Hey, everyone, and welcome to Generative Now. I am Michael McDonough. I am a partner at Lightspeed. We are in the final stretch of the year. And so I am back with my friend and fellow investor, Samil Shah. We have another Generative Quarterly Conversation where we ask each other if 2024 lived up to our outsized expectations for AI. And if so, what do we do?
Samil and I also dissect all the trends of 2024, driverless cars, AI devices, Jensen Huang's rock star status, and the tech takeover of DC that we expect in 2025. So take a listen to this conversation with Samil Shah. Hey, Samil. Mike, how you doing? Doing well. Doing well. Good to see you.
I don't see you all. We talk a lot, but I've never seen this background. So... I'm on the move today. Out of the home office. How long have you had this office? Oh, it's just...
downtown, like just recent. It's just downtown. It's very central. It's just an escape hatch. Got it. Got it. Yeah. Well, it's been, it's been a big year, obviously 2024 ton of ton of momentum, continued hype around all things AI. But I think a lot of people, when you really dig in, feel like it was a little bit of a letdown. Like 2023 was the year of like, was the breakout year.
Right. And then 2024 was a little bit of reality setting in. I don't know. I mean, I think I don't know what people were expecting or maybe their expectations were too high, but it seemed like there was a lot of technical advancements and a lot of really smart people building in and around AI and continuing to build. And it's sort of up and down the stack. I mean, you see
you know, you see people starting new things that people like us or around us are really excited by. And you see large companies making, you know, huge CapEx investments in it. So it feels like it's just taken over the entire conversation, you know? So from, from my view, like, um,
So it seems like tech advancement in and around AI up and down the stack is still moving. If it's a letdown, it may be that like some of that could be pricing related or just momentum related. But those things kind of wax and wane, I think. Well, so pricing related, that's actually another thing I want to talk about, like fundraisers.
But I think progress seemed to stall a little bit. I think a lot of people were expecting GBD-5. I mean, how many times were we hearing, oh, GBD-5 is right around the corner? Like, if you think about how the models sort of act today as opposed to a year ago, I don't know. It doesn't feel that different. Even like some of like in the media formats, you know? I mean, I think a lot of people probably just assumed that
you know, like I think folks that we work with in our industry, this is a good skill because the following skill, they sort of extrapolate very quickly of what can go right. And then they conflate that with it should happen soon. And I think the reality is that like, you have to take the good with the bad. I think the good is that like people would just assume like,
If you listen to Friedberg on All In Pod, he'll just say, "Yeah, you'll be able to just narrate a script and a background and audio and everything and create your own personalized movie and content." Yeah, you will be able to do that. The question is when and for how much. When you add time and money or compute in this case as a vector, I think people's expectations might just be a little bit out of place.
Yeah. Yeah. Maybe it's like we had our minds like so blown in 2023, just like absolutely blown. And then you start thinking about what's possible and believing that everything you're thinking is possible. And by the way, it probably is. But given the rate of change in 23, maybe it was unrealistic to assume that that rate would continue in 24. I also just think like the cost will catch up with people. So I think I view it as all like
very positive and people would compare it to iPhone moment and putting a computer in a bunch of people's pockets. I think this is bigger. I'm more like the Peter Thiel sort of, what he said, I think he said on Rogan, it feels more like the advent of the internet and potentially bigger in terms of capture, value capture. I think the question is when
And how much will it cost to get there? And I think those are just unclear. When did you start thinking like, this is bigger than the iPhone, this is the internet level? When did that click for you? Was that this year? Was that last year? I'd say kind of last year and clicking more. I just think of it as like,
you know, I'm sure you've talked with Nabil about this, right? There's a there's a horizontal thing. I think Jeff Bezos just talked about this a few weeks ago at the New York Times Dealbook Summit. So, yeah, probably about a year of just thinking like the Internet connected different people and created networks and created an excuse for different graphs, you know, including e-commerce, et cetera, et cetera, et cetera.
This seems much more, even more horizontal in the ability for like more and more networks of computers rather than just people and agents working within those networks to do things 24-7. And so, and to go into different fields, to pull together research, make research a reality, all those sorts of things that we can pontificate about, like to me, it's just a matter of when.
Yeah, no, I agree with that. I agree with that as well. Maybe one difference is that the tough part about it, and Teal goes into it on the Rogan podcast from the summer, but like the internet sort of leveled an economic playing field for folks who had access to the internet and could read, write content into the internet. I think the value captured here may go to like fewer people.
and so could be more disruptive economically that way. And so I don't really know what the implications are of that. But I would say like listening to Lex Friedman, Marc Andreessen podcast or the Teal Joe Rogan podcast, those kind of things when they talk about AI and value capture, those seem pretty solid arguments. I wouldn't take credit myself
Who is the small group of people? Is that saying because it's expensive? Because there's a finite resource that you need to be able to access this stuff? Who has that resource? Well, you can think about it, right? There's the chips, the data centers, the energy. People have already started peeling back all the layers of what's needed to go. You can read the tea leaves from the CapEx expenditures.
