Series G at $380B, the $5B India commitment, buying Summa Health in Akron, the Anthropic–DoW controversy, Mythos and Project Glasswing, Nikesh Arora joining the board, and his take on "Tech Lash 2.0." Plus: Is GC going public? HUGE thank you to Deel Co-Founder & CRO Shuo Wang for the introduction to Reggie & the GC team, I am SO happy we were able to make this happen so quickly! What a treat. 🔗 Read the Q1 2026 Review: https://hemant-taneja.com/ #VentureCapital #GeneralCatalyst #HemantTaneja #AI #Anthropic Hemant Taneja: https://x.com/htaneja Molly O’Shea: https://x.com/MollySOShea Sourcery: ⁠https://x.com/sourceryy 𝐄𝐏𝐈𝐒𝐎𝐃𝐄 𝐋𝐈𝐍𝐊 YouTube: https://youtu.be/hWI258ZHbxE 𝐒𝐏𝐎𝐍𝐒𝐎𝐑𝐒 • Brex https://brex.com/sourcery—The modern finance platform, combining the world’s smartest corporate card with integrated expense management, banking, bill pay, & travel. https://brex.com/sourcery • Turing https://turing.com/sourcery—Turing delivers top-tier talent, data, and tools to help AI labs improve model performance—and enables enterprises to turn those models into powerful, production-ready systems. https://turing.com/sourcery•VCX https://fundrise.com/vcx—VCX is the public ticker for private tech, allowing investors of all sizes to invest in venture capital. View The Portfolio athttp://GetVCX.com http://getvcx.com • Deel https://www.deel.com/sourcery—Deel is the global people platform that helps startups hire, manage, pay, and equip anyone, anywhere. Trusted by more than 35,000 fast-growing companies, Deel is the people platform that just works, so teams can scale without the chaos. Visit: https://www.deel.com/sourcery • Public http://public.com/sourcery–Investing platform Public just launched Generated Assets https://public.com/generated-asset, which lets you turn any idea into an investable index with AI. With Generated Assets, you can build, backtest, refine, and invest in any thesis with AI. Gone are the days of one-size-fits-all ETFs. https://public.com/sourcery https://public.com/sourcery • Merge https://merge.dev—The leading provider of customer-facing integrations and agentic tools for frontier LLMs, Fortune 500 organizations, and B2B SaaS companies. Visit https://merge.dev Follow Sourcery for the latest updates! https://www.sourcery.vc/ Disclosure Paid Endorsement. Brokerage services by Open to the Public Investing Inc, member FINRA & SIPC. Advisory services by Public Advisors LLC, SEC-registered adviser. Crypto trading provided by Zero Hash LLC, licensed by the NYSDFS. Generated Assets is an interactive analysis tool by Public Advisors. Output is for informational purposes only and is not an investment recommendation or advice. See disclosures at public.com/disclosures/ga http://public.com/disclosures/ga. Matched funds must remain in your account for at least 5 years. Match rate and other terms are subject to change at any time. 𝐓𝐈𝐌𝐄𝐒𝐓𝐀𝐌𝐏𝐒 (00:00) Hemant Taneja, CEO at General Catalyst (01:21) Present state of General Catalyst (05:08) Seed, Creation & the Customer Value Fund (06:54) The purpose behind GC’s quarterly review (08:53) What good tech journalism looks like (12:26) The biggest AI themes right now (15:06) How AI is changing investing decisions (19:25) Why seed and Series G require the same conviction (22:55) Why does he holds two titles at once? (25:17) Why Silicon Valley glorifies the wrong founders (27:52) Building an AI-native hospital (30:20) Managing funds through bubbles and hype cycles (33:13) How funds sell ownership stakes (34:59) Why the software buyout model is broken (38:44) Vista's new software buyout debt fund (39:20) Global Resilience vs. American Dynamism (41:49) GC’s $5B bet on India (45:48) What global investing teaches you (47:09) The four forces of tech lash (50:12) Anthropic and the Pentagon (54:06) Is GC going public? (55:26) The Puka shell necklace era

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

• 0:00Speaker 00

  If you look at Nvidia adding a trillion dollars of market cap in a hundred days, when was the last time that was happening? We're gonna have companies that are routinely trillion dollar companies. The natural gravitational pull is that a lot of that scale is gonna get concentrated in a handful of companies. At General Catalyst, we don't believe that's ultimately what's gonna create the most inclusive, prosperous, sustainable world.

• 0:19Molly O'Shea?

  People are saying we're in a bubble again. How do you think about the fund management of that?

• 0:23Speaker 00

  When COVID happened, we were the first firm to go to the LPs. And we wrote down our portfolio by forty percent proactively for no other reason than saying, this is not real.

• 0:31Molly O'Shea?

  Why did you write a review? Why did you start this now?

• 0:34Speaker 00

  So, we are in an incredibly fast-moving world. If you look at pace of innovation in software, which is the core of what our industry has supported for a long time, extremely rapid. If you think about geopolitics, extremely dynamic. And I think we have a system in our industry which is very addicted to provocative tweets and messages in general. And a lot of that generally skews us towards taking very polarized views. Because the stuff that amplifies in the world tends to be very black or white. And the progress gets made in the gray. And so, we're forcing ourselves to take a step back.

• 1:04Molly O'Shea?

  One of the hot topics around Silicon Valley is General Catalyst's potentially rumored IPO.

• 1:20Molly O'Shea?

  So, I've heard two people pronounce your name completely differently. Is it Haymont or Hemant?

• 1:26Speaker 00

  Haymont.

• 1:27Molly O'Shea?

  Haymont? Is that right?

• 1:28Speaker 00

  The actual pronunciation is Haymont.

• 1:31Molly O'Shea?

  Haymont?

• 1:31Speaker 00

  Haymont.

• 1:32Molly O'Shea?

  Haymont?

