Inside General Catalyst’s $1B+ Bet on Fixing Healthcare (Hemant Taneja, CEO & Managing Partner)

Hemant Taneja is the CEO and Managing Partner of General Catalyst, a venture capital firm that has evolved into what he describes as a "strategic conglomerate with venture capital at its core." Under his leadership, GC has expanded beyond traditional investing to become an organization focused on transforming entire industries from healthcare to call centers to insurance. In this conversation, Hemant unpacks General Catalyst's unusual structure and ambitious mission. He shares why his firm acquired the hospital system Summa Health in Ohio, why AI roll-ups will create some of the most valuable IPOs in the coming decade, and how servant leadership principles have reshaped his approach to building organizations. We explore: • How General Catalyst evolved from a traditional VC firm into a multi-business "strategic conglomerate" • Why Hemant believes the next decade requires completely rethinking what excellence means in company building • How GC's healthcare transformation company (HATCo) is working to reinvent the American healthcare system • Why GC made the unprecedented move to acquire Summa Health, a hospital system in Ohio • How servant leadership principles learned from Ken Chenault transformed Hemant's approach to building organizations • Why AI is accelerating transformation across industries faster than anyone predicted • How General Catalyst built its global seed practice through unusual acquisitions of La Famiglia, Venture Highway, and Wayfinder • Why Hemant believes AI roll-ups of labor arbitrage businesses will become some of the most valuable IPOs in the next decade • The changing profile of successful founders in an era of rapid technological change • How General Catalyst thinks about balancing profit and purpose across its portfolio — Thank you to our sponsor: Brex https://www.brex.com/mario—The banking solution for startups. — Transcript: https://www.generalist.com/p/inside-general-catalyst-hemant-taneja — Timestamps 00:00) Intro (02:16) General Catalyst’s ambition to help shape the future (04:23) How General Catalyst challenges founders to think bigger (06:05) GC's structure as a strategic conglomerate (10:44) Balancing profit and purpose in venture investing (12:19) The unusual role of CEO in a venture firm (15:11) How Hemant approaches decision-making in operations vs. investing (16:43) Lessons from Ken Chenault and the case for servant leadership at GC (20:55) What Hemant has learned from Amazon, McKinsey, and Nvidia’s cultures (23:37) The Berkshire Hathaway model—and how GC’s strategy differs (25:19) Why Hemant felt GC needed a fundamental rethink (28:33) What has changed since Hemant wrote his book on AI in 2018 (31:07) Why great founders have shifted from hackers to iterative builders (32:55) The origin of HATCo and GC’s push into healthcare transformation (39:32) Why HATCo acquired Summa Health (43:48) What HATCo is planning next (46:30) Hemant’s thoughts on policy and responsible AI self-governance (48:49) Europe’s AI lag, the cloud wave it missed, and the case for sovereign infrastructure (52:38) Why companies move to the US (54:22) How to transform traditional industries with AI (56:37) Rollout vs. buyout, and why starting small makes more sense now (58:56) How rapid model progress unlocks new opportunities to reinvent businesses (1:01:10) What companies need to be good partners in the creation portfolio incubator (1:05:13) Why General Catalyst made rare acquisitions based on deep conviction in people (1:11:34) Final meditations — Follow Hemant Taneja LinkedIn: https://www.linkedin.com/in/hemanttaneja X: https://x.com/htaneja — Resources and episode mentions: https://www.generalist.com/p/inside-general-catalyst-hemant-taneja — Production and marketing by penname.co https://penname.co/. For inquiries about sponsoring the podcast, email [email protected].

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

• 0:00Speaker 00

  If you think about the last seven years, COVID happened, wars have happened, all kinds of crises and the geopolitics. Anybody that say they had a strategy that they rose seven years ago and they're marching down that is really not true. I think it's very much being nimble, being agile, having a true north in terms of our core values and then just seeing where the opportunity is going.

• 0:16Mario Gabriele?

  I think that is one of the great things about tech is that you can have that attitude of learning from everyone. And people are surprisingly open, I think, even with their competitors talking about here's how we run our culture. And you know, there's all of this sort of positive sum thinking a lot of the time. Who do you take inspiration from?

• 0:32Speaker 00

  I try to learn from everybody. My mindset is we're so fortunate in the centricity of people around us. For me, it's just sort of be curious and learn from everyone as much as possible.

• 0:47Mario Gabriele?

  Hey, I'm Mario and this is the Generalist Podcast. As the saying goes, the future is already here. It's just not evenly distributed. Each week I sit down with the founders, investors and visionaries who are already living in that future. To help you see it coming, understand it clearer and potentially capitalize on it. Today I'm speaking with Hemant Taneja, the CEO of General Catalyst. If you follow venture capital, you'll know that Hemant is taking one of the most unorthodox approaches in the industry. Transforming his firm from a traditional investment vehicle into what he calls a strategic conglomerate with venture capital at its core. In our conversation, we explore why General Catalyst bought an entire hospital system to transform healthcare from the inside.

• 1:32Mario Gabriele?

  How some of today's worst valued companies might become the best IPOs of the next decade, thanks to AI transformation. Why the best entrepreneurs have fundamentally changed from hackers to iterative builders. And why every region faces an existential choice between developing AI sovereignty or watching their economies get hollowed out. I walked away from this conversation with a fresh understanding of what the future of venture capital might look like. And practical insights about how AI is reshaping traditional industries and geopolitical power structures. This is a new podcast, so if you like it, I hope you'll consider subscribing and joining us for some of the incredible episodes we have coming up. Now here's my conversation with Hemant.

• 2:15Mario Gabriele?

  It is such a pleasure to have you here today. And maybe to get started, we can talk a little bit about how General Catalyst thinks of itself. One of the ways that the firm talks about itself these days is as an investment and transformation company. And I know you guys have been super intentional about thinking about GC's mission and its purpose in the ecosystem. How did you land on that framing for what you're doing? And why was it the right one?

• 2:40Speaker 00

  It, to me, all started with just seeing the increasing importance of the role of technology in society. You know, when I moved to the Bay Area in 2011, I saw we've gone from building these software companies for efficiency to really reimagining core pillars of society. Huge problems. And so, you know, as you think about the scope, so it just led us down the path for, well, what's the maximum impact we can create? And, you know, by creating the maximum impact, by creating the businesses that can be good for the world, we'll also create the most compounding investments and therefore maximum return. So when you take a step back, you know, where that journey has led us to has been to think of our business in really sort of three parts.

• 3:26Speaker 00

  We sort of say at the core of it is our familia, which is our core relationships. And really it comes down to activating the world's most ambitious people. People that are starting new companies and people that have been building companies as entrepreneurs or executives as well. And, and use that sort of relationship capital to build enduring companies. And that's the investment business. The investment business is how do we create enduring companies which are maximizing for profit and purpose? And those are effectively the building blocks for transforming society. And so if we can build the enduring companies, if we can get them to operate as ecosystems, then we can transform industries.

• 4:10Speaker 00

  We sort of say activate the world's most ambitious people as our core relationships are familia, build enduring companies and transform industries. And that's where the investment and transformation pillars of our work come from.

• 4:23Mario Gabriele?

  Well, I really want to get into all of those different pieces. But just as we're on the subject, what does it mean to activate a hyper ambitious person? In some ways, I would imagine these are people who are pre-activated. They've been activated their whole lives. What is GC's role in saying, you know, actually, we can accelerate you or raise your ambition even more?

• 4:45Speaker 00

  Yeah, it's actually a great question. And one of our core values is expand possibilities. And it's always about pushing ourselves to think bigger and also pushing our founders. I think there's this cultural dynamic in our industry where we're often sort of saying, you know, founders are doing all the work and really in service of them. We are, but we also want to help them think bigger to the extent that we can. So if we're thinking about transformations, the reality is that transforming an industry is bigger than any one company. And so for us, a lot of what we think about is can we inspire the founders to think about a broader industry transformation versus just building an enduring business? That requires you to think about partnerships in a different way.

• 5:28Speaker 00

  That requires you to think about, you know, your goals and the duration of what you're solving problems for in a different way as well. And that is a core insight I've had as we started working on transforming healthcare. And it was very clear that if we could sort of plug eight to 10 amazing founders into a collective vision around what we call health assurance, that we maybe have a shot at transforming this industry that badly needs change. And so that's a lot of where this originally came from.

• 6:00Mario Gabriele?

  Amazing. Well, I definitely want to talk more about some of General Catalyst's healthcare efforts. But just to get a lay of the land a little bit more, what is sort of the composition of the organization today? You talked about these three pillars, certainly, but when you think about, you know, maybe the business lines almost, what are those?

