20VC: Why Now is the Time for the Application Layer | Why OpenAI & Anthropic Won't Win the App Layer | Why Startups Should be TokenMaxxing | Why VCs Should Reduce Weighting on Price & Ownership in an Age of AI with Mike Mignano, USV

Mike Mignano is a General Partner at Union Square Ventures, one of the most iconic venture firms in the world, whose investments include Coinbase, Stripe, Etsy, Twilio, Cloudflare. Before joining USV, Mike was a Partner at Lightspeed, where he backed breakout AI companies including Granola and Suno. Prior to investing, he co-founded Anchor, acquired by Spotify. AGENDA: 00:00 Is Fear of Failure the Secret Weapon Behind Great Founders? 07:20 Why Leave Lightspeed for USV — and Is Thesis-Driven Venture Still Alive? 09:50 Is the Real AI Money Still in Infrastructure, or Are Apps Finally About to Explode? 13:00 Who Wins the AI Model War: OpenAI, Anthropic, Open Source, or the "Rebel Alliance"? 19:00 Are We About to Hand Our Entire Lives Over to AI Agents? 21:00 Can Anthropic Keep Growing Like This — or Will Token Spend Break the Model? 26:00 Can AI Routing Become a $50BN Company, or Is It Just a Commodity Pipe? 30:00 Will the AI Energy Crisis Create the Next Monster Venture Outcomes? 36:00 Can Startups Survive Microsoft, OpenAI, and the Brutal Power of Bundling? 45:00 Should VCs Ignore Price When Backing Generational Companies? 55:30 Is Traditional Media Dead — and Who Becomes the New Tech Kingmaker?

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

• 0:00Speaker 00

  We've got this infrastructure and now it's time for the applications to be built. I think we have never handed over so much of ourselves to a technology before than we're about to do with agents. As a startup, you need every advantage you can get right now. If I were the CEO of a startup right now, I would actually still be pounding the table to maximize token spend. We like to bet on businesses that obliterate, that literally obliterate markets and existing business models. I think this era of building AI products is in many ways about being first and about moving really, really fast. I think traditional media in many respects is dead.

• 0:39Harry Stebbings?

  This is 20 VC with me, Harry Stebbings, and today I'm thrilled to welcome a 10-year-long friendship to the show, Mike Mignano, who is the newest general partner at USV. He's also one of the early investors in Suno and Granola in his prior days before joining the USV partnership. He's a former founder, having sold his business Anchor to Spotify many years ago. And today we discuss the really hard questions, which is how much of the value do model layer companies accrue over the application layer? Is there any value in routing layer companies and routing to model providers? And then how do we fundamentally think about who wins, open versus closed? And what does that mean for venture investing today? That and so much more in this discussion with Mike.

• 1:24Harry Stebbings?

  But before we dive into the show today, founders face a different set of challenges at every stage of growth. For Sid Shait, co-founder and CEO of Dematrix, JP Morgan delivered the guidance and expertise to help navigate what came next. He credits JP Morgan's high-touch approach with supporting Dematrix as it grew and expanded internationally. Whether you're in the early days or expanding into new markets, JP Morgan helps startups navigate complexity with real confidence, offering personalized guidance and deep sector expertise. Find out how JP Morgan helps founders at jpmorgan.com/growwithoutlimits. JP Morgan is the bank of the innovation economy.

• 2:08Harry Stebbings?

  While JP Morgan powers your finances, Navan keeps your team moving. If you're a finance professional, you know the month-end nightmare, chasing down missing receipts and fighting with outdated tools that your employees hate using. It's time to enter the era of Navan. Navan is an AI-powered travel and expense platform that gives you control and real-time visibility into every dollar spent. The experience is seamless for employees, too. They can book a trip in just seven minutes, which is a fraction of the 45-minute industry average. Because the AI handles policy enforcement automatically, you can finally focus on driving business impact instead of manual data entry. How does saving up to 15% on your total travel budget sound? Pretty good?

• 2:50Harry Stebbings?

  Well, that's why the world's best companies like Visa, Figma, Stripe, and Anthropic already have made the switch. Visit navan.com/20vc to get started and enter to win two business-class flights anywhere in continental US. No purchase necessary. Rules apply. Check it out today. While Navan keeps your team moving, Base44 helps you build faster. You have the idea, but with most AI tools, you hit a wall. The setup, the config, the gap between what you pictured and what you actually ship. Well, Base44 is where that wall disappears. You describe it, yeah, Base44 builds it. Apps, websites, AI agents, real working products, built in minutes using nothing but plain language. And it's all batteries included, the backend, the database, the authentication, the hosting.

• 3:35Harry Stebbings?

  The heavy lifting is handled, so you just really stay in the flow. This doesn't just take the busy work off your plate, but it gives you an advantage and pushes you past what you thought you could build alone. So in this market, fast is the baseline. To win, you just have to be first. Base44 is that edge, the move that skips the troubleshooting and gets you straight to the breakthrough. Build your next thing at base44.com. That's base44.com. You have now arrived at your destination. Mike, dude, I am so looking forward to this. We first did our show when you were co-founder of Anchor.

• 4:11Speaker 00

  Correct, 10 years ago.

• 4:12Harry Stebbings?

  10 years ago.

• 4:13Speaker 00

  I looked it up.

• 4:14Harry Stebbings?

  I was underage and I remember Anchor was like the hottest thing in New York and in startups at the time. And I was legit 18, 19, and I was absolutely shitting myself before our show. Cause like you were the-

• 4:28Speaker 00

  Really?

• 4:29Harry Stebbings?

  Yeah, you were the it-boy of venture at the time.

• 4:31Speaker 00

  For a minute, like five minutes, maybe most.

• 4:34Harry Stebbings?

  Well, now you get 20 seconds, so I'd appreciate it. Dude, I want to start actually with something that I ask a lot of great founders, but given your founding roots, I want to ask it of you. Is are you motivated more by the fear of failure or by the thrill of winning?

• 4:50Speaker 00

  I think both to some extent. I think the fear of failure is very, very, very important. I actually strongly believe that great, great things, great companies, great products, great people come from constraints. And I think that failure is the ultimate form of a constraint. You know, you talked about Anchor. Somebody just asked me the other day, they said, at what point in your life did you do your best work? And I thought about it and the honest answer to that question was, I believe I did my best work when we were three months out of cash. When we were about to run out of money and when we were about to fail is when we did our best work. It's so clarifying to know that you're going to fail unless you turn the thing around. And so I think failure can be an incredible motivator.

• 5:34Speaker 00

  But I also think that you have to have insanely ambitious mission that you're trying to accomplish, right? You want, you want to win, you have this hunger to achieve something really hard. So I actually think you need to hold both things in your head to be successful and I, and I try to do that.

• 5:50Harry Stebbings?

  We were talking before about like insights that we had years ago. Years ago with Anchor, you wanted a very natural conversational style record and let people listen in. And I was always like, no, we want manufactured.

• 6:05Speaker 00

  You were doing clips way before clips were cool.

• 6:08Harry Stebbings?

  We were doing clips. I was absolutely into the airbrushing of audio as we do today. And we disagreed on that.

• 6:15Speaker 00

  Yep.

• 6:15Harry Stebbings?

  What are your thoughts on that now?

• 6:17Speaker 00

  I think that there's so much content and the tools have gotten so much better that out of the box, you can have a really, really decently sounding or looking podcast with almost no effort. And so if you want to break out, you actually have to go above that. The baseline has to be excellence, the baseline has to be incredible editing. The baseline has to be, you know, a phrase that you used back, I remember 10 years ago, insights per minute. And so now I'm actually a huge fan of insanely high production value when it comes to podcasts, when it comes to YouTube videos. You know, we were talking a little bit before you asked me about some of the content I've been producing and, you know, we've tried to do something very, very different where we actually break out of a studio

• 7:01Speaker 00

  and we bring in multiple cameras and multiple mics. And we try to do something very, very, very high production value because I think that's the only way to stand out. So anyway, I think you were right, but it took me 10 years to agree with you.

• 7:13Harry Stebbings?

  Listen, I was totally fishing for that. I was right. I do, I do think insights per minute is important. I also think time to value is very important.

• 7:18Speaker 00

  Yeah.

• 7:19Harry Stebbings?

  People ask the most stupid fucking question, which is like, tell me like, where did you grow up? Very little actually is often learned in the where did you grow up?

• 7:27Speaker 00

  Where's your, what's your version of that question?

• 7:29Harry Stebbings?

  I want to go straight to the like, are you motivated more by fear? Like straight away there, I have like someone on a hook. You have to create hooks in content pretty early. I also think very much like venture, you have to be either really big or really small in content. You have to be very natural teenager, putting their phone up on the side and hitting record. Or you are Logan Paul or Mr. Beast or like us at venture, which has studios all over London, it's much bigger. The mid-tier firm doing it from their kind of conference room office, don't work, baby.