And so, you know, people want it to be there and it's just, it's kind of a railroad time. So people are buying the land, building out the data centers, storing chips, building new chips. Like, so the innovation piece and the economic activity associated with it is fantastic. I mean, it seems like it'd be hard to imagine anything like this in our lifetimes.
Frankly, don't you think like we could also get to a place where this stuff is just as accessible as the Internet is? And in that in that respect, like, does it does it then become more democratized than just like a select few having access? I think this is like the open source argument that you and I have talked about before. And I do think there's there's good arguments for having open source capabilities. There's good arguments for having closed source capabilities.
uh networks for security uh security reasons things like that i don't really know which way it's going to go and maybe it's both maybe it's open source with managed services on top i i don't know i mean it feels like it's all moving so so fast but i wonder if like the costs and the the costs are catching up with all of us you know
That to me seems like a big unknown. And, you know, the line I've been using with other investor friends is like people in our industry have conflated the this sort of inevitability and the intoxication of the possibility of what these this horizontal shift can bring with like at any price. And so, you know, again, it's sort of cliche now for VCs to talk about that.
I've just never known how to like price growth deals to begin with before AI. And now it just seems like totally it's there's no rhyme or reason for it. Yeah. Yeah. That makes sense. All right. So that's so that's like that.
what I was calling stalled progress, but maybe that's actually not right. I opened that last one up with sort of like, hey, there's been a letdown here, but now let's hit sort of the other side of the coin, which you alluded to at the beginning of that topic, which was sort of pricing, funding. We saw some of the biggest fundraisers ever
in the history of venture over the past year. Two XAI rounds, or sorry, one confirmed, another there's rumors of that I've seen in the media. Maybe by the time this episode drops, maybe that will or will not be confirmed. We'll see. Obviously, the OpenAI funding round, what was that, $150, $160 billion valuation. These are just crazy numbers, right? These are big, big numbers. To your point of maybe at any price...
Yeah, I don't know. What do you think about this? I mean, we were basically in we were in a trough of a trough of sorrow for NBC for a couple of years. And now we're literally seeing the biggest funding ever. What stayed the same is that there's just these compounding effects everywhere.
You know, you combine VC excitement and the huge funds with the scale and opportunity and intoxication of what the open AIs and X.X AIs of the world can do. And you get a lot of intoxicated behavior, but it may lead to like good times. You know, you don't know.
I think the one thing that's different now is that maybe from the last couple of times we talk about this topic is that every quarter it feels more and more likely that like, oh, hey, SpaceX may stay private forever. And like OpenAI may like stay private forever. And like maybe perplexity stays private forever. Like that feels like an unknown. And I don't know if you know this guy, Mark Rowan, he's...
I think he's one of the co-founders or like co-CEOs of Blackstone. He's someone I follow online because he's just, when he gives an interview, it's like extremely well-reasoned. Like he's, I don't know like half of what he talks about. And any recent podcasts that he's been on?
Yeah. I mean, if you search on him on YouTube, I mean, he definitely gives interviews, but he's selective about the interviews, you know. But he was saying, now I'm parroting what he's saying. This is not my own thought. But like, he had something that stuck with me, which was, you know, he said for like the last 30-ish years that he's been in the business, the conventional wisdom has been that like,
hey, if you're a large investor, public markets are safe and private markets are risky. Okay. And like, that's probably how you and I grew up. His view now is like, that's actually flipped. There's been a realignment where like potentially for long-term large institutional investors, private markets offer more stability and actually public markets are riskier. And, and
I'm watering down his argument, but like, I think what he's saying is that like the the intense liquidity and like algorithms running these these public market trades distort value versus like and create a lot of problems. So it's the old and recent argument of like, you know, 10 years ago, you know, why would you go public when you're you're basically being you can be beaten down any day or any week by an activist or an algorithm, basically.
And so now that technology is also there. So like if you read Matt Levine from Bloomberg, you know, it's basically a solved technology problem that you can run these tenders now and do that. So open AI is doing that. So I think that's the one thing that's really changed, which is like if there's more and more money going into private markets, more and more companies wanting to stay private. This is the 10 decade ago and recent argument coming to fruition today.