• 6:19Speaker 00

  Yeah. So the business looks like a strategic conglomerate. We actually often say GC is a strategic conglomerate with venture capital at its core. So the way the business lines shape up, I'll tell you about three, and we have two others instead that I can't talk about. So there is me on that. So our capital solutions business, we think of that as a business line. That's where we have venture capital. We have creation. We have customer value fund, which is an asset class that we invented. And all the capital solutions are in service of these ambitious founders to help them build enduring companies. And we've done a lot of innovation there. Obviously, you know, we can go into that. We acquired some seed firms. We've, as I said, invented some new capital asset classes and so on.

• 7:04Speaker 00

  Then we have these industry sort of businesses, and these are sort of the other businesses on strategic conglomerate. So example being Hatco, that's really focused on transforming the healthcare system in partnership with the companies we're supporting as well as the health assurance sort of system partners, health system partners that we're partnered with. So it's like a real collaboration. We also have our GC wealth business, which is really in service of our familia, helping our founders and our broader ecosystem from their, you know, wealth management and legacy needs. Then we have a couple of other things we're doing, which is, but each of these is around, how do we think about transforming industries?

• 7:48Speaker 00

  And so the way that we GC runs is, under me, there are these, these, these businesses that are sort of run with a shared set of values and a fair amount of autonomy as well. The capital solutions business, I sort of run myself, and then we have, you know, leaders running these other businesses. You know, overall, we sort of look at it and say, you know, are we using the capital solutions to build enduring companies? And then are we working with industries to transform them via our transformation companies?

• 8:18Mario Gabriele?

  And without, you know, giving away any sort of proprietary details about those last two pieces. When you sort of think about the longer term arc of how the business is built out, you know, do you think about it more of, hey, we want to own more of these transformation moments in different industries? And so we go from healthcare to, you know, defense or whatever you might want to pick. Or is it, you know, a little bit different than that? Sort of curious, yeah, how you, how you sort of see things five plus years from now?

• 8:44Speaker 00

  Okay, so I have to start by saying, you know, Ken always says, Ken's my chairman, Ken Chenault, that great strategies are built in hindsight. The reality is, if you think about the last seven years that we've been doing, you know, this own transformation of our own business, you know, COVID happened, wars have happened, you know, you know, all kinds of crises and the geopolitics. So anybody that say they had a strategy that they wrote seven years ago and they're marching down that is really not true. I think it's very much being nimble, being agile. Having a sort of true north in terms of our core values and then just seeing where the opportunity is going. So first of all, it's led by that. Going back to the values, one thing that I am very focused on is, you know, how do you really think about capitalism,

• 9:28Speaker 00

  which is an amazing tool to work better for society? How do we make it so that we drive inclusive prosperity? And how do we drive sustainability? So like all the transformation work that we think about doing is in the context of sort of those pillars of what we call responsible innovation. And so can we transform some of these very critical industries, you know, towards that kind of an outcome? And so in that, then we think about, okay, well, health was the obvious one to take on because of COVID. And, you know, the whole system was imploding and that's a great time to go in and be good partners to the industry. And as you said, there are others that are not evolving.

• 10:10Speaker 00

  Defense is massively changing and, you know, energy is massively changing because of AI. AI is changing just the nature of workforce. All those are areas we think a lot about to say, can we expand possibilities with our entrepreneurs? And go tackle them in a much more systemic way than just building a collection of portfolio companies to create a good return. And again, you know, I always have to say, this is not a do-gooder comment. This is purely out of ambition that if we can take the mantle to drive that kind of transformation, we'll actually maximize returns for our investors.

• 10:44Mario Gabriele?

  Yeah, that was actually exactly where I was wanting to go next was, you know, how you think about balancing the challenges of maybe being framed more as impact style investing versus this very financial, you know, return profile that you're looking for? Is that something that, you know, you find the need to really emphasize in the team or as part of the hiring or with LPs in such a way that, you know, you could imagine some amount of confusion where there's such mission-driven focus behind your work that folks might, you know, mistake, you know, one set of priorities for another when really you're saying, no, no, no, we have to have both.

• 11:20Speaker 00

  If I and we do our job right, what we will prove is that it's not an either or. It actually is a reinforcing function between profit and purpose. And no one's gonna really fully embrace that on the profit side. Until you actually demonstrate that you build the most valuable companies with that approach. So that's the journey we're on. That's the way we, that's what we believe. I think a lot of where I've been very happy to see this take effect is that people that want to come work here really do want to be part of that. And, and, and, you know, so many great folks have joined in the last few years. They're drawn to it. And, and so I think our, our job is to demonstrate that by aligning

• 12:02Speaker 00

  stakeholder interests, we can actually build companies that are, that are, you know, far more durable, far more compounding, going back to the returns perspective. And, uh, um, uh, you know, in the, in the end, something that works well for entrepreneurs, for our investors and for ourselves.

• 12:19Mario Gabriele?

  Well, I'd love to get into a little bit of the, the tactical nitty gritty of your work because it is unusual for a VC firm to have a CEO. You see it, you know, a little bit on the private equity side, but even that's sort of the more complex publicly traded companies, but in, in venture, it's very, very unusual. And so I'm curious, you know, what your day to day looks like as a CEO, maybe the parts of the job that, uh, you know, feel extremely different than when you were sort of a pure investor at GC and, and what that transition's been like.

• 12:50Speaker 00

  Yeah, look, we're navigating a lot of ambiguity into what, what we become, you know, it's, as I said, it's, it's probably some sort of a strategic conglomerate. That's, uh, uh, driving these industry transformations has venture capital at its core. So first thing is, um, you know, for our venture capital business, which is our early roots, me behaving as CEO there does not work and we don't work that way.

• 13:14Mario Gabriele?

  Yeah, you, you can't tell your other managing partners what to do.

• 13:18Speaker 00

  Exactly. We're partners and, and, and, and, and I've sort of very much said this, that we're in the business of backing conviction. It takes a lot of courage to have conviction in the midst of ambiguity. And so when one of our partners has conviction, my job is that we, we challenge it, but then we get behind it. And that's how we run. And so in that context, I don't ever sort of overrule investment decisions because of my view of the world. We just don't do that. And I actually think the day we start doing that, our performance will degrade. So we have really tried to protect the artisanal nature of how much capital investing should really be done. But then we have these other businesses. And so when you have a set of businesses where the role then shifts

• 14:01Speaker 00

  to is capital allocation, how do you make sure you have a common set of values? How do you make sure, you know, we're living those values towards the maximum economic opportunity? How do we make sure there's the right flabula effect between our transformation companies and our investment business? And that is a new muscle. And in fact, one of the reasons we brought on, you know, Ken Chenault in 2018 to be a chairman was because if we're going to scale, I was like, I don't, you know, I started a company out of college, but that was a pretty small business. I didn't really know how to scale. So it's like, somebody needs to teach me. And so that has been a really amazing

• 14:41Speaker 00

  partnership where he's mentored me to this phase. And so I'm very clear about, am I in my CEO role? Or am I in my, I'm a person around the table role? And I think it takes the right humility to get that right. And I've failed so much in venture that I've been humbled. There's so few things that go right. You're mostly wrong in our business. And so that does humble you. And I do think we have a pretty functioning, you know, culture that's developing.

• 15:12Mario Gabriele?

  One of the things that I could imagine being tricky is, you know, this is maybe an overly simplistic heuristic, but in some ways venture is like really built on a lot of slow thinking, right? You have to be really deliberate, really careful. And in many ways, it feels like, you know, operating a business is all of the fast thinking. It's, you know, a lot more, you know, decisions much quicker, trying to produce information from action a lot more. Do you find yourself toggling between those two modes? Does that sort of resonate with you as a difference? Or is it actually, you know, a little more complex than that? Or do you see it differently?

• 15:45Speaker 00

  Yeah, well, first of all, I don't think in today's day and age, you actually get to be slowly thinking in venture. Things move really fast, so they're actually very fast decisions. And and so you have to lean in your intuition a lot. And and the way we're building our business, there's so much ambiguity on the other side, it's also leaning intuition intuition a lot. So I I actually don't think there is that much of a difference in these decisions. I I would say.

• 16:13Speaker 00

  You need to make sure you're way more first principled on the investment side. I think on the operating side, you can actually lean on, hey, those problems are much more deterministic. And you can say, I can do pattern recognition. I do not like pattern recognition on the investment side. So that's probably the one difference, which is you have to reconstruct logic from first principles every single time on the investment side. Where on the operations, you know, there's lots of stuff you can lean on that's that's that you know will parallel well to what you're about to go do.

• 16:43Mario Gabriele?

  Hmm, that's really interesting. You talked about Ken sort of mentoring you over these past few years. What have been the the dividends of of that mentorship? Like, what are the the pieces that that you've taken from him? In how you have to be as a CEO in this kind of an organization versus, you know, the startup that that you ran out of college?