• 1:33Speaker 00

  Yeah, there you go. You call me HT. How's that?

• 1:36Molly O'Shea?

  Okay. HT, welcome to Sorcery.

• 1:39Speaker 00

  Thanks for having me. And congrats. It was interesting to hear about all the progress you've made about your own business. Congrats.

• 1:45Molly O'Shea?

  Thank you, I appreciate that. Well, today, we're at the top of the General Catalyst Tower in San Francisco.

• 1:52Speaker 00

  The sun blowing at us.

• 1:54Molly O'Shea?

  The sun is out and shining. So, I also heard that you opened up a new New York City office. So, what's going on there?

• 2:02Speaker 00

  Well, we've been in New York for almost fourteen years now. And we have been growing. And I think, as you know, one of the teams now at General Catalyst is this company called Percepta that's focused on

• 2:18Speaker 00

  Driving transformation of enterprises. And it was really important for us to co-locate all of our teams in the same place. So GC's now got a much bigger space in New York where one floor is actually engineers and they're building lots of cool stuff. I'm sure we'll talk about that and then we have our investment team and it's really designed to be welcoming for founders and be sort of a builder environment in general.

• 2:43Molly O'Shea?

  I want to talk about the state of General Catalyst today. So you're now called a company. I know this has been in motion for a bit and you recently just put out, I don't know if this will come out on the day of when it gets launched, but your quarterly review. So if you could map out for people who aren't aware of the wide-ranging structure of General Catalyst, can you share all the different buckets and the strategies that you cover?

• 3:11Speaker 00

  Yeah, so what are we focused on at General Catalyst? You know, if you think about the accelerated role of technology and the way the industry's evolving, like one of my, one of my most interesting observations coming into this year was, boy, we have to rethink what scale means, okay? And, and I say that because, you know, if you look at Anthropic, adding $10 billion of revenue a month, when was the last time our industry was dealing with that? Or if you look at Nvidia adding a trillion dollars of market cap in 100 days, when was the last time that was happening? A trillion dollars? We're going to have companies that are routinely trillion dollar companies.

• 3:53Speaker 00

  And so I sort of take a step back and think about, in that level of scale and frankly, the transformation of the world with AI, if we're driving resilience and abundance, the natural gravitational pull is that a lot of that scale is going to get concentrated in a handful of companies. At General Capital, we don't believe that's ultimately what's going to create the most inclusive, prosperous, sustainable world. You hear about phrases like techlash and whatnot. So we sort of say, what are we here to do? We're here to empower founders to create power law companies that essentially create a kind of concentration architecture for innovation.

• 4:37Speaker 00

  And when we start to take a step back and think about that, we say, okay, what does our company, really an ecosystem, which is more, I think about it, as than even a single company? What does it need to look like to drive the world towards that kind of a vision? And so, you know, when we talk about the different pieces that we have in our business, they all come together towards that true north of, you know, meeting founders where they are, helping them build power law companies, and then do it in a way that creates an inclusive, sustainable world.

• 5:07Molly O'Shea?

  So you have a seed strategy.

• 5:10Speaker 00

  Yeah. So if you want me to list those out, so first of all, you know, at our core, I think of ourselves as the largest seed venture capital fund. Our venture fund is essentially a seed fund. It's run by, you know, three senior partners, Yuri, Heron, Veeria, Jeanette in Europe, Niraj, who covers India for us, and they together really shaped the arc of our venture capital strategy as seed at its core. You know, I think that's a very different way of looking at a commitment to supporting founders at the earliest, most ambiguous stages than organizations of our size. And we just sort of committed to saying that's what our core is going to be.

• 5:54Speaker 00

  Then we have our creation strategy. You've had Mark on the show, and we have really architected a strategy to build companies, to transform companies, and I think that gets applied both in the context of global resilience and in the context of transformation with AI. So all the AI rollups you've heard of, if you look at some of the moonshots we're doing and some of the manufacturing work we're doing, a lot of the hands-on building work gets done in the creation strategy. Then we have Customer Value Fund, which is the first investment-grade rated product in our industry.

• 6:33Speaker 00

  And it's really focused on helping companies figure out how to create hypergrowth. You know, once they figure out their businesses. And so those are sort of the three core products. And sort of when I think about it, almost a capital solution for founders, so that we can help them with increasing odds to become a power law company.

• 6:53Molly O'Shea?

  Why did you write a review? Why did you start this now?

• 6:57Speaker 00

  So we are in an incredibly fast-moving world. You know, if you look at the pace of innovation in software, which is the core of what our industry has supported for a long time, extremely rapid. If you think about geopolitics, extremely dynamic. And I think we have a system in our industry, which is very addicted to short provocative,

• 7:25Speaker 00

  you know, tweets and messages in general. And a lot of that generally skews us towards taking very polarized views. Because the stuff that amplifies in the world tends to be very black or white. And the progress gets made in the gray. And so a lot of what I'm forcing myself and, you know, we're forcing ourselves to do is take a step back. Don't be sort of too in haste in trying to make sense out of the world. Instead, rather than putting out lots of thinking, sort of in a sort of regular stream, high velocity, why don't I take a step back once a quarter and say, what happened?

• 8:07Speaker 00

  How do I make sense out of this in the context of the progress we're making in society? Where do we think the world needs to go? Are we doing the right things? And then share that as sort of a... More thoughtful way of looking at each quarter versus just being in this this stream that I think our industry and frankly were increasingly addicted with social media, which tends to be, you know, quixotic messages for getting reactions and tweets and virality. And a lot of times aren't even views that people really believe. I think those are just ways to get people's attention. We're so starved for attention that we're often saying things that are just not not as an ecosystem helping us make sense out where the world's going and how do we shape it.

• 8:53Molly O'Shea?

  What are the messages that you want to see as headlines?