And enough liquidity where like people inside OpenAI, they can leave as like, you know, with eight figures, you know, before an IPO. It seems like in that chain, it's better for everybody. Right. Now, I don't know how many companies will reach that level of demand. You know, that's probably the bottleneck where it's like you have these premium, premium assets. Yeah. What does that do to venture?
I mean, I think we're starting to see they have to become multi-strategy and part of the multi-strategy quote-unquote
is to like rotate in and out of things before IPO. So like the traditional conventional wisdom is, you know, the benchmark model, you join Mike McDonough starts a company, it's starting to scale, you join at the A, you take 20%, you join the board, you're with Mike and the co-founders for the rest of their journey, you train them to go public, and then, you know, you book a return. Maybe you trade in and out more of these things.
A lot harder, though, right, to trade in and out, especially if it's not one of those like super premium companies that you mentioned. Yeah. So then it becomes like if you go IPO, it'll sort of be like, oh, if you're going IPO, you're actually not one of those top 10 premium companies. Right. OK. Right. Yeah. I guess in that in that world, does the bar get lower to IPO? Yeah.
This is out of my zone of competence for sure. But what I've heard from other people, and I always go to the Goldman Sachs annual tech event right before Thanksgiving in Vegas. So this is actually pretty topical because I talk to a bunch of people about these things just to learn. And essentially, like the way the math has worked, because basically if you're an investment banker the last three or four years, you haven't had IPO revenue, right? You've had no M&A revenue.
Right. Right. So it's just super dry. And even before that, the bar used to be like when you had Anchor or I started in Venture, can your startup get to 100 million of annual recurring revenue with some growth? That's the bar. And then you can be public. Now it feels like it's 300, 400 million. Yeah. Yeah.
And there's like technically you can, I think, do a smaller cap listing. But there aren't banks out there willing to do that because it's basically all the banks have gotten really big. Yeah. And then the other thing that I think Freedberg, I can't remember what episode it was on All In, but Freedberg had a good review of like the Coinbase and Slack listing where like generally there's two types of IPOs, if I'm paraphrasing him. There's ones where you can actually go IPO and also raise capital as part of it. Yeah.
And that has lockup requirements. Or you can do these direct listings where you list on an exchange. Oh, Spotify was. Yeah. And you would know more than me. And you're not raising capital and everyone's liquid as soon as you hit the exchange. Yeah. I think there is still a lockup. I could be wrong. But yeah. Different idea, though. Different idea. And so maybe we see more people doing that. I just don't know. Like.
I don't know how it changes VC because if the funds keep getting bigger and these companies start growing faster and there's fewer of them, there'll be a race flight to quality. And, you know, the current generation of entrepreneurs, I don't mean this pejoratively, like the majority of them, even if they reach scale, like don't know how to take that next step and sort of say, hey, we have to go public or, hey, we have to sell or, hey,
Can we stay private longer? It's very difficult. Even some of the best CEOs I work with who have scaled to that level still don't know exactly what to do. Yeah. Super interesting. Yeah. I wonder if we'll see more opportunities or options for private companies.
to seek liquidity or find, you know, or enable investors to sort of like swap in or swap out. Like you're saying, I don't know what that looks like. I'm also, this is not my area of expertise, but that could be super interesting. I mean, SpaceX is probably the HBS case study on that. Yeah. You know, let's talk about these, these sort of like AI device flops. You know, there were a lot of like startups this year that tried to bring AI to physical devices. Talk about incumbents too.
but at least from the startups or these very hyped products, Humane, The Rabbit to a certain extent, a couple other small ones here and there, they all just kind of flopped. I don't know. That was, I don't know if that's necessarily surprising, but that's certain to be a little bit of a, it seemed to be a little bit of a theme this year. Well, I want to, I want to learn from you because I know you spend a lot of time on this. So like your, your take will be a hundred X better than mine. I think that, um,
In the consumer device, let's say consumer AI device lane, you're adding a lot of risk factors already to something that's risky. So it's like, do I want to purchase new hardware? Do I want to connect it to my phone? Do I want to charge a new thing? And all these sort of things. So when you add all those layers or barriers into consumer behavior, the benefit has to like
10x outweigh all the work and overhead you have to do. And I'm sure something will pop up. I just don't know what it is. And then the other vector is like, I can't remember if you and I talked about these like Ray-Ban meta, you know, that's something I think that's just super interesting. And I use those a lot in the summer. Oh, really? Oh, yeah, yeah. The ones with the AI in them? Like the overlay and stuff?
