Pod Insights The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch 20VC: Max Altman on The New Seed War: Can Anyone Compete with Sequoia and a16z | Leaving $2BN on the Table with Reddit | Lessons from Backing Rippling at $25M Post | Why Climate Tech is a Mirage and Disaster About this episode Max Altman is Co‑Founder & Managing Partner at Saga Ventures, a US$125 M early‑stage fund. Before Saga Max was an investor with Apollo Projects, Hydrazine Capital and Altman Capital (where he helped deploy over US$500 M) into breakout names such as Rippling and Reddit. AGENDA: 03:55 – Venture Capital Is FULL of Tourists With Single-Digit IQs 06:20 – Inside the Madness of Parker Conrad: Genius, Chaos, and WTF Emails 10:35 – The Rippling Deal That Changed Everything 12:40 – Living in Sam Altman's Shadow: The Confession 17:30 – $200M Fund Mistakes: Max's Brutal Lessons From Hydrazine 22:05 – The $2B Reddit Return… and the $2B Left on the Table 25:00 – Why Climate Tech Is a Total VC Mirage 28:40 – The New Seed War: Can Anyone Survive Sequoia & Andreessen? 46:55 – Max's Boldest Predictions
Transcript 16,567 words · 3 speakers
Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 Harry Stebbings? This is 20 VC with me, Harry Stebbings. Now, joining me in the hot seat today, we have Max Altman. Max is the co-founder and managing partner at Saga Ventures, a $125 million early-stage fund. And before Saga, Max was an investor with Apollo Projects, Hydrazine Capital and Altman Capital, where he deployed over $500 million into breakout names like Rippling and Reddit, to name a few. But before we dive into the show today, SecureFrame empowers businesses to build trust with customers by simplifying information security and compliance through AI and automation. Thousands of fast-growing businesses, including NASDAQ, Angel List, Doodle and Coda, trust SecureFrame to expedite their compliance journey for global security and privacy standards, such as SOC 2 and ISO 27001,
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3:38 Speaker 01 Yeah, thanks for having me. I definitely think I'm the most fun of the three. Maybe the most media shy, but the most fun.
3:44 Harry Stebbings? I heard the most intellectual and charming, so I'll totally take that. I want to start though on like a little bit earlier. You grew up in the Midwest, which for me is like a Brit. We know New York, we know SF, and then there's the middle. So this is the middle, correct?
3:58 Speaker 01 Yeah, grew up in St. Louis, now live in Austin, spent a few years in San Francisco, but then bounced back to near home.
4:04 Harry Stebbings? How does that impact how you think about investing as an investor?
4:08 Speaker 01 The culture in the Midwest is very different. It's very humble, it's very communal. And then I remember I got out to San Francisco and I'm like, everyone is so aggressive and individual. So I think it helps a ton. One, in that you build a lot more real relationships and a lot more like close friendships because that's how we grew up. The flip side is we're a little less aggressive and some of the earlier mistakes I made was just being a little bit less pushy than some of the people that might have grown up in Atherton.
4:37 Harry Stebbings? Do you think there are many real relationships in Manchester?
4:40 Speaker 01 There are still some. There are less. I think when I got there in San Francisco in 2013, it looked a little more like a small smaller town, maybe Austin or St. Louis, where everyone really trusted everybody and had deep connection. And naturally, it's grown. 10, 100x the number of VC funds, the number of startups out there. So I think, you know, it looks more like a New York where just generally trust in society, I think, breaks down a little bit as you grow.
5:06 Harry Stebbings? Well, this is like pre-tourist venture.
5:08 Speaker 01 Yeah.
5:08 Harry Stebbings? I think most of the people in Manchester are tourists. They like going to events. They like telling people at private members' clubs that they're VCs and they have single digits IQs.
5:18 Speaker 01 Yes, some of them. I think, though, to be fair, there's a lot of wonderful people in the industry and I'm at least fortunate enough that there's dozens of people who I think I have real relationships with.
5:27 Harry Stebbings? Single smartest friend who's a VC, not a family member.
5:31 Speaker 01 Keith Raboy. I mean, whatever people want to say about him, I think he's extremely smart.
5:35 Harry Stebbings? I love Keith.
5:36 Speaker 01 Yeah.
5:36 Harry Stebbings? Phenomenal. What do you think the world doesn't see about Keith that you do?
5:40 Speaker 01 I mean, he's rough around the edges. He's honest. He probably doesn't agree politically with a lot of people in San Francisco, but that's not taken away from how smart he is, how good of an investor he is. And like frankly, the first board I served on was Teespring and he was also on that board. And people can say like, oh, he's kind of a dick or anything. But I mean, my experience was, I was a 27 year old and he was like, hey, call me whenever. He was taking half an hour, hour calls to help me understand how to do the job. So that's my experience with him.
6:11 Harry Stebbings? God, I remember Teespring. These are back in the day. That's like a blast from the past.
6:15 Speaker 01 It's a throwback.
6:17 Harry Stebbings? This is like Savage Garden being played and you're like, this reminds me of school disco.
6:22 Speaker 01 That was the Silicon Valley I grew up with.
6:23 Harry Stebbings? Those were nicer times.
6:25 Speaker 01 It was a blast. Everyone was just winning and making T-shirts and hanging out and, you know, it all was good for a little bit.
6:31 Harry Stebbings? I totally, it's funny, I spoke to Parker before from obviously Rippling and I remember being in SF when I was like 18 and Zenefits was just like the hottest thing in the world.
6:42 Speaker 01 Oh, it was a blast. That was my foray. I was a quant trader after college because I wanted to go to Chicago as a midwesterner. Hated that, came out, then joined as the first product manager at Zenefits and got to work for Parker directly.
6:55 Harry Stebbings? It was not amazing.
6:56 Speaker 01 It was amazing. He's crazy, but he's the best salesperson and the best product person that I've ever met in my life.
7:03 Harry Stebbings? How is he crazy first?
7:05 Speaker 01 He is that person that on, you know, a Sunday night at 9:00 PM will just call you and just say, I have this new idea, you need to get it done before tomorrow. Or if someone screwed up, he would just email them WTF, question mark. Not any context. Like if anything went wrong, if there was a customer case that looked bad, which just means fix this right now.
7:24 Harry Stebbings? I absolutely love that. What did you learn from the Zenefits experience? Because that was a pretty transformational time in your career as well. It's like a first time in tech as well.
7:32 Speaker 01 Yeah. What I learned first and foremost is you need, especially then, to build an absolutely amazing product and customers don't know what they want. So I remember one of the first times, like my first week on the job, we would do customer discovery calls and we'd listen in and the customers, like I want you to build this thing for payroll and this thing for HR tech. And we would leave the call. I'm like, okay, great. I'm going to write some specs or, you know, we're going to build that. And Parker's like, no, no, no. They say that, they don't actually want that. This is what they want to build. And we'd go build it and the customers would love it. So I think I learned the founder needs to have intuition of what they want. The customers aren't going to know. And then two, sales and growth cure everything. And in Zenefits case, maybe to its detriment
8:15 Speaker 01 a little bit, but we were killing it. The culture was amazing. Sales were off the Chart, the salespeople were partying, we were just having a great time and everyone was happy and everyone was loving it. The flip side is if sales, you know, cure all ailments, sometimes you might not be paying attention to other things that are going on.
8:32 Harry Stebbings? I'm fortunate to know Nick from Raveloud and interviewed him a couple of times and he always says like, culture is kind of bullshit. The only thing you should focus on as a leader is winning because the single biggest determinant of human happiness is personal development. And when you are winning, you are growing personally, skills in like personal, and then also you're financially winning. And so just focus on winning and everything else follows.
8:57 Speaker 01 I fully agree with you. I mean, first off, when any of my friends are like, I want to join tech, what should I do? And I say, don't care about the product, don't care about anything, just go work at the fastest growing company because winning feels great.
9:09 Harry Stebbings? Yeah.
9:09 Speaker 01 It feels amazing. And I think we sort of maybe lost our way a little bit in like the late teens in tech where everyone was, you know, they were making it about their mission and saving the world and we're doing on-demand dry cleaning and on-demand dog walking, but it's going to help the world this way and you should feel good about yourself. And I'm like, just go build a great business and like winning is the most fun thing here. And I think we really lost our way for a little bit.
9:29 Harry Stebbings? In terms of losing the way, and this is unfair of me, but I am intrigued. I take it you're on the Parker side, on the Parker versus Saks.
9:38 Speaker 01 I am, and I think I've been quiet for a while and I'm really loyal to him. Both and he's the one that gave me a chance. He taught me how to do venture. He sort of set the bar for what I want to be investing in and frankly, you know, let me be one of the earliest investors in Rippling. So I'm very loyal to him, but yeah. I think there were some small mistakes made, but they were company-wide. They were under all departments, not just his. Everyone knew about it. They weren't ethical mistakes and he sort of, you know, took the fall. Maybe the CEO has to always do that though.
10:09 Harry Stebbings? It's funny, when I spoke to him, he said it was all Max's fault. He just said all those mistakes were just Max. I took the full.
10:15 Speaker 01 I built a wonderful product. I made no mistakes.
10:18 Harry Stebbings? What price did you do Rippling at?
10:19 Speaker 01 Twenty-five. Us, I had a fund that I was leading that Sam was helping out with a little bit in 2016 called Hydrazine. We were able to put in a pretty good check, co-lead it with initialized Gary and Alexis who all. So I had a great fund that vintage.
10:32 Harry Stebbings? I always find it interesting to understand a little bit about the person in terms of motivations. I also think that elephants in the room are always good to be called out. With a brother like yours, I find these next two questions interesting. And as wonderful as Jack is, I'm obviously referencing Sam.
10:48 Speaker 01 To be fair.
10:50 Harry Stebbings? Jack is a legit like OG, but like no fancy.
10:53 Speaker 01 No, but I also remember talking to Jack one time and he's like, yo, I built a multi billion dollar business and he's crushed it. And one of the most successful early stage ventures, he's like, but people still call me Sam's brother.
