USV’s New $900M Fund: Fred Wilson, Rebecca Kaden & Mike Mignano

USV spent 20 years keeping its funds small on purpose. Its new $900M raise is the largest fund cycle in the firm’s history. I sat down with USV General Partners Fred Wilson, Rebecca Kaden and Michael Mignano at the firm’s New York office to unpack why one of venture capital’s most disciplined early-stage firms is getting bigger now, and what they think the next era of AI will look like. Together with General Partner Nick Grossman, they’re leading USV into its next chapter. USV was early to Twitter, Coinbase, Stripe, MongoDB, Twilio, Etsy, Duolingo and Abridge. More than 20 years after Fred Wilson and Brad Burnham laid out the firm’s original internet thesis, Fred believes AI today looks a lot like the internet in 2003. The infrastructure is here, but many of the defining applications have yet to be built. We get into why AI is making products cheaper to build but breakout companies potentially more expensive to create, why ARR can hide weak retention, the growing importance of founder storytelling, personal AI agents, the “Rebel Alliance” around open AI infrastructure, and why energy may be one of the cleanest bets on AI. At the center of USV’s new thesis is “obliterate, don’t automate.” Instead of making existing industries incrementally more efficient, AI could completely restructure them. Fred’s version is simple. Don’t hire a lawyer, use an AI lawyer. Don’t hire an accountant, use an AI accountant. Don’t hire a doctor, use an AI doctor. Fred Wilson: https://x.com/fredwilson Rebecca Kaden: https://x.com/rebeccakaden Michael Mignano: https://x.com/mignano Molly O’Shea: https://x.com/MollySOShea Sourcery: ⁠https://x.com/sourceryy 𝐄𝐏𝐈𝐒𝐎𝐃𝐄 𝐋𝐈𝐍𝐊 YouTube: https://youtu.be/sYH4fKKtSPw 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 • Zone https://zonefrontier.com/—develops next-generation data center campuses, partnering with AI companies, site developers and technology leaders to bring compute online faster and at scale. Visit: https://zonefrontier.com https://zonefrontier.com/ • 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 at http://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 Follow Sourcery for the latest updates! https://www.sourcery.vc 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. Matched funds must remain in your account for at least 5 years. Match rate and other terms are subject to change at any time.

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

• 0:00Speaker 00

  We raised 900 million in new funds for USV, which is by far the most USV has ever raised in a new fund cycle.

• 0:08Speaker 01

  I don't think a trillion is what we need to underwrite to at USV. I think if our biggest winners are in the single-digit billions, given our fund size and our ownership, we can produce really, really healthy returns for our partners. There's been some outliers at 50 billion or 100 billion, but a lot of our biggest winners are in the $10 billion range, and that's produced enormous returns for us.

• 0:30Molly O'Shea?

  It's also a bigger number than we've raised before, somewhat significantly, and marks a new strategy for us. The market has evolved, the outcomes are bigger, the swings are bigger. I was a little surprised how many of them said, are you serious?

• 0:53Molly O'Shea?

  We are here at Union Square Ventures USV in New York City with Mike Mignano, and we're about to go on a bit of an office tour. After that, there's more. We're going to do a sit-down with Fred Wilson, Rebecca Kaden, and Mike to go over what we're about to announce.

• 1:11Speaker 00

  We just raised a new fund. We raised 900 million in new funds for USV, which is, I would say by far, the most USV has ever raised in a new fund cycle. But there's a reason for that, and I think we will get into that in a little bit.

• 1:25Molly O'Shea?

  So why not 1 billion?

• 1:27Speaker 00

  Oh, well, you know, we're, I would say with USV, we have always been extremely intentional about fund strategy. Not just fund size, but fund composition, how many companies, roughly what size checks do we plan to write, stages, number of companies. And so the 900 really comes from that strategy and that model. We don't, we don't raise funds as vanity metrics. You know, it's not like, we gotta hit a billion, or we gotta hit 2 billion.

• 1:56Molly O'Shea?

  I want to be a unicorn fund.

• 1:57Speaker 00

  The 900 really comes from the strategy, bottoms up, which, again, I think, I think we'll probably get into, right?

• 2:04Molly O'Shea?

  Yeah. Okay, so maybe we can do what you do best, and we can walk backwards to hide all the equipment.

• 2:10Speaker 00

  Okay.

• 2:10Molly O'Shea?

  And then we can pick it up around the corner.

• 2:12Speaker 00

  Sure, let's do it.

• 2:13Molly O'Shea?

  All right, so we are here at Union Square. We're going to walk into the kitchen. These are some main areas, it's very active today.

• 2:20Speaker 00

  Lots of people here today. Yeah, this is, I don't know, a bit of a seating, living room area. Obviously, we've got the kitchen. My favorite feature of this kitchen is this Xplum pour-over machine. Have you seen this thing?

• 2:34Molly O'Shea?

  No, what is this?

• 2:35Speaker 00

  It's basically a pour-over robot. So if you like pour-over coffee, this is a robot that makes that for you.

• 2:40Molly O'Shea?

  Is this an investment?

• 2:42Speaker 00

  I don't know, I don't know.

• 2:43Molly O'Shea?

  Okay.

• 2:44Speaker 00

  But it's really cool. I've seen these in a few offices, a couple startup offices, a couple VC offices. So it's not like USV is the only place that has this, but if you like coffee, it's, it's pretty good.

• 2:54Molly O'Shea?

  It's cool, I've never seen that.

• 2:56Speaker 00

  Yeah, we've got our little bit of a dining room table here. We've got a Board, one of our portfolio companies, Board. Do you know Board?

• 3:03Molly O'Shea?

  No, what is this?

• 3:04Speaker 00

  Board is the world's first tabletop gaming console.

• 3:07Molly O'Shea?

  Oh.

• 3:08Speaker 00

  Founded by Bryn Putnam, who founded Mirror, Mirror Mirror.

• 3:12Molly O'Shea?

  Oh, yeah, yeah, yeah.

• 3:12Speaker 00

  This is an amazing product. Every game comes with its own set of pieces, unique pieces that the screen reacts to. And they also have a platform to make it really, really easy for developers to build games for this. It's really, it's an awesome product, I would definitely recommend.

• 3:28Molly O'Shea?

  Do you play chess on this?

• 3:29Speaker 00

  They don't have chess.

• 3:30Molly O'Shea?

  They don't?

• 3:31Speaker 00

  Yet. They have all their own games.

• 3:32Molly O'Shea?

  Yeah, you gotta make it square.

• 3:34Speaker 00

  Right. Well, I guess you could do chess where you sort of like shave off the edges or something.

• 3:38Molly O'Shea?

  Smaller, yeah, okay.

• 3:38Speaker 00

  But it's awesome, highly recommend. This is what we call the pit.

• 3:44Molly O'Shea?

  The pit.

• 3:46Speaker 00

  So the pit is where we all work and we all hang out. This is my desk, it's very cluttered, I hope you don't get a shot of it.

• 3:53Molly O'Shea?

  Hopefully, there's nothing bad on the screen.

• 3:55Speaker 00

  We talk about deals, we talk about whatever might be going on on X that day. There's also a group chat for the pit. So the conversation that happens here, very actively every day, just continues right when we leave here.

• 4:10Molly O'Shea?

  So no one has an office, or are they?

• 4:12Speaker 00

  No, no one has an office except, well, actually, Tierney and Carrie and Christine have offices.

• 4:17Molly O'Shea?

  This is special ops?

• 4:18Speaker 00

  Because they don't, they don't want to deal with the madness of the pit, which I don't blame them. This is where a lot of board meetings happen, some of our full partnership meetings. We also have another room in here that we use for these types of meetings. One of my favorite things about this office is pretty much every room has really epic views.

• 4:40Molly O'Shea?

  Yeah.

• 4:41Speaker 00

  So you've got great views all the way to the Hudson River over here. You've got views uptown over here. There's a really, really cool view from here where you can see straight up Park Avenue, which I really love. Actually, at my desk in the pit, if I turn to my left, it's literally like a perfect vertical view up Park Ave, which I think is really cool. Yeah.

• 5:04Molly O'Shea?

  I mean, this represents New York pretty well. You can see all of it if you're coming as a founder from, I don't know.

• 5:10Speaker 00

  Totally, and I'll take you up to the roof in a minute where we have literally like 360 panoramic views of pretty much all Manhattan, which is really cool.

• 5:18Molly O'Shea?

  So you guys have invested in 263 companies?

• 5:22Speaker 00

  That number sounds right, yes.

• 5:24Molly O'Shea?

  Okay. And how many do you expect to invest in with this fund?

• 5:29Speaker 00

  You know, I think we, we try not to be too strict and specific about the number, but I think generally speaking, you know, probably somewhere 30-ish, maybe 30 to 40, a mixture of both seeds, NAs. I think we'll do probably a lot more seeds than we've typically done in the past. And, you know, we can get into a little bit of the fund strategy later with Rebecca and Fred, but, you know, going earlier, we believe, is becoming more and more important, just given how many startups are emerging as a result of AI and how competitive the market is.

• 6:04Molly O'Shea?

  Yeah.

• 6:05Speaker 00

  Yeah, this is the library. So this room is, is great, it's beautiful, and we use this for a variety of reasons. We host events here with our founders and different people within the community. As you can see, we also have these, these desks here where we often host portfolio companies, or companies that aren't in the portfolio that need a place to work. It also actually is a library and has lots of books on the shelf here that many of us have read.

• 6:33Molly O'Shea?

  Do you have a favorite?

• 6:36Speaker 00

  Let's see, do I have a favorite? You know, one of my favorites is The Messy Middle. Shout out, USV Product Advisory Partner, Scott Belsky. This is his book. This is about sort of the, the middle of the startup journey. There are many books written about the early days and the formations. There's also obviously lots of books written about the success stories, what happens at the end. But I believe Scott's vision with The Messy Middle was really about what happens in the middle, which is, which is the hardest part, as most startups are not straight lines. So that's a great book. Let's see, what else? Shoe Dogs, obviously a classic. I mean, there are a lot of, a lot of good books on this bookshelf, so.