• 8:00Speaker 00

  Yeah, you gotta be on the extremes. I totally agree with you.

• 8:03Harry Stebbings?

  Speaking of being on the extremes and constraints, Lightspeed is a cash-constrained world to be in. It's tough over at Lightspeed and you made the move to the extremely well-funded USV. And I'm obviously joking, we're going from the very large to the very small constrained USV in comparison. Why did you decide to make that move, dude?

• 8:24Speaker 00

  I decided to go to USV because I am from New York. I've always been in or around New York. And as a builder, when I was building Anchor in New York 10 years ago, I got to meet USV. And I had an incredible, despite them passing, had an incredible experience, started a very, very long friendship. I ultimately became an LP in the funds. And I just really always appreciated their ability and their willingness to be really opinionated and to be very, very thesis-driven, even at times in which the market said it makes, made sense to be very consensus-driven. And by the way, there have been times in the market, including recently, where being consensus-driven has been extremely valuable and extremely lucrative as a fund.

• 9:09Speaker 00

  But the way I like to work, the way I like to build, the way I like to bet is by being thesis-driven. And, and I recognize that being thesis-driven can also be super risky, right? If you bet on a thesis and you're wrong, you miss and you fail.

• 9:23Harry Stebbings?

  Well, the trouble is that thesis-driven can also be conventional. And so, and so what I'm actually worried about is that what if the winners of venture? And what if venture is just from this point out consensus-driven?

• 9:33Speaker 00

  So I think that we are coming out of a time in the market where we have went through a massive infrastructure build-out in AI. We've had these new companies, these companies building these brand-new technologies, which have required vast amounts of capital to build out the infrastructure. And obviously I'm talking about the labs, I'm talking about OpenAI, Anthropic, XAI, SpaceX, et cetera. And those required a lot of capital and they produced magical technology that has generated billions. We're about to see trillions of dollars in value. But now that infrastructure is built and it reminds me a lot of the early days of the internet, when we built out fiber and we built out broadband and then we had these new technologies to play with.

• 10:15Speaker 00

  And the internet came along and an application layer came along and took advantage of that new technology. To me, it feels like we are back in that mode right now where we've got this infrastructure and now it's time for the applications to be built. And I think there's going to be so many applications, so much software, that you're not really going to be able to make a bet unless you know what you're looking for. And I think that's what USV has always been great at, knowing what they're looking for and placing the bet when they see it.

• 10:41Harry Stebbings?

  Brandon McCaw said the other day, we will see much greater value accrue in the next 24 months at the infrastructure layer than we will at the application layer. Agree or disagree?

• 10:51Speaker 00

  I think there is still value to be created and accrued to the infrastructure layer. We're not done. The build out's not done. But I also think now that we've got enough new toys at the technology that we will see massive value creation in the application layer as well.

• 11:07Harry Stebbings?

  Do you think the future of AI is always on? Sam Altman is suggesting so more and more in his kind of verbiage. God, it makes me excited for Nvidia. The future of AI is always on. Do you agree with that?

• 11:19Speaker 00

  I do think that we're entering a world in which context is increasingly valuable for the labs and also for the application layer, right? And so I think we will see products and businesses increasingly try to push us further and further along the edge to an always on world. I mean, I can remember 10 years ago when I got, you know, an Alexa in my home and thinking to myself, wait a minute, this is, this is always listening for the wake word. And now we've, I think to your point, we've kind of moved past that where, you know, let's say you're in a meeting, you're having a meeting, you're having it, you're in a conference room. I think, you know, more often than not, I'm hearing somebody say, hey, I'm granolling this, right? So I think we are moving more and more towards that world for better or worse.

• 12:01Harry Stebbings?

  Do you think the multi-stage funds deliver an amazing pre-seed and seed product? Because I, okay, so I say this, I think you're a little more protective of your brand than me. I don't worry about upsetting people. The worst place to be is a 50 to 100 million dollar seed fund. You will get crushed by the large funds who are able to write large checks and lead rounds, but you're also not small enough to be collaborative. Very difficult middle ground to be in. Do you agree?

• 12:26Speaker 00

  I think the best funds in the world at doing seed are really, really good about building their networks and meeting amazing people. I think you've been doing a good job recently at empowering a new class of entrepreneurs here in Europe and in London with very, very, very early-stage seed checks. So I think you have to build a great network. I also think to do seed well, you have to put your ideas out there into the world. You have to show the market what you're looking for. You have to be willing to take a stand and take a position and say, I just put out a post yesterday about the Rebel Alliance and saying, hey, USV, we're really interested in the Rebel Alliance. This new universe of open weight models and open source harnesses and distributed compute and agents, right? Human-aligned agents.

• 13:10Speaker 00

  And I think when you put things out into the world, you're, you're sending up a bat signal that's telling these early-stage founders that maybe haven't gone out into the world yet with a product, oh, this is the VC or this is the person or this is the team I should be talking to. So I think you need a great network. I think you need to ship your ideas and I think you need to be willing to take bets on people, which again, I think you've done a good job of with your program.

• 13:33Harry Stebbings?

  Can I ask you on the kind of shipping ideas? And this is why I love asking advice, but is what if the ideas aren't fully formed? What if I'm just wrong and then I get a deluge of companies? And actually the thesis wasn't what I thought it would be.

• 13:45Speaker 00

  I think that's totally okay. Much like building a startup or building a product. I think if you're investing, you also have to be willing to put yourself out there and take a risk and, and place a bet. Now, listen, you can hedge that bet a little bit. You can place a counter position bet in something else, maybe to offset the risk of that. But I think you have to be willing to put yourself out there if you want to succeed at anything in technology, whether it's a startup or a venture capitalist.

• 14:13Harry Stebbings?

  Open weights, open harnesses, open models. Ding, ding, ding, ding. We're going to do a prediction round, fun. I told you we had this like truth or like donate round. Sure. This is a new prediction round. The model landscape in five years' time. What does that mature, not mature, but maturer market look like in terms of composition? The players, their weightings, what does that look like?

• 14:37Speaker 00

  You know, one future is that the labs, especially the ones that are starting to approach something that feels like superintelligence. If they reach it, once they reach it, we will have some form of recursive self-improvement such that we hit this exponential growth of intelligence. The thinking goes that whoever gets there first will run away with it, right? Once you reach recursive self-improvement, you're gone. No one can catch up. That's not necessarily the future that I am hoping for.

• 15:06Harry Stebbings?

  For everyone who doesn't know, what is recursive self-improvement?

• 15:10Speaker 00

  This is, this is, this is self-improving AI, right? This is, this is super intelligent AI that can do its own AI research, right? So once you have it, once you deploy it, it can just continually improve itself on the exponential forever until it plateaus, until it self-limits in some way. And by the way, we don't, we don't know what that self-limiting factor may be. It may be that for some reason, these architectures, you know, the transformer architecture, let's say, doesn't scale past a certain point. We don't know if that's going to happen. It could be that the model needs some amount of data that it can no longer access, right? There's a limit to the amount of data. It may mean that we can't keep up with the hardware infrastructure build that we need to, to keep recursively self-improving.

• 15:53Speaker 00

  So in the past, in the history of new technology adoption, I mean, if you study them, they actually all follow S-curves, right? They have a slow takeoff, then they have what feels like an exponential ramp up, and then they plateau for some reason, like we just discussed. That's potentially the second future for AI, right? We, we reach some plateau in terms of intelligence. And I think if that happens, then the technology might start to look somewhat more like a commodity. If it plateaus, then we're at a point where all the other labs can catch up and they can all have the same technology. And if they all have the same technology, then we're going to have a lot of competition. We're going to have a lot of competition in terms of price, in terms of product experience,

• 16:34Speaker 00

  and in terms of the various components that make up the new intelligence stack.

• 16:39Harry Stebbings?

  So if we go on the route one recursive self-improvement and it leads to this kind of exponential advancement, is that done by an OpenAI or an Anthropic or a leading model provider today? Or is that done by a recursive or one of the many others going after? I was literally for two hours in shortage yesterday with one. Or is that done by an entirely new company focused on recursive itself?

• 17:02Speaker 00

  Yeah, probably done by one of the labs that already has all these advantages, these vast compute advantages. They already have models that are at the frontier. They have the infrastructure, they have the chips. So I think it's probably done by one of them. That said, there are a bunch of amazing researchers working on incredible new architectures that maybe haven't broken through yet, but maybe they can, maybe they're building something that is better than the transformer, right? There are a number of these labs out there, Thinking Machines, Safe Superintelligence from Ilya and Daniel. I think if I were to, to bet, I would, I would say the labs that already have the advantages, but that doesn't mean there isn't a new architecture being worked on in a lab somewhere that could leapfrog all of it.