• 17:01Speaker 00

  Look, the big, big transition for me that he's taught me a lot about is this whole idea of servant leadership. And, you know. You know, Ken had asked me once, he's like, well, who do you want to model after? I was like, Ken, I'm a first principles guy. I don't like to model, so I can tell you some traits I like from different people. And and that with him, I was, I sort of said, I want the ambition of what Elon does in in how we think about building businesses. He's he's amazing and we should all, you know, learn from the good parts of Elon. And then I would say, you know, from the investment side, there's so many amazing investors. I want to learn from how they've all created these new asset classes and would like to, you know, be our own little category as well. And then it comes to being a CEO, I want to be like you. I want to learn how to be a good servant leader where people follow you.

• 17:45Speaker 00

  And, you know, that was probably the one big transition.

• 17:50Speaker 00

  I had to do in inside the venture business where before I was just I went to the valley and it's like we're kind of a no name firm. We need to learn how to be in good companies. And I was sort of a, you know, in some ways a solo operator, just like go, go get us into the things that matter. Now I think about it and I look at my partner around the table and I always think about how can I weaponize them? You know, where do they spike and can we lean into that? And where can I offer to help them, you know, just become amazing at the thing they're doing? Because the, the good thing about the GC partnership now is everybody is very entrepreneurial and they all have a sense of purpose of where they want to leave their mark on the world. I'm like, what can I bring to just inject creativity or ambition in the way they're approaching their work and not have it be transactional?

• 18:34Speaker 00

  And that is an additional cognitive load that I did not have probably five years ago, that, you know, does, uh, it does, uh, it energizes me. I think it's, it's like a leverage multiple, it's a multiplier in the organization if that happens.

• 18:47Mario Gabriele?

  Are there any other sort of principles of that servant leadership that you've had to sort of really engrain in yourself a little bit more, you know? If someone was trying to sort of as much as possible, distill some of the other pieces of that, what would, what would be most important?

• 19:01Speaker 00

  It probably to me comes down to one thing, which is when you spend time with people, always do what's in their best interest. Right? And, and if you can get good at aligning those interests, uh, you have a growing movement behind you. Of people that want to do stuff with you because you're bringing everybody along. And, uh, um, that to me is really important. And that, by the way, is not a, oh, the CEO should be a servant leader. We want everybody in the company to think that way. Like just pull everybody along with you. And that, that's what creates, you know, a cultural movement in an organization that's enduring and can, can produce great results. Now, I don't mean, uh, by that being a soft organization. I mean, part of being a servant leader is pushing each other as well.

• 19:45Speaker 00

  Uh, and so, uh, you know, can you get those ingredients right? Can you have a? Uh, you know, servant leadership culture, which also embraces heavy constructive confrontation.

• 19:56Mario Gabriele?

  Yes.

• 19:57Speaker 00

  How do you really do that?

• 19:58Mario Gabriele?

  Yeah, how do you really do that? That's honestly what I wonder.

• 20:01Speaker 00

  I don't know. I'll tell you in a few years, we worked or not, but we're trying really hard.

• 20:04Mario Gabriele?

  Yeah.

• 20:04Speaker 00

  You know, it's, it's, it's just, it, you need to really focus on the collective win. In my opinion, as opposed to, you know, my deal and your deal and like, that happens a lot in a lot of organizations. I've always said, the irony of rich capital is that we're the worst run businesses culturally compared to the, the way we preach our founders. And we can't have that. And so can you actually handle that? I think ego has a lot to do with it. And can you put your ego aside and really focus on the, the mission that you're on? Uh, and, and then, uh, you know, alignment has a lot to do with it. I spend a lot of time making sure everybody feels like they'll get the most purpose here and they'll make the most money here. You know, and, and, and then if I can give that to everybody, including myself, we'll just be happy.

• 20:49Speaker 00

  We're, we're going to, we're going to be at work and that's, that, the, those soft attributes really matter.

• 20:56Mario Gabriele?

  Are there organizations, you know, modern organizations that you think really embody some of those principles of, you know, really hyper ambitious servant leadership? Because, you know, we talk about Elon, spikes on ambition, no question, but I wouldn't think of, you know, Tesla and SpaceX are not servant leadership places. That's more autocratic in many ways, I would think. Who, who do you take inspiration from?

• 21:17Speaker 00

  Look, I, I, I try to learn from everybody. It's just like my mindset is, you know, we're so fortunate in, in the centricity of people around us. There's so many amazing people around us, like they're, they all spike. So for me, it's just sort of be curious and learn from everyone as much as possible. And, uh, you know, people always, uh, like often say we're competitors with other firms. Like when I spend time with them, I'm like, I'm just, I'm like, you know, teach me, but like, we're all learning some cool things. Like, how do I learn from you? But I would say, you know, in terms of organizations, you know, it's hard for me to say, cause you're not really in, in them. But I, I really like.

• 21:55Speaker 00

  Attributes to certain other businesses like, you know, Amazon's been an amazing company. I spent a lot of time with Andy, Jesse and the way they do things and, you know, and what I like about them is that they can preserve this entrepreneurial culture with like so many things can come out of a single company.

• 22:10Mario Gabriele?

  Yes.

• 22:10Speaker 00

  Many companies are a multi-product, but they buy their way into it, but they have organically done that in a few things and done really well. You know, and that, that to me is a, is a measure of entrepreneurship and creativity. And I want that here, like how to really, how to really create that. So, you know, I think McKinsey is an interesting hundred year old organization. They, they have a sense of partnership that do, they do preserve if you sort of hang out with their partners. I'm sure there's politics and whatnot, but like they're, they're a very functional organization in how they collaborate with each other as, as much as I have seen. And, and, and so, you know, there are these traits that I, I really sort of resonate with. You know, um, uh, Embiid is interesting. I mean, Jensen's interesting. He's building the company with a really interesting culture.

• 22:53Speaker 00

  You know, is that it sort of breaks all bounds, uh, and, and, uh, you know, there's something to learn from there. So, you know, I'm, I'm just constantly figuring out what works for these folks, but always go back to let's have our own race. Let's do, you know, at the end of the day, what first principles where that takes us. Doing matters to culture or creativity and sort of, you know, do things that we believe in.

• 23:15Mario Gabriele?

  I think that is one of the great things about tech is that you can have that attitude of learning from everyone and, uh, you know, people are surprisingly open. I think even with their competitors talking about, you know, here's how we run our culture. And, you know, there's all of this sort of positive sum, uh, thinking a lot of the time, uh, that maybe is a historical artifact that still remains today. And so that's really powerful. You mentioned that, you know, when you were sort of doing some of this thinking with Ken, you had, uh, folks in mind on the, the financial investor side that you were inspired from, who had created new assets, you know, because what you're doing is so unusual, so novel. I'm curious like who you took inspiration from there or lessons that you found particularly interesting when you looked at these different asset classes and industries.

• 24:00Speaker 00

  Look, I, I think Berkshire is a super interesting conglomerate. Ken's actually a lead director there. And so I've gotten, uh, into exposure to, you know, what Warren and them are doing and, I would say that's interesting. I think the way they create the insurance flywheel to no scale, the way their rigor around buying good businesses and like what what they probably didn't do, and I think they have good reasons for it, is activating synergies across those businesses. And that's the place where we'll probably, when I say a strategic conglomerate, that's maybe where if we can do our job right, we'll be different. We'll actually create some flywheel synergies. But I really do think that's a, you know, the all time great businesses and

• 24:40Speaker 00

  and what I admire is the courage with which to invest every time the market is scared. They're so good at it. You know, if now, if you take out the impact of the insurance slide, well, maybe their returns aren't any more spectacular than others, but like the whole system has built an amazing enduring business, right? And so that that to me is about consistency and sort of believe and a belief system. And that's really admirable. And then I think if you look at, you know, other asset classes, there, there are companies that have emerged and become real platforms that I think are interesting. So I'm just constantly figuring out, you know, what worked for them and what if that is, you know, what should we learn from that?

• 25:20Mario Gabriele?

  Well, in that respect, we have very similar interests and jobs because that's, that's definitely what I like doing, too. You know, when you talk about this transformation for GC, I think you've mentioned on some other talks that, you know, maybe it was in the sort of middle of the last decade that you started to talk to your partners about like, hey, I really think there's something bigger to be done here. And they had the confidence in you and and also, you know, the belief in the vision that you painted to to undertake that. I'm curious what it was in you at that moment that gave you the confidence to say, hey, I see something, you know, much bigger here at a time when that was really, you know, not much of a discussion point in venture as far as I've ever heard.

• 26:04Speaker 00

  Look, I think so this this happened in 2014 and and, you know, there was a confluence of things, but I would still say it was probably mostly intuition. I would say, you know, watching what was happening with Stripe and Snap and Gusto, we had invested in them and then building Livongo and just think, wow, these are, these are important responsibilities for these different parts, you know, small businesses or consumers with chronic conditions or entrepreneurs in the case of Stripe, like, and that that we had to take seriously. And there were, in some ways, endless markets.