• 7:18Molly O'Shea?

  Well, speaking to your point of going earlier with this fund, you guys are also incubating companies. You just released one that you incubated yourself, Supertake.

• 7:29Speaker 00

  Yes, yeah, so, you know, one of the things I'm sure we'll talk about is it's getting easier and easier to build products and get them to market quickly and test them quickly. One of the things that we've been talking as a partnership for a long time now is this idea that it's never been easier as a result of AI for people to take control of their own financial independence, right? We're coming out of a world in which, you know, huge, huge companies and a huge market has been built on paying people for financial expertise and financial services. With Supertake, we believe that regular consumers should be able just to invest in their ideas without having to know anything about the stock market, anything about picking stocks or building a portfolio,

• 8:14Speaker 00

  or what it means to rebalance or actively manage a portfolio. And so with Supertake, it literally does all that for you through an agent. You just give it an idea or a belief you have in the world, and Supertake will go and invest in that idea directly through your Robinhood or Coinbase accounts or brokerages, and then it will actively manage it for you. So it will tell you how it's doing, it'll check the news for you regularly. If something's broken in the portfolio, it'll automatically rebalance it for you. And it really speaks to the types of companies that we look for in the theme of obliterate, don't automate, which, you know, we could talk about, we talk about our theses. We just think that AI companies are not only making it easier

• 8:57Speaker 00

  and faster to achieve existing processes in the market, but literally restructuring markets completely because humans now have access to intelligence and expertise that previously they had to pay a lot of money for. So Supertake is a great example of that, and something that we were able to, at least for the initial product, just build ourselves.

• 9:15Molly O'Shea?

  That's awesome. Did you build it in this room?

• 9:17Speaker 00

  We did not build it in this room. We built it in lots of other rooms, though.

• 9:20Molly O'Shea?

  So if it's becoming so much easier to start companies, and you can do it with just one person, why do we need venture capital?

• 9:30Speaker 00

  So, I mean, it's still expensive for a startup to operate and scale a business. Obviously, things like inference are becoming more and more of a line item for startups, right? Great products are getting built, but to subsidize those products and make sure that customers can actually use them, maybe without having to pay themselves at first, more and more startups are subsidizing inference on behalf, on behalf of customers. The other thing I would say is, as it is becoming easier and easier to start a company, there are so many more companies, and therefore, it's probably harder than ever to actually stand out and break out from the pack. And so, you know, we're seeing startups getting more and more aggressive about their go-to-market and about their marketing strategies and making sure that they can really break through the noise. And so.

• 10:15Speaker 00

  I think startups are always going to be expensive to to maintain, to operate, to build, to break out. It's just building the actual product, I would say, is arguably easier than ever before.

• 10:27Molly O'Shea?

  So we just walked through the entire floor. This is like the main floor, right?

• 10:31Speaker 00

  Yeah, yeah, this is the main floor.

• 10:32Molly O'Shea?

  What are your favorite parts about this office? You've worked at different offices not too far away.

• 10:37Speaker 00

  Yes.

• 10:37Molly O'Shea?

  So what's your favorite vibe about this space?

• 10:40Speaker 00

  I tell you, like, one of the things I really love about the USV office is there are lots of different vibes in the office, right? You come in, it's very comfortable, it's very homey, obviously, like, beautiful furniture and chairs and couches. And then as you get further in, it's more of like a co-working space. Obviously, people working, talking. As you go in the back, you have a little bit more of like an introspective place. In the library, you can get some quiet. And then, as we'll see in a bit, the roof offers a whole different element. So, you know, whereas I feel like most New York City offices, especially small offices, it just feels like you're in a room.

• 11:12Molly O'Shea?

  Right.

• 11:12Speaker 00

  There really are like actual different sort of personalities to this office.

• 11:16Molly O'Shea?

  Thank God, you guys have light here, yeah.

• 11:17Speaker 00

  And we have light, yeah. Pretty much, like I said from earlier, pretty much every corner of this office gives you a different view of New York City, which I think is really cool, because it's my favorite city.

• 11:27Molly O'Shea?

  Do you have a good window cleaner? What's the?

• 11:29Speaker 00

  It's a good question. I'm not sure who cleans the windows, but they clearly do a great job.

• 11:34Molly O'Shea?

  We've made it to the rooftop. What goes on up here?

• 11:37Speaker 00

  This is just a really great place to work when the weather's nice. We'll come up here, you know, I'll take some calls, people do lunch up here. We also, you know, occasionally have different get-togethers and, you know, meetups with founders. There's a party that we often do here every fall that people really like. And, you know, much like downstairs, as I mentioned, the nice thing about being upstairs on the roof is you have an amazing view from pretty much everywhere. I mean, right through this archway here, again, you can see a perfect view straight up Park Avenue, which I think is incredible. You can see the Empire State Building. If you walk over this way, you can see all the way across the Hudson River to New Jersey.

• 12:21Speaker 00

  Also, on really nice days, the sunsets on this side of the roof are really spectacular. So it's a great roof, it's a great feature of the office, and it's something that I think we all really appreciate.

• 12:35Molly O'Shea?

  We're experiencing some good fall weather today. Okay, what is your hottest take right now?

• 12:40Speaker 00

  My hottest take? I would say the user interface is not going away. I think one of the things we're seeing all over X, people love to say that the user interface is dead. Everything is being collapsed and folded into a chatbot. I don't believe that to be true. I think the user interface is where people build trust with a product, where they gain comfort and know how to navigate different experiences. I think that the user interface is how products convey different concepts and ideas visually. And I have a hard time imagining that we're just going to be delegating all of our computing away to agents. Yes, I think agents will do many things for us, especially the things we don't want to do.

• 13:23Speaker 00

  They might go shopping for us, they might file our taxes for us, but they're not going to watch Netflix for us. They're not going to watch YouTube for us. They might not even scroll X or Instagram for us, right? I think we're going to want to do those things. And so I have a hard time imagining that the user interface is just going to turn into a chatbot everywhere.

• 13:42Molly O'Shea?

  Okay, pretty good hot take.

• 13:44Speaker 00

  Thanks.

• 13:44Molly O'Shea?

  All right, so next we're going to go and do a sit-down with Fred, Rebecca, and Mike. So stay tuned. Okay, do I start with USV? Welcome to sorcery.

• 13:56Speaker 00

  Thank you.

• 13:56Speaker 03

  Thanks for having us.

• 13:57Speaker 00

  Thanks for having us, Molly.

• 13:58Molly O'Shea?

  So we have Fred, Rebecca, Mike. How are you guys doing?

• 14:02Speaker 00

  We're great, yeah, feeling really good.

• 14:05Molly O'Shea?

  All right, so we have a huge announcement we need to discuss. Who wants to take it away?

• 14:09Speaker 00

  I think you should take it.

• 14:10Speaker 03

  All right, yeah, well, we're excited. We closed our most recent set of funds. Raised $900 million. You know, in many ways, it's a continuation of what USV has now been doing for many decades of, you know, thesis-driven, great partnership with founders, backing businesses that we think are going to be leaders of their markets over the next decade. But it's also a bigger number than we've raised before, somewhat significantly. And Mark's a new strategy for us. The market has evolved. We think it's, the outcomes are bigger, the swings are bigger.

• 14:51Speaker 03

  The opportunity to leverage the new technology in the market and the applications that will be built on top is super, super significant, and the rounds are bigger and more expensive and faster. And we are evolving our strategy to keep up with that and really be able to attack that market.

• 15:09Molly O'Shea?

  Amazing. So maybe we go back to the 2004 LP letter. So what were you talking about then, and how is it different today?

• 15:15Speaker 01

  Well, that was early on in the internet era. Internet, commercial internet had arrived in 95, and by 2003, a lot of the underlying infrastructure had been built. Not very different from where we are with AI, you know, a lot of the AI infrastructure has been built, but we're still waiting to see what the big applications will be, right? That will get built on top of it. And that's where we were in 2003. The infrastructure was there. We had Google, we had Amazon, we had Yahoo, we had eBay, but we didn't yet have Facebook, we didn't yet have Twitter, we didn't yet have YouTube, we didn't yet have iPhone. And so we imagined that there were going to be all these new applications

• 15:59Speaker 01

  that would be built on top of what we now think of as the web. And I think the moment we're in right now reminds me a lot of that, except now it's AI.

• 16:09Speaker 00

  Couldn't agree more. I think we feel like Fred said, you know, the AI infrastructure has been built. Obviously, it's still getting built, there's going to be more and more opportunity. But we're at this moment where we're starting to see the beginnings of what feels like an explosion of the application layer of AI. Obviously, there are products that we've all now been using for the past couple of years, like, you know, granola and Suno and things like that. But, you know, just over these past weeks, obviously, everyone's been talking about a whole new type of application layer with Instinct and Muse and Grokbot. And so it feels like we're entering a new phase where agents will be powering a lot of new experiences, both for enterprises and consumers. And that's really, really exciting for us.

• 16:54Molly O'Shea?

  So I'm curious, how do you justify the round size increases if models are, if it's preferred now to go to open source and it's cheaper? Like, where does all that capital go to?

• 17:07Speaker 00

  Yeah, I think, you know, something we talk about often is how it is getting dramatically easier to build a product. You know, we recently announced that we incubated a product that we built very, very quickly and very, very cheaply. And lots of other builders are doing the same thing. But what that means is that there are so many more startups that you have to stand out from and break through the noise from. And so, you know, one area that a lot of the capital is going is doing just that, breaking out. You know, marketing, messaging, positioning. I think we're seeing a lot more investment, especially in consumer, for startups trying to break through the noise.