• 17:45Harry Stebbings?

  Okay, number two is that actually we have less of this kind of exponential and more of a linear style. When you look at that kind of more mature market on the S-curve basis, what does that composition look like in terms of market between open and closed and Anthropic and OpenAI?

• 18:01Speaker 00

  I think in that world, enterprises and, and individuals are probably optimizing for a couple of things. I think they're probably optimizing for cost, right? They're starting to think about the trade-offs between intelligence and spend and how they can optimize their token spend. So what does that mean? It probably means, you know, leveraging things like open weight and open source models. It probably means leaning into things like the routing layer to optimize the token usage towards the model that maybe gives you the most bang for your buck, rather than always just token maxing and picking the most powerful model. I think the other thing it looks like is choosing tools and products and, you know, hate to use the new, the new buzzword of the past six weeks, harnesses

• 18:46Speaker 00

  that are maybe a little more human-aligned.

• 18:48Harry Stebbings?

  Can you help me? What the fuck is harness? So, so I feel so bad.

• 18:52Speaker 00

  No.

• 18:52Harry Stebbings?

  Do you know on X, I really want to do Grok, what is a harness? But I know everyone will be like, oh, hurry.

• 18:57Speaker 00

  I think of the harness as the application that tightly, tightly couples with the model. So in the case of, you know, Claude, it's like the Claude desktop app. And I would say specifically Claude Code and Claude Co-Work that are sort of having this, this loop, this, this flywheel of product and model sort of engagement. You know, some other harnesses that I think people are pretty excited about are things like Hermes. I consider Hermes a harness that takes over your Mac Mini. I don't know if you've set it up yet. Pi from Irandell is another great harness, European company. Having products, agents, harnesses that are human-aligned and aligned with your own goals and incentives, I think is going to be really, really important. I think people are going to be a little more self-conscious

• 19:40Speaker 00

  about the incentives of the model they're using. Obviously, the incentives of the models that come out of the big labs are to make the lab's models smarter, better, faster. And you might think to yourself, hey, if I'm outsourcing all of my agency and all of my personal information and these goals and my credit cards and all these things to an agent, I want that thing to work for me. I want that thing to be completely aligned with my incentives. You know, I published a thing a few weeks ago on X called, who is your agent working for? And that was the big idea we were trying to get across with that. And that I think in the future, as you become more and more comfortable handing over the keys to an agent, you're going to want to know that it's working for you. So I think that's a little bit like what that second future looks like.

• 20:24Harry Stebbings?

  I have to say, I think people will get incredibly comfortable handing over the keys in the same way that we got incredibly comfortable putting our credit cards online, using Apple Pay, finding our husband or wife online. And I think that will be de facto in five years.

• 20:37Speaker 00

  There's a chance you're right.

• 20:39Harry Stebbings?

  I don't think anyone gives a shit about privacy, other than hardcore technologists. And I know that's blunt, I'm gonna get killed for that.

• 20:46Speaker 00

  No, no, no, you're not. I think there's a good chance you're right. You know, if we're just thinking in terms of bets and probabilities, I think the history of the internet and personal computing suggests that you are right, Harry. But, two things. First is, I think we have never handed over so much of ourselves to a technology before than we're about to do with agents. Yes, you're right. We browsed the web, we used Chrome, we used-

• 21:10Harry Stebbings?

  But it didn't do shit for us.

• 21:12Speaker 00

  It didn't do shit for us. Right. We still got to control it, right? Yes, maybe we let these companies learn about our interests and the things we care about, but it wasn't out buying stuff for us, right? It wasn't out sending very personal messages to family members and loved ones. It wasn't a second self, right? It wasn't us. I think now we're gonna be doing stuff like that, and it might just make us think a little bit more about the incentives of the model that are doing those things for us. That's number one. Number two, I'm not sure that every model and every agent needs to be superhuman aligned. I'm not sure every person needs to care about it. I just think enough people have to care about it, such that one player or a few players keep the others in check, right?

• 21:57Speaker 00

  I think we need market forces where a couple of good actors keep the rest of the other actors in check. So, is it gonna happen? I don't know. History says it won't, but I think it's possible.

• 22:08Harry Stebbings?

  Do you think Dario has had a massive own goal in terms of marketing and messaging? He's been saying about labor displacement for years, ah, everyone's gonna be unemployed. And telling your customers they're gonna be unemployed is always a bold statement.

• 22:18Speaker 00

  What I see in Anthropic is I see an extremely mission-driven company. And Anthropic, you know, love them or hate them, there's no doubt they've been extremely successful. I think at the time of us recording this, they're the most valuable privately-held company in the world.

• 22:32Harry Stebbings?

  You know, I think core to the, will they continue the exponential revenue growth that they've had, is percent of spend in terms of developer salaries on tokens. And Mark Benioff said that he spent $300 million on Anthropic, specifically for the dev team, which equates to 3.8% of dev salaries spent on tokens. Now, if that goes to 20%, Anthropic's grossly undervalued, that exponential revenue will continue, and well done, everyone who's invested in all their employees, great. If it goes to 100%, holy shit, this is just so much larger than we ever thought it could be. But if it stays, or if we see migration to open models, it's a very different game.

• 23:11Speaker 00

  I think it's a risk. There are two schools of thought playing out right now with regards to token spend. I think one school of thought, which we're seeing, and I think when I really think about it, probably applies more to the incumbents and the big companies, the sales forces of the world, rather than the startups, is that if every employee is just spending like crazy on tokens, the fundamentals of these businesses are gonna be in trouble. They're just too big, right? There are too many employees at a Salesforce, or, I don't know, a Microsoft, such that every employee can just have an unlimited token spend budget. So I think we're gonna see a lot of those companies start to constrain their spends. And we've seen mentions of things like these on X recently.

• 23:52Harry Stebbings?

  We've seen Meta, Uber, Microsoft in the last week, yeah.

• 23:54Speaker 00

  I think if you're a startup, the calculation probably looks a little bit different. Your organization is smaller, right? So you're not gonna have a situation where you have 5,000, 10,000, 50,000 employees just spending out of control. You can more tightly control the spend. But also, I think as a startup, you need every advantage you can get right now. And so if I, you know, if I were the CEO of a startup right now, I would actually still be pounding the table to maximize token spend on the right things, right? Definitely with coding, maybe not with other things, just for simple tasks like summarization or, you know, operations-type work, I'd probably be leveraging Sonnet or something. But if I'm at a startup and I'm coding, I wanna be using the frontier. I want every advantage I can get against Salesforce.

• 24:39Harry Stebbings?

  So if you are the best dev, are you gonna go to a big incumbent who are gonna give you a budget and really constrain your abilities in terms of model usage? Or are you gonna go to a startup where fundamentally they say, hey, it's a free-for-all, be your best self?

• 24:51Speaker 00

  I think you're gonna go to a startup, especially the startups right now, that are mission-driven. Especially the startups that are mission-driven, which by the way, I don't know that we've really been in that mode for the past couple of years. Yes, Anthropic's been mission-driven, but there's so much money and capital sloshing around the valley in this ecosystem. I think a lot of companies haven't needed to be mission-driven. I think now they will, and it's gonna work to their favor.

• 25:14Harry Stebbings?

  Do you not think we enter a world there now where Fable will come back in some rejuvenated form, one way or another? Where Fable comes back and newer and better models come back, and you just have the 100x engineer, and you pay for that token spend, which is enormous, with the replacement of the 10 other mid-engineers?

• 25:33Speaker 00

  I do think engineering organizations are going to evolve. You will increasingly have probably somewhat smaller teams of higher caliber and higher quality engineers, because I think a lot of the lower-level tasks increasingly can be delegated away to agents.

• 25:49Harry Stebbings?

  In terms of the open ecosystem, when we look at it today, what percent of enterprise workflows do you think can be done with open?

• 25:56Speaker 00

  80% of non-coding tasks in the enterprise can be done with models that are not at the frontier. I think if you're coding, you probably wanna be leveraging frontier models, but I think things like summarization, or the generation of docs and briefs and things like this, I don't think you need to be at the frontier, and so you probably can leverage open-source models. I think a lot of the open-source models we're seeing are catching up faster than they were previously. I don't know that you need to be at the frontier if you're not coding.

• 26:25Harry Stebbings?

  China have the best open-source models. It's unbelievable to see the rate and the evolution of their open-source ecosystem. Is that concerning, do you think?

• 26:33Speaker 00

  I think, look, I think startups and teams go where the incentives are. I think as we shift to a world in which this rebel alliance might actually have a fighting chance, we're gonna see a lot of smart teams going more and more towards open.

• 26:45Harry Stebbings?