• 8:58Speaker 00

  Well, I think what I want to see is understanding the capabilities of technology and understanding how do we use them to drive resilience and abundance and what progress are we making towards that. I want to see early sort of signs of where things could go wrong. So it can be intentional about, you know, how do we shape the arc of adoption of technology. I, you know, want to see us sort of sharing a learning as opposed to either doomsday mindset of the world's going to fall apart or that, you know, everything's just going to be tremendous. You know, Patrick, I mentioned this in the review, Patrick mentions

• 9:43Speaker 00

  beneficent singularity. And, you know, I do think AI brings a lot of advantages and positivity. But if it concentrates opportunity in the hands of very few, then it also brings instability in the end because that's not what society is going to reject that. So I think we need to think about how to really diffuse technology and AI in this through the next phase in a way that's good for everybody. So I want to see us seeing where that's breaking. I want to see where it's working so we can lean into it more and essentially become a movement there. Every one of us is working towards driving that as opposed

• 10:23Speaker 00

  to just, I mean, I just think it's it's it's chaotic, it's petty, and it's not

• 10:37Speaker 00

  It's not helping us as an industry rise up to the occasion of what's at stake. I think we're gonna make progress in the next 10 years for centuries to come. I think we should step up to that and really do it right. Because it's gonna be for all the generations that follow us, it's just gonna impact them.

• 10:54Molly O'Shea?

  So where do you find those signals?

• 10:57Speaker 00

  It's a great question. So I, look, I try to spend time with technologists as much as I can. We are working in the bowels of a hospital and we are working on transforming other, you know, existing businesses. And I'm very focused on can we learn from what's happening on the ground? I think, and we mentioned Precepta earlier, I actually sat down with them at the beginning of, as they said in this review, in the beginning of the year to say what changed in how we actually develop software. And literally, this is a team that's been around for 15 months, they're some of the best engineers. And they said literally almost everything.

• 11:40Speaker 00

  And for a organization like that, that's that young, to say they have to formally transform how they think about taking advantage of software to solve problems and helping, you know, companies drive their AI transformation. That was profound. I was like, wow. If they are having such profound changes, think about the rest of the world that needs to get their arms around this technology and how much help they need. And so I just think sort of being closer to the mindset of being a builder as opposed to just capital allocator is something that I am trying to push myself to and frankly, all of us at G C, because that's how really we're gonna get a feel for what the possibilities are in our shape.

• 12:26Molly O'Shea?

  So the review starts out with AI because you can't start anywhere else.

• 12:32Speaker 00

  I mean, look, I think when you think about AI, the big things that are happening, the

• 12:40Speaker 00

  The progress that's happening in how fast technology is being developed is incredible. The progress in the capabilities of AI models, I mean, you know, we put out some research from a Percepta team that's in the review as well, where LLMs are just getting a lot smarter. I think this profound sort of understand those capabilities evolving. I think it's important to see the profound adoption that you're seeing with, you know, Anthropic, for example. So the capabilities of these models and how rapidly they're changing is pretty profound. And then it has an impact on the existing software industry. And it's sort of thinking through, well, boy, what's going to happen to a lot of the

• 13:24Speaker 00

  companies that we are supporting, a lot of the founders? You know, how do they take advantage of this? And where is there a risk in how we think about the value, both financially and technologically? And what is sort of the new world going to look like? So I think there's, there's all these, these conclusions you have to derive on the basis of all the changes that are happening. And, you know, you have, you obviously have, you know, interesting questions like Anthropic dealing with the Pentagon that happened and, you know, what are the right ways to do this? Metoo sort of got launched, we knew about this, you know, several weeks before the models were launched, but what do you do with the technology that's that button?

• 14:06Speaker 00

  Like, what's the right way to bring this to market? And I just think it's a little ironic because the same people that, you know, a few years ago would say, we need to be completely open and let technology be diffused fast, would say, is Anthropic being irresponsible in, in putting Metoo's out when they were also accused of being too safety native? It's just, and this is my point about just how do you, people saying things that are provocative but not really thinking deeply of what's the best way to bring these technologies to market and the intentionality required to do that? That's all, by the way, the last 90 days, right?

• 14:48Speaker 00

  And, and so it's just the pace of progress and the complexity of what we have to deal with societally, technologically, financially, and how we think about creating value. I think, I think our industry has, has to really, you know, build a lot of new skill sets to do it right.

• 15:06Molly O'Shea?

  So I want to get into the Anthropic part a little bit later, but in terms of how this is, and even with Percepta, how is this?

• 15:17Molly O'Shea?

  Like, what are the implications on the investing standpoint? Like, how does this impact your investing decisions?

• 15:25Speaker 00

  Yeah, it's been really interesting three years. The thing that is remarkable is

• 15:35Speaker 00

  that it was completely unclear where the value is going to be very early on. And, you know, are the models going to commoditize? Or even if they commoditize, are they going to be, you know, really valuable? It wasn't, it wasn't clear when the ChatGPT moment happened in November 2022.

• 15:52Speaker 00

  How is it going to diffuse in the, in the enterprises? It wasn't really clear. What is the role of hyperscalers and are there going to be AI clouds that emerge? It wasn't really clear. And then how much are the models going to do versus what a big part of the Valley startups have been traditionally, which is enterprise infrastructure? Are the models going to gobble up a lot of those capabilities? And so I think when you fast forward, it's a lot clearer. And, you know, we've been fortunate that, you know, we, we, we made some investments in the nuclear cloud area, so Together is an example of that, doing very well.