• 17:48Speaker 03

  We're excited about open source models, and we see the trend moving in that direction. And there's kind of a lot of promise there. If you look at the fundamental costs that companies are spending on compute, it's in a totally different hemisphere than it's ever been. Even if you take something like Instinct, right? Like, the numbers that they're talking about on what they're going to have to spend on compute to service their needs is pretty wild. And so that's a really different cost base. There's a bunch of big questions out there. How much does that go down? And I think we're in this time, and we feel like we've been in this time, where we don't know the asymptotes of things, right? We don't know when models stall, we don't know how low compute goes. And so one of the challenging and maybe exciting things is you're playing a little bit against an unknown field.

• 18:32Speaker 03

  But there's a fundamental cost of compute that is part of the conversation and kind of cost block of companies that really wasn't really there before. The other thing going on is that the types of companies we are investing in and that are scaling in the market are different and more varied than probably in any other time in USV history, right? So we have software applications that are emerging that we believe are going to leverage this new technology that's been built to totally transform how we live and how we work and how we are productive and all these kind of things. But we also have a robust energy portfolio, right? And we believe that programmable, cheaper, faster energy is the horizontal undercurrent of everything being built on top.

• 19:15Speaker 03

  And the cost structures of those energy companies are totally different. Or our investments in physical AI and the physical world, right? Where we're investing in things that are really full-stack, robotics companies that are building their own models, and also the deployment on top, sensor businesses. And so they have different cost structures that are requiring both different levels of capital and sometimes different types of capital than previous eras have justified.

• 19:40Speaker 00

  You know, one thing on the inference, it actually reminds me of kind of an earlier era of technology, maybe the mobile era, or even, you know, sort of the post-internet era, where, you know, you had these great consumer products and businesses subsidized the usage to make sure these products could get as adopted as far and as wide as possible before customers are forced to pay. I think right now, you know, we're coming out of a period where I think, you know, AI applications in the enterprise and consumer have been more paid for by customers. We're coming out of a lot of subscription businesses. But now products like agents, you know, to your point about the inference, we're seeing that startups actually want to subsidize the inference

• 20:22Speaker 00

  and pay for it on behalf of customers to reach that critical mass of adoption. So I do think it's actually going to be pretty expensive to build large-scale consumer businesses if you don't want your customers to have to pay subscription.

• 20:33Speaker 01

  OpenAI and Anthropic are still subsidizing or chat offerings, right? I mean, you know, Claude will ask you to start paying at some point, but, you know, this is, ChatGPT has been free for how long? Gemini is still free, right? A startup can't come in and charge for something that their competitor is giving for free. And so I think you're right, that inference or compute. is going to be an expensive subsidy for fast-growing apps for a while.

• 21:02Speaker 03

  Yeah, I have a question. In the early days of Twitter or Facebook, right, they offered something for free to the market. And I think one of the things that USV believed in those days is that giving away a lot of value for free in order to back into an opportunity to create a network was a very, very good strategy. Did it feel like they needed more money than other companies had ever needed because they were doing that?

• 21:23Speaker 01

  They did need a lot of money. I mean, Twitter, the original financing was 5 million, and then a year later, it was 25 million, and then a year later, it was 100 million. At that time, those were big numbers.

• 21:34Speaker 03

  Yeah, relative.

• 21:34Speaker 01

  Right? Like, we could multiply by 10, and you'd get to 50, 250, and a billion.

• 21:42Speaker 03

  Yeah.

• 21:42Speaker 01

  And that's kind of what we're seeing now, right? And that was also, you know, 2007, so that's 20 years ago. Just pure inflation is going to give you a multiple, too.

• 21:53Speaker 00

  I think what's also interesting about that era compared to this one, I think a lot of these products, people have pointed out, are not that retentive, right? Because there aren't things like network effects. But back then, with a Twitter, with a Facebook, I have to imagine that you all were seeing these and saying, we need to scale these things as quickly as possible, because once we do, we're going to have this incredible network effect, and there's going to be this incredible lock-in. It feels like it...

• 22:17Speaker 01

  What was different then, that I don't think is true anymore, was that not every VC saw that.

• 22:22Speaker 00

  The network effect.

• 22:23Speaker 01

  Yeah, in the early days of Facebook and Twitter, there were venture capitalists who were arguing, we need to monetize this, you know, we need to, you know, have a subscription so we can, you know, have a revenue line that will allow us to finance the company. And there were others, we were in the other camp, who were arguing that, you know, if we can get 10 million, 50 million, 100 million users, we will be able to finance the company. We ended up, you know, winning that argument, and we were right about that. And that's really how that model emerged, that companies used, you know, even to this day, to get to network effect.

• 22:58Speaker 03

  I wonder if one analogous thing is, there's the belief right now, that if you look at these kind of emerging consumer agents, the answer is scale, right? That functionality is not all that different among them, but that if you hit breaking points of scale, or maybe distribution, that you can win markets. And so it's a race to see if you can have the right compute and have the right distribution to get there. There's another strategy, which is one that we've been talking a lot about, which is maybe more analogous to the Twitter era, which is, you actually may still need a network effect.

• 23:29Speaker 00

  Yeah.

• 23:30Speaker 03

  in order to maintain longevity and have retentive behavior. And that network effect is going to come with who can really be the first and best at multiplayer behavior, and taking these kind of new single-player behaviors, and figuring out how to make them truly multiplayer. And it's not that we don't need network effects anymore, it's just that we need to get there in this kind of new way.

• 23:52Speaker 00

  We haven't seen them yet.

• 23:53Speaker 03

  We haven't really seen them yet.

• 23:54Molly O'Shea?

  I want to push back on the agent, like, economy so much, because it's kind of obvious every single company is going to have an agent of some sort. You'll probably have more securitized boxing within those. I mean, we were joking about this earlier, but it's kind of true. You like, input all of your sensitive data, and it kind of roams free. But it's clear with Facebook and Muse, I mean, Deal even launched theirs for most of like, management work and that kind of thing. Like, every company will have an agent of some sort. Obviously, it's one of the most cost-intensive things, because it's running so many different programs at once, and nodes, and that kind of thing. But I

• 24:34Molly O'Shea?

  just have to push back on that. So like, do you think that's a viable, long-term category? Like, how does that compress versus years ago?

• 24:43Speaker 01

  We do. We do. We think that Amazon will have an agent, so I'll have my Amazon agent, and I'll have my Shopify agent, and I'll have my Etsy agent. But I think I'll also want to have my shopping agent, or maybe just my agent, that will talk to my Amazon agent, and my Etsy agent, and my Shopify agent, so that I don't actually have to be managing conversations with each and every one of those agents. I can just have my agent go off and do a task. Today, what's happening is the agents, as you point out, are logging into these services and kind of pretending to be me. Amazon doesn't like that. I think

• 25:24Speaker 01

  last week, they said to Facebook, we're not going to let Muse access Amazon, right? We'll see more of that. But I think eventually what will happen is, there will be some standard or some way of agents connecting to the agents that each service offers you, and making it easier. So I think we're in the early innings of how this plays out, but we do believe that people will want their own agents, that represent them, as opposed to my Amazon, only having my Amazon agent.

• 25:55Molly O'Shea?

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• 27:22Molly O'Shea?

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• 27:47Speaker 03

  Before we go too far, let's talk about USV's strategic positioning, where you guys are investing, and what your typical check size is.

• 27:54Speaker 00

  Yeah, so, you know, USV has always been, you know, for its history, really been focused on the early stage, mainly Series A, sometimes some seeds, sometimes a little bit more than that. I think we're going to continue to play the same game, and invest in the same stages, for the most part. But to Rebecca's point from earlier, we're going to be doing it with a slightly larger capital base. Not so that we can do many more deals or fewer deals, but more because, as we talked about earlier, the shape of the market and the shape of the deals has changed, as it's gotten easier to build. You know, there's also much, much more demand flowing in in the form of capital, and startups are raising

• 28:35Speaker 00

  more. And so, for a fund like ours, to stick to our strategy, to stick to our various ownership targets, and make the fund math work, we need to write slightly larger checks. It doesn't necessarily change the way we think about deals, or the way we think about companies, or our thesis-driven investing. It's more of a reflection of where the market is today.

• 28:54Speaker 03

  And what was the pitch to LPs? Was it an easy one? It, you know, I think USV has a long history with a group of LPs that have been very, very loyal to USV, and I think USV has been loyal and good to them as well. And so there's a lot of trust established there. And we added some new ones. And I, you know, what was interesting to me was, LPs see the same thing we're seeing. Yeah. We're not living in different worlds. They see it, too. And so, I think, you know, maybe a few years ago, this would have been an edgier push than it was right now, because the market has pretty clearly moved in a direction. And, I don't know, one thing that I feel like I've kept saying to myself is, you cannot like things about the market,

• 29:39Speaker 03

  but you're unlikely to change the things about the market. And so, you know, we believe that it's a pretty unique time to be on the field investing, and we want to be on the field in the right way.

• 29:50Speaker 01

  And we have four areas that, you know, we talk a lot about.

• 29:56Speaker 01

  You know, in conversations like this, on our website, with our LPs, with founders, Rebecca mentioned them, physical AI, AI applications, AI infrastructure, and energy. And so those are the areas that we're investing in, and we're consistent about that everywhere. Our LPs understand that. So there are other areas out there. Founders who are working in those areas have lots of places to go to, but they don't come to us because we're not loud about those things. But the things that we are loud about, founders find their way to us.

• 30:36Speaker 00

  And I think that's what we mean when we say like, you know, the strategy is kind of the same as it's always been at USV. We're thesis-driven. There are things we like, there are things we don't like. You know, 900 million may represent a big jump up for us, but relatively speaking, it's still maybe considered small relative to a bunch of other funds. And I think that size and this thesis-driven approach is what enables us to play the game that we want to play relative to the rest of the market.