  I'm really intrigued. You said about the routing layer. Do you fundamentally think there will be 10 to $50 billion companies built in the routing layer? Or do you think your inference providers like Fireworks or Base10 eat into that? Or candidly, if you wanna go a step above that, you've got Nebius, who sits on top. When I had the founder of Nebius on, he's like, we need- I'm not gonna put it on his accent, because I'll sound like a Bond villain, then he'll fucking kill me. But like, you need to eat all of the stack.

• 27:10Speaker 00

  I do think routing is interesting and important right now. Again, as enterprises are trying to optimize their token spend, they wanna make sure that the model they're using is the right model for the job, not only in terms of its capability and what it can get done, but its cost. And so you're gonna have companies that are singularly focused on this, companies like OpenRouter out of New York, which is doing some really interesting work. And then you're also gonna have companies that are leveraging other parts of the stack for their products, that build their own routing layer as an opportunity to monetize. Actually, we've talked to a number of companies building at various different levels of the stack, that when you talk to them about their business model, they talk about

• 27:53Speaker 00

  building a routing layer and monetizing the routing layer. So, I think it's a really interesting area that has a lot of opportunity, and a lot of different companies are gonna go after it because they see the potential.

• 28:03Harry Stebbings?

  How do you monetize a routing layer without becoming just a commodity pipe?

• 28:08Speaker 00

  It's a good question. I think a lot of companies right now are thinking about, you know, charging a small margin on top of it. And I think to your point, that might not be a great business model. I put out a piece on X about this a few weeks ago, and a number of people chimed in with some of their ideas. And one interesting idea I heard was this notion of almost a bounty model at the routing layer, where the routing layer gets rewarded for choosing the right model, right? So if you choose the most efficient model, or the best model for a certain task, that's when they collect a fee. And I thought that was kind of an interesting idea. Haven't necessarily seen it built out yet, but I thought it was a pretty interesting idea.

• 28:47Harry Stebbings?

  I think it's hard to see that $50 billion company built in routing alone, I have to say.

• 28:52Speaker 00

  Maybe. On the other hand, we've seen time and time again, in the enterprise, in infrastructure specifically, that these infrastructure companies, they become deeply embedded in the developer workflows and in the developer ecosystems, and you just can't rip them out, because it just becomes the gold standard. So, maybe somebody will build that routing layer that every developer adopts and never wants to remove.

• 29:14Harry Stebbings?

  Would you say it's unfair of me to say that USV missed the model game?

• 29:18Speaker 00

  I think USV was playing a different game, and that's actually been the history of USV.

• 29:23Harry Stebbings?

  Is the game not unbelievable returns in generational-defining companies?

• 29:27Speaker 00

  So, USV, again, I think has never been afraid to take a position. And I think USV did not invest in any of the big model layer companies. But what USV now has been doing for a number of years, and I'm a big believer that we haven't seen the full circle of this narrative play out, is they've been betting on energy. They've been betting on energy since 2001. And the idea has been for a long time now that no matter what model wins, if you believe in AI, and if you believe in intelligence, there's going to be an energy layer underneath that is gonna be needed to power these things. And over the time since 2001, we've learned that we only need even more energy than we thought,

• 30:06Speaker 00

  and we need more portability of energy than we thought. And so, energy is a big theme at USV. It was starting in 2001, and it still is to this day in 2026. Did I say 2001? I meant 2021.

• 30:19Harry Stebbings?

  How do you think about investing in energy, given the CapEx intense nature of it? We're investing in a company called Fuse Energy, which I think is incredible. I'm so happy. But it's a capex intensive business in terms of like the energy space.

• 30:33Speaker 00

  It is, but I think there's also a lot of innovation happening. And where there's innovation, you can you can find early teams that are doing science experiments before anyone else is thinking about them. USV a few years ago invested in a great company called Radiant, which is building small nuclear reactors that literally come off of a factory line. You know, and it's going to be one of the first companies in the world to test in the dome in the United States for nuclear energy. And so I think there are a lot of interesting models and ideas happening on the edge of innovation. Those are the best places to bet as a venture capitalist, because in the earliest days, they're actually not that capital intensive.

• 31:10Harry Stebbings?

  You know what's the way I fucking love Boom Supersonic?

• 31:13Speaker 00

  Crazy.

• 31:13Harry Stebbings?

  Yeah, don't get me wrong. We all love Concord and Blake. I love flying too, dude. Game on. But there's this massive business in turbines for AI.

• 31:20Speaker 00

  Yeah.

• 31:21Harry Stebbings?

  What a wonderful world.

• 31:22Speaker 00

  We have a bet in a company called Rune, amazing company. Have you heard of Rune?

• 31:25Harry Stebbings?

  No.

• 31:26Speaker 00

  They're building micro data centers that sit directly next to generators, you know, wind farms and things like that to solve the portability issue. How do you get the energy as close as possible, as quickly as possible to the compute, to the data centers? And so we're on the lookout for things like this that are sort of innovating the model of energy and portability of energy.

• 31:47Harry Stebbings?

  Isn't this just like the joy of capitalism? I met Panther Lasso, you know, this company that does data centers at sea?

• 31:52Speaker 00

  Oh, wow.

• 31:52Harry Stebbings?

  And it's just like fundamentally to Adam Smith's invisible hand, kind of the market solves itself.

• 31:58Speaker 00

  Yeah.

• 31:58Harry Stebbings?

  In terms of we got an energy crisis and then you get Rune and Panther Lasso and Elon building data centers in space.

• 32:05Speaker 00

  It's crazy. It's awesome. It's a cool time. It's a fun time to be investing.

• 32:09Harry Stebbings?

  It is, and this is why I get really pissed off with a lot of European entrepreneurs who are still building SMB accounting solutions.

• 32:16Speaker 00

  I think that there's an opportunity for for automation in the enterprise. Personally, I would much rather build products and companies that obliterate. That's actually something we talk about at USV all the time. Don't automate, obliterate. But hey, some people want to automate.

• 32:30Harry Stebbings?

  What does that mean, don't automate?

• 32:31Speaker 00

  Well, you just talked about automation and you talked, I think you were talking about SaaS in a sense. I think there have been amazing companies built that automate existing workflows, existing processes. But at USV, we like to bet on businesses that obliterate, that literally obliterate markets and existing business models. We actually don't do a lot of enterprise investing for this exact reason. Enterprise investing often requires selling to a middleman, you know, selling to selling to customers or building things that just make existing businesses faster. We want to invest in businesses that literally reinvent the way something is done. Take Doctronic as an example. Are you familiar with Doctronic?

• 33:11Harry Stebbings?

  No.

• 33:12Speaker 00

  USV led the seed in Doctronic a couple of years ago. At the time, it seemed like a crazy idea. AI putting a doctor in literally everyone's pocket. Now, we could have invested in AI that make medical practices faster, more efficient, or help you with, you know, insurance claims. Or we can put doctors in everyone's pocket and totally reinvent the model with AI. So I think that's what we're talking about when we talk about obliterate, don't automate.

• 33:39Harry Stebbings?

  Doctronic, doctor in your pocket, da da da. It reminds me of education. Sorry, I didn't mean that disparaging. It's awesome.

• 33:48Harry Stebbings?

  But it reminds me, sorry. Education all kind of reminds me of the same, actually. And do you know who the biggest winners are in both education and in medicine in most cases?

• 33:57Speaker 00

  Who's that?

• 33:57Harry Stebbings?

  It's the horizontal players. It's YouTube. And my worry is, especially with like health, ChatGPT is second most used thing, health. And so my question to that tide is not tied to Doctronic. It's how do you think about where model providers will go and eat into the application layers and not kill our lunch?

• 34:16Speaker 00

  Maybe. We just talked about a bridge. I think you had Shiv on here recently. A bridge has been working on this problem for close to 10 years now, and it's given them a massive advantage. It turns out in highly regulated industries like healthcare, you can't just walk in the door and and say, hey, we're going to do healthcare now. You have to actually build relationships, build partnerships clear through regulatory hurdles. And that ends up being a form of a moat. USV invested in a bridge, I think in 2018, eight years ago now. It took that company, you know, five, six, seven years to hit this inflection point now where this product is being used by so many doctors in so many different healthcare systems because they were able to clear those hurdles.

• 34:59Speaker 00

  And so we can say that we live in a world where the labs and the hyperscalers can take over any product and any market. But the reality is that's been the story of technology and innovation since the beginning of time. There are always going to be startups and founders and entrepreneurs that specialize and do the really hard things before anyone else has thought of them that end up prevailing. I mean, just take Spotify, which we talked about at the beginning, right? Spotify went up against a behemoth. It's classic David and Goliath story. And they could have been killed 50 different ways along the way, but they specialized. And they did the hard thing early and often, and now they're obviously the winner. So I hear you that the labs can kind of go into any application layer.

• 35:41Speaker 00

  But not only do I think that that's not true, I also just think it's not really fun. And what fun can we have as venture capitalists if we don't believe that startups can take down the Goliath?