No, I have the last version. So like, I'll get the new version, but I'm, I'm just a huge fan of that with like the music and like not having your AirPods in. So I don't know how that'll change all of that too. Like, I'm not really sure, but, but I think maybe, maybe to, to wrap on that, like, I do think something like a key fob or something that you could just talk to or ask questions to that's like just voice, you know?
i do think that will happen at some point but but again it could be the watch too yeah right i think a lot about the watch i i feel like the apple watch is in very theoretically i mean i also think apple's made some mistakes here with ai so far but like in theory the apple watch seems like a very very important opportunity for in the airpods right and the airpods and the airpods absolutely yeah
I completely agree with that. What's your view as an investor, though? Like, obviously, you have to track all these new consumer AI advice coming. You probably want one. You probably want one for yourself. You want it to work. I buy all these things. Like, as soon as they come out, I buy it. You know, I preorder them. I've got one coming, I think, within the next couple of weeks.
Yeah, partially because it's my job, partially because I'm, you know, I'm just I don't know, I'm I'm I'm a nerd for this stuff. I remember getting like remember the Pebble watch back in the day. Like, I think I got like the first Pebble watch. Like, I'm just always into this stuff. But no, I think as an investor, you know, when I've looked at these, it's been it's been hard to sort of build conviction. I'm not.
I actually am an investor that sort of, I try not to have too many hard and fast rules because nobody knows anything. So just buy and try everything and see what clicks. No, I guess I'm just saying I'm never going to be like, I will never invest in a hardware product. I just, I don't know, maybe. But I do think as the year has gone on, it feels hard for me to...
rationalize some of these things. I just think there's so much risk as a startup in, you know, the supply chain for hardware, getting the technology right, and then going up against obviously the incumbents. And isn't open AI like working on a phone? Open AI is working on stuff. Yeah. I mean, I saw something recently, a startup product technology, super cool, like almost nothing bad I can say about
the product, the technology, but it's like, yeah, it's gonna take us three years to get this thing to market because of, you know, the supply chain and stuff. And three years just feels like an eternity, especially in AI land, especially when we already know these incumbents are building these things. You know, when all these, these smart speakers came out, Kindle, Google home, you know, and then to some extent Siri plays in this world with the watch and the phone, it was a problem that these things are all on different platforms, but
The problem was somewhat mitigated by the fact that none of this stuff was actually that useful. Right. They were they were they were just setting, you know, setting timers and playing Spotify and whatever. But I think the moment this stuff becomes really good, I think that fragmentation becomes kind of a problem for the user. Yeah, I totally agree with that. I think that's a great insight. I'm actually wondering if.
The best positioned company here is the company that can do this horizontally. Well, that's what like that's like Xiaomi in China, right? Yeah. They basically took over your home, which Apple tried to do. And they have a good position with their mobile devices, Apple TV. But they've really they really haven't invested in Apple TV. Yeah. I think I know you talked. Oh, by the way, I listen to your NG pod. Yeah.
Yeah. That was great. It was great to hear his- Larger than life, MG. Totally a legend. I think he's been talking about just then actually doing a TV, you know? Apple? Yeah. Yeah. He's talked about that before. I'm thinking very specifically about OpenAI. I think if OpenAI can become indispensable to the consumer-
they will be in a really strong position to integrate with all of these players and be that horizontal glue that kind of connects all the devices agnostic of who made them.
I see. So they would go to the hyperscalers and basically say, give us premium access. And then that could be the control point to telling it what to do and learning your preferences. Totally. You can already see this. They have the integration with the iPhone.
Right. Imagine that makes its way into the HomePod. I don't I don't even know if people still buy that. But like and they do something similar with Google. I think that's a bit of a long shot because Google obviously has Gemini and they're going to lean really hard into this. But I don't know if you fast forward five years into the future and open AI is the dominant AI and sort of voice interface.
I don't know, maybe they're in a position where they can do this. This was actually a huge part of Spotify's strategy. And it's fairly well known that Spotify, you know, from very early on, really focused on what they call ubiquity, which is being ubiquitous across all platforms and devices and just and being present and being there. And that gave them a big boost.
leg up and leverage over, say, Apple Music, which wasn't available on Google devices or in your car or on your smart speaker or on your Google Home or your Alexa, right? So I wonder if OpenAI can do something similar. Yeah, I hadn't thought about that way. I mean, your insight is right. Like, if I were to summarize what you just said, which I had never thought about before, the fragmentation of all these home devices and
didn't really pose a problem to folks like you and I or people at home because the service capability was limited.