• 16:33Speaker 00

  Anthropic obviously has been a great company that came from behind, but has a, you know, a strong leadership in the market in the categories that it cares about. From a, from a model perspective, we also did Mistral in Europe because sovereignty does play, going back to how is technology going to diffuse and how do you really make sure opportunity federates around the world? And, and then the question is sort of on the applied layer, you know, we've sort of led the wave around these AI rollups where the thesis was everywhere we offshored for labor productivity, we're now onshoring back with AI. And so, and, you know, as mentioned earlier, you've had Mark on the show, I think we've gone and really industry by industry, sort of thought through where will technology

• 17:19Speaker 00

  effectively diffuse, create efficiency and then also a way to drive abundance for the customer base of these companies and gone and built a pretty strong portfolio there. So I think it's been. A lot of zigging and zagging, a lot of doubt. But in the end, the founders have led us. It is a pretty interesting stack that becomes the next generation AI-native stack for how we're going to diffuse intelligence and we're going to have businesses, you know, capture value and turn their secret sauce into, you know, economic advantages in the next wave.

• 17:55Molly O'Shea?

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• 18:40Molly O'Shea?

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• 19:25Molly O'Shea?

  I'm curious how you hold all of these different types of investment strategies together at one. So in Q1, you wrote in here that you invested in 20 seed companies, but you also invested in Anthropic Series G. So how do you hold the weight of those together?

• 19:44Speaker 00

  Well, I think that's in part cultural. We're not laser focused, whether we invest at seed or we invest in the latest round of Anthropic or anywhere in the middle. It's very much about are these founders that are building companies that have the potential to be power law companies? Can we bring unfair advantages to them to be highly successful? And do we believe there is extraordinary compounding opportunity from the moment, the point we got in? And so those criteria and the characteristics of those companies don't really change when you go from seed to late stage. You're still believing in that there is incredible appreciation

• 20:29Speaker 00

  and compounding and venture return from when you're entering. And that's just frankly, the fact that we can say that and write a large check into a company at a multi-hundred billion dollar valuation just speaks to the concentration of the opportunity behind certain kinds of companies. But our ethos is very much focusing on the best founders, making sure as long as our values align, we're going in to go build power law companies. That shouldn't change. We do have people that really dedicate themselves. As I mentioned, we have a team that genuinely cares about making sure our venture capital fund is seed first. And seed first doesn't mean writing lots of $3 million option checks.

• 21:11Speaker 00

  Seed first means having a mindset and a commitment to supporting founders at that stage where they're the most vulnerable and there's a lot of ambiguity and giving them everything they need to navigate that ambiguity. So it really does, it has forced us to really rethink how we're going to create the experience for them. And we give Jeanette, first of all, who is our president, a lot of credit for really pushing that when we brought La Familia in and then Yuri and Niraj, when they brought their firms in and we sort of put together a whole global way to support seed, they just really lead with those values. And, you know, Mark and the work we do at Creation is very much that.

• 21:53Speaker 00

  If the idea is that we're going to go be essentially co-founders with a team and pick on a thesis that we jointly believe in and go do a roll-up or hatch a company like Hippocratic AI we did in healthcare, we're just going to lock arms, we're going to go build together. And, you know, it's a very different mindset, but it's again towards solving some massive problem. So that common thread is alignment on values and the belief that we're going to build companies that again fit in our overall thesis and get to significant scale. So that does bring us together. We align economics, you know, across all these funds with the whole team. We don't have a US fund and a Euro fund and India fund.

• 22:38Speaker 00

  We are global in everything we do and we're one team and everybody participates equally. And then so everybody's got a place where they own the responsibility of building out the firm's investment capabilities and then and places where they participate.

• 22:53Molly O'Shea?

  You hold a very uncommon title in the world of venture capital. You're the CEO and managing director. So how does that lead into decision-making for these investments? Are you the last person? Do you have the check writing, decision-making power for all of these?

• 23:13Speaker 00

  Yeah. So there's a reason why there's two titles. And internally, we're not big on titles. We just want to make sure we back people with the greatest amount of conviction and we follow their conviction in the way we do our investment work. But the role as a CEO is to, again, orchestrate that ecosystem I described at the beginning of this conversation. But the way we make investment decisions is, you know, the seed team, any two partners can do a seed. People push each other's conviction and we're very lightweight process. And later-stage investments, we just wanna see anybody, doesn't matter how, what their tenure is, tee up ideas with conviction.

• 23:55Speaker 00

  And my job is to make sure people are doing the right level of thinking and addressing questions that others have, so that the conviction passes muster. I think if we start making investments only where I believe success will be created, that would be hubris on my part, and there'll be lots of missed opportunities. And so it really is, you know, giving everybody who's got conviction the courage to leap forward and lean in, make an investment, and then own it, is really what I think creates the best return. So it's like, you know, GC's a really interesting ecosystem, because in that venture capital

• 24:35Speaker 00

  part of our business, we still continue to need to run like a partnership, and a conviction-oriented partnership, not a dictatorial partnership. And then we have other parts where, you know, we need to run with the rigor of a real company, with OKRs and goals and, you know, financial planning, and the key is to have an ecosystem architecture, and this is something that's very much work in progress. Because I view us as just another startup that's trying to be an important institution in this next phase, sort of creating that architecture that allows for these entrepreneurial souls to go do their best work towards that, you know, adoption of AI that we're talking about.

• 25:17Molly O'Shea?

  You've experienced 25 years of Silicon Valley hype cycles. So how has your leadership changed throughout the years until now? I mean, before the cameras started rolling, we were talking about Anthropic and their hypergrowth, and how they pretty much reached a year of growth in one quarter. So how do you balance all of that for yourself?

• 25:34Speaker 00

  I think I've aged and matured and become sophisticated, but KB here would say I'm still a 22-year-old leadership founder in a 51-year-old body, so the answer's probably somewhere in the middle. Look, I think the idea of leadership, I've been very fortunate to have Ken Chenault as our chairman. And, you know, Ken joined in 2018, and he's been really deeply working on not only creating succession in the business, but help us think through architecturally what does this ecosystem looks like, and taught me a lot about servant leadership. And servant leadership, again, is in service of making sure everybody here is successful, but then also to make sure GC is in service of the world.