• 35:50Harry Stebbings?

  I'm also not sure if it's as binary, even if they do, you know, you saw Claude and Anthropic dedicate an entire team to design and to go up against Figma. Figma is still a business that does multiple billions in revenue and there's still multiple players in the space.

• 36:03Speaker 00

  Great product.

• 36:04Harry Stebbings?

  Great product.

• 36:05Speaker 00

  Trusted brand.

• 36:06Harry Stebbings?

  Trusted. You know that my biggest mistake also, especially on the developer landscape, was I thought that there would be like a runaway. And of course Claude has run away and done amazingly well. But Loveable is at 500 million in AR, Cognition is, Rappler is, you know, Anthropic Codex is crushing. They've all crushed.

• 36:22Speaker 00

  There usually isn't a market winner that takes 100% of the market or 80% of the market. Usually what you see is that the market winner takes something like 30% of the market, right? Which means the 70% remaining is totally up for grabs. And if the market's big enough, that can produce some really large winners.

• 36:42Harry Stebbings?

  Do you see different deals at USV to the types you saw at Lightspeed? I'm not saying bad or worse. Do you just see different?

• 36:49Speaker 00

  You know, going back to what we talked about earlier with seed, I think if you put yourself out there in the world, you're going to see deals that match those themes and ideas. And not to say I didn't do that at Lightspeed. We did that at Lightspeed as well. But to the point earlier about being very focused on energy, right? Or now being very focused on this rebel alliance, we're going to see a lot of those companies come to us. And I think when you're small, you kind of have to pick your spots. You have to have constraints and focus on a small number of things. And so I think to the extent that we see things different, it's because we focus really, really deeply. And for a period of time, we may only look at a couple of different areas that we have theses on.

• 37:28Harry Stebbings?

  What are you unsure of right now that is worrying you? To my point earlier, I think a lot of people are concerned by the intrusion from model providers into the application layer. Where investors in Legora, Anthropic are very openly suggesting they want to come into legal. I think that's fucking moronic for multiple reasons, when you're chasing AGI to be like, ah, we're going to go after your lunch Clifford Chance or Slaughter and May. Doesn't make much sense.

• 37:53Speaker 00

  As much as I say that there's always going to be opportunity for startups and that, you know, one model or one company can't can't do everything, of course, you still worry about competitive threats. You know, as you know, like I partnered closely with Granola when I was at Lightspeed, Suno as well. I mean, those are two startups going up against massive, massive incumbents. Granola in particular, you know, OpenAI launched a directly competitive product, right? Notion, a very well-funded startup, launched a directly competitive product. And so I do worry about that, but I think, again, that's that's always been the worry when you're building in startups.

• 38:30Harry Stebbings?

  Is the worry not for Granola just breaking into enterprise, like that traditional enterprise? Like Notion have found it incredibly hard to break into traditional enterprise. These are startup and venture funded products, which is amazing, and you can get to 500 million in revenue. But you need to be 5 billion in revenue.

• 38:47Speaker 00

  I think the nice thing about Granola, what it really has going for it. And one of the things that I believe has helped that company in enterprise penetration is being really focused, right? They're just doing notes. They're just doing notes. I think there are other companies, startups selling into the enterprise that try to do, you know, many different things.

• 39:06Harry Stebbings?

  But dude, I think you've got to do more.

• 39:08Speaker 00

  Maybe, but I think you want to get your foot in the door. And I think when you want to get your foot in the door, you want to sell one thing. And once you're in, then you can you can expand horizontally to different categories. But I think if you come in, expand it really, really wide, now you have to convince the enterprise to give up all these different things, right? You got to give up your Gmail and your Google Docs and your Google Sheets and your calendar, right? And this, and that. Whereas if you're just doing meeting notes, it's like, hey, we're just going to be your second brain for your company, right? We're not going to do anything else. We're just going to be your second brain. Oh, and by the way, we're the best at it.

• 39:43Harry Stebbings?

  Do you not worry about the enduring wave of Microsoft and bundling? Whether it's Teams that crushes or whether it's, you know, Copilot that it's the shit. I mean, these products are, Microsoft has built a business on doing 65 to 70% meh products, but with the power of bundling, beat the competitors.

• 40:01Speaker 00

  I do worry about that, of course, absolutely. We saw this play out with Slack. By the way, Slack is still around. It's still massively valuable product, but yes.

• 40:09Harry Stebbings?

  I'm like 27 billion. I love the way we say this. It's like 27 billion. I'll take it.

• 40:12Speaker 00

  Yeah, I do worry about it. What I have also learned about AI products and Granola is that context is extremely valuable, right? If Granola gets inside of your organization and everyone in the organization starts using it and producing and accumulating all of this amazingly rich and valuable context, that's not something you as an enterprise want to give up. You've built out this incredibly rich history of information that actually helps you work better. I think this era of building AI products is in many ways about being first and about moving really, really fast.

• 40:49Harry Stebbings?

  You know what worries me is just like the meh of such large outcomes. And again, this all sounds incredibly disparaging and it's not meant at all because I'm a podcaster, so incredible disclaimer.

• 41:00Speaker 00

  And a VC.

• 41:01Harry Stebbings?

  But my point being, like, when you have a SpaceX at 3 trillion, do you know Elon Musk made more money overnight than Warren Buffett has done in his entire career?

• 41:10Speaker 00

  Credit to him.

• 41:11Harry Stebbings?

  Credit to him. Well done. God bless capitalism.

• 41:13Speaker 00

  Amazing entrepreneur.

• 41:13Harry Stebbings?

  Amazing entrepreneur. God bless capitalism. But my point is, like, when you have the outcome sizes of Anthropic and OpenAI and the trillion dollar companies, the company that does 500 million in AR. Tough.

• 41:26Speaker 00

  I think it all goes back to what are you optimizing for? What's your mission? What are your constraints? We talked about VC early on before we stepped into the studio here. USV has always had small funds. It's the game we like to play. You can be very successful in terms of what you're trying to accomplish as a venture firm with a small fund. Now, maybe that same model can't work if you have a $10 billion fund, but we're playing a different game. And I think you're playing a different game, too.

• 41:55Harry Stebbings?

  I would not do venture without media. I said to my LPs the other day, two things that really shocked them. I said, you can't do Series A unless you have a $400 million fund today. Absolutely no chance.

• 42:06Speaker 00

  Well, Series As are expensive now. They're, you know, they're 100 million posts. They're 80 million posts. They're occasionally 150 million posts. And so, yeah, if you want to write a check into around that size and get decent ownership for your, your, your fund, you have to have a slightly bigger fund than you had three years ago.

• 42:21Harry Stebbings?

  Are you being more elastic around how you think about ownership?

• 42:24Speaker 00

  I think it depends on stage. The way we think about it at USV is that the, the seed and Series A stage ownership is important. And the reason is the outcomes are bigger right now. You talked about it. And the companies that end up doing really, really well, raise a lot of capital very, very quickly. And the valuations get very high. And in those later rounds, it's actually very, very hard to buy ownership, especially if you're a small fund. And so you have to get that ownership early on. And seed and Series A are kind of the rounds where you can do that. Now, once a company sort of crosses that chasm, maybe into the Series B or to the Series C, you can identify them as being market leaders and potential generational companies. Then I think it matters less.

• 43:09Speaker 00

  Then it's just about getting capital into those companies and underwriting it as a cash on cash type outcome. Forgetting about percentages, just imagining, okay, if we put $25 million into this, what can the multiple be on that? Is it a 10x? Is it 100x? Is it 1,000x? If it is, you know, if it's something really big like that, then you don't really need to think about ownership.

• 43:29Harry Stebbings?

  We just did a deal together. And by the time this comes out, it'll be announced. I actually got a message from the founder overnight, which is why I'm able to talk about it. Paul at FOMO.

• 43:37Speaker 00

  Oh, nice.

• 43:38Harry Stebbings?

  Yeah. And you guys did that round later.

• 43:41Speaker 00

  Later for us.

• 43:42Harry Stebbings?

  Yeah. And that was why I asked that question.

• 43:44Speaker 00

  Yeah.

• 43:45Harry Stebbings?

  But you saw the size of market. And for people that don't know, it's the next generation trading app in many respects. I guess you saw that multiple expansion at the entry price you came in at.

• 43:54Speaker 00

  That's a perfect example. You know, we, we saw that where it was and we said to ourselves, how big can we see this getting? We think it can be a lot bigger than it is now. And so for this one, we're not going to be ownership focused. We're just gonna, we're gonna put a check in. We may not be able to bet every round from here out because again, we have constraints to the size of our funds. But we think there's enough opportunity and enough upside from here that it's worth it.

• 44:16Harry Stebbings?

  Should you do it if you don't think there's like a mega outcome? I know that sounds strange.