11:04 Harry Stebbings? Sam Altman's brother raises 12 billion dollar fund and also fires to the moon and cures cancer. And it's like, Sam Altman's brother.
11:12 Speaker 01 Yeah. And, and we have a group chat about this all the time where Jack's just like, you know.
11:16 Harry Stebbings? Is it called Sam Altman's Brothers?
11:17 Speaker 01 No, it's our family group chat. It's the three of us, but absolutely. Jack can absolutely crush it. And they're like, but Sam Altman's brother raised an amazing, you know, 275 million dollar fund.
11:26 Harry Stebbings? What do you think you're running towards?
11:29 Speaker 01 I want to be successful in my own right, like ego is a real thing in human nature. And I don't think I ever want to say, hey, Max, you know, crushed it on these funds, but you know, Sam was loosely involved. And it's like, it's not really his. So I, you know, I, I left after doing three funds with some combination of Sam and Jack to build out my own firm, just for ego and pride, to be completely honest.
11:53 Harry Stebbings? Were you nervous about that? And I don't mean that badly, but it's a little bit like a GP at Excel or Sequoia, or you name it, spinning out and doing their own. And it's like, gosh, I've crushed it with this, but I, I did have some help.
12:05 Speaker 01 Oh, I absolutely did. I think a few things are like, one, it's fun to make it a little harder. Absolutely. It's going to be a little harder if Sam's not involved, but like, that's good. It's, it's good to be pushed and have to like work for what you want. I also think I was really fortunate that I kind of grew up with a Sequoia founders fund level, like training and background. Like we all lived in a house in the mission and all the best people, whether it's like a Peter Thiel or a Keith are coming by the house, talking about investing, you know, I think we had about 17 unicorns across the fund. Cause it's just a small world and everyone's. Coming by. So I'm like, oh, these are the founders of Instacart or Reddit or Rippling or Boom.
12:46 Speaker 01 And it's like, this is the bar. So I learned the bar and I got my really amazing education. So I felt pretty comfortable going in. And I think my sort of ace in the hole is dude, Harry, I can't fail. You know how embarrassing it would be if this fun like shat the bed? Like I can't fail. And I think it's a great motivator.
13:05 Harry Stebbings? I totally agree. For anyone entering venture, I always say the most important thing is actually just to meet as many founders as possible. Because establishing the benchmark of what good is, is one of the most important things you can do early in your career. Yours is a little bit of a cheat with those founders and like that exposure. But I completely agree with you there. So we're kind of running towards wanting to do it on your own. Before we get to Saga, I do just want to touch on Hydrazine. Why was it called Hydrazine? This feels like a chemical plant.
13:31 Speaker 01 All three of us are very bad at branding, you know, whether it's ChatGPT or the fund Jack and I did together was called Altman Capital. None of us are good at branding. I think one day we were just like sitting at the kitchen table and we had to give it a name. And there was like one day to do it. And I think, I think it was maybe Jack, which is like, call it Hydrazine. There's no real reason for it.
13:52 Harry Stebbings? And the domain was available and everyone's like, ah, fuck it, the domain's there. How big was the fund?
13:57 Speaker 01 Uh, that was 200 million.
13:58 Harry Stebbings? It was 200. That's a lot more than I thought, dude.
14:01 Speaker 01 Yeah. I mean, I was sort of quietly like.
14:03 Harry Stebbings? Did you raise money for it?
14:04 Speaker 01 Not for that one, but then the other one that Sam and I did in 2020 called Apollo, I raised money for that.
14:10 Harry Stebbings? Okay. So let's just stick on this one. This is fascinating. So you do that fund and it's the three of you working on it?
14:16 Speaker 01 It's me full time. Sam's, you know, helping out a little bit. Jack is fairly involved, you know, help, helping a tiny bit, bringing us some cool deals. But he's getting really busy with Lattice.
14:26 Harry Stebbings? And he's just fucking around building a billion dollar company.
14:28 Speaker 01 Exactly.
14:28 Harry Stebbings? What is that? And okay, so we have that. And then you mentioned Rippling at 25. Was that the strategy, like lead, pre-seed, seed rounds?
14:37 Speaker 01 I would say it was a looser strategy. It was give money to the best people. You know, we did Reddit at a higher valuation. We did Rippling.
14:46 Harry Stebbings? What price do you do Reddit at?
14:48 Speaker 01 600. Still pretty good.
14:49 Harry Stebbings? It's pretty good.
14:50 Speaker 01 Yeah.
14:51 Harry Stebbings? How big a chat are you writing?
14:53 Speaker 01 The rippling was 1.35 million.
14:56 Harry Stebbings? At 25?
14:57 Speaker 01 Yeah. I just was dumb enough to never like, you know, beat my chest and talk about things. I sort of maybe grew up more as a Midwesterner, you know, from St. Louis, who's like.
15:06 Harry Stebbings? Wow. So you have like a 5% position on that on a 25 inch.
15:09 Speaker 01 Yes, to start, but you know, we weren't great at really doing our prorata and holding it all the way through, but it's still going to be a great return for the fund.
15:15 Harry Stebbings? Yeah, but even with the heavy dilution, you've still got a 2% say.
15:18 Speaker 01 Yeah.
15:18 Harry Stebbings? Wow, in a $20 billion company, say that's.
15:21 Speaker 01 Yeah, it's pretty good.
15:23 Harry Stebbings? Did you sell along the way?
15:24 Speaker 01 We've sold a tiny bit, frankly, just because our LPs have asked for liquidity because they're mostly endowments and have been squeezed. Parker's amazing and I've never bet against him, so we still hold a bunch of it.
15:36 Harry Stebbings? How do you reflect on that time doing Hydrazine? Like, what are the biggest lessons that you've taken with you?
15:42 Speaker 01 Yeah, I mean, I think first and foremost is really fortunate to work with family because you automatically trust that everyone is doing what is best for the firm and not what's best for them. You can also be radically candid with each other and just like, this was a dumb deal. We cannot do this. You screwed up in a way that you might not be able to do with a new partnership. So I think when we were building the firm, we have an equal GP firm. There's no associates right now. Everyone is completely incentivized to do what's best for the firm, not for themselves. And I think we built the firm that way because of what I learned earlier.
16:18 Harry Stebbings? Do you think most venture firms have fucked up cultures because of the hierarchical structure of them?
16:23 Speaker 01 I don't know if they're fucked up cultures, but I don't think they're incentivized to have the best returns. If you're an associate at a firm and you're maybe there for five or six years, your job is to get a deal done that's going to get marked up quickly. So you look good and then can get promoted or get poached to go to another fund, but you have so little carry and you're probably not going to be there the 12 years until you see any liquidity. You're not incentivized the right way.
16:48 Harry Stebbings? What was the single best deal you did from Hydrazine and what's your lesson from it?
16:52 Speaker 01 I mean, definitely Ripley, not to keep beating on the same drum. But the learning was just give money to the best people that you know in your network. I remember.
17:02 Harry Stebbings? Be price insensitive because I remember that deal was also, it was expensive for the time. I think it was actually a thirty five entry.
17:09 Speaker 01 Twenty five pre.
17:10 Harry Stebbings? Twenty five pre and Keith, the boy famously turned it down and initialized it instead.
17:16 Speaker 01 Yes.
17:17 Harry Stebbings? And Keith always tells me it's one of his biggest regrets.
17:20 Speaker 01 Yeah, at the time, this was two thousand and sixteen, that was really pricey. And I remember actually after, you know, everything left, Parker and I, we were both depressed and we were chatting. And he came back and we were talking, I think it was like a seventeenth street site glass in San Francisco in the Mission. He's just like, I want to build a laptop leasing company. I want to do something, but I have this fire. I cannot lose to Andreessen, I can't lose to David. And I'm like, yo, this guy, like, he's a chip on our shoulder. He can't lose. He's the best founder I've ever met. Like, just give him money and the rest will take care of itself.
17:54 Harry Stebbings? Do you kind of think like that, which is like, fuck it? Don't worry about price, don't worry about ownership. If someone great comes, just give them money.
18:01 Speaker 01 I think mostly, I mean, that being said, we do have a portfolio construction in the current Saga Fund. We do like to own ten percent, but I'd rather own three percent of an amazing founder than, you know, hey, we have our fifteen percent ownership in this company. That's going to be worth zero, that doesn't help us. If we can even get two or three percent of the next DoorDash or Airbnb, we're in great shape.
18:21 Harry Stebbings? What was the biggest mistake of that fund?
18:24 Speaker 01 Not following on to our winners. We were a little bit like Lucy Goosey. Dude, Harry, I was running a two hundred million dollar fund from my living room in Pack Heights, just like kind of casually typing away, doing some deals, meeting people for coffee. And we didn't have a great portfolio construction strategy. So we just like, great, we have our ownership, you know, let it be. We weren't trying to put more money into companies.
18:46 Harry Stebbings? And now you're proactive on reserves in a way that's very different.
18:49 Speaker 01 Absolutely.
18:50 Harry Stebbings? Do you think you were able to predict your winners sufficiently?
18:53 Speaker 01 No, but we're able to tell within six to nine months who's gonna be a winner and I think who's gonna peter out.
18:59 Harry Stebbings? Do you think so?
19:00 Speaker 01 Yeah. Do you not?
19:01 Harry Stebbings? I actually think it's even quicker than that.
19:04 Speaker 01 Sure. Okay. I just wanted to be nice. It's two to three months, probably.
19:08 Harry Stebbings? Yeah, no, I'm with you. After the first board meeting, first few updates, you're like, the way that they run this, the structure, the mindset, the approach, the aggression, I think you see it so quickly.
19:18 Speaker 01 Yeah, I mean, I think that the investment we're the most excited about in Saga are now profound. Within three months, I was just like, oh, they're building an office, they're hiring the best people, they're working on Saturday nights and their product looks amazing and they're closing deals. And it was obvious within three months.