But if it gets to my Spotify, you know? Yeah. But if it gets to a point where the ad gets really good, the fragmentation across these platforms will be a problem because then it's like, I want to just connect my Spotify to my Sonos, to my Amazon, to the, and I wanted to know my preferences and know what I ate for dinner last night. Yeah. It's too much of a loop. So like, yeah, what's the glue, the personalized glue that brings it together. That, that,
that future that you articulated feels more likely than one of those platforms dominating it.
because they haven't shown they've shown weakness in a lot of these categories yeah i think google could win that um i i put more stock in google to win that than apple actually i don't know well they've done that a little bit but like pixel they they need to flood the market with pixel they need to flood yeah that's i was just gonna say that apple's got the hardware advantage google's got the software advantage i feel like yeah they would need to make pixel as popular as the iphone
Yeah, that's fascinating. I hadn't thought about any of that. I mean, I've kind of given up on the smart home view. So I think that's a super interesting thesis. Do you use it? You don't have like smartphone home stuff? Not really. Really? Like you've stopped over the years or? I just was never really interested in it. Like it feels like the juice isn't worth the squeeze. Yeah, it's pain in the ass. I have invested in it quite a bit and I have...
I have a very connected setup. I've got cameras. I've got thermostats. I've got hubs. We have that, but it's all just different platforms and it's like a point solution. So I meant like trying to connect everything in some kind of harmonious way just felt like...
A mile too far. Yeah. So I did that. And I would say it's it's a pain in the ass, I think, to your point. And it's brittle. Brittle. Yes. Yeah. It's like doing an off connection to like LinkedIn. Right. It's worse than that. Yeah. It I actually had a huge problem with it recently where like I was trying to add all these cameras, but they weren't working properly. And so.
I like removed some cameras as a way to almost like reset it. And it just blew up my whole setup. There was like a bug and it just zapped my whole setup. Meanwhile, I have cameras like hanging off the roof that you have to physically scan to reconnect them. Like it's, I had to get on a ladder. Like it was. You're a better person than me. I just would give up. It's just not worth it. Next thing we should cover 2024 sort of surprises. Jensen is a rock star.
Like, like possibly we've never seen a tech CEO be a rock star before. This is a guy who was literally signing autographs like on, on women's physical bodies. Like, I mean, I've never seen a tech CEO be a celebrity or a rock star like this guy. I mean, even Zuck, you know, Zuck, Zuck has become very, very, very, very, what do they call? Base, base Zuck. Yeah.
But Jensen arguably is even more of a celebrity than Zuck is. This this is out of nowhere for me. Yeah. I mean, I think it's a great story. And I think when he gives his interviews are so consistent and authentic. And, you know, if you if you listen to any of those interviews like they're
They're very, like his philosophy just seems very consistent. He's been doing this a long time. And I think he leans into the, it appears like, I mean, obviously he's got publicists now and people helping him, but it seems like he leans into the fun of it, but doesn't get
i think so yeah yeah i mean but like you know like you said these kind of rock star viral moments where he's had he you know he's pictures of him flying around the internet whether it's his jacket or you know signing people's bodies or whatever but i also don't think he's he gets enwrapped in the in the fame part of it where where like his humility doesn't get um overtaken you know yeah do you think how much you think is intentional
about his persona now, his public persona. I don't think you get up there and do all these interviews and like be calm and say these things that are your philosophy without it rooted in something deeper. Yeah. You know, I think people would see through that. And it's hard to find other CEOs. Like I think when you took, when you hear like a Bezos interview and he goes into like
how he designs a team meeting or something, you're like, okay, this guy's been through a lot of team meetings and really thought about how to do it. Like can't really fake that, you know, in terms of like the leather jacket or the, the rockstar moments, I think of it, maybe it's charitable that he's just like leaning or accenting into what he's already doing and just kind of layering in a little more mustard. Um,
But that's sort of how he is. I mean, how much is this the sign of some sort of bubble or stock price sort of inflated kind of mania? I mean, a couple of years ago, there were crypto celebrities that are now in jail, right? You know what I mean? Yeah. Yeah. Yeah.
I think because Jensen's been doing this for 30 plus years, like one of my mentors just said, like, he's been very successful, you know, like multiple companies he started, some in public, some were acquired for huge amounts. So he's just been around the block. And so he said he's seen people get obscenely wealthy at different ages. And he says, like, when people get obscenely wealthy, when they're really young, they're more likely to be a jerk.
But if someone gets it late 40s, 50s, 60s, they're a little more mature. So I do think some of that is at play here where it's just compounding at the end. I also think of Jensen, and again, maybe I'm giving him too much credit, as someone who's trying to make sure the mailroom guys and the secretaries and the people that work the grounds in NVIDIA go home with eight figures.