• 26:15Speaker 00

  And so, sort of, leading with humility and curiosity and ambition and, you know, trying to create a legacy-defining company, that is something that, you know, I deeply care about. I deeply care about values. Those are not just words. We want to live them. I deeply care about making sure we're kind. One of the things I write about in this review is that kindness and ambition are not at odds with each other. I think in Silicon Valley, we try to glorify the asshole symptom of founders, thinking that's almost a necessary ingredient to succeed, and I don't think it has to be that way. And so, you know, we're creating a culture where we can have a team where everybody feels

• 26:57Speaker 00

  like they're doing their life's work and they can be entrepreneurial, you know, in the GC ecosystem. I think, you know, for somebody like a Hersh to come, Hersh and Atul to come and, you know, co-found Percepta with me, or Jeanette to drive European transformation on the GC platform, or Paul Kwan driving global resilience work on the GC platform, like, they have to breathe. They have to be able to execute their own vision and values, which obviously has to be consistent overall for where we're going. And, you know, my job is to empower them. And so, a lot of my focus is on how can everybody here be the best

• 27:42Speaker 00

  version of what they can be to create the change that they care about that's aligned with where I want the world to go. So, that's the leadership, sort of, you know, philosophy.

• 27:51Molly O'Shea?

  You're one of the most innovative funds or companies, I guess, in Silicon Valley. So, how do you keep getting buy-in from LPs on these new ideas? Like, how do you get buy-in on buying a hospital? Like, how do these ideas develop and how do you get the support around them?

• 28:09Speaker 00

  It's a great question. And I think the...

• 28:15Speaker 00

  Main message I've communicated to LPs, but to our whole familia, as we call it, is everything we do is to meet founders where they are and give them powerful advantages. So when we buy a hospital, if you go to Suma today in Akron, Ohio, we have seven of our companies and the Percepta team and our own investment team that's literally there all the time, trying to figure out how to take this community hospital that in all odds will go down the path of being another bankrupt health system in this country to become an AI-native hospital, okay, to drive abundance, to actually be economically viable so that we can take care of our community where it's been for over 100 years.

• 28:58Speaker 00

  And so that, you know, when LPs hear that, what do they see? They see that we're getting on-the-ground help, work experience, understanding where the problems are. Our companies are getting enterprise-wide experience to go deploy AI, and society's getting potentially a model for how health assurance, which is what I call it, is proactive, affordable, accessible care, can be deployed all around US and hopefully at some point around the world. If that's not the way to create the best enterprise value in our companies, I don't know what is. So I strongly believe that, you know, all the innovation, and frankly, you know, Ken

• 29:38Speaker 00

  told me in 2018 to write a three-year strategy, which we'd never done before, and now it looks like nothing like what I wrote. And he also said to me, great strategies are built in hindsight. I think we follow our intuition. We have our values, we have our true north, and all these innovations that look crazy at the time end up being consistent with the values. And, you know, some experiments will fail, but some are gonna go be huge enablers for these founders to go change the world. That's, that's the reason they should pick us, and that's the, that's the place where I wanna invest our, our revenue that we make as a business is to go, you know, create these advantages for the founders. When LPs see that, they, they understand it.

• 30:20Molly O'Shea?

  And then how have you thought about fund management through these cycles? People are saying we're in a bubble again and at the last bubble and even through ZIRP, funds were selling off to secondaries or just trying to get some liquidity for DPI. But when you think about maybe hyperinflated assets or companies, how do you think about the fund management of that?

• 30:41Speaker 00

  It's a great question. It's a very hard question. I'll tell you, the way this industry has traditionally operated is, let's hope a couple of our companies hit the power law. We return the fund a few times over and the rest will take care of itself. That's been the model. The sophistication to actually learn how to exit companies, most people in this investment business aren't very good at it. Many people in our team are also just learning to do that. But the problem with thinking that way is, maybe there's a couple of founders that hit the power line, become profound companies in a fund cycle. But what about the other 10s? They also are doing important life's work. And so how do we get them to create enterprise value?

• 31:25Speaker 00

  How do we get them to endure? And how do we get them to create value? So our innovation philosophy is like figuring out how to do that. And then what I really do push our team is that every one of us has that responsibility. Writing a check into a company is a privilege for everybody around the table at GC. Creating economic value on the other side and societal value is the actual job. And that is a cultural transformation and a journey we are on to say, we need to be able to help our founders do that. We've built a lot of effort around it. The last thing I'll say is, what happens in bubbles is your companies get incredibly valued.

• 32:08Speaker 00

  And it screws with your mind as investors because you think you're great because you got paper gains. And it screws with the LP planning because they have these inflated valuations that impact how they do capital planning. So it's not good for anybody. So when COVID happened... We were the first firm to go to the LPs and we wrote down our portfolio by forty percent proactively for no other reason than saying this is not real. We got a lot of credit from LPs when we did that. When the chat GPT moment happened, we went back company by company and said, what is the actual reality we believe in? And we're going to course correct and say that's what the value is of our businesses and the NAV of our portfolios. Now we're going to manage from there. So I think just being intellectually honest, rigorous, and making sure we acknowledge

• 32:51Speaker 00

  that a huge part of the job is to drive economic value is something that has to be how you manage your funds. I don't think it matters if there's a bubble or not. Bubbles are actually great for us. No bubbles, then you also don't get, you know, a company, companies that really make fast progress and generate outsized returns. But this philosophy has to be enduring in how you do the work.

• 33:12Molly O'Shea?

  There have been some funds that have notably sold portions of their GP, whether it's Thrive, Insight. Have you thought about that? Is that something that you've done? And maybe for people who don't know what that means, could you explain what selling some of your GPs?