19:34 Harry Stebbings? It's so interesting. And the flip side of that is also obvious when you've got it wrong in three months. Do you tell founders when you've lost faith in them?
19:41 Speaker 01 No, I'm not an asshole.
19:43 Harry Stebbings? Do you think that's an asshole thing?
19:45 Speaker 01 No, I think if I've lost faith in you as a person, that's an asshole thing. I think if you say-
19:50 Harry Stebbings? Do you? If a founder continuously lets you down, I don't think it's bad to lose faith in them.
19:56 Speaker 01 Okay, I think what I will say to founders is, hey, if it's been years and it's not working, I think I'll say there's absolutely no shame in shutting this down, taking a break, returning 10 cents on the dollar to us. Here, we don't care if it's 10 cents on the dollar or 50 cents, it doesn't move the needle. We're not in a game of downside protection. And or just go get Aqua hired, go work at an amazing company. Like, it's not working out and that's okay. I think we tell them that.
20:23 Harry Stebbings? Did you have any zeros in that fund?
20:24 Speaker 01 Yeah, we had a lot.
20:26 Harry Stebbings? Any reflections on those?
20:28 Speaker 01 The things that failed were things that were built for the market of maybe, you know, San Francisco and Manhattan. And the example I, you know, might use is, you know, on-demand dry cleaning app. I love paying extra money to have this, you know, nice shirt, go and get dry cleaned myself and I get to stay in my apartment. But people in Austin and people in St. Louis aren't gonna want that. That's like clearly not a real scalable VC business. Like, why the hell are we investing in that?
20:52 Harry Stebbings? My favorite is, I remember Shasta once did, do you remember Shasta?
20:56 Speaker 01 Yeah.
20:56 Harry Stebbings? Shasta, I'm not picking on them, but Shasta.
21:00 Harry Stebbings? That's so brutal of me. They once did a frozen yogurt maker with like sachets that had to be that. And I'm like, it's hardware tough broadly. And then frozen yogurts with the Giucero style, you need our sachets. And I'm like, this feels very demographic specific.
21:20 Speaker 01 Yeah. And I do believe that the majority of the best companies are going to be built from San Francisco, but the people need to be a little bit outward looking in what they're building because your market better be the entire United States at a minimum to be able to succeed. I mean, I think that's why Rippling is doing great is Parker's like, hey, our main target demographic is a really nice HR woman in Nebraska. So we're going to build a product that she's going to love.
21:44 Harry Stebbings? So you enter Reddit at 600 and then you sell out?
21:48 Speaker 01 After the IPO.
21:49 Harry Stebbings? After the IPO. And you sell out at what price again?
21:52 Speaker 01 It was about nine billion when the lockup ended.
21:54 Harry Stebbings? What's the reflections on that?
21:56 Speaker 01 That was tough. I think the market cap's about 39 billion now. I think it's pretty public. The fund owned just about 7%. You can do the math. That's about maybe 2 billion of gains that could have been. It's a lot, but we're in the business of saying after the lockup, we're not public market investors. And you know, LPs are like, thank you. You did your job. We would like you to distribute it back. And I think that's reasonable. We aren't public market investors.
22:23 Harry Stebbings? So you would do that again?
22:25 Speaker 01 I think that has changed my thinking. And I think from here, it's going to become a discussion on a one off basis because that's, that's the difference between a 5X fund and a 15X fund.
22:34 Harry Stebbings? Because what I've learned is actually quite a lot of LPs on the institutional side have like auto sales, which is like the minute you distribute, they sell, even if they don't particularly want to. And so actually you can do them a favor by holding it because they're not allowed to hold it.
22:50 Speaker 01 Yeah, I believe that. And I think, yeah, moving forward, it's just going to be call your anchor LPs and say, let's talk through how we want to handle the situation. Obviously go the other direction, but there's a world where they could all get hundreds of millions of dollars back more.
23:02 Harry Stebbings? Yeah, that's helpful.
23:04 Speaker 01 Yeah.
23:04 Harry Stebbings? Apollo, how big was Apollo?
23:06 Speaker 01 It was also 200 million.
23:07 Harry Stebbings? Stick with the 200. Same strategy?
23:10 Speaker 01 Same strategy. We wanted to add a little more hard tech. So we sort of branded it as we're doing a little bit more robotics, manufacturing, climate tech. Maybe we can get into that later, too. Because we had less deal flow there and we had a great deal flow.
23:25 Harry Stebbings? Why make that transition? I always worry a lot when we see a generation of venture investors move into hard tech, climate, manufacturing, defense. And suddenly it's not connect to LTV and payback periods on like channels that we all understand. It's bon costs and manufacturing bills that is like, what the hell?
23:45 Speaker 01 Yeah, I think I mostly agree with you. I do think there are clear winners, maybe, you know, an Androl or a Hadrian that we're in that are clearly gonna help the fund. But I do think it's sort of like, it's more fun, maybe, you know what I mean? It's like we were getting a little bored. It's like it's more fun to do that stuff. And frankly, we maybe branded ourselves that way, but we were doing Palantir. We were doing other good things.
24:08 Harry Stebbings? You did Palantir?
24:09 Speaker 01 Yeah, a little bit.
24:10 Harry Stebbings? What price?
24:11 Speaker 01 High, about 4 billion.
24:13 Harry Stebbings? I mean, what's the price now?
24:14 Speaker 01 300, but again, we sold on exit.
24:17 Harry Stebbings? Oh, which was like 40?
24:19 Speaker 01 Yeah, we did well, but um.
24:21 Harry Stebbings? My heart's not bleeding for you throughout any of this, to be honest, Max.
24:26 Speaker 01 Dude, I'll be fine, but I do think most VCs have the position to say, once things become liquid and the lockup ends, that their job is to distribute. It's not just us.
24:37 Harry Stebbings? The hard thing is you hear shows like this and you're like, God, hold, hold. And then what you don't see is that the monstrous amount of companies that is like, and then it's in the dumps.
24:47 Speaker 01 Yep.
24:48 Harry Stebbings? And like 10 years later, it's still, you know, they've been the same for 10 years. Any lessons from the Apollo?
24:55 Speaker 01 Stay focused. I think we got a little bit, like you just said, we're doing this and we're touching climate tech because we're curious and like didn't have a ton of success there.
25:05 Harry Stebbings? Was climate a disaster?
25:06 Speaker 01 Yeah, of course it was a disaster. I think it's gonna be a disaster. Like, hey, climate change is real. The government should deal with it. I don't think.
25:14 Harry Stebbings? What makes you say that? I agree with you totally, by the way, and I always say climate's not a category in itself.
25:20 Speaker 01 We're completely dependent on the price of carbon. And when the economy starts to do less well and you are a mega company and you need to say, we're spending billions of dollars a year on carbon credits. At the end of the day, it's like, great. So if you spend your money there, you're going to have to lay off people and tell them, hey, by the way, you're unemployed and can't feed your family because we really wanted to buy some carbon credits because the money's the same amount of money. And I don't think that feels good for anyone. Like, that's not how businesses are going to work moving forward.
25:50 Harry Stebbings? Do you think climate is a luxury concern? And what I mean by that is like, you know.
25:55 Speaker 01 Of course it is. I think it's very real, but yeah.
25:58 Harry Stebbings? And so your regret is doing climate?
26:01 Speaker 01 Yeah, I think we wanted to be somewhat involved with it. And there were a lot of amazing founders building in it. And they're going to build great things, but they're not going to get us great VC returns.
26:12 Harry Stebbings? Any others?
26:14 Speaker 01 Yeah, I think it's sort of stay in your lane. And this has really set how we've built in saga of like, look, I think I'm a very good seed investor. I think I have a great network and people like me. I think I can slip, you know, medium sized checks into a lot of great deals. But I don't think I can go out and win series As at this point in my career.
26:34 Harry Stebbings? Why?
26:35 Speaker 01 It's a knife fight. And founders found in Sequoia and Index and Cosla, like they're amazing firms that have sort of locked it up. I went to go lead a series A or try to lead a series A one time. And I remember the other term sheet came from Sequoia. And I saw the email that the founder got. It was from Mike Vernal and they basically said, hey, Sequoia is on the board of the six most valuable private tech companies in the world and the six of the 10 most largest IPOs of the last 12 months. And by the way, feel free to talk to any of these people about their experience working with Sequoia. And it was like the Colossians, it was like, you know, Dylan at Field, it was the guys at DoorDash.
27:20 Speaker 01 And I'm like, dude, I'm not going to win this deal. Like, why the hell would they take my money against that? So don't try to do that. I'm clearly going to lose the deals that I want to lose. And if I win them, it's probably not the ones that I want.
27:31 Harry Stebbings? So the takeaway is then that you have to get in before them?
27:34 Speaker 01 You have to get in before them or partner with them.
27:36 Harry Stebbings? Do you not find that they are there so much earlier now? Like, they're there from pre-seed and seed. Sequoia have Sequoia art, for fuck's sake.
27:44 Speaker 01 I don't. I mean, if they did, you and I wouldn't have a job, frankly.
27:47 Harry Stebbings? I don't think we do.
27:49 Speaker 01 We do what?
27:50 Harry Stebbings? We do have a good job. Honestly, why am I in Europe? I'm in Europe because they're not here. I'm in Europe because I can absolutely beat them in Europe at seed and a with a very high win rate. I'm not in the US because why the fuck would they take me when you've got Andreessen or Founders Fund or Benchmark who do the large, large kind of first rounds or any of the great firms with a super low cost of capital, so they're less price sensitive than me with the brands that they have and the networks they have. Why are they going to take me? I think seed in SF is for suckers.