• 31:01Molly O'Shea?

  Well, to that point, I was an LP at one point in my day. And there are very, like, there are very few funds to invest in. You typically know which ones you're going to invest in like a year before you invest. It's all long-dated and like very much organized. Were they waiting for you to raise larger? Did you have pressure for that over the years?

• 31:23Speaker 03

  One thing that I think USV has always done quite well, and I think Fred and Brad said this, is we're very, very communicative with our LPs. We talk to them a lot. We don't take it for granted. There are support. We do quarterly calls. We update them on our strategy. We update them on our portfolio. We tell them what's working. We tell them what's not working. We tell them what we're thinking and where our heads are. So by the time we come and say, okay, we're going to shift the fund size from X to Y, they've known it's coming. This is part of a conversation that's been going on for a long time. I was a little surprised how many of them said, are you sure you shouldn't raise more?

• 32:01Molly O'Shea?

  Really?

• 32:02Speaker 03

  Yeah. Again, because we're not living in a bubble, right? They're seeing the same things in the world, you know, that we are. And they're seeing the landscape of what's advantaged, but also that they appreciate that we... So why have a small, relative in any world, a small fund? I think there's a bunch of reasons. One, you can return it easier and get into carry and have the dynamics of the fund work the way you want it to. Two, you can be pickier, right? We always want to manage a fund in a bottom-up way. And when I say that, what I mean is there's a universe of companies. We don't want to say we need to be an X percent of them for this map to work. We want to say we have strong hypotheses and ideas about what we want to do.

• 32:47Speaker 03

  And if we're right enough about the ones we do aligned with us, this fund is going to be a big success. And so we don't want to get bigger than that strategy allows for. But that number has shifted. And so that was an ongoing conversation with the LPs.

• 33:01Speaker 00

  It also aligns interests, right? Like when the funds are small, it kind of focuses the results on the performance of the portfolio companies, and everyone rallies around that. When the funds are really big, it potentially distorts the incentives a bit. That's one thing that I've really appreciated about USV's small fund strategy.

• 33:20Speaker 03

  When you started USV, did you want it to stay a small fund? Or did you ever want it to be a really big fund?

• 33:25Speaker 01

  I like the earlier stage of investing, and so the ability... When we started it, you know, we were thinking of writing like a $3 million Series A check. Obviously, that number's changed a lot over the years, but that's how, that's where we wanted to be, and it's where we still want to be.

• 33:40Molly O'Shea?

  What is a typical Series A today?

• 33:42Speaker 01

  I'd say it starts with 10.

• 33:44Speaker 03

  Like, yeah, I think 10 is now on the small side.

• 33:47Speaker 01

  That's why I say it starts with 10.

• 33:48Speaker 03

  Yes, 10, you know, you're obviously seeing some Series As that are 100 or...

• 33:52Molly O'Shea?

  A billion.

• 33:53Speaker 03

  A billion, right? Like, we also know what's not in our zone, right? That's not in our zone. We want to, overall, and there will be exceptions to every rule, we want to lead our co-lead investments. We want to make real bets in things and stand behind them. There might be a time where we break that and write a, you know, strategic check into something in a different way, but overall, that's really our strategy. The checks that we believe, the Series A checks in this fund, will probably be 10 to 30 in order to do that. They don't have to be the whole round, so the rounds could be bigger than that, but that's probably what we're looking at. And then we'll do a lot of seeds. And we'll even do some earlier-than-seeds. Maybe Mike can talk a little bit about that, too.

• 34:35Speaker 00

  Yeah, we, you know, one of the things that we've been thinking a lot about at the seed stage is, you know, what are some new and different strategies that we can pursue as a partnership that maybe USV hasn't traditionally pursued to get real ownership at the seed stage, right? One thing could be taking more pure founder bets, which as a thesis-driven firm, like, we haven't, we haven't done a ton of that in the past. Another thing could be, you know, earlier we talked about how much easier it is to build something than ever before, how much cheaper, how much faster. We have a lot of strong opinions about different categories and theses.

• 35:15Speaker 00

  And so in some cases, we feel like it might make sense to actually build something inside the partnership as a bit of an incubation.

• 35:24Speaker 01

  Yeah, and there's another slant on that. We have a couple of venture partners, Jared Hecht and Scott Belsky, who are really accomplished entrepreneurs and product thinkers and builders. And working with them, and Mike, who is also very much in that camp. We can do things that aren't really an incubation, but we have an idea. We go find somebody who maybe wants to start something, and we kind of partner with them to get it off the ground. So we're not the founder, per se, but it's a, it's a situation where we have like full ball control, if you will, and we'll provide maybe the first two checks into it before it goes out to market.

• 36:08Speaker 01

  And so this is all kind of, I think, a continuum between real incubation and founder bets and maybe what I would call like proprietary seeds. And I think maybe those will make up as much as a third to a half of all the seed investments we make. Because, as Mike said, it's getting easier and easier to prototype something and take it to a small group of users and actually get real feedback and see if you've got something or not.

• 36:41Molly O'Shea?

  That's a good point. So how has the measurement at which you diligence these companies and the milestones and the success metrics changed over time? What do you look for now, or what do you overlook now that you might have looked at before?

• 36:55Speaker 00

  I think one of the things that I've been really excited by coming in as USV's newest partner is how much of this team cares about products. You know, it feels like the deals that we've dug in on sort of always require, not requires, doesn't, there's not a hard requirement, but it feels like there needs to be somebody on the team that's like really excited about the product. Now, obviously, that can't always work, especially in today's market, where, as we just mentioned, you know, in some cases, we want to go earlier and earlier and just bet on a founder, maybe somebody that's in our network that we really trust, but...

• 37:31Speaker 03

  Or we're betting on micro-nuclear reactors.

• 37:33Speaker 00

  Right, exactly. So it can't always be about the product.

• 37:35Speaker 01

  That's a little different. So in the energy side of our business, it's different. But I would say in anything that touches the consumer, it's a combination of what Mike said, which is using the product and getting kind of an instinctive feel for whether the product is good or not. And when you combine that with retention data and cohort data, the magic is when you can start to, the thing you feel is the thing you see in the data, either the retentiveness of it that you feel and you see, or maybe you, you're like, you know, I might churn off of this because of X, Y, Z, and you see that in the data, and you're like, oh, you know, they're going to have a churn problem. And so it's, I think it's a combination of using product and sort of a product-native

• 38:19Speaker 01

  mindset combined with a lot of data and really looking at cohorts and understanding what real users are doing.

• 38:25Speaker 03

  I think the other thing, though, is that team right now is playing, team is always the most important thing, right? No great company can be built or started without an A++ team. We actually debate that sometimes because sometimes there are these examples of crazy runaway network effect businesses where the momentum of the network can carry it far enough that maybe team matters left. But I think in today's world, team is playing, you know, it's always played an important role. I would argue it's playing a more important role than ever for really a bunch of reasons. One is that I think great hiring is harder than it's ever been. There's massive, massive talent competition. And so the ability to pull people away who are excellent from really, really strong

• 39:08Speaker 03

  other opportunities, sometimes where they're getting paid a lot of money by large labs or incumbents or whatever it is, or startups that have raised billions of dollars. You need the right founders that can really kind of mobilize a world around that. The other reason is I think narratives and market narratives are aggregating faster than they ever have. So the market is designating winners, right? And telling these stories in a way where value aggregates, often in a way that way, way, way precedes where the business is. And so the ability to be the founder that drives that story and gathers that attention and breaks through the noise and designates themselves as the owner of a market very

• 39:52Speaker 03

  early is super important, right? Both for investors and raising money, for team, for customers, that narrative piece and storytelling, I think we are paying way more attention to now than we probably have in other markets.

• 40:07Speaker 00

  Also, if it's easier than ever to build a product, you know, we want to back founders that we believe can really go the distance, right? And that's, I think that's more rare than ever.

• 40:17Molly O'Shea?

  I know this is like, you know, we're talking early stage, but the company's mature. Like you have, you guys are sophisticated investors. Like you are actually looking at performance metrics. Like it is clear, and it's also clear which ones end up becoming scams because they're really good at marketing themselves. And then which ones like actually have performance and revenue and that kind of traction. So I'm kind of trying to get below the layer of like, yes, it's a great product. Yes, it's a great team. Yes, it's a great founder. Like what do you want that team to be focused on? Is it retention? Like, is it, is it revenue? Like, what do you care about?

• 40:53Speaker 00

  So last time I was on Sorcery, there's a, there's a clip now that I see on X all the time from that interview where I guess I said ARR is a fake metric. I said something like that. I see this. I, I think ARR is, has become, you know, a metric that a lot of investors pay attention to, given how fast the revenue rate has ramped for so many of these companies. But, um, you know, I think one thing that we care a lot about is kind of clicking a layer deeper than that. You know, so many of these products now, because so many are subscription based, right? We talked a little bit earlier about how so many products are subscription based. I think it's easier than ever before to get somebody to pay for a product via subscription

• 41:36Speaker 00

  without knowing if they actually like that product, right? A lot of the subscription plans are annual. A lot of the time you have to pay just to try the thing. And so we try to look often more at the true usage retention of the product. Like, how often are people actually coming back to this product and using it? Are they coming back every day? Are they coming back every week? Do they churn out after a month? Um, I think that's probably a more telling thing to look at than just revenue, revenue retention. Yes, great. If the company can hold on to that revenue for a year or two years or three years, obviously that's going to show up in the business. But if the product isn't good, at some point, they're gonna churn and the business is gonna fall apart. So I think people should be paying more attention to that, like, like we used to, I'd say in

• 42:21Speaker 00

  an earlier era of investing.

• 42:23Speaker 03

  I think it's user retention and product innovation. I think we're in a moment in the market on the consumer application side where trial behavior is at an absolute high.

• 42:33Speaker 00

  Totally.