• 26:38Speaker 00

  Our business wasn't really equipped to support those. The capital bases aren't there. The governance mindset isn't there. The experiences and their responsibility quotient wasn't there. So I was like, well, how is this all going to shake out? So it sort of felt like just an inflection point of like, this industry has to change because the ideas just became so much bigger. Because we're really building a digital society and we're going to build it with Moore's Law and Metcalfe's Law behind us. Which is going to be a lot faster than the last industrial revolution, which was, you know, a hundred years. And so that was one thing. I think the second thing was you always look at the founder market fit, right? And I was like, well, why me? And, and I started to feel like, okay, you know, I was kind of a not that great in my investing when I was in Boston.

• 27:23Speaker 00

  I was learning. I came here at the right time. I got exposed to these amazing people and I was like, I think I'm trying to, I think I'm going to be good at this. I had sort of had internal conviction. I didn't want to come across as arrogant. So I was very timid in the way I said that to my partners, but I was like, I think I'm going to be good at this. And I want to really maximize my own potential in this. And the third was, that's around when I had started writing my book on AI, which I published in 2018. So I'd written this paper in HBR around economies of on scale. Yeah. What was really happening with data? And it just led me down the path of like, how is the world really going to unfold from there? And like, what does it all mean? And, and so it just, it just so much was going on.

• 28:07Speaker 00

  It just pulled me to words, think from first principles and, you know, not, and be unconstrained. I didn't want to be constrained with the accordion of stage, sector and geography that venture capital innovation is, that bubbles happen and all those things, your funds get bigger and all those dimensions and the bubbles contract. And people stop that and then do that again. And then it was like, I was like, I gotta break out of this and think about what these companies need.

• 28:31Mario Gabriele?

  Wow, super interesting. From those maybe early conversations in 2014, were there any things that have happened today that you would have been able to sort of predict? You were like, you know, these are the areas that even back then, we were very crisp on. And you know, sort of the other side, I'd be curious which parts maybe have surprised you the most over the years.

• 28:51Speaker 00

  You know, on scales when I ordered in 20, I think we published in like January, February of 18. The whole idea was mass personalization, right? So last century was mass production, economies of scale, and this is mass personalization. And that, you know, you could see big data go to machine learning. And then all this sort of premise of, hey, that's going to invoke AI. So it was a continuum, right? I mean, it's sort of all happened. I had said at that time, it's a 30 year cycle. Started in 07, you know, when we started really building this digital society with Facebook, Connect, AWS, iPhone. And all that kind of came around within 12 months. And that it's going to accelerate when AI actually happens as well. But it's just going to sort of push.

• 29:36Speaker 00

  There was AI, but then all these other technologies, you think about all the innovations in biology, CRISPR and stuff happening. And you had, you know, this whole idea of blockchain was starting to take hold of like, wow, you put all these things together. There are just so many technology forces that are going to push that are sort of economy wide. They're not specific to any industry that this will hyper accelerate. But I had no idea what that meant. You couldn't, obviously, just like you couldn't envision Uber in 06, couldn't envision, you know, ChatGPT at that time. And so the acceleration is just stunning to me.

• 30:16Speaker 00

  Because every time I think about an idea, over the last couple of years, when I think, oh, these pieces are getting built and they're going to do this someday, it happens. You know, in a matter of months, I'd be years. So that acceleration has surprised me. And so I just keep telling our team, we have to completely rethink what excellence means in terms of company building in this next phase from what we're used to. We got to unlearn all that. All that's out the window.

• 30:41Mario Gabriele?

  All these old benchmarks and thresholds and things like that.

• 30:44Speaker 00

  We're going to use terrible returns if that's how we think. The world's changed. So, you know, so anyway, so that acceleration curve is a lot faster. And so it puts a lot more pressure from a responsibility perspective as well. And so just understanding what that means, it changes. Understanding what an excellent entrepreneur is, changes from what it was seven years ago. It's all changing. We have to rethink our business in a lot of ways, how we invest.

• 31:09Mario Gabriele?

  That's really interesting. You think that the composition of great entrepreneurs look different today than than 10 years ago? What are the differences there?

• 31:17Speaker 00

  I do. I think the previous cycle, version of cycle with the cloud and mobile was all about creating great customer experiences. So the hacker, the product market fit, the simplest thing possible to go do and take hold was the mindset. That's what we're looking for, right? We're looking for these hackers. If you look at what's happening now, technologies are changing fast, geopolitics changes fast. AI is a transformation opportunity, not really, I mean, it's innovation, but it's sort of the value accrues to companies that have customers and data and the courage to change, I would say. So, so that's going to be bespoke. I don't think

• 32:01Speaker 00

  you're going to have as much of the bottom up PLG product market fit. It's going to be the iterative founders that just know, you know, how to move, keep moving forward in the middle of the hurricane. Everything is shifting around you. How do you keep moving forward and keep making progress? It's a very different mindset. I actually am a very iterative human being myself. I don't get anything right the first time. So, but, but I, I, I, I love it right now because it's like complete ambiguity and stuff just changing. And it's like, well, let's just keep iterating towards, you know, our true north and, and tolerate the ambiguity. So you need founders to be, to have a lot more grit in the context of how to handle ambiguity right now.

• 32:42Mario Gabriele?

  Interesting. Yeah, that, that's, I was talking to a, an AI entrepreneur and they talked about the fog of AI and how, you know, it's very, very hard to, to see even a few months ahead. Yeah, there's, there's, that makes total sense to me.

• 32:57Mario Gabriele?

  You know, healthcare has been one of these areas that you've spent a lot of time on. You talked about sort of COVID as this catalyzing influence. How did you decide like HatCo, Health Assurance Transformation Company, this initiative was the right way to start to play this? And, and then maybe we can actually dig in a little bit deeper from there, but let's start there.

• 33:17Speaker 00

  Look, healthcare, I'm 20 years into it. I mean, the first company I incubated in healthcare was in 2005, 2006, when some folks from a Boston hospital, I was in Boston at that time, health system called me and said, hey, we have all this data, electronic medical rate, record data. We're trying to figure out what to do with it. Do you want to meet us? And I was like, my first question was, what's electronic medical record data? Because I had to go learn about it and it just took me down a rabbit hole. We built a company, we sold it successfully, but it was small, a couple hundred million. Then I learned from that around a lot of the, you know, in a nutshell, I just feel like we didn't really build the right technology for this industry for a variety of reasons we can go into.

• 33:59Speaker 00

  The intentions were great, the outcomes weren't. And then, you know, I built this company called the Vango, which gave me a Sensibility for how do you actually build true culture at the intersection of technology and industry, healthcare in this case. And so that led me to starting a commur in 2016, 2017 to say, I'm just going to go work with some systems and solve this technology problem for them. Build a software company that is doing it the right way for this industry. Now I have started three companies. So by 2019, I was actually finishing a book on healthcare, saying, hey, we figured it out because Livango had a big outcome and wow, I think we can build great consumer experiences in this industry.

• 34:42Speaker 00

  So I gave a presentation with a partnership saying 2020 is the decade of healthcare. This is in fall of 19 and we should put 20% of our capital into that. And that's now in hindsight, overmatched with less than what I was thinking. But then COVID happened. So I launched a book right when COVID was starting. Actually edited the book a little bit to show the impact of COVID and how the system was breaking. It was called Unhealthcare. And then you could, it was just incredible because you could see all problems. Insurance companies were minting money because no one's getting procedures. Hospitals were looking for bailouts. Workforce was exhausted. There was no, you know, public health system to actually take care of a population at

• 35:27Speaker 00

  a societal level. Nothing existed, right? Yeah. We sort of leaned in and said, if we're not going to do it now, when are we going to do it? Like we have a prepared mind, we've been building companies. We started doing partnerships with health systems. I was like, let's go make them successful in their communities as like the contrary insight as opposed to following the money. Yep. And I sort of followed the need and that's the journey we went on and it became clear that we could come up with a model. To drive their transformation and that's what led to creating Hacko.

• 36:03Mario Gabriele?

  Hmm. Before we go deeper into Hacko, you said, you know, some of these early efforts showed you what was needed from a cultural perspective. You know, when you think about healthcare and sort of innovation, what were sort of the deep lessons there that maybe were not obvious from the outside?

• 36:19Speaker 00

  So at that time, Solivongo was the largest digital health outcome when it went public and sold. And before that, I was just seeing a very clear pattern. It was either somebody out of the healthcare, a physician or administrator, who's just like tired of technology not working and coming up with some incremental solution. Or it was some really smart technologists in the valley saying they want to start a healthcare company because they want to know how it impacted the world. They made some money. They want to do something bigger. Who goes and then hires, you know, but goes with the belief that their technology will solve all problems. And so the technology people underestimated that this is not a market. It's got complexity.