28:25 Speaker 01 I really don't agree with you. I also think the data points of like the funds I've done will also disagree with you. We've built a model. Saga is a $125 million fund. If we have one winner and we start with 10% of it and we can't cover the whole market, we only cover a portion of it, the fund's great. If we start with 10%, end up at 7% of IPO, it goes for 10 billion, return 700 million, we just need one. We don't need to be Andreessen where we lead 10 or 20 seed deals. And I also disagree with you that they have them all locked up. I think there was a stat that came out recently of like post transformer world in the last four to five years of all the AI companies that have started
29:09 Speaker 01 that are now worth over a billion. Of the first 40 of them, only one person had two lead checks and that was Andreessen and no one else had two. And if you look through the smattering, there are, you know, Green Oaks is in there, a lot gills in there, but there's a lot of other random people. And there's really not something where Sequoia and Andreessen is taking up half of those lead checks at the seed.
29:31 Harry Stebbings? You're totally right. I'm totally wrong. And your breakout company is Profound, you would say.
29:36 Speaker 01 Yeah.
29:37 Harry Stebbings? Okay, where's Profound?
29:38 Speaker 01 Profound's in New York.
29:39 Harry Stebbings? Oh, right. There we fucking go.
29:41 Speaker 01 Yeah, no. We've got to be everywhere.
29:43 Harry Stebbings? Ladies and gents.
29:46 Speaker 01 But I think we have some good companies in San Francisco as well. But yeah, Profound was in New York and we were able to start with a really large position there and they've obviously had tremendous success. And if that works, the fund's great. And that's our model. We don't need to cover everything. We need to have a few people who love us enough to take our money early on.
30:03 Harry Stebbings? Do you think the multi-stage players are doing seed well?
30:06 Speaker 01 No, I don't think they can. And obviously, I'm biased saying this.
30:10 Harry Stebbings? Because obviously, I don't know if you saw the graph, but it actually outlined how many investments. I'm slightly butchering numbers, but I think it was Andreessen's 70 seed investments over the last two years. And Sequoia was second with 26. It's a very active strategy from both.
30:24 Speaker 01 Sure. And I think if there's a seed that we're competing against and Marc Andreessen is doing the deal and he's like, I'm going to join your board, we're probably going to lose. But I don't think that's what's happening. And like, not to be an asshole, but usually it's, you know, a partner at Andreessen and we can sell against that. We can just say, hey, you are not going to get the time of the day with the GPs. We have a three GP only firm. You're going to get the time with us. When you go do your Series A, we will be the conduits. I agree with you. They need to have a Thrive or a Sequoia or Kleiner brand at some point to succeed. But work with us now and we will make sure that you graduate and get in that sort of branded tier one firm
31:06 Speaker 01 by the Series A or the Series B and you're going to be successful. I think it works a lot of the time.
31:10 Harry Stebbings? The one thing I do say to them that really does resonate is the price alignment. And it's like fundamentally, you want people who are price aligned to optimize for the next round. And if you get Andreessen at seed, they're not being like, hey, you should totally go and raise at the best price possible next round. Because they want to do it.
31:25 Speaker 01 Yeah. And if they don't do it, you're screwed.
31:27 Harry Stebbings? Exactly.
31:28 Speaker 01 And I know everyone says this, but like, the risk of them not following on is massive. Like, I fully believe if they're like, hey, Sequoia led our seed. And I'm like, hey, are they doing your A? And they're like, well, they're doing their pirata. I'm like, this is not a good company. Like objectively is not a good company.
31:45 Harry Stebbings? So you think signaling is very real?
31:46 Speaker 01 Signaling is extremely real, or at least it's like a good way for us to sell, but it's real.
31:50 Harry Stebbings? I totally agree. You know, the other thing that I think founders don't realize is it's also not always indicative of company quality. And what I mean by that is like, people leave firms and then you're orphaned. And when you're orphaned, no one's internally pushing to lead your A because they don't really know you. I just took Vernal's place in managing the position, but I don't really know you.
32:11 Speaker 01 Sure, but they also have like $8 billion and they can't spare like 10 or 20 to put into the A. Like, to be honest, almost none of the best deals I've ever done have been sent by another fund because like, why would they? They're like, hey, there's this great deal. You should really get in. I'm like, if it was a great deal, you wouldn't be sending it to me. You'd be doing everything. And Harry, the same with us. If we have a great deal, like Profound, we are putting in all of the money we possibly can. We're obviously fighting with Kleiner and Sequoia, which is challenging because they also want as much as they can. But there's not room to bring in other people. So if a VCC sends us a deal, like it's, we're not normally excited. The best deals we have come from founders referring their friends.
32:51 Harry Stebbings? Which founder, when they refer a deal, do you take it most seriously? Or so far has been the best deal referer?
32:58 Speaker 01 It's a great question. We've had a lot of luck from a lot of actually the CTOs, to be totally honest. The CTOs in the companies that we are in, because they're a little bit less like flashy and they're connected to really deep technical people. We've had a lot of success of them sending us their buddies.
33:15 Harry Stebbings? Love that. VC wise, when they send you a deal, who are you like, okay, I'm on it right now?
33:22 Speaker 01 I think Box Group is great because I remember growing up around SV Angel. And, you know, going to the Giants games with like Topher and these guys were just like awesome. And they're like, hey, our model is to do a little bit here and there. We don't need to lead anything. Like, there's a reason why there's leftovers when they send them to us. And I think Box Group has actually sort of succeeded in building the same model. I remember everyone's like, hey, for those funds, like, this is not going to work. You don't have enough ownership. You need to hit 10 unicorns. And SV Angel was like, okay, we will. And they did. You know, I really take seriously what the two of them send us.
33:55 Harry Stebbings? But you didn't decide that was the structure that you were going to go for. Like, actually, when you look at yours, you are ownership sensitive. You're not an index fund. Why did you decide not to be the, hey, we're going to be in everything and we're going to hit 10 winners? And why did you decide for more concentrated?
34:12 Speaker 01 I think one of it is playing to my strength. I'm not everywhere. I live in Austin. My two partners live in San Francisco. We cover a lot, but we don't cover the entire thing. We historically have not, I've done basically no PR, which we could probably dig into later. We're not covering the whole universe, so I don't think that we're set up to have a smattering of 10 to 12 unicorns in this fund. And frankly, I enjoy spending a little bit more time with the founders. So we're doing 20 to 25 checks in this first fund.
34:42 Harry Stebbings? We'll get to construction. I just have to ask you mentioned about kind of being in Austin. Now, do you not think that your being in Austin negatively impacts your ability to get deals?
34:50 Speaker 01 No, I think there are actually some really strong companies in Austin, whether it's Base Power or Sironic. They're significantly less than San Francisco, but I've found that when I'm in New York or San Francisco, I make a lot of decisions and a lot of hectic decisions, but I don't make a lot of great decisions. Like, I make the best decisions when I'm like in my backyard, meditating by the pool, like calling the founder and really thinking through it. And I found in San Francisco, I couldn't have that level of like clarity of mind.
35:20 Harry Stebbings? Okay, so let's go to the first fund where we're like, okay, we're gonna do Saga. I love Bam, by the way. He's such a good dude. And so we decide this is the team. How did we come to the number 125 for the first fund?
35:31 Speaker 01 We were a new partnership. We built a model where we said, hey, we are going to do 20 to 25 lead seed checks. And then we'll probably spend 10% of the fund doing what we're calling these like opportunistic deals. Jack and I had invested in Owner.com before this. Adam, I think, is an absolute killer. So when he was raising a little bit more, I texted him, I'm like, yo, can you like, you know, help us out a little bit? Obviously, we went on to do a pretty nice sized check in there and like we'd be stupid not to. But the construction was around 20 to 25 lead seed checks, around, you know, two or two and a half million dollar entry price. The math math then was 30% reserves to about 100, 125 million.
36:16 Speaker 01 And I think it was actually great to prove out that the three of us could work together. Obviously, we're gonna size up from here, but I don't think it would have been great to start with 300 million.
36:24 Harry Stebbings? Is two and a half million dollars or two million dollars, is that enough as an entry ticket? I find now that like seed rounds are five plus, and actually, if you wanna have a 10% plus, almost two to two and a half, it's not enough.
36:36 Speaker 01 Right now it is not, but we started this 18 months ago and dude, Harry, 18 months ago it was. The deals were at 20 or 25. I was not seeing these 50 or 60 million valuation deals even in last year.
36:50 Harry Stebbings? How do you think about this? I think I had some. Or some like the watermelon seeds or whatever, you know, the melon seeds or whatever you want to call it, align to a fruit. But like the great person who leaves Stripe and they're raising 10 on 50, 20 on 100. How do you think about those deals?
37:06 Speaker 01 That's what's keeping me up at night. That's why I'm not sleeping for the last six months. I'm extremely price sensitive. I'm just like, hey, we get 25 bullets per fund. And if you pay twice the price, you get half as many bullets and that's a really tough way to invest. That being said, like we can't fully sit out and at least right now.
37:25 Harry Stebbings? It doesn't mean you get half as many bullets. You can just do the same check and have less ownership.
37:29 Speaker 01 Yeah, that's another way to think about it.
37:31 Harry Stebbings? My biggest mistake on the prior fund, it was a $33 million seed fund and $107 million series A fund that was deliberately meant to be kind of more collaborative. We could have done 11 labs at a 25 and put in 200, 250 and it was 1%. And I was like, we can't do a 1% deal. That would obviously have returned the fund many times over. And very stupidly, I was too tied to ownership.
37:54 Speaker 01 Yeah. And, and that's been me kind of forever. And I think my partners now are luckily pushing me in the opposite direction and I'm, I'm really warming up to it. Though you have to believe if you're coming in at 50 or even 100 for a seed, that there's a way that this thing exits for 50 to 100 or 200 billion. It can no longer exit for five billion and have that be a good investment. So you have to believe that's possible. And, and I kind of think that is the direction where things are going, like not to be on the AI hype train. But I do think we are going to have a lot of exits eight years from now around the $100 billion mark.
38:28 Harry Stebbings? I have a framework for like the three things that I would need in a deal. If it's kind of slightly off strategy, like a 1% of 11 labs in this way, or like a situation here with the Stripe. And it's one, financial, do I think that we're going to make a 10x plus? If you're going to make a 10x plus, just do the fucking deal anyway.