• 42:34Speaker 03

  And engagement behavior is at an absolute low. And that makes sense, right? We're getting thrown so many new things all the time in the market.

• 42:40Speaker 00

  And you have to pay to try them.

• 42:42Speaker 03

  You have to pay to try them, and we want to. It's on the news. It's the main discourse in the world. Everyone's like, are you up to speed? Have you tried Instinct? Have you tried Muse? Have you tried Robinhood? Like, we want to try them all. We're gonna stick with very few. So the trial behavior is a little bit of a fake out, right? Because we know you can get people to try, but it's only really gonna have long-term value if you can get it to integrate into someone's life.

• 43:07Speaker 00

  Totally.

• 43:08Speaker 03

  And so figuring out how to tell that is, I think, the whole thing. And part of that is watching how someone iterates on product, right? I don't only think it's like great product insight, it's what are the little hooks and things they do and changes they make that keep that product going and fresh and different? Because realistically, the idea that we get, you know, full insight into retentive product behavior before we get to make a decision is not really true, right? Like, if we really needed that, we'd be having to write way, way bigger checks than we would like to write here. So we're gonna have to make an inference about that with less data than, you know, maybe we would like. And so I think you're looking for proxies for that, both on the team and on the data side, that give you the sense that that's to come.

• 43:51Speaker 01

  But a lot of this that we've just been talking about, I think of as like seed, series A, series B kind of conversation. One of the hallmarks of USV is that we are very long-term investors. We're, we still, all of us are still working on companies that, you know, we funded over a decade ago. And so as these companies grow, what you want to see is that the team can, can launch new products and new lines of business. We, we had all of our CEOs together last week at our annual CEO summit. And one of the stars of our 2016 fund is this company called Abridge, which is an AI for healthcare company. And Shiv was telling a bunch of us, just in a casual conversation, that they had made

• 44:33Speaker 01

  all of their money for the last five or six years on a single product. And he's most proud of the fact that in the last 12 months, they've launched two new products, really two new lines of business. So now it's a three-legged stool instead of a one-legged stool. It's gonna be a much more stable business. And, and the three products are very synergistic. So when a customer adopts one, they're kind of locked in. When they adopt the second one, they're more locked in. When they lock in, when they adopt the third, they're kind of all in on Abridge. So that, to me, is the evolution of a company that's, that's going from being, you know, a great company to being potentially a fantastic company.

• 45:14Speaker 01

  And, and the, the thing about venture capital is anybody who studies it, and you've been an LP, so you know, is that it's usually two or three, maybe four companies per fund end up being the stars of that fund. And, and to be one of those companies, one, one of two or three things has to happen. And what's happening at Abridge is probably my favorite example of, of a company that can make something, can make a company that could be like 100X.

• 45:39Speaker 03

  Well, one of the things I like about that, that I think, is that if you think about Abridge or like a bunch of the winners that have emerged, including Twitter, they're often not straight lines. It's not like they popped immediately and like it was, it was obvious, right? Abridge is in 2016, you know?

• 45:54Speaker 00

  And we're seeing a lot of companies now that feel like they are straight lines.

• 45:57Speaker 03

  It feels like it's obvious and it's unlikely that that's the story.

• 46:00Molly O'Shea?

  That's a good point. So to dig into, I guess, this pattern, if there is one over time, like, is it obvious to see that in a company? Is it a straight line, to Rebecca's point?

• 46:11Speaker 01

  If we go back, USV has probably now had over 10 early-stage funds in, in the life of USV. And every single one of them have produced two to three really great companies. And if, you know, you just sit there and you, and you list them. In our first fund, we had Twitter, we had Etsy, we had Indeed.com. Indeed.com, you know, we still see ads on TV. We, we haven't been an investor in that company in 15 years, but I, I suspect that company is like 50 or 100 times bigger than when we sold it a decade or, or more ago. And then in our second fund, we had MongoDB and we had Twilio, um, you know, which were, you know, products that developers used.

• 46:54Speaker 01

  And then we had Stripe, and then we had Coinbase, and then we had Duolingo, and then, um, now we're getting into the more recent era, like Abridge is a 2016 company. And, and I've left off a few. But there are probably 20 or 25 companies that, you know, we've invested in over the last 20 years that I would, you know, consider to be extraordinary companies in terms of not just the investment that we made, but like what they've become. I mean, Indeed's really interesting. Like, you know, we were there at the very beginning. It was Paul and Ronnie and a couple engineers, and they had this idea. Today, it's like probably the largest job hiring system in the world, right?

• 47:37Speaker 01

  You know, and it just came out of nowhere to become that, right? You watch these things emerge that way. It's, it's remarkable. I mean, Twitter, you know, well, now we know, you know, what it is. It's one of the most important, you know, pieces of media infrastructure in the world. And, you know, when we invested, it was like five or six people, right? So that's pretty interesting. And one of the things that we can give founders, and we're not alone in this, by the way, is that there are plenty of people here at USV who have that kind of perspective on what it takes to really build a generational type of company. And, and the, and the fact that it's not a straight line, right? Like Coinbase was like, you know...

• 48:23Speaker 01

  You know, like it was like a series of like little moves and then flat for a long time, then a little move, flat for a long time, with a couple of big breakouts in 17 and 19 that led to it becoming a public company. So it's never a straight line to the top and sometimes there's management changes. Twitter is sort of famous for having kind of a revolving door of CEOs for a long time. So that's its own set of things that you have to work through sometimes.

• 48:51Speaker 03

  But if you take a bridge, for instance, like a bridge, the idea of the product was very similar, but it went down a very different go-to-market road for years that didn't get them anywhere and turned out to not be the go-to-market road, right? That made sense for that product at that time.

• 49:09Molly O'Shea?

  What was it?

• 49:10Speaker 03

  Consumer.

• 49:11Speaker 01

  The idea was you would walk into a doctor's office and record the appointment. Well, it turns out it's actually the doctor who wants to record the appointment.

• 49:18Speaker 03

  And so you think you back a whole business, right? You think you back, you know, you get conviction on this idea that patients want to record themselves, you know, in their medical appointments for XYZ reasons and you're backing this team to go after that. What you learn you're backing is not that. You're backing kind of a team, a product sense and a direction, right? And what you backed was the idea that Shiv could build the team that took this like kernel of an idea that was directionally right and kind of wrong in the details to start and navigate it to the place where the right product and then, as Fred talked about, eventually the right series of products, met the right go-to-market at the right time. And that sometimes happens right away and sometimes takes a while and you need the teams

• 50:03Speaker 03

  that are gonna be able to kind of go on that journey and fight that out.

• 50:07Speaker 01

  It's usually an extraordinary founder, though. Not always, but Shiv's an extraordinary founder and the other startup that we backed in Pittsburgh, Duolingo, again, an extraordinary founder.

• 50:19Speaker 03

  More of a straight line?

• 50:20Speaker 01

  No, no, the first product was, no, the first product had nothing to do with what they ultimately, yeah.

• 50:26Speaker 03

  Really? What was the first product of Duolingo?

• 50:28Speaker 01

  It was like translating, you know, like foreign language documents. No, it had nothing to do with, I mean, but, but.

• 50:36Speaker 03

  He's amazing.

• 50:37Speaker 01

  Founders, Rebecca said this earlier, founders who can combine a vision for something that they want to exist in the world with the ability to tell that story and galvanize the right people and the right investors and the right product, that's, we've all seen it, we know when we look at it, we're like, oh, that's a great founder. But it's easier to see it when they're, you know, the CEO of a public company than, you know, when they're just walking in our door with an idea. And we get that wrong more than we get it right.

• 51:09Speaker 03

  How do you get it wrong?

• 51:11Speaker 01

  Well, we think somebody can be a Luis or a Shiv, but it turns out that they can't get out of their own way, they overthink things, they struggle recruiting, they struggle retaining, they're a micromanager.

• 51:25Speaker 03

  They struggle making hard decisions to make the big changes early enough, right? To say, this go-to-market's not working, let's try something really different. It's hard to burn boats as startups.

• 51:34Speaker 01

  Mike's been a founder, so he has a lot of empathy for this.

• 51:37Speaker 00

  Not a straight line. Yeah, it's never a straight line. But, you know, everything these two are talking about right now is what I love about USV being thesis-driven, right? You know, all of the examples that they both just cited, if you think about them in the context of when the bets were made, it's extremely early, right? Like the Coinbase bet was very, very early on in the history of crypto. The Abridge bet was very, very, very early on in the history of AI and data capture.

• 52:08Speaker 01

  Particularly AI and healthcare.

• 52:09Speaker 00

  And I think, you know, Rebecca's framework that she just laid out a few minutes ago about a great team and a direction of an idea, I think is so, so important and so key. And I think that's how USV has been successful at these bets early. Another one that, you know, we've been talking a lot about is Radiant, which, you know, Fred is on the, on the board of. You know, that bet was made before it was obvious to everyone in the world that energy was gonna need to be so abundant for AI. But, you know, this team had a, had a thesis and had a point of view about the importance of energy, which was what led to that investment. And now, sure enough, how many years later?

• 52:47Speaker 01

  We invested in Radiant in '21, so we're five years into that one.

• 52:52Speaker 00

  So, I mean, anyway, it just speaks to the power of, I think, thesis-driven investments. But I think to your point and, you know, to your answer, Fred, we don't always get it right. And sometimes not only is the team wrong and the person, but sometimes the thesis is wrong.

• 53:06Speaker 03

  Sometimes the benefit of thesis-driven investing is you can, I think, a few things. One, you can bet on spaces that are more on the come or less obvious because you have a prepared mind and perspective that you're bringing to it of something you believe. You're not just seeing a company, seeing what they believe, you have a belief. You can also start the conversation with a founder in a different place, right? Because you're saying, I have a set of hypotheses on something and you have a set of hypotheses on something, where do we align, right? Which I think is actually a lot more fun and probably sets you up for a relationship in a different way, but also I think tends to get us to a better outcome than, than otherwise. The risk is like, there's a lot of ways you can be wrong and be wrong and people, you can be wrong on the whole thesis, right?