• 33:26Speaker 00

  So, selling a portion of the GPs, usually what you do is you sell a slice of your fees and carry that you get from funds. And there are many reasons why people do that. You can do that because the, when there's a succession, new partners want a mechanism to buy out old partners. Sometimes you need to do that because you need capital to invest in the business. So there's many reasons. So it's a, the wrong reason would be if you do that to take capital off yourself because then you're misaligning with your investors. Okay? The investors gave you money, carry has some value, you sell it to the third party, monetize, but your investors didn't. That would be a problem. So, we did do this, by the way. We did it in 2018 with Peters Hill.

• 34:11Speaker 00

  And the reason we had done it was because we had decided Right when, around that time that we're going to scale to have the kind of capital needed to build companies in this generation. And, you know, I think a few firms went down the path of you're going to need platforms. And by the way, whatever scaling we did, it seems anemic compared to what these companies did in terms of capital today. But we, we needed to do that to scale. But then we also did buy that relationship back, you know, a couple of years ago, once we got through the, the scaling capital needs. And so, yeah, I mean, I think it's a much more common practice outside of our industry than in venture, but, but some of the firms that did try to scale, they did go do that

• 34:55Speaker 00

  and, and, you know, there's, there's been reasons for it.

• 34:59Molly O'Shea?

  One of the fun topics you talk through in this was how the software buyout model is broken. Can you walk through the math around that? So even if a company scales and gets to 50% EBITDA, they could still be a loss to LPs.

• 35:14Speaker 00

  Yeah, look, so in private equity, there was, there has been a circulation of assets. A P firm buys a company, they buy it on the idea that, you know, we're buying it on a certain multiple of EBITDA. We will lever that EBITDA so that the amount of equity we put in that business is, let's say, a third and two thirds is debt. We'll double the EBITDA and then we'll sell the business for, let's say, double the price on the same multiple. We do double the price, you pay the debt back, you actually could make a, you know, four, five X return on your equity in, let's say, a five-year period or how long it took you. Good return, it's probably a little less than that, but let's say it's a good return.

• 35:59Speaker 00

  And, and then somebody else buys it. But this happened because there's this assumption of a terminal value on those multiples in these businesses. So now think about the reality today. If you said the, the multiples of these businesses are going to compress significantly. If the multiples went from 15 times revenue to three times revenue. And your business doubled, you're still valuing the business for a lot less. I give an example on this in the review than what you paid for. So your equity has actually never recovered in that case. Why? Because the assumption of terminal value is gone.

• 36:40Speaker 00

  In the world of AI today, where code is self-writing, to say that a piece of software in a company that has been existing, let's say, five years, the free cash flow on that is worth 30 times means you're going to have 30 years of generating that free cash flow is what you're paying for. How can you ever make that assumption when technology is changing so fast to say these things are that durable? So when you start saying these existing pieces of software are not going to be worth that much, then that exit math of terminal value as the way to make an investment and make money completely goes away. Now, that exit math in terminal value exists in software. It doesn't exist in a lot of the other non-software industries.

• 37:25Speaker 00

  In those industries, you've always looked at our business on a free cash flow basis. A business is worth a certain amount on a free cash flow multiple, and we're going to create structures to monetize on free cash flow basis, not terminal value. I think software is just now maturing to a state where it's going to have the same dynamic. And there's a one-time massive reset that's going to happen because of the amount of leverage in the system. And there's a lot of leverage coming due in these P VAC companies in the next five years. And in many of those companies, the equity value will certainly not exist. Some of them may not even recover their debt because the compression of multiples is so large. And by the way, that does not mean those are bad businesses. That just means they were badly priced

• 38:09Speaker 00

  in the context of where the value really resides in this new reality. And so you'll see other opportunities on how to create value on those companies as well. So you're already seeing venture capital gobbling up. PE businesses, if you get a lot of what Mark and Madhu and our team is doing in creation, we're buying some of these things from PE firms. We're buying them for not a lot and we'll arb them into AI transformation and maybe there's a way to create outfits. I think you'll see interesting structures and interesting approaches to take these businesses and figure out how to create value on the other side of this erosion of terminal value.

• 38:44Molly O'Shea?

  What do you think about Vista's new software buyout debt fund?

• 38:48Speaker 00

  It's small. That was my first observation, like $250 million, but I think they're probably dipping their toes into the water around this idea that there's a lot of stress assets and they get software, they're a great firm. They get software well and they're probably thinking about how can we design these new structures and start playing. So I bet that could become a larger strategy for them. If they figure out how to go from terminal value to pre-cash flow basis of creating value in these businesses.

• 39:19Molly O'Shea?

  One of the very unique things about General Catalyst has been your global growth. There are other funds that like to tout American dynamism that kind of baskets this national interest, but you have global resilience. So why did you choose global resilience as a strategy?

• 39:38Speaker 00

  Yeah, I guess a few things. I think global TAM, last I checked, was bigger than the American TAM. So it allows us to play in a bigger market. It comes down to our values. We believe in inclusive prosperity. So if we're going to have AI diffuse, we want to make sure it's captured all around the world. It's genuinely something we care about. And the other thing is, if you think about our two trends, global resilience and artificial intelligence, the geopolitics is going to force supply chains to shift.

• 40:12Speaker 00

  Does Europe really want to buy American defense products? Maybe some countries will, but the biggest ones won't. They want to create resilience. Does India really want to rely on Russia or America for their defense? Not really, they want to do it on their own. So our view was, well, defense primes are going to emerge everywhere in the world. Okay? And we want to help founders create those everywhere. So, you know, we were in the seed, we've been invested in Anne Ralston Seed. We are deeply invested in Hildingson Seed. And that's a project that Jeanette and Daniel Leck and Paul Kwan have worked on. And then we're invested in Rafi in India, that Niraj has been working on as well.