And I think he takes that pretty seriously, given his roots. I also think we may have done a pod like early this summer where like the bloom was coming off the rows of AI just like six months ago, a little bit where people were starting to like slow down and back up and they just blast the estimates every quarter, you know? So, so they are the straw that stirs the drink now in terms of,
this industry. And, you know, if you're thinking about the risk, like, I don't think of it as so much a bubble. I think even more is like the risks are greater given the size of the mountain. So like there's the China, you know, anti-monopoly sort of anti-trading risk. There's the
There's a risk around like, hey, if everyone, you know, you have this advantage in chips, like are other people going to be building chips? The data center wars, right? Government risk, like maybe they become so big and powerful that the government sets eyes on them. Like that's how I'd be thinking about it. But the chips part feels far away, right?
The China stuff, I'm not qualified to opine on. I don't know how that will work. I don't see the government going after NVIDIA because I think we're past that era now. I think people want to let this stuff loose. And if one company becomes a $10 trillion company, so be it. Amazon will be a $10 trillion company. NVIDIA probably will become a $10 trillion company. Google will probably be a $10 trillion company. So that's the trajectory we're on where the overall...
The flood of money around the world is coming here. Markets have basically survived into a soft landing. Like two, three years ago, we wouldn't be talking about all this stuff. We were thinking the world economic engine would die. And then basically, you know, we're entering. I think people after a number of years of like regulatory crackdown are sort of the gloves are off now.
And so it just feels like there's going to be a lot of room to run. So maybe a new kind of bubble. I don't know. But that's where fortunes are made. Good opportunity to transition to a little bit on the politics side. You know, Trump won. We don't need to necessarily get into whether or not that was or wasn't a surprise or like we don't need to get in like personal politics, but maybe sort of the implication of that on kind of tech politics.
and the tech takeover of Washington, D.C. Was this a surprise? And by the way, you know, obviously lots of people from our industry
Now moving into VC, we've got David Sachs, new AI czar. We've got other folks from the industry moving in. Congrats to all them. But yeah, was this a surprise to you, this sort of tech takeover of DC? And what do you think we have to look forward to? I would characterize it a little bit different. I don't think of it as like a tech takeover. I just think of it as like a reorientation around how the government works.
from the viewpoint of the United States government, their stance towards enabling, supporting, accelerating technologies, both for the domestic economy and increased opportunities for folks, and also internationally as a competitive advantage and security posture. Okay. So
It feels pretty clear and like an apolitical statement almost to say that like that has changed, felt like it's changed 180. And I think that it has unleashed a lot of enthusiasm around tech from when before it was sort of like, I don't know what the right word is, but like gun shy, you know, not really sure how to interact with the government, you
So will there be negative effects of this shift? I'm sure unintended consequences, but like overall, it seems very positive for the economy. It seems really positive for proliferation of technologies. Again, some of those could have, you know, in the short term, adverse effects like robots and AI and labor force stuff, um, or call centers, et cetera, or crypto, right? Who knows? Um,
But then also I think it's a more real politic view of how the world is interacting and how states are interacting with each other and the type of warfare that is now being conducted or the type of espionage that is now being conducted. It seems a more real approach to those situations. So I think that those markets for entrepreneurs, for investors like us,
We'll have a lot of room to run if that kind of openness stays now, because it's actually very tough, regardless of what political candidate you're for, which party you're for. It feels like that genie is now out of the bottle and it would be very hard, especially from that international competitive point of view and the security posture point of view to actually go back. Yeah.
I think that's right. And, you know, one thing I am definitely wondering about and curious to get your take on it is sort of the conversation we were having earlier around public markets versus private markets versus M&A opportunities. Like, what do you expect the near-term impact of these changes to be on our business, business of startups, VC? This is what I talked to a lot of people at Goldman, the Goldman event about too, which was kind of, again, I'm just parroting the synthesis of what I heard. I don't know.
But a lot of, I talked to a lot of bankers and a lot of large investors, institutional investors and large investment funds. Basically, they felt that in terms of IPOs, like
They're not expecting 2025 to be like a watershed moment for IPOs where like there's just a flow of lava underneath a volcano that just erupts because of pent up demand. I think that they view it as like a trickle for next year and it will take a while. And can you explain that a little bit? Like what's behind that?
I think just like, I don't know. That was just a consensus view. I really don't know. I don't know. Um, when I, when I started repeating that to other people, they were like, yeah, I believe that too. I believe that too. Like, it's just not going to change overnight. Um, I think people maybe want to see what the next three to six months also bring. Like there could be a lot of just change that it's hard to model for, you know, a lot of distraction out there. Uh,
And then in terms of M&A, like I think a lot of people, again, this is the extrapolation of people in tech when they're very optimistic. Like, yeah, we'll just start again. I'm not sure it will because the rules are still the same. Like you still have to disclose the stuff. I do think there'll be less of a fear of like M&A scrutiny. But again, I don't know how many high quality assets are there, you know, to actually pick from.