• 53:47Speaker 03

  You can go down a road that isn't, you know, the right road to go down, but when you go down the right one, it's worth it.

• 53:54Molly O'Shea?

  Today's episode is sponsored by V C X by Fundrise, the public ticker for private tech, allowing investors of all sizes to invest in venture capital. Learn more at getvcx.com. Some of you may not have heard this yet, but our sponsor, Public, just launched something called Generated Assets, and it brings AI into investing in a way I've honestly never seen before. Here's how it works. You type in an idea like AI-powered supply chain companies with positive free cash flow or defense tech companies growing revenue over 25% year over year. Public's AI then dispatches a swarm of agents that scan every single US stock, evaluates them and instantly builds a custom index around your thesis. What really stands out is how clearly it explains why each stock is included.

• 54:39Molly O'Shea?

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• 55:22Molly O'Shea?

  I guess to distill this, this like theme down, what are the key behaviors or actions that successful companies make that win each technological shift? Like, we're in a major technological shift right now. How have you seen that throughout time of what the key behaviors are of those teams or of those founders and maybe the key traits of those types?

• 55:48Speaker 01

  It's getting the idea right. What I mean by that is, everybody knows that we're all gonna have personal agents. But if you, if you look at each of the products that are out there, they're all a little different in terms of how they feel, how they work. Getting it right is the right set of features, kind of stitched together in the right way and delivered with the right business model. And then also with a team who has the ability to access capital and scale against the opportunity if they actually catch fire. So that, that I think it's, it's not just the ability to raise capital.

• 56:32Speaker 01

  There's lots of people who are great at raising capital, but they can't build a product that really wins. And there are people who build a product that really wins, but they can't, they can't galvanize a team or money and so they get beat. It's the ones who can do both that ultimately really win.

• 56:49Speaker 00

  Was identifying that aspect of fundraising ability as important maybe 10 years ago? Was it, was it as obviously important 10 years ago?

• 56:59Speaker 01

  The interesting thing, Rebecca alluded to this earlier, sometimes if a product really catches fire, it can raise money even without the right team around it. And then you have to kind of scramble, you being the founding team and the board, kind of have to scramble to figure out how to fix the team and get it right so that, so that all the, all the things can come together. And I would say that was true at Twitter, that was also true at Etsy. So it isn't always the case that the...

• 57:36Speaker 01

  The right product emerges from a team who has maybe the right stuff to make it a lasting business.

• 57:45Molly O'Shea?

  Why is one of the categories called Rebel Alliance?

• 57:48Speaker 01

  Well, rebel just in the sense that there are now the sort of established winners in AI, which would be OpenAI, Anthropic, Grok, Gemin AI, I guess, all that's Google. And then there's this sort of open source world out there of open source models, open weight models, open source harnesses, and all this other infrastructure that you can stitch together to build something that looks like Claude, or looks like Cursor, or some sort of full stack product. We call it the Rebel Alliance because a lot of developers out there, they don't want to build on like a closed stack.

• 58:31Speaker 01

  They're worried that if they build on top of Claude, for example, just to pick on Anthropic, that somehow Anthropic will ultimately compete with them, and then they'll get cut out. And this famously sort of happened in the early days of social media. People built lots of businesses on top of Facebook, and Facebook ultimately decided they wanted to be in those businesses themselves, and they got cut out, right? And so developers out there have this concern, I need a stack that I can control and I can trust. And so we call it the Rebel Alliance because there are people who are kind of rebelling against the leading emerging stacks and trying to construct their own.

• 59:10Speaker 00

  And it turns out like that stack is actually very, very large, and there are lots of layers to it

• 59:17Speaker 00

  for not only opportunity, but for the different needs of the developers, right? There's things like alignment with the models, and making sure that the models are aligned with the needs of the enterprise or the customer. There's things like memory, there's things like routing, there's things like the models themselves, and making sure that they're open weight, and you know, a developer can actually manipulate them the way they need to. And so we feel like not only is there this, I don't know if we want to call it like uprising of developers wanting to not be beholden to this one sort of player ecosystem, but it's also very, very, very large, with lots of layers, which is why it represents an entire thesis for us.

• 59:54Speaker 01

  I mean, we had a moment on stage last week at the USB CEO Summit, where I was interviewing the CTO of Coinbase about some of the changes that they've made organizationally to be more AI-centric in how they do the work. And he just casually mentioned that they moved away from Claude, and they built their own harness, their own coding agent harness, on an open source product called Pi. Well, we're an investor in this company, Arundel, who put Pi out into the market. I didn't even know that this had happened. I was just like, yes!

• 1:00:29Speaker 01

  And that's, you know--

• 1:00:30Speaker 00

  Tons of developers--

• 1:00:31Speaker 01

  Well, so a company like Coinbase and Shopify has done the same. They were, you know, pretty loud about it. And I imagine many other companies too, where the CTO and the engineering leaders look at it and say, oh, we can't just build everything on top of Claude, right? We have to have something that's more flexible, that we can evolve with our needs, and all of this is really getting built up in these open source tools. We're very excited about that area. It's an area that we feel like we have a lot of conviction around that maybe other venture capitalists aren't as excited about as we are, which is something we like because the founders feel a kindred sort of spirit with us,

• 1:01:16Speaker 01

  and so we tend to be really competitive in those environments.

• 1:01:20Molly O'Shea?

  Any other areas?

• 1:01:22Speaker 01

  Well, I think energy in general was an area that, you know, I think we staked out early. And, you know, we basically said, look, if you really want just a simple way to bet on AI, and not have to think about all this other stuff, just bet on energy.

• 1:01:36Molly O'Shea?

  Energy, yeah.

• 1:01:36Speaker 01

  Now, we're not just doing that, by the way. It's 20, 30% of our portfolio, but we feel like it's a very levered bet on AI.

• 1:01:44Molly O'Shea?

  It's a good one.

• 1:01:45Speaker 00

  We talk a lot about obliterate, don't automate, which is kind of another phrase for the investments we're making at the application layer of AI. The way we think about that is, it's the idea that--

• 1:01:57Molly O'Shea?

  AI is going to kill us all?

• 1:01:58Speaker 01

  No, no.

• 1:01:59Molly O'Shea?

  No, no, opposite.

• 1:02:01Speaker 00

  But that it may obliterate an existing market, right? There was an era of software, you know, over the past decade, SaaS, enterprise, that was really about automating businesses and automating markets that already existed. But with AI, you know, businesses and consumers can tap into intelligence that was previously gate-kept by really large organizations or really large institutions at a fraction of the cost. And we believe that through that, literally entire markets can be restructured through that democratization of intelligence. So a great example of this is something like healthcare. We have an investment in a company called Doctronic,

• 1:02:42Speaker 00

  where they're leveraging AI not to just make the existing healthcare system more efficient or more practical, but to literally give consumers a doctor in their pocket in the form of AI.

• 1:02:55Speaker 01

  That can actually write prescriptions in some states.

• 1:02:58Molly O'Shea?

  Really?

• 1:02:58Speaker 01

  Yeah.

• 1:02:59Speaker 03

  Utah, right now.

• 1:03:00Molly O'Shea?

  What kind of prescriptions?

• 1:03:01Speaker 01

  You name it. What do you need?

• 1:03:03Molly O'Shea?

  Oh, no.

• 1:03:05Speaker 01

  Probably not.

• 1:03:07Speaker 01

  Probably not controlled substances.

• 1:03:09Speaker 03

  It's not controlled. Right now, it's literally refill.

• 1:03:13Speaker 00

  But you can see--

• 1:03:14Speaker 03

  Anything you want.

• 1:03:15Speaker 00

  But you can see that if everyone had access to a doctor, literally on demand, immediate, for virtually no cost, what that would do to the existing healthcare market in this country.

• 1:03:26Speaker 03

  One of the things that I love about obliterate, don't automate is that it's perfectly applicable for this moment in time, but it's probably the best articulation of the thesis USV has always had. Fred actually wrote a blog post in 2014 called Obliterate, Don't Automate, about the USV thesis. We've always believed in the opportunity to restructure markets and drive the value back to the end user away from the centers of power in the middle. You just can do that with a whole new toolset right now. So the opportunity to restructure healthcare, or restructure education, or restructure manufacturing, or whatever, gives this opportunity to drive the value out of the middle to that end user in a totally different way because of the toolsets at hand.

• 1:04:09Speaker 01

  A simple way to think about this is, don't hire a lawyer, use an AI lawyer. Don't hire an accountant, use an AI accountant. Don't hire a doctor, use an AI doctor. No human whatsoever in the loop. It's not about selling AI to doctors, or AI to lawyers, or AI to accountants. It's like, I'm not going to have an accountant. I'm literally going to tell my AI to prepare my tax return. I'm going to give it access to my bank, and it'll just do the numbers and send the IRS my-- you know, I don't need a human, I don't need to pay a human. I would say 20 to 30% of the legal work that we do here at USV does not get touched by a human lawyer anymore. Now, we know what our AI lawyer can do and what our AI lawyer shouldn't do.

• 1:04:51Speaker 01

  That's increasing over time, but we're not careless about it. But there's certain things, like issuing the term sheet, we do not need a lawyer to do anymore.

• 1:04:59Molly O'Shea?

  No. How many of those have you issued?

• 1:05:02Speaker 03

  Right. And so we can train a model on all of our previous term sheets and issue them, right? And so, and the thing that is exciting now isn't where everything is, it's the slope, right? And if you just play out that slope, it covers a lot of domain.

• 1:05:14Speaker 01

  Right, your AI lawyer is as bad as it's ever going to be.