• 44:20Speaker 00

  I'm not sure. For, for us, for USV at the later stages, if we don't think that there's a gigantic outcome, it probably doesn't make sense for us to bet.

• 44:29Harry Stebbings?

  But even should you do it early if it's not a gigantic outcome is my kind of question.

• 44:34Speaker 00

  Look, I think in general, you always want to believe that the things you're betting on are playing in large markets with very, very large surface areas. And we're going to look at every company that way. But I do think that because our funds are smaller, similar to yours, there's probably more downside protection for us in that model than say at a larger fund where you have to multiply billions of dollars. For us, the fund that we're investing out of now, the core fund, it's a $275 million core fund. And so you can multiply that a lot easier than multiplying, say, several billion dollars, especially if you get the same type of ownership that, that a larger fund is getting.

• 45:09Harry Stebbings?

  I think it will be the best time ever, though, for the very large platform funds. And I think they'll be able to deliver venture-like returns because of the expansion and outcome sizes. Do you think that's true or not? I mean, you look at like a Thrive.

• 45:21Speaker 00

  Yeah.

• 45:21Harry Stebbings?

  I mean, their numbers are better than 90% of seed fund numbers on their growth, growth vehicle.

• 45:26Speaker 00

  Yeah.

• 45:27Harry Stebbings?

  When you look at, I mean, you know, they have made a cursor phenomenal. The OpenAI fund, obviously incredible. Like they are getting venture outcomes on multi-billion dollars.

• 45:37Speaker 00

  We think that we are coming out of a period where there has been a massive infrastructure build out and very, very capital intense companies. Firms, large firms that were able to invest in those very capital intensive companies have done phenomenally well. But again, I think we're also now playing in a world where there will be a proliferation of startups and apps at the application layer that are less capital intensive. And for those, again, I think you're going to need to know what you're looking for. And I think you can, you can get in those companies at more modest check sizes. Now, I don't think you can have a fund that's in the middle to do that. I think you need to either be on, on the large end and play the consensus game or be really small and really opinionated and multiply a much smaller fund.

• 46:22Harry Stebbings?

  Are you elastic on price? You know, candidly, we, we've lost two deals in the last year. And listen, we got outbid and I don't know if we would have won if we'd paid the same price. I hate people that say that.

• 46:32Speaker 00

  Yeah.

• 46:33Harry Stebbings?

  But by like two or three X, we bid 150 and another we got bit outbid by 300, another bit outbid 400. Should I have just paid?

• 46:41Speaker 00

  I talked to my partner, Fred Wilson, got a shout out Fred, one of the, one of the goats. And I asked him a question. I said, what is, what is the biggest lesson you've learned in VC? Actually, I asked him, what are a couple of the biggest lessons? And one of them was never pass on price. So Fred says never pass on price. I think in reality, there's probably some nuance. Just to bring it back to the USV strategy, I think for us, again, if we're investing a little bit later stage, we need to really believe that it's a market winner. The multiple can be very, very, very high. And in that case, we can be a little bit more elastic on price. But I think at the earliest stages, especially when we're investing out of our, you know, our, our small funds,

• 47:23Speaker 00

  I do think there will always be a limit for us on price, just because otherwise we can't make the fun math work.

• 47:28Harry Stebbings?

  You know why my job is just incredible is because I, I really am a student of this business. And by the way, you said shout out to Fred. I emailed Fred when I was 17 years old and him and Brad Feld both responded to me within 30 minutes.

• 47:39Speaker 00

  Wow.

• 47:40Harry Stebbings?

  Like that is the testament to giving time to people when, you know, candidly, I had nothing.

• 47:46Speaker 00

  I told a story on that, that podcast where when Anchor first launched, I had never met Fred and the Anchor app accidentally auto tweeted for Fred. And he has a big follower count on Twitter at the time, uh, now it's X, obviously. And he was not happy about that. He started lighting me up on, on Twitter. This is one of the day, like the day after we launched Anchor. Obviously that was uncomfortable for me as a first time founder. But to your point, I cold emailed him right after the fact and I apologized and I offered to troubleshoot it with him. And he responded immediately and he was super gracious and forgiving and understanding. And so I, I had a similar experience.

• 48:25Harry Stebbings?

  And I think all publicity is good publicity.

• 48:28Speaker 00

  Yes, true.

• 48:29Harry Stebbings?

  Actually, you probably gained.

• 48:30Speaker 00

  We got a lot of publicity from that.

• 48:31Harry Stebbings?

  Yeah, you probably do. Never pass on price. Where I was going with the student adventure style is I think it actually goes something that Peter Fenton told me, which is use price as a litmus test for your conviction.

• 48:42Speaker 00

  There you go.

• 48:42Harry Stebbings?

  And it's like, actually there are founders like Alan Chang at Fuse or Jack at our Wallace. You could treble the price and I'd still pay it today.

• 48:50Speaker 00

  Yeah.

• 48:50Harry Stebbings?

  You have founders like this where if you doubled the price, you're like, I'd still pay it.

• 48:54Speaker 00

  Yeah, yeah, absolutely. I can think of some of the best deals I've done. And, you know, even though I'm, I'm happy with where the price landed in hindsight, I'd probably pay double the price if I could go back and do it again.

• 49:03Harry Stebbings?

  If I were to ask you, what are your biggest lessons now, having been in venture in the same way that you asked Fred? What would you say they are?

• 49:10Speaker 00

  You can't project your own ideas on the founder. Sure, you can offer ideas, of course, if the founder wants. But especially as a, as a former operator, you know, you often think, oh, I know how this business should be built or I know how this product should work. And I think that can really, really get you into trouble. You know, one of my former partners, Jeremy Liu at Lightspeed, I made this mistake a few times and, and he called me up one day and he said, hey, I, I think you're, you're projecting as a former founder. And he's like, in my experience, that's very, very dangerous and very risky. I think it was a great lesson. The reality is even if you have great ideas and you think you know the answer, even if you're right, by the way, the reality is it's the founder's company and they may want to build it a completely different way.

• 49:52Speaker 00

  And not only that, if you project your ideas on a team that you're evaluating, you might get it completely wrong. Right? You might look at a business and say, I know what this company needs to do. It needs to do A, B, C, D, and then it's going to win. But if you make your bet based on that evaluation and that judgment and that team doesn't do those four things, you made a bad bet. So don't project, don't project. You have to really believe in the team and the team's judgment and the team's ability to execute on their own plan. That was a big lesson for me as a former CEO.

• 50:21Harry Stebbings?

  Founder, market, product. Rate them one through three.

• 50:24Speaker 00

  When I first started this job, I would have said product, market, founder. I've completely flipped that. Now founder, market, product. I think that the founder is the most important thing. At the end of the day, most startups, especially early stage startups, they're going to pivot in some form or another. What's most important is are they resilient? Can they execute? Can they adapt to change?

• 50:46Harry Stebbings?

  When you get founder reads wrong, what do you not see that you wish you'd seen?

• 50:51Speaker 00

  I often see communication as a big hurdle for founders. I think one of the hardest things you can do as a leader is communicate effectively, because I think communication touches every part of company building. It's part of recruiting, which, as we know, is one of the most important things you could do. You have to be able to communicate your mission, your values, why you exist, what you're trying to accomplish. You have to communicate to investors, right? If you're not a great communicator, you're not going to be able to raise capital. You're not going to be able to put venture dollars into the business. You need to be able to communicate your product vision to your team, right? How can you align the team around building the perfect product if you can't communicate it? You have to be able to tell your story to the market. When I think about some of the mistakes I've made in evaluation, it's maybe been on communication.

• 51:36Speaker 00

  That's probably been one of the biggest.

• 51:37Harry Stebbings?

  What do you think the single biggest mistake in ventures you've made in terms of miss? I would say mine probably is one that you gave me, which is, well, two of yours. I turned down Suno when David Frankl at Founder Collective introduced me at the seed. You know what the lesson was there? Really interesting. And I hope Mikey's gonna be saying this, I'm sure he is. It was a 250K check or a 200K check, and so the ownership was, you know, 1%.

• 52:00Speaker 00

  Yeah.

• 52:00Harry Stebbings?

  And I was like, no, I need to be high ownership. My LPs tell me high ownership. And Granola, honestly, was a lack of imagination. Chris I saw was great, but like, it was a very unformed idea.

• 52:11Speaker 00

  Yeah.

• 52:11Harry Stebbings?

  And I was like, I can't.

• 52:13Speaker 00

  Founder.

• 52:13Harry Stebbings?

  I can't.

• 52:14Speaker 00

  Founder first.

• 52:14Harry Stebbings?

  Well, founder only thing. When founders, the other two don't exist.

• 52:18Speaker 00

  Yeah.

• 52:18Harry Stebbings?

  Terrible mistakes there for both. Ironically, both, you know, you did very well on, so congrats.