38:45 Speaker 01 I agree.
38:45 Harry Stebbings? Two, does it give us brand halo effects? We're both building firms. If you're investing with Sequoia, Kline, the best of the best, you do get a brand halo from being associated. And then third, do we get network benefits from being close to Matty?
39:02 Speaker 01 He will share super cool deals from the best in AI in Europe and we will get a network that we didn't have before. And I think if you have those three, if it doesn't tie to the 10%, I'll still do it. Yeah, absolutely. And I love that you mentioned the last two of just having the brand cachet and being around the best people. We've done that. I've done that for the last eight years. Like, it's absolutely the right way to invest. You you go to people's websites, other funds, and they're like, we've invested in all these amazing companies. And you're like, well, I do that too, because it really helps. And founders don't care if you did a 25K check or a million dollar check at the seed. They just think that you've invested in the best companies. We absolutely should be doing that. So you would say to do brand checks, because a lot of managers like, oh, I don't know, it's not pure.
39:47 Speaker 01 Absolutely. And also, like you just said, it gets you around the right people. It is always a good thing to have a CEO of a multi-billion dollar company that you're texting with on a weekly basis. It's never going to be bad for the firm. Totally agree with you there. Okay, so we have a 125. How is the fundraiser process? It was pretty easy, relatively speaking, but it was harder than I was maybe expecting. How long did it take? Five to six months. Pretty good. Pretty good, but I don't know, it felt longer when I was there. Why was it harder than you thought? We were three partners who had not had traditional VC backgrounds, and it was a new partnership.
40:27 Speaker 01 And I think the biggest reason we got no's was everyone's like, you haven't worked together, you're not living in the same city. So we want to hold out and see how these things go and feel it out for fun, too. Also, we went right to institutionals. I was fortunate enough to like not be a maybe traditional emerging manager because of the prior fund track record. So we went right to endowments and foundations, and some of them love that. We ended up with, I think, six endowments in the first fund. But a lot of the endowments don't love new partnerships and first funds. And we were sort of elephant hunting rather than going to some smaller family offices. Was that a mistake in hindsight? No, it was amazing, because now we have really sticky, amazing capital for the rest of our careers, as long as we like. Don't fuck up. Exactly.
41:13 Speaker 01 And then going into fund two, like.
41:15 Harry Stebbings? What would you advise managers on anchor hunting?
41:18 Speaker 01 This was the advice, and I will give him credit, that Sam gave me that I did not listen to, which is don't talk to other LPs until you have your really high quality anchors locked in. And then, of course, we went and talked to everyone and everyone's like, how much capital have you raised? And like, we're about to raise, you know, 20 from this person. They're like, okay, so you've raised zero. But we had a few people that I had worked with before in Hyderza and Apollo. They took a little bit of time, but we got them across the finish line. They came in with some pretty nice checks. And then we went back to the other LPs and they're like, oh, okay, we're automatically in. These endowments that have worked with you before are in. Clearly, you must be good. So I think wait until you have your anchors locked up.
41:57 Harry Stebbings? Did you notice that different LPs wanted different things? Endowments, foundations, pensions, corporates, family offices? Did you notice a disparate communication requirement?
42:10 Speaker 01 Of course, they're all incentivized completely different. A fund to funds or someone that works at a family office is incentivized to get the best returns possible because they're paid out on the upside. An endowment or a foundation, for the most part, just wants to keep their brand intact, have a nice relationship with you, make sure you don't do anything dumb. But like, why do they care if you're a seven X fund or a two X fund, at least financially? So we absolutely saw that as like for the more traditional institutional capital, like, give them a story and a product that feels good for what they're invested in for a family office or a fund to funds. Tell them how much money they're gonna make if they invest with you.
42:49 Harry Stebbings? What's the largest check you have in a 125 fund?
42:52 Speaker 01 15. I don't really want more than 15% from any one LP.
42:56 Harry Stebbings? So we have then like six core endowments. Did we do the brand as well? Were we just getting a load of founders to put in community tickets or not really?
43:05 Speaker 01 No, and I don't have a good reason to why not. We just sort of said, okay, great. We have this. We had our number. We're done. I think in the future, we might spend a little more time getting that in.
43:16 Harry Stebbings? What was the biggest surprise about the fundraiser?
43:19 Speaker 01 That the goal was not to tell the LPs how much money you're gonna make them, even though they're financially, you know, my job is to get LPs the most money back. And I thought that's what they wanted to hear. But I think what they want to hear is you have a strategy that fits exactly what their portfolio wants.
43:36 Harry Stebbings? I think it's also a way to show naivety with respect, which is like, if you come out with these big numbers of, oh, we're gonna, I have so many young GPs and I sound so fucking old despite being quite young, but I've been doing this 11 years, so yeah. And they're like, oh, yeah, if we really fuck up, we'll be like a seven, eight X. And, you know, if we really hit it up. And you're like, do you know how hard it is to do a five X? Like, it's hard. And so I think you can show your immaturity and naivety if you throw out numbers.
44:05 Speaker 01 Absolutely. I was fortunate enough to have data from the earlier funds to say, we have absolutely crushed it and we're now at like about four X DPI. I think we can get to five or six and we knocked it out of the park. 10 is insane. Like, our goal here is to get you to four or five. And that's amazing. Like, if someone comes in and says, we're gonna get you an eight X, I would kind of walk out of the room.
44:25 Harry Stebbings? Totally agree with you there. And so we have 20 to 25 positions, three million each, reserves a little bit, but you're not doing much reserves, so.
44:33 Speaker 01 We have a third for the reserves.
44:35 Harry Stebbings? Not really, mate.
44:37 Speaker 01 Do you think?
44:38 Harry Stebbings? You take the sub fees, you're a hundred and then you're at two and a half, 30, you're at 75.
44:44 Speaker 01 Yeah, so we have like 25% realistically. Here, question for you. Do you think pro rata is a real legal right?
44:51 Harry Stebbings? No, but I think it's a moral obligation that you earn, which is like, I don't think anyone should have a right to in the future bullshit. I think you earn the right to step up and write another check.
45:03 Speaker 01 Yeah, I 100% agree with you and you have to earn the right for doing your pro rata in the series A and the series B and the series C. But I think we've gotten to a point where Sequoia or Kleiner or someone leads you around, like, you're not often getting your full pro rata. And I think you have to be honest with yourself on that. So I think a lot of the times that I've learned is like, hey, model in the pro rata, but you're only gonna get 70 or 80% of it. We've never had 100% of ours taken away, but we've definitely had cases in a really great deal.
45:30 Harry Stebbings? Who's the worst?
45:31 Speaker 01 No one's the worst. They're doing their job. Like, what am I supposed to say?
45:35 Harry Stebbings? Number one rule of an interview, when their voice goes up a notch in terms of tone, no one's the worst. You're like, okay.
45:42 Speaker 01 But I mean, like, realistically, we're in a place.
45:45 Harry Stebbings? Who's the most collaborative large fund?
45:48 Speaker 01 I've had a great time working with Cosla in this fund. We've had two deals where we've ended up at the seed with 10% and they've ended up with 10% and we've just had like a great time working together.
45:57 Harry Stebbings? Who's the least collaborative?
45:59 Speaker 01 Sequoia is tough, man. And I don't blame them. Like, they're the best of the best and I don't blame them.
46:07 Harry Stebbings? That's very funny. So I don't think it's like a legal right. I think it's something you earn the right to. And I think good founders understand that and will fight for you to have it.
46:16 Speaker 01 Yeah. And in our cases, the founders that we've spent the most time with, they always go to bat. We get 70, 80% of our parata, even in the best deal. But often they say, hey, can you step back a little tiny bit?
46:28 Harry Stebbings? We're seeing incredible preemption on rounds like never before. You've obviously mentioned Profound a lot. There's this incredible preemption on rounds. Do you tell founders, the money's there, take it, you have to? Or do you worry that actually too much money too quickly will distort the company?
46:46 Speaker 01 It'll absolutely distort the company. Like, getting fat and happy early on is not great. You know, people used to say like, hey, be ramen profitable. And like, maybe we're not in the days anymore of like sleeping on a mattress in the ground, eating ramen. But I don't think it's good to say, hey, we can just burn through money trying tons of different things. There's no rush. Like, let's throw big parties. Like, you need to have like a lot of fear that you're gonna kind of run out of money every day to be pushed to work harder.
47:13 Harry Stebbings? So do you tell them not to raise that round?
47:15 Speaker 01 Yeah.
47:15 Harry Stebbings? How often do they listen?
47:17 Speaker 01 They didn't listen once in this fund, but for the most part, they listen. And I think what we tell them is, I think Marc Andreessen said it really well on my brother Jack's podcast, is like, VC's job is to be a brand for the company until the company can build its own brand long term. So I'm like, well, then our job as a new fund is to make sure we get them the best brand, whether it's the Thrive or Sequoia or Kleiner, to lead their A. So we're like, hey, hold tight, please listen to us and run a really clean Series A process and get one of those best people on your cap table. And then hiring will be easier, selling will be easier, raising capital will be easier.
47:58 Harry Stebbings? Super interesting. You said that you say, hey, don't, it can distort you. It can also king make you. And what you see with a Harvey or a Bridge or any of these kind of king made companies or a Rillette even, I don't know if you saw Rillette, but it raised from Sequoia and then iconic very quick succession, it makes everyone else scared to enter the space. And so if you tell companies, and this is where I don't have the answer, I'm kind of oscillating with you on this. If you tell them not to, because I share your concern, then someone else can king make in that time. And that makes it very hard to get the oxygen back in the room.
48:32 Speaker 01 Oh, absolutely. One of my biggest fears for companies that we've invested in is Andreessen coming out and putting a hundred million dollars like right off the bat into one of their competitors. Like, that's absolutely terrifying. So I do believe, yes, we need to get all of the gravity behind our best companies. We need all the best investors. They need to get hundreds of millions of dollars to build out their moat and have their war chest against any of their competitors. I just don't think that should maybe happen right at the seed, like maybe wait until after the A to do that.