And they may take that three to six months to just wait and see like what's actually going to happen. Are these nominees going to stick? Are they going to what are their first moves going to be? So I think in 2025, it's just a year of kind of like, let's see where the dust settles, even though it feels like overall like a good trajectory. I remember in the beginning of the pandemic or like the beginning of the downturn Ukraine war, like there were these memes on Twitter, like stay alive till 25.
And last year it felt like people's change into like, actually, I amend that, like stay alive till 26. Yeah. I, I think, um, I think I agree with you on the IPO side. MNA, I'm, I'm a little more optimistic for if it turns out that, you know, there is a, there is a regime change, which it seems like there's going to be. Um, and if that regime is more friendly to MNA, um,
My guess is, and, and, and maybe, and maybe your point is like, we have to like see, we have to like see proof of that. I think, I think I would expect a flurry partially because the market has been ripping now for a while. A lot of these big companies are sitting on a lot of, a lot of cash. Well, there's, there's a couple of things there. Like I, I want what you're saying to happen. I wonder the part I wonder about is how many things do people actually want to buy? Yeah. I, I,
I think they want to buy. That's my, that's my gut based on just, I don't know, people I've talked in some bigger companies. I think they want to buy. I think they kind of always want to buy. It helps them want to, it helps them move faster. Like clearly I think, and you know, like the, for AI companies, it makes a ton of sense, right? Like, and for these larger incumbents with big market caps and cash, like,
on the books, like it really makes sense to do that. And so that could be a real boon for the tech industry, you know, if that happens. But it feels like it has felt so dry and so restrictive for so long, it's hard to imagine that. Yeah. Yeah. Again, I think you probably need to see proof that like it'll be easier to buy stuff. But I think once that proof has been established, then I would expect the floodgates to open personally.
I'm not an expert on this. Who knows? Yeah. I hope you're right. Let's talk about one thing I wanted to get your opinion on. This is a little less focused on AI, just a little more broadly tech. But I feel like we're seeing a little bit the return of the emerging GP, like new funds. Oh, definitely. Yeah. New funds started by, you know, GPs at bigger funds. Every week.
seeing a lot of them what's going on here i feel like you're the guy to ask yeah and you and i've talked about this a little bit before but not directly like this and it's actually good timing it's a complete rebalancing so the way i explain it is that picture your 20 billion dollar you know university blue chip endowment they've been in all these great funds for years uh for decades even
And they've supported these franchises across growth funds and opportunity funds and SPVs. And then as a fund scale, their ticket size got bigger and bigger and bigger. And so what's happening now is that all of capital is moving down the stack. All VCs want to invest earlier. All LPs want to invest in smaller funds. It's all following the same pattern.
And so they're rebalancing and they're saying, hey, like John Smith is leaving this fund we've been in, you know, for three decades. We've had a great relationship with them, but now they're a $3.6 billion fund, like, and they've got a huge team. And like, what kind of return can we really drive? But John Smith is leaving and start with Becky Roberts, you know, this new fund, and it's going to be 225.
And we already know that. Like, I'd rather give them... I'd rather take the $100 million I gave the mega franchise, give them $25, anchor this fund, and run with them for a few funds because I have a greater likelihood of return. So that is happening a lot. They want to be in smaller funds. And so basically...
You know, at Haystack, I've always, maybe to a fault, kept it really, really small and constrained because I've always felt like the best governor on VC behavior is fund size. I think the same thing is happening now with some LPs where they're just like, if I can constrain this group to like start at $175 for their first fund, maybe they go to $225 for the next one and $300 for the next one. I ride them for three funds.
It's better for me than to be in the mothership at three, 10 times the size. But at the same time, they are also still funding large funds. You know, there have also been a number of these mega funds that have successfully raised over the past year. So that seems like a little bit of a difference. That comes back to the foreign investment, right? Where like more and more of that capital is coming to the U.S. from different parts of the world. And you have these countries that coincides with this trend where you have these countries that may have
let's say certain types of natural resources that are extremely economically valuable to them, but they need to diversify out. So it's happening at that time, you know. But are the endowments that would normally invest in the megaphones, are they literally moving their capital or are they diversifying? They have been for years. They have been for years. I mean, they'll stay with some. They're pulling out of the bigger funds. I mean, increasingly. Wow. Yes. Interesting. Mm-hmm.