• 52:23Speaker 00

  Two different motions, by the way. Granola, for me, was a pure founder bet, pure founder bet. I knew Chris. I've known Chris now for 15 plus years.

• 52:31Harry Stebbings?

  He's also not an amazing seller. I'm just gonna give it that and be blunt.

• 52:35Speaker 00

  But I knew Chris up close, you know, I, so when I was building Anchor, the Socratic office, Socratic was his previous startup, was right behind ours. And we did a few meetups together, you know, we've gotten our, we got our teams together for a few happy hours. And I, and I, you know, I would talk to him as another founder and we would share our struggles and, you know, get advice from each other. I was like, this guy, I know he can do it. I've seen him. I've seen him do it. Pure founder bet. Suno was something very different. Suno was a pure thesis-driven bet. For me, the thesis came from actually the days of Anchor and seeing what it meant for a product to democratize a creative medium. And music had never really been fully democratized before AI.

• 53:16Speaker 00

  So I went out and I met with every team building AI for music. I went out and I hunted down every team. And then, of course, I met Mikey and the team and I was like, wow, this is an incredible team. And, and then the founder, then the founder lens came on and I was like, this is incredible team.

• 53:32Harry Stebbings?

  How obvious is it when you meet a founder that you want to invest?

• 53:35Speaker 00

  With Mikey and the Suno founders, it was immediate. I met Mikey.

• 53:38Harry Stebbings?

  Is it normally immediate?

• 53:40Speaker 00

  Not always, not always. With Suno it was. Uh, Mikey and I sat down at a restaurant and, uh, near my home in Hoboken, New Jersey. He, his, his family's in Jersey, so we met up, uh, in Hoboken. We just immediately hit it off. Just instant connection and, you know, I immediately recognized how, not only how smart he and the team were about the models they were building, about their vision for the world, but also how passionate they were about the problem. Mikey is a former musician. I felt like he could deeply, deeply connect to this idea of how do you make music creation, expressing yourself, creativity, how do you make it easier?

• 54:19Harry Stebbings?

  When you're doing Suno at 5 billion, what are you underwriting that to?

• 54:23Speaker 00

  So we believe that Suno has unlimited upside potential. You know, if you look back at the history of media on the internet and you think about the generational platforms that truly democratized a medium, right? YouTube, TikTok, Twitter, Facebook, to some extent with writing and publishing. I mean, these are insanely valuable platforms and you don't really think about the upside of them.

• 54:47Harry Stebbings?

  Does Suno not have to move from a tool to a platform then?

• 54:49Speaker 00

  So I probably would have said yes when I invested. First of all, I, I do think it is a platform, but I think you're asking about something different.

• 54:57Harry Stebbings?

  Consumption platform?

• 54:58Speaker 00

  Yeah, you're talking about, do you need a crater side and a consumer side? Similar to what we saw play out on Spotify as an example. I think when I originally invested, we thought that it did. Now, I'm not so sure that we understood what Suno could be back then. What is happening now in Suno is what Mikey and the team have been saying for a while and what I now believe. It's that it's literally a new behavior. The team calls it creative entertainment. People are coming into Suno, they're making music for the pure joy and entertainment value of making music. You know, previously, like, let's say on Anchor, you would make a podcast for the purpose of getting distribution and eventually monetizing it, right?

• 55:41Speaker 00

  Now AI has made music creation so much fun that you're making music to make music. And I think it's actually not too dissimilar to what we see with Claude Coe or Mid Journey, right? Or some platforms that are making it easy to make games with AI. You have no greater aspiration for this content, right? You're not trying to become a hit game developer. You're just having a lot of fun making games on your computer. And we see that a lot in Suno.

• 56:07Harry Stebbings?

  What miss? Brilliant, but you should be a politician. I ask you what miss? I'll tell you about my two greatest hits.

• 56:16Harry Stebbings?

  Thanks, dude.

• 56:17Speaker 00

  So one company that I would have loved to invest in a long time ago, which we didn't at Lightspeed. We, we met them a few times and I think we could never really wrap our head around kind of price. Also, at the time where they fit in the market. Now, I think with the, the benefit of hindsight, I really regret not ever having, having had the opportunity to invest in Substack. I really believe in Substack. I realize it's not your traditional sort of AI company. But I think over the past eight years, and I think the trend is continuing. I think we're moving more and more and more towards a world of self-publishing and people controlling their own destiny in terms of media and what they create and what they publish and how they monetize it. And I think no company, maybe other than X, has done a better job of that than Substack.

• 57:02Speaker 00

  And so, uh, that's a company where, you know, I love the founders, I love the purpose behind the company. I love the product and the platform. Unfortunately, never got a chance to invest.

• 57:10Harry Stebbings?

  Is traditional media dead?

• 57:12Speaker 00

  I think traditional media in many respects is dead.

• 57:16Harry Stebbings?

  I, I go to these large houses, your, your Times is of the world, your Skies. And dude, they have these insane production places for pods that I know no one listens to. And the teams are ridiculous and it's all like, guys, you don't get where this game has gone.

• 57:32Speaker 00

  I probably underestimated just how big independent media could become. When we built Anchor, you know, we had this vision of democratizing audio and giving everyone a voice. And I would say by the time I left Spotify in 2022, I'll admit, I kind of thought the opportunity was baked. I was like, okay, it's done. It's done, you know? We've got YouTube, we've got Spotify, we've got, you know, whatever, we've got X. It's gotten so much bigger since then. And that was only four years ago. So much bigger. I mean, every traditional TV show or, you know, media personality, everything has made the leap over to self-publishing or independent media. I mean, I think you're a model example. You've been doing this forever.

• 58:14Speaker 00

  But also just like huge names that were on some of these large media organizations that just made the leap. And now they just have a YouTube show or they just have a show on Spotify. And so like, I don't even think we've reached the peak yet. I think, I think television is still in the process of being massively unbundled.

• 58:31Harry Stebbings?

  When TechCrunch Europe shut down and now Wide Europe shut down, I coalesced the best writers in Europe. I had 10 million bucks from very rich billionaires to bring together the next generation. And then I sat down with my investing team and they're like, why the fuck are we doing this? We have no editorial control on them, just like OpenAI don't on TBPN. We can't influence it.

• 58:52Speaker 00

  Yeah.

• 58:53Harry Stebbings?

  What's the point?

• 58:54Speaker 00

  Yeah.

• 58:54Harry Stebbings?

  And to your point, editorial freedom is everything.

• 58:56Speaker 00

  Which is why I love Substack and why I like X and why I like YouTube and Spotify. I think these platforms are amazing.

• 59:01Harry Stebbings?

  Are you ready for a quickfire round?

• 59:03Speaker 00

  Sure.

• 59:03Harry Stebbings?

  Single best first founder meeting you've ever had and why?

• 59:06Speaker 00

  Bryn Putnam, CEO of Board. Have you seen Board? Tabletop gaming console, just announced Series A a few weeks ago from, from USV. When I met Board, when I met Bryn, I was blown away. Force of nature founder, such clear vision, such deep domain expertise. So prior to Board, which is a beautiful tabletop display, Bryn was the founder and CEO of Mirror, the Mirror Workout device, which she sold to Lululemon. She took that domain expertise and said, I know how to build a tabletop gaming console now with the same hardware and the same supply chains and just crushed it. When I met her, I walked out of that meeting and I thought to myself, I have to invest in this company.

• 59:47Harry Stebbings?

  One of the single greatest Xs also.

• 59:49Speaker 00

  She's brilliant. She's brilliant.

• 59:51Harry Stebbings?

  You can invest in one seed fund. Which seed fund do you invest in?

• 59:55Speaker 00

  I'm a big fan of what Matt Hartman is doing with Factorial. Factorial is a fund, do you know Matt and do you know?

• 1:00:03Harry Stebbings?

  Dude, I met Matt years ago when he was at Beta Works with John.

• 1:00:06Speaker 00

  Yeah.

• 1:00:06Harry Stebbings?

  And I went to Beta Works and I remember they had a company called Poncho. Do you remember?

• 1:00:10Speaker 00

  Yeah, of course. You, you mentioned weather, chief weather officer earlier.

• 1:00:14Harry Stebbings?

  Yeah, dude, I'm like old.

• 1:00:14Speaker 00

  Poncho's the original chief weather officer.

• 1:00:16Harry Stebbings?

  Yeah, and so I remember them doing better work together.

• 1:00:18Speaker 00

  Matt's brilliant. So Matt has innovated on a completely new model of venture where he arms angel investors. These are not scouts. These are angel investors. He arms them with additional funds on top of their own capital, which then Factorial, obviously then, you know, monetizes through carry and whatnot. But the brilliant thing about that model is now he's got all these great angel investors part of the Factorial network. You know, these are people like Clem from Hugging Face, like real angel investors. So I think that's brilliant. Second answer, I would say tied for, you know, my favorite seed fund has got to be Haystack. I'm just a huge fan of Samir and Divya and the work they do. It's an incredible fund. Obviously, they've produced some generational outcomes.