• 37:02Speaker 00

  And the people from inside the industry never understood what technology is actually capable of. What we did was we bridged the world. When I, you know, spent convinced Glenn to sort of jump in and do this with me full time, move to the valley and build Evango, I was like, hey, I'll build a tech team. Do you know how to navigate this? And the reason it happened, by the way, it was like really interesting. I forgot about this. I invited him to the valley and I had him meet eight founders, 30 minutes each.

• 37:31Speaker 00

  Then we had dinner and Glenn's is really polite, midwestern, like, you know, one of the all time greats in healthcare. And we're sitting down and he's like, hey, man, I don't know how to tell you this, but these companies are not going to work. They don't understand the market. I was like, exactly. What'd you do?

• 37:46Speaker 00

  But I can put a team like this together. So let's team up. And so, you know, he bought into that, him and his part, longtime partner, Lee Shapiro. So we kind of built the business and that became a playbook of can you actually culturally respect the importance of technology and the importance of having empathy for what's in healthcare at the same time? Versus one being subservient to the other. And that was the unlock for us to get it done.

• 38:08Mario Gabriele?

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• 39:35Mario Gabriele?

  you ended up buying Suma. How did that come about? Like, why was that the right target? How did you think about even that type of purchase?

• 39:43Speaker 00

  You know, we have been working with about 15% of the healthcare system in the US now. We're working with their C suites, on their transformation, helping them out, bringing our companies in. And we're making progress. And they're happy, to some extent. Our companies are happy because it gets them access to the market a lot more efficiently. But it was not going to change the game. So for us, it was like, well, we should just go purchase one and really do this end-to-end. And buying a health system is a terrible investment to our funds. That's actually because we don't want to maximize the profits. It's like a community we're taking care of. So that's what we actually decided. We'll buy it from Balanchi. We'll buy it ourselves.

• 40:26Speaker 00

  And we'll hold it for the long term and do this. So then the question is, what do you go buy? You wanted it to be a representation of the country, not the elite coast, because the problems are different. You don't want it to be an academic medical center. You wanted it to have an insurance company as well as a health system. You want it to be, it's got the challenges of addressing issues like Medicare, Medicaid, so a safety net environment. If you want like the hardest problem and the greatest representation of the microcosm. Because if you could do it, others will follow. We have, we have a lot of interest. You'll see some announcements where others wanna work with us on this and, and be along for the journey, even though they're not systems that we own.

• 41:08Speaker 00

  And so, uh, you know, it's a, it's gonna be a really interesting few years, where hopefully we can create the playbook that needs to get replicated everywhere.

• 41:17Mario Gabriele?

  Well, fascinating. So I hadn't understood that, actually. Hacko started more in this advisory sort of connection capacity of connecting these different health systems with the tech world more directly. And then sort of became, hey, we actually need to do something much bigger and we need to buy this. We need to buy hospital for, you know, to put it simply.

• 41:34Speaker 00

  Yes. And, uh, you know, it's a complicated process because it was a nonprofit, which is most of how hospital systems are. To convince the community leaders, our intentions are right, obviously the team and the board. Uh, we have a great, uh, relationship with, uh, leadership of the system and the community leaders that spend a lot of time on the ground there. And, uh, the Attorney General, you know, it's a little bit of sort of converting it to for profit, like the process, it's a little bit of what OpenAI is going through. So we sort of went, you know, went through that at a much, much, like smaller scale.

• 42:07Mario Gabriele?

  Elon's not trying to thwart you.

• 42:09Speaker 00

  Well, it's, it's, it's, it's, this has been done before. That's, you know, OpenAI is just an unprecedented everything.

• 42:14Mario Gabriele?

  Yes, indeed.

• 42:15Speaker 00

  Hopefully that'll sort out. So it was complicated, but you know, recently we got a, uh, approval from the Attorney General and, uh, we're now in the middle of, uh, you know, uh, taking over the system. It's very exciting. Our team's very excited. And our founders are very excited and the team at Suma is very excited to, you know, get going. And we have a lot of work mapped out that we wanna do. Uh, and I'm pretty deeply engaged in it myself as well, so.

• 42:40Mario Gabriele?

  It's been, you know, I think about a year since the announcement. Have you gotten to start on any of the sort of like, you know, big projects? Or has it really been sort of getting these foundations right and making sure this transformation from nonprofit to for-profit happens first before you can sort of, I don't know, start to take the steps you're most excited about?

• 42:58Speaker 00

  So we have done all the pre-work. On what to do over the next couple of years, but we didn't wanna start if the AG wasn't giving us approval. Cause it's not, didn't wanna start creating this location that they have to then deal with. So, but, but that pre-work is very detailed, 120 projects mapped out of things we wanna do. So it's a, it'll be, you know, we're getting everybody together actually in a couple of weeks. And a lot of the health systems that are partners and a lot of our founders, we do this once a year. It's a gathering and we're gonna do some demos and stuff there too. It's like, it's very cool.

• 43:32Mario Gabriele?

  Wow.

• 43:33Speaker 00

  Some sort of like Camer and Hippocratic and Sword and AI Doc and these companies are doing. It's just, these are remarkable founders and if you can unleash sort of a common creativity and a common objective. I, I do believe that's what it's gonna take to take on a gnarly problem like healthcare.

• 43:49Mario Gabriele?

  What are a few of the things on that, you know, 120 project list that you're, you know, particularly excited about?

• 43:56Speaker 00

  You know, you'll be surprised how arcane these systems are. It starts with actually just giving people visibility so they can make smart decisions.

• 44:03Mario Gabriele?

  Yeah.

• 44:04Speaker 00

  There's a lot about using AI, but these workforces are eviscerated. So, so a slight digression, when ChatGPT happened, I thought healthcare would be the slowest industry to adopt AI. People's lives, regulations, whatnot. But it has in hindsight ended up being one of the fastest. We're actually doing the largest implementation of Scribe technology with Camer at HCA right now, for example, largest in the world. And the reason for that is because this workforce is so depleted because of COVID. They're so short-staffed, they're like, give us any help you can. And that's what happened.

• 44:44Speaker 00

  And so one of the things with AI is, you know, our, our team can barely do 80% of the work that they need to at Suma. And so can we give them the leverage so they can actually treat more patients, which makes the business better, right? More, you can take care of more people, better for business and better for the community. So just give them these sort of superhuman capabilities. That's where a lot of the initial projects are.

• 45:09Mario Gabriele?

  Fascinating. How do you think of what, you know, success hopefully looks like here? Obviously there's sort of the experience angle of it, but from an investment perspective, do you have sort of benchmarks in your head? Or is that really not how you even think about this initiative?

• 45:23Speaker 00

  Look, step one, what's really important is that we take care of the community because these businesses serve a very important purpose. So can we expand our capabilities in the ways we serve the community, not shrink, which is what happens when these are maximized for profit? That's one. Second is, can we take care of the workforce? We'll be the largest employer in Akron. And so how do we take care of that? How do we help, you know, prepare this workforce for the AI world? What does that really look like?

• 45:51Mario Gabriele?

  Yeah.

• 45:51Speaker 00

  And then the third is, if you run, if you do all that, and you say, while doing all, this is the profit and purpose comment, while doing all that, can you run with best-in-class metrics? The best-sell systems run at 20% EBITDA. The community hospitals and the nonprofits run at low single digits. So can we meet somewhere in the middle because we ran more effectively and could serve more and whatnot as well? So I think this is a 10-year project for me, you know, we have to take it slow, we have to be deliberate, we take care of the people, and we have to create this model, then we can give it to others to go do it.

• 46:31Mario Gabriele?

  We're talking a little bit about, you know, AI's obviously transformative effect in healthcare, and you've been, I think, pretty vocal about the need for us to develop this technology responsibly. You sort of founded Responsible Innovation Labs in 2023. As you, you know, look at where we are two years later, how do you feel about the way that AI is being developed today? Do we need, you know, new safeguards that aren't there yet? Are we getting more safe, less safe?

• 46:57Speaker 00

  Yeah, so I think first of all, we did this responsible innovation protocol, self-governance protocol, and it was like widely misunderstood because I feel like people don't really read on Twitter. They just want to say provocative things. The ambition was not to be, not to slow down progress. The ambition was, hey, if we can be thoughtful about how we use this technology, how we accelerate the use of this technology, it'll give our regulators time to regulate. If we start being irresponsible with it, they'll be forced to regulate, which will slow us down. That's sort of the point. Something to me is about building trust between policy and technology. And, you know, everything is, to me, in transition. I actually like a lot of

• 47:41Speaker 00

  The things that, you know, the folks are doing in DC, you know, Shuram and others, the way they're thinking about it. And um, my, my view is, you know, every region needs to work as fast as possible to become leaders in AI infrastructure. Because that's going to be important to capturing, labor is going to melt into productivity. And if you don't have your own infrastructure and the best, your productivity is going to hollow out the economy and go to somebody else. That's the challenge for every part of the world today with AI. And so we have to, we have to take care of that, particularly in America, Europe has to do it, India, everybody has to do it. So that to me is like move fast.