• 40:53Speaker 00

  So, so our belief is that the opportunity is everywhere and we want to help founders. And we want to, we do want to do it globally. I think we, we went down the path of leaning into Europe and India when Europe was a complete contrarian bet and India was starting to emerge as a FOMO bet. And we, but we just think those regions are going to innovate. I mean, there's lots of smart people everywhere, opportunities everywhere. And if you have leaders at GC that care about creating successful innovation ecosystems there, we want to empower them.

• 41:28Molly O'Shea?

  Part of that too is it sounds like you've been traveling a lot.

• 41:32Speaker 00

  Yes.

• 41:33Molly O'Shea?

  So.

• 41:34Speaker 00

  I flew 650 hours last year.

• 41:35Molly O'Shea?

  650 hours. Okay, not bad.

• 41:39Speaker 00

  It's about a month on the plane and growing.

• 41:43Molly O'Shea?

  I think Alex Karp's numbers are really, he spent three months on a plane.

• 41:46Speaker 00

  I believe it.

• 41:47Molly O'Shea?

  Something crazy like that. So you recently invested $5 billion in India? How did that begin?

• 41:53Speaker 00

  It's not a fund. So again, we invest everywhere through our, our single funds. Well, the, the commitment that Niraj and I made was to invest $5 billion over the next five years in India's resilience opportunity. And that's where, you know, we're, we're working on building a hospital chain in India. We've got defense, we're working on manufacturing. We're in companies, great companies like Zephto, which is sort of the e-commerce infrastructure. Look, India's got a tremendous opportunity out of it and, you know, given the GDP growth and, and, you know, it's a very entrepreneurial country. I was born there and I think India's tasted success. It's had a bunch of interesting, large-scale outcomes now where

• 42:38Speaker 00

  parents who have a lot of influence on their kids in India,

• 42:42Speaker 00

  you know, they, they used to push you to go work for a multinational if you had a good academic tradition. Now it's, it's embraced that maybe you should go start a company, build a tech company and build something at scale because there's role models for that. And so I think the cultural resonance to entrepreneurship is there and the economic opportunity is massive. And so it's a, you know, we're very excited about this. We're, we're, and I, and it's personal to me as well. I do care about making sure we make a difference there and, and it is for Narayana, just for our whole team in India and several others here.

• 43:21Molly O'Shea?

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• 44:49Molly O'Shea?

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• 45:08Molly O'Shea?

  What do you think this worldview stage has given you perspective wise? Like, what are the biggest lessons? I know you've mentioned a few, but I mean, we are in San Francisco. So how do you take all of those learnings back here and help the culture build upon that kind of light?

• 45:26Speaker 00

  Look, you know, there's that saying that if you want to go fast, go alone. If you want to go far, go together. The AI opportunity is a transformation opportunity. And if you really want to transform the world, you need to bring it along with you. And I think this idea that the rest of the world is dumb and we're just going to replace them is pure hubris. And I just don't think it's the way the industries and the world wants to do business with us. You know, we talk a lot about tech lash and I just think the idea of partnering, being really good at actually deeply partnering with the world is a skill that we can do a much better job of.

• 46:10Speaker 00

  And I just think it expands the opportunity. And so, you know, like the irony, and I think I put that in this review, the irony of how we behave is, we'll say in the same breath, I want to build a legacy-defining company, and legacy companies are stupid. So, somebody else is like you from the past is stupid and your future legacy is important. That's just a disrespectful posture in society. And I think taking these companies that serve a purpose, there are good people that work there and serve an important role in society, helping them be successful. I think that's one of the biggest economic opportunities. I think there's true joy in that.

• 46:53Speaker 00

  It's hard because you have to deal with the inertia and friction of the world, but you can flow through it if you actually are working with them with good intent and good respect. And that's a little bit of what defines the general catalyst way.

• 47:09Molly O'Shea?

  On the tech clash, okay. I thought this was interesting and this was all the way at the end. But you said there are four forces of tech clash. One is this ambiguity on social media and real life.

• 47:22Speaker 00

  You need to be polarized, yeah.

• 47:24Molly O'Shea?

  Polarization there, political containment. You have a really good hot take in that one. The genius asshole myth, which you talked about a bit, and then contempt for legacy, which you just covered. So, I mean, I guess to go over the topics that we didn't cover, could you cover the social media standpoint?

• 47:42Speaker 00

  Well, look, I think we have sort of justified that it's okay to say ridiculous things in social media because it gets you attention, even though that's not how you actually perform in your day-to-day jobs. There's a lot of that because often, you know, you see people who have some messages and that's not really what they would do in the real world, it's just to gain attention. And I think decoupling what you communicate and what you do and thinking that's okay, I don't think that works in the end. It just creates a lot of unrest and confuses people. It's not good leadership. So that's just, you know, we try not to engage in that.

• 48:25Speaker 00

  I can say lots of provocative things to get tweets and likes. I think it's an entirely unproductive exercise if you're focused on the long term. It is a very short-term mindset. All these things are actually reflective of how short-term we become in our thinking. And this other point around politics, listen.

• 48:49Speaker 00

  You, you, I think Tony Bear said this, you know, you, you govern from the middle. And all the complex issues when you design policy around, you need to take a view and understanding all sides and designing versus being really polarized. And so, you know, we took a stance that we're, we're not going to engage in politics. And, and, but we want to work with the administration, whichever one is there, with genuine partnership to help them think about how can innovation truly be impacted scale in our societal systems. So we launched General Catalyst Institute. We invested what we would have gone in, in politics towards helping create good policy.

• 49:32Speaker 00

  And that's a more enduring, long-term way to engage. Even though in the short term, maybe, you know, you could see some disadvantages with that as well. But I'll tell you, leaders in DC have embraced us because we have come with no agenda and, and embraced our founders. We brought many founders there. And I give our, our, our team in DC now also supporting in Brussels and Delhi a lot of credit for, you know, helping bring good education, good ideas to DC, and it's been embraced. And so I, I just have, I just, I just believe that if you create real partnership, people will engage all stakeholders regardless of politics.