• 1:00:59Harry Stebbings?

  Who, when they send you a deal, is the highest signal of quality?

• 1:01:02Speaker 00

  I was really fortunate at Lightspeed to collaborate closely with Nat Freeman and Daniel Gross before they, they went over to Meta. And yeah, when Nat would send me a deal, which he did on multiple occasions. And, and by the way, that's actually how I met Mikey from Suno. You know, I always knew to pay attention. You know, if Nat's sending me a deal, uh, I gotta pay attention to that.

• 1:01:21Harry Stebbings?

  That's the greatest shame in venture about them not investing me, which is so good.

• 1:01:25Speaker 00

  So good. Yeah, they're great. Love those guys.

• 1:01:27Harry Stebbings?

  Oh my God. What is your favorite growth fund if you were to invest in one?

• 1:01:32Speaker 00

  I think the Lightspeed Growth Fund is phenomenal. Again, they've done Anthropic, they've done XAI, they've done SpaceX, they've done amazing, amazing investments over the past. I mean, over the history of the firm, but really over the past four years of AI, they've been phenomenal.

• 1:01:46Harry Stebbings?

  What is your biggest lesson from working with the legend that is Fred Wilson now you have done?

• 1:01:51Speaker 00

  One of the biggest lessons I've learned from Fred is that there is really nothing more important than your relationship with the founders. A, because that's probably the best thing you can do to help a founder is just to be there for them, right? Like, that's what founders need. Founders are lonely. I, you know, I could tell you as a former CEO, it's a lonely, punishing job. And so just having somebody you can actually trust and actually feel you're aligned with is very, very important. But, but secondly, you know, selfishly, I think reputation is everything in this business. You need a great reputation. And the only way you're going to have a good reputation is if you have great relationships with founders.

• 1:02:28Harry Stebbings?

  What's your biggest parenting advice? I heard that you are an incredible papa. You're also a great investor. What's the biggest parenting advice?

• 1:02:36Speaker 00

  I feel I was extremely fortunate growing up in that I had parents that were extremely supportive of me and my interests, but who also did not pressure me in any one direction. I'll give you an example. I grew up in a home where baseball, an American sport, I don't think it's very popular here, was a very big deal. Baseball's a very big deal. And I played some baseball growing up, but I didn't continue with it. And, you know, I think there are a lot of homes like that in the United States where, you know, if you're not playing the sport or going to the university or pursuing the career in the thing that the family really cares about, you're a failure or you get pressured into sticking with it. And, you know, my parents, my dad, who, you know, former coach and baseball player, great, what do you want to do next?

• 1:03:21Speaker 00

  And I think that that is so important. And it's definitely something that I really try to remember and try to instill in the values of my family with my kids. You know, I really want my kids to do what interests them, but I never want to pressure them to do it. I want to support them. You know, I want to be there for them. I want to drive them to practice. I want to do everything I can to empower them, but I never want to pressure them too much.

• 1:03:44Harry Stebbings?

  I remember calling my mom and telling her I was dropping out of law school to do this podcast that made no money, having worked so hard for years to go to law school. She was like, cool, if that's what you think's best.

• 1:03:54Speaker 00

  Yeah. She might pressure test you, right? Hey, are you sure? Like, talk me through it. Talk me through it. But once you, I'm sure once you, or no, not even. Okay.

• 1:04:02Harry Stebbings?

  I said, listen, I fell asleep in the first law lecture and I skipped and that's for you. And she was like, I think law's not for you. Yeah. But penultimate one for you, what have you changed your mind on most in the last 12 months?

• 1:04:13Speaker 00

  I do think that there was a moment not that long ago where, where I, and I know I said the opposite a few minutes ago, but where I thought the model providers could do everything. I did. You know, I, I, I thought that we were headed towards this world where there would be one company or five companies that would just do everything. And I think fortunately, what I've been reminded of over the past year or so, or two years, is that companies can't do everything. They can't do everything. Even the biggest companies can't do everything. And I'm, and I remember, oh, man, 10 years ago, 15 years ago, we thought the same thing about Google. We thought the same thing about Apple. We thought these companies are going to just take everything. And the reality is they can't and they don't. And so I've been reminded of that recently and it's, and it's been a surprise and I'm, I'm glad for it.

• 1:04:55Harry Stebbings?

  You work with Fred, who's obviously been around the block a few times. I don't work with him, but he's my papa, is Roy O'Driscoll from Scale, who likewise has been around the block a few times.

• 1:05:05Speaker 00

  Yeah.

• 1:05:05Harry Stebbings?

  He got into venture the same year I was born. And he reminds me that Microsoft, at one point, were looking at becoming a bank. That is how like the incumbents just looked at everyone.

• 1:05:14Speaker 00

  Totally. It works sometimes, right? AWS, great example, but they can't do everything.

• 1:05:19Harry Stebbings?

  Final one for you. When you look forward to the next five to 10 years, what are you most excited for? I like optimism. What do you like? This can be amazing.

• 1:05:28Speaker 00

  So my partners the other day, Rebecca and Nick, we asked each other actually, like, what are, you know, what do you want? What do you, you know, what do you want to do at USV? And I said three things. First thing is I want to show up to work each day and collaborate with people who I love being around, people who I enjoy collaborating with, people who I just have fun with. That's actually number one for me. Number two is I want to partner with some incredible founders. And again, like similarly, I want it to be about that relationship and that dynamic, you know, and I want these founders, obviously, who are going to change the world. And number three is I want to produce generational returns in terms of funds, in that order. Number one for me is show up to work, have fun with the people I work with.

• 1:06:10Speaker 00

  Number two is partner with founders who, who I love and who I believe can produce generational companies. And then number three is produce generational returns as a fund, in that order. And I think that's a good recipe. I think if you optimize for fun and like enjoying your day to day, good things will happen.

• 1:06:27Harry Stebbings?

  Mike, I so appreciate you taking the time out on the London trip. I so appreciate you putting up with my bold stances as you recoil back and go, don't, don't, don't attribute it to me.

• 1:06:35Speaker 00

  Cut this, cut this.

• 1:06:37Harry Stebbings?

  Don't attribute it to me. I, I really appreciate the decade-long friendship now.

• 1:06:41Speaker 00

  Unbelievable.

• 1:06:42Harry Stebbings?

  You are a star, dude. Thank you so much.

• 1:06:43Speaker 00

  Oh, he does.

• 1:06:46Harry Stebbings?

  But before we leave you today, founders face a different set of challenges at every stage of growth. For Sid Shait, co-founder and CEO of Dematrix, JP Morgan delivered the guidance and expertise to help navigate what came next. He credits JP Morgan's high-touch approach with supporting Dematrix as it grew and expanded internationally. Whether you're in the early days or expanding into new markets, JP Morgan helps startups navigate complexity with real confidence, offering personalized guidance and deep sector expertise. Find out how JP Morgan helps founders at jpmorgan.com/growwithoutlimits. JP Morgan is the bank of the innovation economy.

• 1:07:30Harry Stebbings?

  While JP Morgan powers your finances, Navan keeps your team moving. If you're a finance professional, you know the month-end nightmare chasing down missing receipts and fighting with outdated tools that your employees hate using. It's time to enter the era of Navan. Navan is an AI-powered travel and expense platform that gives you control and real-time visibility into every dollar spent. The experience is seamless for employees, too. They can book a trip in just seven minutes, which is a fraction of the 45-minute industry average. Because the AI handles policy enforcement automatically, you can finally focus on driving business impact instead of manual data entry. How does saving up to 15% on your total travel budget sound? Pretty good?

• 1:08:13Harry Stebbings?

  Well, that's why the world's best companies like Visa, Figma, Stripe, and Anthropic already have made the switch. Visit navan.com/20vc to get started and enter to win two business-class flights anywhere in continental US. No purchase necessary. Rules apply. Check it out today. While Navan keeps your team moving, Base44 helps you build faster. You have the idea, but with most AI tools, you hit a wall. The setup, the config, the gap between what you pictured and what you actually ship. Well, Base44 is where that wall disappears. You describe it? Yeah. Base44 builds it. Apps, websites, AI agents, real working products built in minutes using nothing but plain language. And it's all batteries included.

• 1:08:55Harry Stebbings?

  The backend, the database, the authentication, the hosting, the heavy lifting is handled. So you just really stay in the flow. This doesn't just take the busy work off your plate, but it gives you an advantage and pushes you past what you thought you could build alone. So in this market, fast is the baseline. To win, you just have to be first. Base44 is that edge, the move that skips the troubleshooting and gets you straight to the breakthrough. Build your next thing at base44.com. That's base44.com.