• 48:21Speaker 00

  But then there is the, how does, how does that infrastructure get applied into healthcare or financial services, education, all these places? There, I think we need to be moving intentionally, move responsibly, because it's people's lives. And, uh, you know, can you build, uh, the right set of governing principles and how you build those companies? So I think to me, it's sort of nuanced, uh, answer, the world's not black or white.

• 48:44Mario Gabriele?

  Yep.

• 48:44Speaker 00

  Which is how we do these debates, the world's always gray. And so we have to sort of think about where to move fast and where to be more intentional.

• 48:50Mario Gabriele?

  When you think about, you know, the need for every region to move fast, because otherwise, you know, you're sort of losing the, the battle of the century, let's say, for your own sovereign power and so on. Is that a realistic goal for some of these regions? You know, you talk about Europe, for example, obviously a lot of talent in Europe. I'm based in London now, have, have had a chance to see some, some more of this ecosystem. You know, in many ways, Europe is just like at least an order of magnitude behind in terms of the capital and talent from the US. Like, is it realistic for Europe to say, hey, we really think we can be an AI leader on par with the US? Or, you know, are there sort of comparative advantages you have to develop that are a little bit different?

• 49:35Speaker 00

  So let's just focus on Europe in particular because we do have a heavy focus there. Jeanette, who runs Europe for us, is focused on this problem pretty deeply. You know, I would say, think about what happened to Europe in its manufacturing industry the last 20 years. I mean, they outsourced to China. And now the auto industry, for example, is in a very precarious position because the Chinese cars are better and they're cheaper. And the market for European companies is in China, so we can't really tariff you out of that problem. So like, what are you gonna do? It gets sort of hollowed out. Same thing is gonna happen on AI now to the services sector.

• 50:11Speaker 00

  So if your lawyer, you know, salary turns into a cloud workload for a company in the US, you're gonna hollow that out. So they have to have a great sense of urgency on solving it. One of the reasons they are in this position is because they missed the boat on cloud. It's the US cloud's there. And so do they need to build sovereign clouds? Do they need to get behind sovereign AI? It's actually one of the reasons we built a... We believe Europe will. I mean, they have to. And so it doesn't mean their company's gonna be, you know, larger than the ones getting built in the US. But Europe's a big market. And with AI, you can actually serve across the entire region because languages and regulations can all be handled by AI seamlessly.

• 50:57Speaker 00

  That market, from an entrepreneur perspective, can actually operate as a single market much more now than before. If you believe that, then there is a good local market. And if the right founders, some of them might be the folks that should move from here to go back and solve these problems for Europe, can build enduring companies that can do this in Europe. Our job is to back the best founders everywhere and let them, you know, build enduring companies. Our thesis is that, and I wrote about this with Fareed Zakaria in my articulation of global resilience, that you've seen reglobalization and in critical industries like AI or defense or others like that, healthcare, you're gonna create local supply chains. On the strategic parts and then have global supply chains on the commodity parts.

• 51:41Speaker 00

  That's the reglobalization happening. So that actually gives you a bit of a moat to build in these regions for those founders. So naturally, I think the right founder is going to step in and take advantage of that opportunity. And we're, we're trying to support them all. In the long term, as these come, as you see these market leaders emerge in these different regions, then at some point, depending on the spink, will be globalized again. And they can all compete for, you know, who let capitalism do its thing. Let them compete for who can build the best, you know, global companies. That to me is the cycle we're in right now.

• 52:14Speaker 00

  And I think Europe, Europe has that opportunity. Capital needs to mobilize and then I think talent needs to be inspired to go take on that problem. Like Helsing is a good example, then Mistral is a good example of that. Parlo is a good example. I mean, they're like, there's a bunch of companies now, you know, Legora is another one. There's, there's that are like Europe native, that are like scaling fast and have a good chance, you know, to be valuable technology companies.

• 52:39Mario Gabriele?

  Definitely, I think the, the concern is that a lot of those companies end up either in whole or in part, sort of moving back to the U S because of that, those access to capital and talent. And so, you know, I couldn't say from which of those, I think maybe Legora.

• 52:55Speaker 00

  They, they, a lot of them moved back because of access to market. So what happens is when a company started in Europe, it starts in some country, not Europe. It creates some success there and it says, okay, where do I go next? And U S is always the answer because it's like, you know, 50x bigger than any other country. Right? So, so that's why it was happening. What I'm saying is with AI, that can actually change. Because you can support all the languages and, and the nuances in these, in many of these industries now. So I'm not talking about like core data infrastructure. Yes, maybe you want to come this way because it's where the biggest customers are. But like if you're doing stuff in legal or health or energy, like those local markets can operate a certain way.

• 53:37Speaker 00

  And so I, I do think in, there's going to be more of important companies getting built there than there was. That's why, I mean, we, we made this bet, you know, over two years ago when we brought on the La Familia team. Because we, we knew this, this pendulum was going to spin. And then we've invested in some incredible companies like Helsing, Legora, Mistral, Parloa. These are like, these, you know, incredible businesses. They're going, doing really well. So.

• 54:02Mario Gabriele?

  Yeah, I'm definitely optimistic about that in general. I think, I don't know, I would like to see another wave come up behind some of these companies like Mistral and Helsing. And you know, I think there's still very many, very, very much too few of them still. And we need another 30. But, but, but yeah, hopefully we'll see that in the next few years. On the AI theme a little bit more, one of the, the sort of areas that you've been spending time on is with this sort of like AI roll up idea and how to, you know, renovate more traditional industries. How has that sort of come together a little bit? And what are sort of the, the guiding theses there?

• 54:39Speaker 00

  With AI, if you want to change an enterprise with AI, you have to do three things at the same time. That's why most enterprises are stuck with pilots and not real deployments. You need to change the data infrastructure. You need models for that industry. You need to change the workforce because you have humans doing work differently and you have agents doing work that are AI. And so all that has to come together. So unless all three of those things happen, it doesn't work. So the question is, how do you reduce the dimensionality of that to lead to success? So the insight we had, back to what I was saying, was that find parts of the enterprise where those businesses already decided to outsource those for labor arbitrage.

• 55:17Mario Gabriele?

  Ah, interesting.

• 55:18Speaker 00

  So like everywhere there was labor arbitrage, why don't we go and say, hey, well, we will turn those into AI agents versus Indian agents or, you know, Philippines agents. And so that's where this was born out of. We said, so for every department in the enterprise, let's go figure out how to go do that. And, and the fastest way to do that was, you know, incubate a great team and then just go buy these companies that are declining assets. Because everybody knows these labor arbitrage companies are going to go away. So to me, the roll up is just customer acquisition. We buy them and then we transform them into AI. Like my, my contrarian comment at that, in that meeting was some of the best IPOs, you know, 10 years from now are going to be transformation of the companies that are the worst valued today.

• 56:04Speaker 00

  These labor art businesses will become high margin AI services companies. So if you believe that transition, you know, there's a huge amount of transformation that's going to happen there. So that's a lot of, and I give Mark Bargwa a lot of credit and he, he has really executed incredibly out of creation to go do that for us. And I think we have amazing teams. We just hosted them last week, all these companies together. So they can learn from each other. And I was blown away. It's a, it's a lot of confidence that this will yield pretty important transformations.

• 56:38Mario Gabriele?

  Really interesting. The, the idea of it being sort of roll up based versus like larger buyouts. Why is that the right way to play it? Because I could, you know, I think I've seen people sort of talk about it from the other angle. And I could sort of imagine, I could argue almost either side of it.

• 56:53Speaker 00

  So first of all, I met a lot of senior folks from large private equity firms that are trying to figure out how to do this. The problem is, I think there's a sweet spot of size, after which, you know, injecting innovation, the physics of it kind of gets in the way. Cause what are we doing? Our creation business is in some ways the antithesis of the private equity business. Private equity business is you buy a business and you optimize it for costs, you do financial arbitrage. Creation, that what we do, we buy a business, we actually increase costs, we raise, you know, we invest technology into it. We, we, we improve them and then over time, you know, you can create financial leverage as well. But it's very innovation first mindset, very different. Injecting innovation in a company that's, you know, a few thousand people is one thing.

• 57:38Speaker 00

  Tens of thousands gets a lot harder. How do you really do that?

• 57:40Mario Gabriele?

  So yeah.

• 57:41Speaker 00

  And I think we eventually will be able to do it. We're kind of on this journey of let's start with really small ones. We get to midsize ones. So we're going to scale the capital to be able to do this. And over time, we will be, we'll learn how to do bigger ones, maybe department or a department or like opportunities will arise. But I think that's, that's got ways to go, in my opinion.

• 58:01Mario Gabriele?