• 50:12Molly O'Shea?

  That brings us back to Anthropic versus the Department of War. Okay, so can you break down a little bit of what happened with that? And then also what brings us to Mythos? And how they actually, they decided to strategically roll that out with Project Glasswing?

• 50:28Speaker 00

  Look, the Anthropic Pentagon thing was very tricky. And I cannot say the perspectives on either side were wrong. It's just like from where you sit and how you think about the world and what's important. And it's really what led to those issues. But it, what it shows you is just the complexity of what we have to go through. And I think if you need a culture, we can, you can actually have conversations around this and, and create productive outcomes as opposed to taking very binary positions.

• 51:02Speaker 00

  Because I, when I listen to and I spoke to the folks in DC and what they think is important for national security is correct. And when I listen to Dario and some of the things he's talking about are also correct. These are just complicated issues. And so judging versus just, gosh, think about the people trying to make these decisions on both sides and the unprecedented complexity of this. And we just rile people up as opposed to take a step back, think hard and think about how do we really address this. And so I'm sympathetic to it. It's like, boy, it's a very complex dynamic.

• 51:44Speaker 00

  Now, Mito's, listen, I gave Dario a lot of credit for the way he handled it. They've had that model for a while. They did not release it. They thought a lot about it. And what did they do? They gave it to the companies to create an advantage, to essentially eliminate, you know, security debt in the existing infrastructure before more and more complex technologies are getting out there as opposed to not. This was not to create fear in the ecosystem. I just think it's ridiculous, frankly, to take that stand. I think they've been very responsible. I know some of the CEOs they've worked with on exposing them early,

• 52:28Speaker 00

  make sure they take advantage of this. What else would you do? I thought we were accelerationists in this group. So the same people are now complaining about this. I don't really understand that. I mean, I think they actually did it responsibly. And on the other side, it's like, my God, these models are incredibly powerful. And what's to come? And it's just, again, from an investment perspective, where do you invest? Like, what else is going to be irrelevant because these models become stronger? It's like the uncertainty of what's durable and not is just stunning right now.

• 52:58Molly O'Shea?

  Part of Glasswing 40 is Nikesh Aur, who you just brought on. So how does that work? And congratulations.

• 53:05Speaker 00

  So Nikesh just joined as a leading point director. And he's been, first of all, Nikesh is incredibly brilliant. He's a He's an entrepreneurial soul running a Fortune 500 company and he's done an incredible job building that. He's also a great investor mind. So as I think about our, you know, GC ecosystem, which is a collection of investors and builders, I just think he'd be a great mentor for all of us. And I've had many conversations with about where this is going and every one of those conversations is extremely provocative and so it made sense to lean on him, just like I and we lean on Ken.

• 53:42Speaker 00

  And I just believe in, you know, great leaders that are deep thinkers and have seen scale to just be guiding, you know, guiding the team here at GC. And so that's been, that's the purpose. So really excited that a lot of us are going to work closely with him.

• 54:00Molly O'Shea?

  Amazing. So as we close out, just a couple of quick questions. So one of the hot topics around Silicon Valley is General Catalyst's potentially rumored IPO. Do you have any comment on this?

• 54:15Speaker 00

  We're not going public.

• 54:16Molly O'Shea?

  You're not going public? No.

• 54:18Speaker 00

  No, I've said it many times.

• 54:20Molly O'Shea?

  Why do people think that?

• 54:21Speaker 00

  I don't know.

• 54:22Molly O'Shea?

  You don't know?

• 54:23Speaker 00

  You have to ask them.

• 54:24Molly O'Shea?

  Okay. We'll ask you all. Two, on Harry Sevings podcast, this is, this is a really difficult question. On his podcast, you said you eat risk for breakfast. What do you eat for lunch?

• 54:41Speaker 00

  Look, I think first of all, why did I say that? I really do leap into new things. I imagine failure is just never that bad. And so I actually want to make sure our entire organization is fearless in how we take risks. You don't want to take stupid risk. You want to take calculated risk, but you need to be able to do that to make progress. And, you know, if we can actually have a culture of taking risk and a culture of conviction, which I guess would be my lunch meal, then we would do a great job.

• 55:12Molly O'Shea?

  And what's for dinner?

• 55:13Speaker 00

  Those are probably the two things I care about. Curiosity.

• 55:16Molly O'Shea?

  Okay.

• 55:16Speaker 00

  How about that?

• 55:17Molly O'Shea?

  That's pretty good. Well-rounded diet.

• 55:22Molly O'Shea?

  And then lastly, so Julian Fialco had a burning question. Your early your early days at General Catalyst, you wore a puka shell necklace. What is the story behind the puka shell necklace?

• 55:36Speaker 00

  I don't even remember. I think, so when I joined GC, it's actually, you know, I was 26. I joined as an EIR for four months. And I quit this nice job I had after selling my business. And my parents were like, what are you doing? What is this EIR thing? But, you know, the firm and, you know, David and Joel, the founders empowered me. Like, I take pride in empowering everybody else at GC today. And I remember my early reviews used to be, we think you're going to be great at this, but you just gotta, you know, have a little less fun in your mid 20s. And I think puka shell is just a reflection of sort of that phase of life.

• 56:14Molly O'Shea?

  That's amazing. Well, thank you so much for such a thoughtful conversation and also for putting out the first quarterly review. Appreciate it.

• 56:26Speaker 00

  Thank you. Thanks for having me.

• 56:27Molly O'Shea?

  Hey, it's Molly. If you enjoy our interviews, check out our newsletter, sorcery.vc, where we deliver a once a week top deals and tech headlines email and also go deeper on our podcast interviews. Subscribe to Sorcery today. And don't forget to subscribe to the podcast on YouTube, Spotify, Apple, or wherever you listen. Link in description to sign up.