49:02 Harry Stebbings? Do you think Profound raised too much too soon?
49:04 Speaker 01 No, they didn't raise that much.
49:05 Harry Stebbings? In quick succession?
49:07 Speaker 01 I think it's really hard if you get Sequoia to offer you money and be on your cap table and have that amazing brand halo effect to not take it. And I think someone always should.
49:17 Harry Stebbings? You said about raising a clean Series A. Interesting description. How do you advise founders on raising a clean Series A? What does that mean?
49:26 Speaker 01 I think it looks a lot better and feels a lot better if someone's raising thirty million and someone has a lead check that comes in with twenty and then they fill in the rest after that. People do these wonky things where they're like, we raised five from this person and we have this thing so circled. And then you get to your lead and they're like, there's only room for us to do under half of this deal. We're out. And I'm like, don't do that. I promise you, they're going to sit out if you've filled up two thirds behind it. And I think a clean Series A also looks like a nice process. The metaphor I always give them is it's like a big horse race where all the VCs are chasing you. And what you want to do is maybe have one horse start first. So you maybe talk to a potential lead like a week or two before, then you send the deck out to everyone. But you want
50:09 Speaker 01 all eight horses chasing after you at the same time. You don't want to have this as like a random sloppy process.
50:14 Harry Stebbings? I totally agree. I think the biggest mistake they make is they speak kind of sporadically. And what they forget is, and I don't think people know this, but like the WhatsApp, especially in Europe, WhatsApp, I don't know what you have in the US. But the WhatsApp group channels with associates, with junior partners, and I'm not being derogatory, but just truth. Where they're like, nah, Matt Max, honestly, company not growing as fast as I thought, easy pass for us. That can be seriously detrimental when there's 20 other funds on it.
50:40 Speaker 01 Absolutely. Like, why would you not say, we're about to start this race, work with your lead seed investor, get the deck ready. And when you're ready, open the gates, AKA have me and my partners introduce you to one of the GPs at all of the firms. And then have the fundraiser process start. They have to do it that, they should do it that way.
50:58 Harry Stebbings? It's the biggest way that they fuck up. And actually, it really frustrates me when that happens. So it's also so annoying. They kind of, I don't know if they just want to be independent. But you'll speak to them, they'll be like, oh, I reached out to all these people. I'm like, why? I know Mamoun at Kleiner, why reach out to some, someone else on the team who's more junior, who doesn't know the space as well, who's the wrong partner?
51:20 Speaker 01 I think there's two things to that. One is it's really hard if like a more junior partner from an Andreessen or someone like that reaches out. Or an associate in another firm reaches out from a branded firm and they're like, we want to talk to you. It's, you're like, oh, I feel great about myself. Oh my God, I can't control myself.
51:37 Harry Stebbings? And often they've done work on a space, they've mind mapped it and they're like the one who's covering insurance.
51:41 Speaker 01 Yeah. And, and they go talk or, you know, Harry, like there are a lot of people in this industry. That say they know, you know, it's sort of like name drop, they know everybody and then we're going to make this introduction to, like you said, Mamoun or Alfred Lin. And they can't. And I think there's a few seed funders, I think both of us in this room can just like text those people directly. I think some of the founders don't believe that, you know, we can necessarily do that. And it'll be as easy as, as it is for us to do it.
52:08 Harry Stebbings? Do you find there's more and more low dilution rounds? This is another thing I'm finding, which is like before it was like generally rounds were like 20% dilution. You'd have 15 for a lead and 5% for angels and pro rata. Now more and more I'm seeing just the 10%.
52:24 Speaker 01 Yeah, I mean, I think it's just economics, to be honest. There's now like hundreds of billions of capital chasing slightly more companies. I think the experiment we're going through right now and went through in 2020 is like, hey, if we put 10 times as much capital into the market, there better be 10 times as much good equity to be sold and 10 times as many amazing companies being built. And there's definitely more, but there's like two or three more. So now we have this system where there's just so much capital chasing not that many great deals. So the founders have all of the sway and all of the decision making of how they want to run their process.
52:59 Harry Stebbings? Are you enjoying this time?
53:01 Speaker 01 I like it. It's fun. People are building really cool things. And that's what's getting me excited is during that lull, I was talking about when it was on demand dry cleaning. Like, that's not fun. I can't get out of bed to like go invest in that. But now we're seeing people that are really swinging for the fences. Like, it's fun to think about, you know, Androl or Hadrian Manufacturing or, you know, Sironic and Austin. Or it's fun to just be investing in these really cool companies. That wasn't the case before.
53:28 Harry Stebbings? Do you think Trump has done more for US tech to help or to hurt it?
53:33 Speaker 01 Help. I'm generally someone that less regulation is a good thing. It is opening up the M and A market, having people feel like we have a hot IPO market is wonderful because it gets money back to the LPs and the VCs get that money back and just everything is healthier. And I think it's clearly better.
53:51 Harry Stebbings? On the H1B, where did you sit on that? I sit in the UK where it seems like an obviously moronic decision.
53:57 Speaker 01 Terrible. Like maybe, maybe the worst decision related to tech that this administration has had. Like, first off, why would you not want an amazing engineer immigrating to your country? Just like straight up, we want all of the best, smartest people going to work in our country. And then also it's really bad for the small guy. Like, cool, Amazon, Google, they're like, well, we got this really great engineer. Who graduated from IIT, we want him, 100K, no big deal. But if you're a Cedar Series A company, it's completely hamstringing you. It's, I was really frustrated to see that.
54:27 Harry Stebbings? But I mean, I actually went on to the NBC, as I said, it's like the biggest opportunity for Europe.
54:31 Speaker 01 It's great, or Canada, it's great for you guys.
54:33 Harry Stebbings? Phenomenal. Sadly, we continue to put on a suicide vest and shoot ourselves. When we were talking about companies that you liked, dude, this was beforehand. You said about a sphere of influence of AI labs and how that builds our framework for investment thesis. I put, what the fuck does that mean?
54:51 Speaker 01 Okay, that means I could not explain it well enough.
54:54 Harry Stebbings? Terrible. A sphere of influence of AI labs, help me out.
55:00 Speaker 01 I was a CS and math guy, I was not, I was not an English guy. I think what I mean is when OpenAI and Anthropic started getting popular, everyone's like, we're gonna build things that are adjacent to that and they are, you know, AI voice or AI video gen. Because right now, you know, OpenAI is worth $30 billion and is, you know, offering chat. And I was like, look, it's not because of inside information and it's not because I know that he is one of the most ambitious people in the world. But like, they're trying to be a multi-trillion dollar public company and so Anthropic. And that means they're gonna have to try everything. Amazon tried making a freaking phone, you know what I mean? Like, they're gonna try everything.
55:39 Speaker 01 So if you have like the naivety to think you're gonna build something that's really close to what OpenAI is building and they're not gonna build it, you're crazy, like, you know what I mean? So I think we've really stayed away from things that OpenAI will encroach on and just offer a better product. Everyone's like, oh my God, they had this dev day thing and it's gonna kill a couple dozen companies, you know, in San Francisco.
56:02 Harry Stebbings? Do you think they actually do kill them? And that's what I mean, like, yeah, if you look at like an 11 labs, I, no one would touch that because like, oh, that's kind of a voice. I mean, Sam's gonna come for that. Well, turns out they didn't.
56:13 Speaker 01 Yeah, and I think there are a few examples where they just have got.
56:17 Harry Stebbings? Shopify and Stripe partnership of the decade.
56:20 Speaker 01 Yeah, but I think you're forgetting the ones that are like, hey, we whipped this up in a weekend and it's sort of some API thing that OpenAI is gonna build. I think 11 labs is the exception to the rule. So this kind of led us to leading in what we're calling like second order effect AI companies that are further away from what OpenAI looks like when it's a $3 trillion company.
56:40 Harry Stebbings? How do you determine whether it's further away?
56:43 Speaker 01 Like, it's a little bit of an art, not a science. I think I just try to visualize. I meditate and I visualize like what they're gonna offer when it's a three billion dollar company.
56:51 Harry Stebbings? I sit in the pool and I think, will they do this or not?
56:55 Speaker 01 Yeah, but I think the two real things that I think about, one, what are these world-class engineers that are sitting in downtown San Francisco going to build? And what do they not want to touch? So when we're looking at companies, we did a company called Fleetworks that we're pretty excited about. And they are doing, while it's in the AI voice space, it is for supply chain trucking logistics. And they're helping them match things better for shipping. And I don't think the people there are gonna want to be calling and dealing with a shipment of oranges from Miami to New York that are late. I think they wanna stay sort of in their ivory castle a little bit.
57:34 Harry Stebbings? If you have the chance to use every advantage to your benefit, and it's not public information, but it's like allowed. You're both private companies. It's not insider information. Can you not just call your bro up and say, hey, are you gonna go into trucking and logistics? He goes, nah. Or are you gonna go into profound? A lot of people with profound or peak were like, oh, well, OpenAI will do it. Like, can you just call him up and say, hey, dude, are you gonna do it? Like he would with me or Parker?
58:02 Speaker 01 I think I could. I don't. I think for a lot of reasons is first and foremost, like the company's under scrutiny. Like, obviously, I don't want to put him in a weird position where he's leaking anything. It just, it doesn't seem like good for OpenAI. And it doesn't feel good. Like, I kinda want, and you might say this is stupid, like, earn this on my own right.
58:25 Harry Stebbings? I get you. I'm sorry. If it was your buddy, like, if it was a Jason company to Rippling, you'd probably text Parker and be like, hey, dude, is this on the product roadmap?
58:33 Speaker 01 Yeah, sure.
58:34 Harry Stebbings? Nah, we're super busy, dude. Do you know what I mean? It's not actually that different.