  How do you stage the process? Do these teams sort of do a bunch of fact finding, build the software and the sort of internal tooling first? And then, you know, sort of get the first target on board, the next one and the next one? Or is it more sort of running those two things in parallel path where you're saying, actually, we're going to take, you know, we're going to make our first acquisition at the same time as we're figuring it out. Because it's valuable for us to see it from the inside and, and figure out what needs to be automated.

• 58:28Speaker 00

  It's a great question. But where do we start? One of these companies, we immediately started saying, let's build a product and maybe we can go get some organic customers to prove it out and selling for targets. And then you somehow sort of converge those into, okay, now we have the technology validated and you can actually organically go build this as well. But we'll also go acquire these customers and move fast. And that's kind of crescendo and, you know, a bunch of the, you know, Julia, there were some amazing companies getting built right now. They're doing this out of our creation portfolio.

• 58:57Mario Gabriele?

  Yeah. And the creation portfolios is these incubations for, you know, more common parlance, let's say. Have you found that there are certain places where this works best? You know, you've tried now a few of these rollups, are there sort of, you know, nuances within that sort of higher level thesis that you're, you're discovering where there's really the, the biggest leverage?

• 59:18Speaker 00

  Yeah. So, so I think, I think first thing is as technology gets better on the AI model side, it unlocks how much more sophisticated work can you do? Like the closer you get to reasoning working really well, it's really take more and more complex tasks that are done this way, right? So that's one. So it's got its own continuum and I feel like, you know, customer support got unlocked and then legal got unlocked and, you know, like it, it, the insurance underwriting is getting unlocked from risk perspective. So I think there's like more, every time we make more progress with the models, I have this visual of there's a certain additional number of applications in the world that just became ready to be turned over to AI. Right? Like this curve. And so I think that's the thing that I would say, you know, is important.

• 1:00:03Speaker 00

  And then the other is it, it comes down to how technology, where is the company you're buying? And then how courageous are the people that are leading it? Cause if you don't have buy-in from those companies saying, we want to come be a part of it, we're, we're not selling out and giving it, we're going to come and help do this and do the cultural transformation and create a culture that can embrace a services team and a, you know, hardcore AI engineers. As well, like go back to what I said with Levango, can you actually infuse that kind of culture right at the beginning? That has a lot to do it, you know, one of the companies, Long Lake. That, you know, Zach, Franklin and Alex Taubman are building. It's amazing. I mean, they, they, they are doing this at an incredibly rapid pace and they're creating a blueprint for this whole industry for us.

• 1:00:46Speaker 00

  And, uh, but it comes down to can you really embrace the cultural orientation of these two teams and like put it together?

• 1:00:52Mario Gabriele?

  Can you remind me what Long Lake is doing? I think it's maybe insurance.

• 1:00:55Speaker 00

  I would look at it as all the small businesses, there need to be transformative AI in, in the US are going out. They're going and putting them together and building these platforms. And it's like, is it constantly some opera? Is it Danaher? Like sort of, it's a, it's a sort of its own category defining company, like really impressive what they're building.

• 1:01:11Mario Gabriele?

  Wow, how interesting. Have, have you found that the caliber of entrepreneur that you can get to do an incubation project is different than the ones that you find on the outside? Like in some ways, I imagine it's harder to attract a true N of one, you know, top one basis point outlier style person to come sort of in-house into this structure and do things. Is that, is that true or is it different sort of just different archetypes?

• 1:01:39Speaker 00

  First of all, look, if I look at our last, you know, 15, 20 years, we did kayak, we did demand where we did circle, we did Livongo. I've done a few category, kind of companies that went their own categories and, you know, have been multi-billionaire outcome. So, so, um, to, to me, it comes down to, is there this really elite person that already has an idea? That they should just kind of go run with and let's get behind them. Whereas sometimes it's really, there's an elite person, maybe haven't done something before, maybe don't have an idea, but have the ingredients. Maybe it isn't even a full package, not to be CEO, but we can, we can train them, but they spike. And they can be fast builders and, and, uh, you know, are willing to co-create something with us.

• 1:02:20Speaker 00

  They kind of go this way, but I, you know, if we do our job right, uh, I think we'll build, we haven't yet proven this. Our largest internal incubation was 18 billion. But I'm like, can we build a hundred billion our company this way?

• 1:02:33Mario Gabriele?

  Yeah.

• 1:02:33Speaker 00

  I think we have some things in our portfolio now that like, you know, Camer, for example, or Hippocratic and others, where I do think that kind of potential is there. And, um, Uh, you know, we want to keep honing in. How can we be good partners to these folks? They can be true outliers as well. That's part of the creation journey.

• 1:02:49Mario Gabriele?

  Yeah.

• 1:02:49Speaker 00

  Uh, and we have, you know, we have a few of these companies now that we're, we're, we're trying to prove. But if you already have an idea, like, we don't want to disrupt that. We don't want to tell you, come be part of this. This to me is like much more creative, figure stuff out from ground floor. Floor is, it's earlier than seed, right? Like, we've made a lot of investment in making sure General Catalyst can be the best or one of the best seed firms, uh, you know, that part of our business in the world. That's what, you know, Jeanette and Yuri, who joined us, who built Wayfinder and Nirage from Venture Highway, you know, that's what they're working on. But creation is actually in some ways even earlier. It's a person trying to figure out what to do. We have ideas, they have ideas. Hey, this is our, it's like our studio, right?

• 1:03:30Mario Gabriele?

  Yes.

• 1:03:31Speaker 00

  And we'll build something with first principles, uh, you know.

• 1:03:34Mario Gabriele?

  Now that you've been doing this for long enough, have you ever sort of mapped how the hit rate changes for sort of creation inception, uh, sort of incubation companies versus outside investments? Because in a way, I imagine you could tolerate a, a lower success rate on your incubations, given, you know, usually there's a, a different ownership dynamic there. You know, you could, you could calibrate a hit in different ways, but you know, at some kind of positive threshold, I wonder, I'm curious, have you seen?

• 1:04:00Speaker 00

  It's actually the other way. It's actually, our, our hit rate on creation is a lot higher.

• 1:04:04Mario Gabriele?

  Huh.

• 1:04:05Speaker 00

  Cause we only do like 20 to 25 companies, uh, in a fund, very concentrated. Cause we've done the thinking, we're, we're building together. Uh, we'll get through the first, and the venture would be through a couple, three rounds ourselves to make sure we've value the business and they will invite others to participate as well. Uh, versus, um, uh, seed embraces a lot more ambiguity. I think ideas in creation in some ways are like more obvious. We're not, we're not doing accidental innovations in creation. We're looking at like, here's a problem that needs to be solved. Uh, and so, uh, those are in some ways more. Execution heavy and can lean on our network and we can sort of build together. So it's actually the other end and our performance in that business is, you know,

• 1:04:49Speaker 00

  over 20 years is incredible because we own a lot. Ownership drives that. And so, you know, like, you know, we've invested in Stripe from the beginning and we, you know, we're one of the largest shareholders there, but we don't own nearly as much as we would own of, you know, Long Lake or Camer or Hippocratic, these companies. So I think that's a, that's what ends up driving like an even more elite return in the end.

• 1:05:13Mario Gabriele?

  Fascinating. Let's talk a little bit about the, the seed practice. And, you know, you mentioned Jeanette and Niraj and, you know, some of the, the team members there. One of the ways that you've sort of bolstered that practice is through these sort of firm acquisitions, La Famiglia, Venture Highway in India. You almost never see acquisitions in VC, super unusual. How did you guys think about like that as a viable strategy? When is it the right time or, you know, the right circumstances for, for that to happen for GC? Yeah, I'd love to, I'd love to explore that.

• 1:05:47Speaker 00

  I have to say, I don't think we were intentionally going down that path. I just, you know, I just thought, and every one of them has had its own journey. Like Niraj and I started talking about potentially doing this together maybe five years ago. And, and it's because we, we actually grew up in the next town or in Delhi. I'm a few years older, but like, so we're like, we both care a lot about building important companies in India, making a difference. But it took me five years for him to sort of be convinced this a hit. It's, it's better to be an entrepreneur here on the GC platform than doing this on his own. He can take tackle problems much bigger. India is really ready for prime time and he needs that capital and scale. And then with, with Jeanette, it was actually much faster.

• 1:06:33Speaker 00

  She had invited me to come speak at her conference that she was called Y Now. And I saw, you know, the, her community that was there, it was like a hundred people. Large group in tech CEOs, so the most important people from Silicon Valley, all brainstorming. And I asked her, I was like, what are you trying to do? And she said, well, I want to transform Europe. I was like, well, you can't do that with a couple hundred million dollars of seed capitals. You need, you need a real platform. And what if we could accelerate you by a decade? So I think, I think they, these are folks that I knew for years. So I knew it was a cultural fit. I'll come to Yuri in a second. And they had their own sense of purpose in the markets that we wanted to lean into. And, and, and they were doing this in a very creative way.