• 1:05:17Speaker 03

  It will never be as bad as it is today.

• 1:05:19Speaker 00

  The company that we recently announced that, you know, we talked about as sort of an incubation, super take, I mean, this is another great example of this. The whole idea of that company is, you don't need expertise around the stock market, or you don't even need to pay a financial manager to come up with a portfolio strategy for you and then deploy it. You can just have the AI do that. And so that's another example of sort of breaking down the barriers of sort of gate-kept institutional knowledge via AI.

• 1:05:46Molly O'Shea?

  The age-old question to this would be, why can't incumbents do that?

• 1:05:52Speaker 01

  They won't do it. They have people. I mean, lawyer's a perfect example of it, right?

• 1:05:58Speaker 01

  We say to our lawyer, you know, you can issue the term sheet, we're just not going to pay you to do it. And they're like, well, why would I do that? You know, I have people to pay. Okay, fine, then I'll just use an AI lawyer to do it, like--

• 1:06:10Speaker 00

  And their business model depends on the people as well.

• 1:06:12Speaker 01

  The incumbents cannot-- and I think it's particularly powerful in people-based businesses. The incumbents cannot--

• 1:06:23Speaker 01

  Offer something for free.

• 1:06:24Speaker 03

  Our partner Brad is, I think, always says this the best. But his line is always the best time to bet against an incumbent is when them doing what you want to do fundamentally threatens their current business. It is very, very hard for major incumbents to burn their own boats and to take that kind of risk. So if you think about, you know, there's plenty of news out there about certain law firms, right? Hiring engineers and machine learning.

• 1:06:53Molly O'Shea?

  Morgan and Morgan is going into AI. Did you see that?

• 1:06:57Speaker 03

  Yes, exactly. And trying to build the models. And some of them will do it and some of them will try. But overall, it would come, it will cannibalize their own business.

• 1:07:07Speaker 01

  Right. I mean, Google has done, I think, an admirable job. They know that Gemini is going to cannibalize Google Search. And the numbers are staggering. I saw last week, search is way, way down. It's dramatic. They are doing it, but they have all these other businesses. They've got YouTube, they've got Waymo, they've got Gmail, they've got Android. Like, they can literally kill the thing that funded all those other businesses because now they have all the other businesses. If all they had was search and they never built those other businesses, they'd be in a world of hurt right now.

• 1:07:38Speaker 00

  Yeah, a lot of publicly traded incumbents are going to have a really hard time doing this because they have to answer to their shareholders and keep revenues going up and to the right.

• 1:07:46Speaker 03

  But I think your fundamental question is the one we're thinking about all the time. It's not only why can't incumbents do it, it's why can't anyone do it?

• 1:07:52Speaker 00

  Right.

• 1:07:53Speaker 03

  Right? It's why can't I build that agent to do my taxes? Or why can't I train my, we trained our own, you know, legal model. We didn't buy it. And so what is going to create advantage in this moment in time when the building is faster and more efficient than ever? You know, and that is something we're thinking about. And that goes back to network effects and speed and team and product decisions that are going to make these abstractions the ones that people rely on. And also some of these other categories like physical AI and data at the edge and, you know, energy and things that operate in a little bit of a different way than software.

• 1:08:29Molly O'Shea?

  So an area where all of this is directing, it's part of Rebel Alliance, is trust and security. And so how are you thinking about cybersecurity and all of those types of things as we obliterate and automate everything?

• 1:08:45Speaker 00

  It's definitely an area that I think is about to change. I think a lot of cyber focus over the past few decades has been focused on the enterprise. It's probably going to undergo a lot of change at the consumer layer now, just because of how many consumers are going to be, I think you said earlier, just like handing over everything to their agent, whether it's Instinct or Grokbot or Muse. I mean, one of the things I was thinking about just this morning was the concept of password reset is going to have to change. If you give your agent access to your email, which is where all your password reset emails go, they just automatically will be able to access literally every account you own. So it's definitely an area we're thinking about. You know, we haven't traditionally made a ton of investments there, especially at the

• 1:09:30Speaker 00

  enterprise, as we mentioned. But it's an area that's going to change dramatically.

• 1:09:34Speaker 01

  We have a portfolio company, they call themselves Common Fabric now. They just announced, right?

• 1:09:40Speaker 03

  Yes, Common Fabric.

• 1:09:42Speaker 01

  And it's a sandbox that's focused on this very issue about how do you give users the security that they want, but also the power that they need. They have a particular approach. I think it will be interesting to see whether that approach or a different approach will emerge, but we have a lot of conviction that users are going to need some new help in security around this stuff. I mean, I think about my mom, who's 96. She's not prepared for this world. Like, she's not going to be able to know what's real and what's not real. I'm not sure I know what's real and what's not.

• 1:10:20Molly O'Shea?

  People get spooked by, or spooked by those AI videos all the time.

• 1:10:24Speaker 03

  All the time. Well, we've always been interested in this idea of security and privacy and control with the user versus the platform. And we've done that to kind of more and less success over time in terms of how much the end user actually cares about it. There have been companies like DuckDuckGo that had enough of an audience that really cared about privacy and search, that created a really, really strong business around it. And there have been plenty where we may want them to care about privacy and security, but there's not enough of an incentive system for the end user to really care about it. That may be changing.

• 1:10:57Speaker 00

  Yeah.

• 1:10:57Speaker 03

  Right? It may be part of the conversation in a big enough way where things like on-device and private models and these kind of personal security and more consumer-oriented products may have a moment that in previous iterations it didn't have because of the awareness and the scale and all those kind of things. I also think things like biometrics may have a different kind of moment in terms of proving humanity. And so I think we may be entering a time where things that previously struggled to get attention have this moment to grow.

• 1:11:27Speaker 01

  The other thing to think about is if you can run models locally on a secure device like a iPhone, then you can give a lot of this secure information to your local model and have it do the work locally as opposed to out there in the cloud. We're not there yet, but I don't think we're very far from some pretty powerful models being able to run locally.

• 1:11:49Speaker 03

  Nikhil and I saw a company this weekend that's doing local models on your phone.

• 1:11:53Speaker 01

  So we're there?

• 1:11:54Speaker 03

  Yeah, I think we're there.

• 1:11:55Molly O'Shea?

  Wow. Surprise.

• 1:11:59Molly O'Shea?

  Well, Fred, you know of all people, though, it doesn't just stop at that. Even in crypto, like you can click a link and your whole wallet will be erased.

• 1:12:07Speaker 01

  I've done it.

• 1:12:08Molly O'Shea?

  You've done it? Oh, wow. Do you have anything left?

• 1:12:11Speaker 01

  No, no.

• 1:12:15Speaker 03

  We should be worried.

• 1:12:18Molly O'Shea?

  What stops your agent from clicking the link?

• 1:12:21Speaker 01

  So I have owned crypto assets for 15 years and I've been hacked four times.

• 1:12:27Molly O'Shea?

  Oh, my God.

• 1:12:28Speaker 01

  But I still have like 99% of all my crypto.

• 1:12:31Speaker 03

  Well, not bad.

• 1:12:32Speaker 01

  So, but I've been stupid and done things I shouldn't have done and not had my crypto as secure as it needed to be. And I've learned the hard way, as most people in crypto have. I think if you talk to most people who have been in crypto for as long as I've been, they will tell you something similar to that. Hopefully, the ratio of losses to what they've kept is the same as mine because I feel good about that. There are some stories out there that are horrible where people lost everything. But I think most people, you know, got hacked and it scared them enough to kind of take the proper measures.

• 1:13:12Speaker 00

  I almost lost all my crypto once. I got very close to being scammed. I was on the phone with a scammer for like 15 minutes thinking they were legit.

• 1:13:19Molly O'Shea?

  You were on the phone?

• 1:13:20Speaker 00

  Yeah, it was bad. And my wife, she was like, you need to hang up the phone right now. And sure enough, she was right. But I came very close to losing all of my crypto.

• 1:13:31Speaker 01

  I mean, Coinbase, you know, company that I'm still on the board of and was, you know, one of our really great investments over the years here at USV. That's a big part of what they do. You know, they have cold storage where they store assets super securely for their customers. And there's a lot of, you know, there's two factor and there's like delayed withdrawals. And there's all these things that they do to protect those assets and literally protect their customers from their own stupidity, which I'm guilty of, by the way.

• 1:14:04Speaker 00

  Yeah, in many ways, it's a security company more than anything else, right?

• 1:14:06Speaker 01

  Yeah.

• 1:14:07Speaker 03

  Well, that's an interesting analogy because like people wanted to get into crypto and were interested in it, but it was, it felt dangerous because you'd get scammed all the time and there was a big privacy risk. And Coinbase came along and said, just give it to us and we're going to handle that part of it for you.

• 1:14:22Molly O'Shea?

  They're the most trusted brand in like the sketchiest.

• 1:14:25Speaker 03

  And it's just a trusted brand.

• 1:14:26Molly O'Shea?

  No offense.

• 1:14:27Speaker 01

  Exactly.

• 1:14:27Speaker 03

  Totally. Yeah.

• 1:14:29Speaker 01

  They're the most trusted brand in the sketchiest industry ever. That's.

• 1:14:33Speaker 03

  That should be their tagline.

• 1:14:34Molly O'Shea?

  No, they make it literally seem so normal. Like, it's awesome. I've talked to them about it. Even Kat, they're like, they do a great job marketing.

• 1:14:41Speaker 03

  And most people don't know how exactly they're keeping it safe.

• 1:14:44Speaker 01

  Right. Yeah. Well, that's on purpose.

• 1:14:45Molly O'Shea?

  Yeah.

• 1:14:46Speaker 03

  Totally. Probably by design. Yeah. And also they don't really care as long as you trust that it's safe. You don't really, and I wonder if we're kind of at that tipping pointer moment in AI as well, where like everyone's interested. We know it's going to provide a lot of utility, but we're looking for these kind of trusted brands and platforms that can kind of give the comfort that things are in good hands.