58:39 Speaker 01 Yeah, I think I just wanna be really sensitive as my brother that, like, he is not putting himself in a compromised position at all, sharing information he shouldn't.
58:46 Harry Stebbings? Has his fame made your life harder or easier?
58:49 Speaker 01 Both. I mean, like, Hey, let's be honest, like clearly it allows me to have more success in investing, where it's just like I have, because of him, some brand halo effect. And people are like, oh, Max, do you invest in AI? And I'm like, I can, you know what I mean? There's something around that it definitely helps. It helps a little bit with deal flow. I think it makes it worse of like, do you remember in San Francisco and you're out at like a party on a Saturday night? You know, someone will ask about it, you know, I, my friend wants to go work at OpenAI. Can you help him get a job? I'm a little bit.
59:22 Harry Stebbings? Do you get that?
59:22 Speaker 01 Yeah, San Francisco, of course, and Austin, I don't. San Francisco, I get that all the time.
59:27 Harry Stebbings? Oh, God.
59:28 Speaker 01 Gross, right?
59:29 Harry Stebbings? Oh.
59:30 Speaker 01 I love a lot of the people there. The culture can be challenging.
59:33 Harry Stebbings? Do you not just find it transactional where it's like, also like, it's like with me, okay, it sounds awful, but people will be really nice to me and I think, oh, they like me. No, they just want to get on the show. And it's like, they just want to meet your brother or ask you a favor with your brother and they'll wait till three coffees down. And then like, by the way.
59:50 Speaker 01 Yeah.
59:50 Harry Stebbings? And you're like, oh, no, it's coming. It's coming.
59:54 Speaker 01 Yeah, of course. And I think I've been fortunate enough to know who's like that and have my sort of crew there that's not like that. But I do think it gives me more motivation to sort of prove that I can be an amazing investor myself and build out a huge brand for Saga. And I think that will take some of the pressure off of that, to be honest. It's definitely a driving factor for me. And frankly, like, we have not done the PR, but that's part of the reason that I'm doing it now to show that like I'm a really good investor myself.
1:00:18 Harry Stebbings? Why not doing the PR?
1:00:20 Speaker 01 It was a mistake. So in 2015, 2016, when I started doing this, it was very much just hang out with great people, like be a mensch for a decade, do like a lot of favors, be really likeable and you're going to get into the good deals. There's now too many VC funds and too many companies. And I think right now you do have to do PR and build your brand. I think it just took me a little bit longer, frankly, to be able to come to that realization. But yeah, moving forward, and you are the first, I think the PR train is going to start a little bit.
1:00:51 Harry Stebbings? Do, what do you want with Saga?
1:00:53 Speaker 01 I want to build, I think, what like a first round capital looked like when I grew up. I want to have something where 10 or 15. Years from now, we are maybe a quiet luxury brand, a la like a Thrive or a USV, where everyone's like, hey, they are the premier early-stage brand. They're not as loud as everyone, but we think of them as excellence where.
1:01:14 Harry Stebbings? So you don't want to get bigger and bigger and bigger?
1:01:16 Speaker 01 A little bigger. I think we'd like to be, you know, five or six GPs, two or three associates. So we have the incentives, you know, cap out around maybe three, four hundred million per fund.
1:01:25 Harry Stebbings? How do you feel about the prior generation of seed firms in the valley? Because I think there's a really hard chasm to be in, transparently, which is you have seen the movement earlier from large multi-stage funds with larger costs of capital and bigger and bigger teams. So they can actually equip them to do seed. And they've done that pretty well, your founders funds to your sequoias. And then you have this new generation, which is your convictions, your use and many new great firms. And then there's kind of the firms founded in two thousand and eight, two thousand and sixteen. Why, you're in a bit of a messy middle.
1:01:57 Speaker 01 Oh, for sure. I think it's really challenging to be like a seven hundred million dollar fund now. I think you're either a really massive, powerful platform like an Andreessen or a GC or you have the legacy cachet like a Sequoia or a Kleiner. Or you have to be a boutique firm that has a very specific offering and stays small. And you kind of, I know you're struggling.
1:02:20 Harry Stebbings? Do you think like a first round or a floodgate or a uncork or a boutique seed firm that stayed boutique? And Felicia's, I would actually put differently because I think they cleverly scaled AUM into a multi-stage very efficiently. But I think that boutique seed firm of old is in a tough spot.
1:02:38 Speaker 01 I think so, but I also think it's sort of just like every generation has a refresh. I mean, you mentioned Sarah, like I think conviction is going to be a great firm. I think there's room to have a new set of firms, maybe every decade. And to be honest, like I kind of think.
1:02:52 Harry Stebbings? Not on top of the old, though.
1:02:54 Speaker 01 No, replacing. Yeah, I think they have to replace. There's not room for both.
1:02:57 Harry Stebbings? And so they are replacing the floodgates, the uncorks, the first rounds, because the multi-stage players have come in so efficiently. You can't have your bro, you, Sarah, me come in and not have a displacement.
1:03:10 Speaker 01 Yeah, and I think you have to. And I think I was fortunate enough, actually interned for Steve Anderson at Baseline when I was in 2009, who I think was one of the most amazing investors and taught me a ton. And then he kind of rode off into the sunset after hitting Twitter and Instagram and is like an almond farmer or something now, like living a great life. And those guys were absolutely amazing and really set the stage for what seed investing looks like. But I kind of think, yeah, we have to compete with them. We have to do better than them. There's not room for all of us. And frankly, I kind of think, Harry, you were younger when you started, so you might have a little more time. I got like 15 years of this until I'm really good, and then I'm kind of over elephant, and a new set of seed funds will replace me.
1:03:51 Harry Stebbings? And what did you learn from Steve Anderson? He's one of the OGs.
1:03:55 Speaker 01 Yeah, it was crazy. I mean, I think I like Paul Graham connected me to Ron Conway. And then Ron's like, oh, you should meet this guy, Steve Anderson. I was like 20 years old. And I was like, okay, cool. Like VC job sounds great. He was, I think, really focused on just doing a few things well and not covering the whole market. And he sort of stayed in his lane. He was liked by a lot of people. He just didn't try to cover everything. He's like, I got a fund of his size. He just needed to have one or two good wins per fund. I think he had more than that. And I think it's kind of guiding how I'm building this fund.
1:04:30 Harry Stebbings? How do you think about selling and when to sell? We see this extension in private markets where companies take much longer to go public, obviously, and secondaries are a much more active thought process for managers. I think trading sadly has become a lot more prominent part of our job, actually, as investors.
1:04:48 Speaker 01 It has. And I think historically, I've held longer. We've also had some, frankly, that, you know, had their $5, $10 billion valuations in 2022.
1:04:59 Harry Stebbings? What did you hold when you should have sold?
1:05:01 Speaker 01 It might not have hurt to sell Gusto. I think Gusto is a great business, but I think, you know, they were valued at 10 billion at one point, and I think they're still going to be a strong business. I don't know if they're going to have explosive growth from there. Great guys, but couldn't have hurt to take it a little bit off the table. I think our job has definitely changed now. We need to spot when the market is inefficient and there's too much hype. And some things just get overvalued, and especially as a seed investor, not a growth stage investor. If we can show that we're 100x or get money off the table at 100x, we don't need to wait for that 200 or 300x. So we have to sort of make our own. Again, it's almost like a gut instinct when we think it's overpriced. This all being said, some of the best advice I've got is that last double or that last
1:05:45 Speaker 01 triple comes really fast, where, you know, things grow quickly and then they're around a 500 million to a $2 billion valuation, and they sputter in a little bit, and then at the very end, they just go. And people are like, hey, hold Andro, hold more Rippling, hold more SpaceX, it's gonna double. And it's the difference between your 3x firm and your 6x firms. It's really hard to let these things go, Harry.
1:06:09 Harry Stebbings? There's two points. So the one on duration, it's like when you actually look at the numbers, when you have like a 4x DPI fund, and it takes 17 years.
1:06:16 Speaker 01 Not great.
1:06:16 Harry Stebbings? It's actually the same as like a 2.6x fund in 10 years.
1:06:20 Speaker 01 Yeah.
1:06:20 Harry Stebbings? And that really struck me, because you're like 4x, amazing, but actually, the power of duration and time and the importance of time really has an impact on your material returns.
1:06:32 Speaker 01 Yeah. Oh, if you hold for 15 years, it needs to be 7, 8x to make it worth it.
1:06:36 Harry Stebbings? And then on the last double, I completely agree again. It was Brian Singerman who taught me about the last double, and how, as you said on your Andrels, going from 18 to 36 is not actually that fundamentally monumental a movement of company. It can go there just progressing as planned, but the 18 billion in value, you're probably not going to see in the rest of your entire portfolio.
1:07:00 Speaker 01 No, I know. And you risk losing it, which is really scary.
1:07:03 Harry Stebbings? Do you think it gets better when you're just rich already? And I think, so I actually have a theory on this, which is like when you're Sequoia, you have Have a let it ride mentality because honestly, you're not about shit. I've got to return money to LPs so I can get my next fund. You you don't need more money personally, so it's not going to move the needle for you there. It's a let it ride mentality.
1:07:24 Speaker 01 Absolutely. And I mean, there's something to be said of like, if you're still early in your career and making money and you're like, hey, I can get out. I can sell this for a few hundred million, not to you, but you know, back to the LPs and you take a nice chunk yourself. Or I can wait and see if it goes to half a billion. It's pretty hard to like not take what's on the table. If yeah, if you don't need the money, like let it ride all the way up.
1:07:44 Harry Stebbings? What was your first big hit personally, like financially?
1:07:47 Speaker 01 Rippling and Reddit. We sold a little bit of Rippling on the way up just because like our LP is one of the money and.
1:07:53 Harry Stebbings? Did you notice that change in your mindset?
1:07:56 Speaker 01 Yeah, it's a lot more relaxed where you're just like, hey, let's let this thing go. You do have to be careful in our industry though, because it's just, we're around a lot of people that have done really well. And I think it's hard to not get on the ladder to nowhere where you want more and more and more. So I'm pretty careful.