• 1:07:18Speaker 00

  And they were both very successful. I, I actually think, you know, we'll see in a few years that, you know, they are to the best investors in the ecosystem. If you look at their portfolios, it's, it's really, really remarkable. And then same for Yuri. Yuri was introduced to me by Gary Tan. And, uh, you know, I met him and I was like, oh my God, like, how come I don't even know this person? And he's, he's got the most interesting portfolios in the valley. He just quietly does this and, you know, and is in all the right companies. And, and, you know, we were lucky. I think he saw that if, how happy Jeanette and Niraj were and the fact that they didn't feel like they were getting, you know, consumed in this like large vortex and they could actually have their, their platforms. And that had a lot to sort of convincing him to come here.

• 1:08:03Speaker 00

  And the three of them are, you know, I mean, they, they own our seed effort and they're the stewards of the early stage of our business now. And, and I have a lot of confidence that we can protect that because if we don't protect that, then we'll become irrelevant after a few years. And I feel like our core is secure and we can now have the license to do a lot of these other things that we're doing. So it's, it's been, all I can say is this is pure luck, man. Like this is not a strategy. It just happened and then, and then this team works really well together. And, you know, I just feel lucky that we ended up, we, we all feel lucky that we ended up together and doing this, so.

• 1:08:36Mario Gabriele?

  That's amazing. It sounds like the acquisition was really like almost a talent acquisition. Like you could, maybe, you know, GC could have said, hey, we're gonna. Pull together an India team and we're going to pull together a Europe team and you know, this is how we're going to sort of take on these markets, but it would have been difficult maybe to get the style of person, the connectedness of that person, the sort of sophistication of that person with regard to those markets. Is that, is that sort of like the way that you've thought about it?

• 1:09:03Speaker 00

  For me, it was important that the people that come into the partnership are going to make the partnership stronger. So it's just a very important consideration. Now, you know, Nourid and Jeanette had built teams. So we got those teams as part of that as well. So that gave us a ecosystem and a workflow and, and you know, their portfolios that we can invest further in where it makes sense. Yuri was a one man band. He's like a one man show and but that gave us, but we already had a team here. So that gave us a leader that we were just missing to help us really drive that. So I think, I think it all came together, but it was very much about the whole package. And they are entrepreneurs that are rebuilding, but they, they would have built large firms 10 years from now.

• 1:09:45Mario Gabriele?

  Yeah.

• 1:09:45Speaker 00

  So I think they had the infrastructure, they had the team, they had the goodwill and the relationships in the ecosystem and the understanding of how to play those markets. So I think we got, we got a lot and, but if, if they weren't going to be a good fit as leaders in the, in the business, then it wouldn't have worked. So as this is, I, I do not advise it. I think it was more of an intuitive step, but it's, it's, I feel very fortunate where we've ended up.

• 1:10:12Mario Gabriele?

  And now that these sort of platforms are part of GC, do you, do they sort of still operate as?

• 1:10:17Speaker 00

  That's one team.

• 1:10:18Mario Gabriele?

  One team. So they'll talk across, talk between each other?

• 1:10:22Speaker 00

  They talk every day. We call and see decisions together. Yeah. One team, one dream. I'm very focused on, you know, we can innovate on products, but alignment, as I mentioned earlier, that's like really important. We need to all have the same set of values, economic alignment, purpose.

• 1:10:39Mario Gabriele?

  Were there like cultural issues that you had to work through there? Or was it just sort of like, hey, actually we found the right people and it was relatively straightforward? I always think of, you know, so many acquisitions end up being failures in a, you know, traditional corporate environment and usually that's down to some cultural mismatch.

• 1:10:55Speaker 00

  Integrations were painful because I think.

• 1:10:59Speaker 00

  You have different ways of looking at businesses, you know, you have all these teams that are all coming together. And we already had a team in Europe. India was easier, we didn't have anybody there. And so integrations were a little difficult. India's got its own challenges because like, you know, so far away. We want to make sure they feel every bit part of the team as our other location. So, but we're working through it. I think it comes down to if these leaders have the right mindset, it works. And that, that to me is where I'm saying we just, we just got really lucky. I think it's a, it's almost like, and three of them had worked together for like 20 years, the way they behave.

• 1:11:32Mario Gabriele?

  Hmm. Amazing. Oh, that's really cool. Yeah. Well, I'd love to, to wrap up with sort of our traditional ending questions. These are on the more philosophical and abstract side. The first one is, if you had unlimited resources and no operational constraints, what experiment would you like to run?

• 1:11:48Speaker 00

  The experiment I would like to run is around funding proactive care with health. So the way our insurance system works is nobody pay, invest in people's health. Because we only, it all funds when people get sick. But if you could actually redirect some of the dollars towards funding longevity and health and, and insure it. So it really becomes pervasive versus only those who can afford it. It'll have downstream effects, but it's gonna take a few years to prove that. So we need, we need the, the courage and the capital and the time to be able to do that. I think that, that if I could do one thing that I don't think this is easy to do, that, that I know will just really ensure the success of our healthcare work, that would be it.

• 1:12:29Mario Gabriele?

  Hmm. Are there any longevity efforts that you found particularly interesting in recent years?

• 1:12:36Speaker 00

  I think there's a lot of underlying innovation happening around longevity. We've funded some science companies like Alto's, but then there's, you know, consumer phenomenon like Ro Health, which is a company we seeded in like 16, I think. That has become an incredible business around GLPs and GLPs are a proxy for longevity as well. So like, there, there is a lot of that happening, I think. And so I would, I would, my, my belief is that somebody needs to come and pull this together into a platform for longevity. But there's like little experiments, people are paying for it.

• 1:13:06Mario Gabriele?

  Yeah.

• 1:13:07Speaker 00

  Technology is showing promise. It's like all the technology before the iPhone came about. And then, you know, see jobs come to pull it all together and this amazing experience and the industry takes off. I think that's gonna happen with longevity. Somebody's gonna do that.

• 1:13:17Mario Gabriele?

  Hmm. Amazing. What's a tradition or practice from either another culture or era that you think should be more widely adopted?

• 1:13:25Speaker 00

  So one, one tradition. That I think a lot about, which I think could

• 1:13:31Speaker 00

  be good for Western societies around this whole notion of not fighting death. I'll go back to healthcare, like, like if you look at America, half of our healthcare costs go to how do we sort of protect that last six months of life, which is a horrible experience for everybody and bankrupt society.

• 1:13:47Mario Gabriele?

  Yeah.

• 1:13:48Speaker 00

  And, and, and it sort of comes down to this short-term mentality in some ways. In India, you know, you, you learn about, okay, there's, there's reincarnation. I don't know if it's real or not, but there's this idea of a soul and enduring mindset. And I think the the eastern philosophy around that, sort of infusing that more in how we build businesses is something that's interesting. I actually, you know, just announced that I'm I'm releasing a new book. It's called The Transformation Principles, and I talk a little bit about that in there. I think that might be one thing that I'm, I'm thinking can be better embracing the ethos of how we build companies here.

• 1:14:21Mario Gabriele?

  Huh. How does that apply to the company building in your view, knowing when a company is sort of not working and it's time to sort of let it go?

• 1:14:29Speaker 00

  Well, or when you're building a company that you want it to endure, it's going to outlast you. And it needs multiple acts, and it needs to have a culture that can persist. Like, how do you really think about those things with like that? That kind of an arc cannot be rushed to, how do I maximize in the short term?

• 1:14:45Mario Gabriele?

  Hmm. Fascinating. I'll look forward to reading that. Okay, final question. If you had the power to assign a book to everyone on earth to read and understand, what would you like to assign?

• 1:14:54Speaker 00

  Look, we're, we're, um, in a, a really turbulent time because of all the geopolitics. So one book I'd mention, I think like a 2015 book is Printers of Geography. Marshall. It helps you understand

• 1:15:09Speaker 00

  why different regions behave the way they do, what their constraints are. And I think having empathy for, uh, and I think that sort of talks about like these 10, uh, different regions. And, you know, empathy for that could then help you think about how to build, um, uh, you know, businesses uh, and economic value to take care of the people there as well. Cause I, you know, one of our core values is inclusive prosperity, and I think a lot about. And we're obviously doing this contrary and think of going global is can we have that empathy for what these different regions are concerned, starting like, and, and, and build with that intention for, you know, what's best for them?

• 1:15:46Mario Gabriele?

  Amazing. That sounds like a great book. Thank you so much for taking the time. I really enjoyed this conversation and I, I learned so much.

• 1:15:52Speaker 00

  Thanks for having me. That was really fun.

• 1:15:54Mario Gabriele?

  That's it. Thank you for listening to this episode of The Generalist Podcast. Please subscribe on Apple Podcasts, Spotify, or your preferred podcast app. Ratings and reviews help others discover these discussions, so if you enjoyed the conversation, I'd be grateful if you could take a moment to leave one. For all past episodes and more, visit us at thegeneralist.substack.com. See you next time as we continue to explore the future.