• 1:15:06Molly O'Shea?

  I went to their last system update product launch in New York, just a couple of blocks away. And that was one of the questions that I asked both Kat and Brian. It's like, you guys built the most trusted brand in one of the toughest markets. Like, what do you think all these AI companies are getting wrong?

• 1:15:23Speaker 03

  What'd they say?

• 1:15:24Speaker 00

  What'd they say?

• 1:15:25Molly O'Shea?

  Well, I mean, like they're telling people they're going to lose their jobs and die. So that doesn't help. It definitely doesn't help.

• 1:15:33Speaker 00

  It's a good way to destroy trust.

• 1:15:35Molly O'Shea?

  Okay, so I hope you don't mind. I went over a bit because this like dynamic just works really well. It's awesome. So we might not have that much time for solos, but I just figured this like is.

• 1:15:45Speaker 03

  That may be fine.

• 1:15:45Molly O'Shea?

  This is just awesome.

• 1:15:47Speaker 00

  Maybe we just do like the quick office thing.

• 1:15:49Molly O'Shea?

  I think we should do that.

• 1:15:51Speaker 00

  Maybe the two of us can just do that. You have to go in a few minutes.

• 1:15:53Speaker 03

  Do they want to know what time it is?

• 1:15:54Speaker 00

  10 of.

• 1:15:56Molly O'Shea?

  9:52?

• 1:15:56Speaker 01

  I got eight more minutes.

• 1:15:58Molly O'Shea?

  Okay, cool. So I figure just like two or three more questions.

• 1:16:02Speaker 01

  Sure.

• 1:16:02Molly O'Shea?

  But like, this is awesome.

• 1:16:03Speaker 03

  Great, so then maybe we're good.

• 1:16:04Molly O'Shea?

  You guys are so fun to talk to.

• 1:16:06Speaker 01

  Oh, amazing.

• 1:16:06Molly O'Shea?

  And like, the vibe and the dynamic is great.

• 1:16:08Speaker 01

  This is the vibe, I mean, what you're seeing is the vibe among our partnership, and frankly, the entire team. I don't mean to make it just about the partners. It's a very conversational, kind of back and forth, wanting to hear what the other person thinks, and collectively kind of coming to ideas together. That's how we work.

• 1:16:28Molly O'Shea?

  Okay, so I'm gonna ask you a hard question now.

• 1:16:30Speaker 01

  Sure.

• 1:16:30Molly O'Shea?

  Do you expect every company to become a trillion-dollar company?

• 1:16:34Speaker 03

  No, of course not. You know, if you expect, if you expected every company to become a trillion-dollar company, you would not, somehow you would not be taking enough risk, right? Like, venture is based on an outlier mechanic. But we don't invest in companies that we don't see the opportunity ahead of us.

• 1:16:53Molly O'Shea?

  Do you think it's realistic to think that, like, these companies right now will become, I mean, obviously Anthropic's not that old. We have ChatGPT, that's a little bit older, OpenAI, but like...

• 1:17:03Speaker 03

  I maybe, I have kind of two takes on the question. What part of your question is, does every market have to be a trillion dollars, right? Can you get into a market that you don't see it today? I think one of the things that USV has done quite well historically is be willing to bet on markets that aren't yet there, but are on the come. Crypto being maybe the best example of it. Energy right now as well. Education, these markets where if you were underwriting exactly the dollars spent in crypto at the moment of a Coinbase investment, you would never get close to being able to underwrite the value of what that became, nor what that market became. So you need to bet on markets that you are excited about today, but even more excited about where they're going. We're certainly doing that right now.

• 1:17:45Speaker 03

  We've been talking about things like robotics, like what can happen because of a sensor proliferation. None of that is that interesting today in what is live in the market. But do we think when we look at 2030, or 2040, or 2050, those can be trillion-dollar markets? Absolutely. Radiant nuclear, right? The market for nuclear energy today is almost zero, right? It doesn't really exist. But we believe it's going to be one of the most essential energy sources that are out there. So we have an interest and ability to write forward on markets, on what we think markets can become versus only what they are today, which I think is really important to our strategy. I think there was a time where we could underwrite businesses of different scale. Part of it was fund size, part of it was market dynamic.

• 1:18:30Speaker 03

  There was a time where like, number three, four, five in the market could still actually accrue a lot of value. I am not as sure that that's where we are today. Others may disagree. But I actually think value is aggregating to top players faster than they ever have before, and interest isn't really existing in the longer tail. So we are less interested in saying, well, we're not in the one or two player, but maybe this three or four player can again, get enough value that it's a great investment. I think there was a time that worked. I'm not sure that time is now.

• 1:18:59Speaker 00

  Yeah, in many ways, every USV investment has to, you have, you almost have to believe that it's a TAM expansion opportunity. If you're, if you're sort of evaluating the size of the TAM as a fixed TAM when you make the investment, it's, it's probably not going to make sense.

• 1:19:14Speaker 01

  But I also think that if, there was a time when we felt if a company could be worth a half a billion dollars, we could make an investment. Then I think the number, you know, kind of grew to a billion. I don't think a trillion is what we need to underwrite to at USV. I think if, if our biggest winners are in the single-digit billions, given our fund size and our ownership, we can produce really, really healthy returns for our partners. And that's where it's been. You know, there've been some outliers at 50 billion, or, you know, 100 billion, but, you know, a lot of our biggest winners are in the $10 billion range, and that's produced enormous returns for us.

• 1:19:59Molly O'Shea?

  I ask this also because I just came from Bending Spoons. And so, you know, they're obviously buying up a lot of companies. They're doing it in the low $1 billion range. They did some earlier ones and that kind of thing. But it was, you know, markably like, the Zerp era of funded companies that were at 11 billion, 15 billion, and they got written down to around 1 billion or 2 billion, that kind of thing. But how do you think about that valuation sensitivity today? And where does it get irrational?

• 1:20:30Speaker 00

  I mean, if we get into companies early enough, at the earliest stages, and with the right ownership size, as Fred just said, even exits in the single-digit billions can still be enormous for us, given the small fund size of our strategy.

• 1:20:47Speaker 01

  This will always happen. There will be some companies that overshoot what they're really worth, and they'll come back to earth. Not all companies, some companies just are rocketship. But some companies, they have a moment where the world thinks they're worth 5 or 10 billion, but they really are worth a billion. And that's perfect for a Bending Spoons, right? Like, their model's really interesting. They can, you know, pick things up, you know, when the venture journey's over, and, and grow those businesses, you know, with a different, you know, kind of capital structure.

• 1:21:15Molly O'Shea?

  So as we close out, this is my partner question, but my partner, my favorite partner, I don't know where my camera is, there's like 500 cameras here. Sorcery is sponsored by Brex, and so they think a lot about performance, spending's part of moving faster. I think about this, you've gotten this question before, in terms of who you surround yourselves with, and, you know, performance is like a measure of, like, maybe the five closest people to you. Without pumping your book too much, I will try to get you to think outward of that. It could be an author, it could be like a historical figure, it could be just a longtime mentor of yours. Who are the people that really keep you inspired, or keep you challenging yourself?

• 1:21:59Speaker 01

  Founders.

• 1:22:00Speaker 03

  I know, that was it, yeah.

• 1:22:01Speaker 01

  I mean, it really is founders. At our CEO summit last week, we all went around the room and said, who inspires us the most? And our partner Brad got up and said entrepreneurs, and I thought to myself, damn, he did it again. That's why it's great to be a venture capitalist. Every day someone walks in and you're like, oh wow, that person is thinking about things in a completely different way, and changes the way you think about something. So I have to say, most venture capitalists would probably tell you the same thing, that founders are the real inspiration for us.

• 1:22:32Speaker 03

  When you see an outlier founder start to kind of chug, right? And like, hire that talent.

• 1:22:40Molly O'Shea?

  Are there any particular names that you guys have?

• 1:22:42Speaker 03

  Yeah, I've been thinking a lot about like, okay, I have a founder I work with named Zach Kanter. He's the founder of a company called Steady. He sent this email out, an update yesterday. He's been at this for 10 years, right? It's a long time. The business is cranking. That really happened in the last three years. And he fought that out for seven years, and then he got there, and he knew exactly how to take advantage of the moment when the stars aligned for him. Some of it was external market, some of it was a really high bar of team, even through really hard times. Some of it was just like, getting the product at the exact right place, that when it was useful, it was there. And that kind of like intensity and lining up the puzzle pieces is so hard.

• 1:23:24Speaker 03

  And I think about the kind of haves and have-nots in the portfolios I work with, and a lot of it is that. Of like, can you make these things line up so you're really ready at really the right time? And you just keep that intensity at full charge, even when it's like, the wind's not at your back? And that I find really inspiring to work with.

• 1:23:47Speaker 00

  A thing I always say about like, the best founders, at a certain point, you know, they reach this level where it's almost like, they see the matrix. And they can just, they can, they can do anything. You know, a great example, you know, you and I know that, we've talked in the past about Suno, Mikey Schulman, which is a, you know, Suno's a USV portfolio company. You know, when they just started out, they were so, you know, obviously so excited about the opportunity ahead of them, music, but they had never founded a company before, and they'd never operated in music before, which is such a challenging market to operate in. And after now going through the paces for a couple of years, and obviously having a

• 1:24:28Speaker 00

  tremendous amount of success, I mean, Mikey is just operating at an insane level. That, you know, if you met him when he had just started, it's just, it's just a world of difference. And we learn a lot from him, and from all of our founders.

• 1:24:44Molly O'Shea?

  Thank you very much, Fred, Rebecca, Mike. Really appreciate it. Congratulations. Thank you.

• 1:24:49Speaker 03

  Thank you so much.

• 1:24:50Molly 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.