1:08:12 Harry Stebbings? Do you feel like you're on that? Like one thing that I've, I was very lucky when I, because I grew up so young in this business. Where people were so much richer than me that almost the competition just wasn't there. Do you know what I mean? Like at twenty, you'd hang out with Doug Leoni. And I I have no money and Doug's obviously very, it's fine.
1:08:31 Speaker 01 Yeah, I think I'm unfortunately in a little different position where I'm closer age to those people and just around them a lot. And I think for me, it's just very important to say like for my own happiness and like ability to succeed at work. To sort of stay off of that like adonic treadmill.
1:08:45 Harry Stebbings? Do you genuinely think that they are happy in large part?
1:08:48 Speaker 01 Some of them are, some of them are not.
1:08:50 Harry Stebbings? Take every billionaire that you know, you know, a lot, I'm sure. I know a lot. I would say one is happy.
1:08:57 Speaker 01 Yeah, I I know a few that are. I think it's the ones that have kind of prioritized family and things. I think I would be less happy as a billionaire than I am right now.
1:09:05 Harry Stebbings? Why?
1:09:06 Speaker 01 Because of the things you're talking about, I would want a nicer house than I'd want a boat and I want to constantly just upgrade my life and I don't think I would just be happy with what I had. It's really dangerous because it's like, hey, I bought a $20 million house, but my buddy down the street has a $40 million house and I'm good friends with him and I go over there. It's really challenging, I think, to just say, I don't want that.
1:09:27 Harry Stebbings? What single purchase has brought you the most happiness?
1:09:29 Speaker 01 I got some really sick outdoor speakers for my backyard. I love listening to music. I love sort of meditating and just chilling back there and it was absolutely worth it.
1:09:40 Harry Stebbings? Dude, we're gonna do a quick fire. So I say a short statement, you give me your immediate thoughts, okay?
1:09:43 Speaker 01 Yep.
1:09:44 Harry Stebbings? Favorite underrated founder of the last five years. So like, Parker's amazing, but very much in the mainstream. Who do people not talk about enough who's a killer?
1:09:54 Speaker 01 I think Lux Srini, who was the CTO at Zenefits, went on to build Zero Down. It didn't quite work out, but the timing was wrong. And then joined leading a special, a kind of special architectural projects at Rippling, has just been an amazing guy to watch over the last kind of decade.
1:10:11 Harry Stebbings? What's the biggest BS about venture today?
1:10:14 Speaker 01 Oh, boy. I think that it is, people say it's this sort of chummy, like collaborative thing where we're all kumbaya and having fun. And then like, you know, you get to it and someone just like elbows you out of the way. It's not. It's a competitive market. We're all competing for a scarce amount of good equity.
1:10:30 Harry Stebbings? Well, I think we've just seen the complete commoditization of venture and this is essentially Wall Street now.
1:10:36 Speaker 01 Yeah, absolutely. We look much more like a hedge fund or PE world than we do VC from 10 years ago.
1:10:41 Harry Stebbings? What deal do you regret passing on most?
1:10:45 Speaker 01 Hadrian. I was friends with Chris, just like socially, we were hanging out a ton during COVID, whiteboarding things. And I remember I just like wasn't, maybe I wasn't as aggressive those days. So I didn't give him an offer and then like, he talked to me like two weeks later and he's like, hey, like, Delian's leading a round and everything, you know, and I was like, oh, you know, why didn't you talk to me? He's like, why didn't you talk to me? We were sitting together for like weeks on end. And I was like, oh shit, maybe I should be a little more aggressive offering term sheets.
1:11:11 Harry Stebbings? What's the biggest lesson you've learned from Sam about how to analyze people?
1:11:16 Speaker 01 Figure out what someone truly wants and the answer is not always money. It might be title, it might be recognition, it might be the ability to work on what they want. So when you're either hiring someone or trying to partner with them in any way, truly understand like what is the most important thing to them. It can't just be compensation.
1:11:35 Harry Stebbings? What's the biggest advice you have to an emerging manager raising their first time fund?
1:11:39 Speaker 01 Be humble and know to stay in your lane. The worst thing you can do is come right out of the gate and say, we're going to lead series As. Know what you're good at. That might be seed, that might be box group strategy, that might be coming in, but just stay in your lane and be honest with yourself.
1:11:55 Harry Stebbings? What did you believe about venture capital that you've since changed your mind on?
1:12:00 Speaker 01 That you could be what I call like a text guy where you can kind of just sit at home and text people and build great relationships and fly totally under the radar. I don't think you can do that anymore.
1:12:10 Harry Stebbings? I agree, and I think that's aligned to the
1:12:11 Speaker 01 Of course you don't, yeah.
1:12:12 Harry Stebbings? To the commoditization of venture. That was my theory though 10 years ago. Every year, Mike Maples always says, I look for an insight development in founders, a unique way that you see the world that others don't share. And the insight development I had 10 years ago was I thought we'd see the commoditization of venture and that you fundamentally need to show yourself differently as it got more and more crowded.
1:12:31 Speaker 01 Yeah, I remember when I first got to San Francisco, like Andreessen was more up and coming and I was like, no, like it's, you know, it's Sequoia and Founder's Fund and Benchmark and they're just these loud splashy people. I don't see this working. I was clearly wrong and they got it right, just like you.
1:12:47 Harry Stebbings? I think they will do so well, I have to say.
1:12:49 Speaker 01 Absolutely.
1:12:50 Harry Stebbings? Like when you look at also the size of X, it's expanding so much. I was always like, oh, well, the rate of return is just expected to be lower and they'll be happy with that. No, no, not necessarily because if Databricks is a 200 to 500 billion dollar company, the return won't be like Josh with his check into OpenAI. I don't want to bring anything, but like at 30 billion, I was like, dude, come on. Well, actually there could be a 30X on a billion dollar check.
1:13:13 Speaker 01 Or more and like absolutely, I think people are like, how are we thrived, going to deploy all this money well? There needs to be these multi hundred billion dollar exits. So like, turns out there are, or you know, and it's not just going to be OpenAI. I think it's going to be a lot of them.
1:13:26 Harry Stebbings? You know what I like about Mark Andreessen? I saw a tweet from him yesterday and it was a newspaper article from like, you know, the early days of the internet and it said, you know, serious concerns about amount of internet users.
1:13:39 Harry Stebbings? And I spoke to an LP yesterday and theirs was like, really? Like OpenAI, they've got all the users they could get for AI. And I was like, really? Like, okay. And it just, I like the optimism. I don't understand people who are negative about the future and do what we do.
1:13:58 Speaker 01 Yeah, people also just can't wrap their head around the size of some of these markets. Like, the example always is like, oh, you're selling software to customer service agents to like, improve their efficiency. It's like, well, what if you just like were the whole market cap of all customer service agencies? I think that's like 400 billion of value right now.
1:14:15 Harry Stebbings? I spoke to a bank in Europe the other day and they said, oh, you know, about customer service. How much do you spend a year on customer service? Guess their number.
1:14:23 Speaker 01 30 million. If it's a big bank, I don't know, is it like Barclays or something?
1:14:27 Harry Stebbings? It was 520.
1:14:29 Speaker 01 520 million?
1:14:30 Harry Stebbings? Yeah, it's a big bank.
1:14:31 Speaker 01 It's a big bank, so you're not selling software to it. You're selling the whole thing, the whole 520 million.
1:14:38 Harry Stebbings? That's a lot of fucking money to go to customer service.
1:14:40 Speaker 01 And even if, you know, the cost of labor goes down and it's like you can capture 50% of that.
1:14:45 Harry Stebbings? This bank spends 350 million on KYC alone.
1:14:48 Speaker 01 I, I think people forget all the time just how big these markets are. One of the companies we're really excited about, we invested in is Stand, which is redoing the insurance market in California as all of the big insurance companies are pulling out there. And they're basically saying, we can now use fly drones over and visualize the houses and help underwrite exactly what we think the fire risk is. Harry, right now, if you're in a fire zone in California, your premiums are like 5%, like literally 5% of the home. Like, if you have a $5 million home, you're spending 250,000 a year on home insurance and fire risk zones. So they're like, great. Other people are modeling this based off the zip codes. We are actually going to be able to have computer vision and model this, and we're going to be our own home insurance broker.
1:15:32 Speaker 01 Harry, if they succeed, the market cap of the big ones in the US are 100 billion. I think all states private, they're worth 300 billion. Like, it's so freaking big and people can't get their head around that.
1:15:42 Harry Stebbings? Final one for you. What would you do if you weren't scared?
1:15:46 Speaker 01 I think I would do a lot more to sort of brand myself as a thought leader. I've definitely been a little bit more PR shy. It wasn't like, you know, I always had like stage fright growing up. I think I would be that guy who's just like, hey, I'm going to host these fireside chats and I'm going to like be the person who is everywhere and their face is everywhere.
1:16:05 Harry Stebbings? Dude, I've so enjoyed this. For me, the joys is when it's like a real conversation and when it totally does not follow a structure, which
1:16:13 Speaker 01 This one did not.
1:16:13 Harry Stebbings? Clearly did not. But thank you so much for doing this with me, man. It's so nice to in person.
1:16:17 Speaker 01 Yeah, absolutely.
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Previous 20VC: Cursor Raises $2.3BN: Who Wins the Coding War | Peter Thiel and Softbank Sell NVIDIA: Analysed | Why Venture Capital Will Hit $1TRN and the Opening of Retail | Why Stripe and the Best Companies Will Never Go Public Next 20VC: Base44's Maor Shlomo on How Vibe Coding Will Kill SaaS and Salesforce | Why it is BS that Vibe Coding Platforms Do Not Have Defensibility and Bad Margins | Why He Worries About Google, Not Replit and Lovable | Why Long Anthropic, Not OpenAI? Page updated October 26, 2026 · transcript and summary are machine-generated