I also imagine they're probably consolidating towards the winners in that class, right? Whereas they previously did a bunch of them. Maybe now they concentrate that position. I think now what they're doing is like, it's mainly focused in the Bay Area. Like my text and phone is off the hook with LPs asking me, hey, I heard this person's leaving. Hey, can you inform me that this person they're leaving? Right. So I become this conduit to all these people, um,
And it's no problem right now for people spinning out of funds, especially brand name funds, to raise $1,500 million. No problem. Interesting. Do you expect that'll continue in 25? Yes. Yeah. So yeah, that was something that was a little surprising to me. Sounds like not at all surprising to you. It's been going on. Yeah. This is a famous Fred Wilson line where he said, there's always these gaps in venture. So like,
you know, you've been now in venture over two years, you see like the traditional series A funds have scaled to billion, 2 billion, 3 billion plus. A 7 on 35 A, we could call it a C today, or it's not as interesting to move that amount of money or there's not enough meat on the bone for these larger funds to invest. So who's going to invest that round?
It's these people spinning out. So what Fred would say is like, there's a gap. Usually the gap lasts about two years, but people always fill the gap. So right now that gap is open. People are filling that gap. So you'll see a lot of funds saying, we'll do a seed in series A fund.
um you know we'll raise 250 300 million and if you're an lp that's been held hostage in a three to six million dollar fund and you feel like that's a burning building writing those new that new fund a 30 million dollar check is easy yeah especially if you know that yeah super interesting okay let's move on we we have a couple other things to get to one of the things i want to talk about is and this has been
In some ways talked about to death on podcasts, on the media. No, not Juan Soto. I would love to talk about Juan Soto. We have to end on that. Okay. It feels like there's a renewed popularity of podcasts.
Oh, renewed content. I feel like it was a podcast year inflection. Well, so, okay. I think that actually is right. I agree with you. I think maybe, maybe, maybe, maybe if I could sort of modify my, my explanation, I actually feel like a few years ago we hit peak podcast and everyone's like, that's it. It's over. We've reached the top of the mountain. And then this year happened. And I, and I feel like we, we just went further.
And and now it seems again, I know everyone's talked about like the podcast election, but now this almost feels like the true moment of disruption for traditional media as a result of YouTube shows, talk shows on YouTube, podcasts on both YouTube and Spotify. Yeah.
And there's some really cool, like new and interesting formats coming out. I want to shout out one in a bit that I think is super interesting. Yeah. What are your thoughts on this? I mean, I agree with everything, everything you said. Like I have no notes, like it is a juggernaut. I mean, when you combine the ease of background audio and AirPods, when you combine the power of search and YouTube and the algorithm and the recommendation system,
system they have um the fact that like you and i can just record a zoom conversation every week and publish it and like thousands of people would listen to it um it just shows that like people have this idle time and they want to they want to connect or or stalk or listen to different people um
The straw that's stirring this drink is YouTube. And if YouTube wasn't in this juggernaut position, I don't know if we'd be saying all this, right? Because YouTube creates, is like the container where everything goes and then everything is kind of clipped and parceled out from there into different networks and brings people in, right?
And so I think that is beyond a point of no return and also easier to access. Even I'm sure your kids, it's easier for them to search on YouTube and listen to a young creator than to find something on linear TV. They don't even know how to do that. Yeah. It is super funny when you're in, maybe it's the same with your kids. If I'm in a hotel room with my kids and we put on
TV. They don't understand the channels. They just, they think it's such a foreign concept. Yeah. It's really funny actually. Yeah. But, but going back to the podcast thing too, like it just doesn't really make sense. Like it, like to me, like if you, if you think about just like a traditional podcast format, like David Rubenstein, you know, the co-founder Carlisle has been doing this like great interview series on and partnership with Bloomberg.
And Bloomberg has its own TV channel, so they obviously have a lot of money and a huge media arm. And Rubenstein is connected to like a who's who of politics and finance, so he can interview anybody. Right. And he's trained at this. I think it makes sense to like create for YouTube and then distribute everywhere else.
So that he ends up on Bloomberg TV, you're just catching people who are stuck at the Bloomberg terminal or have Bloomberg TV on the background. But really, it's more of like, can you create a direct connection with your audience and have them trust you? I think Lex Friedman has done one of the best jobs of this. And I'm sure there are others, but like,
He's basically trained his audience to be like, hey, if you're anywhere interested in this topic or this person, like this will be a good experience for you. And it's very hard to imagine getting that anywhere else. One of the things that I have found exciting about it is you're starting to see like these new formats emerge because people realize the distribution that they have. And whereas I think in the beginning.
people were just sort of all following the same format. Now you're starting to see people experiment a bit more. There's a, I think there's like some big, well, I think there's some big, what's the big comedy podcast. You send me clips from sometimes where it's like, it's like a live talk show is a bunch of people on stage. It's super popular. I probably should know it. Tony Inchcliffe. Oh yeah. Tony Inchcliffe. Like that's like, that's a new format. Kill Tony. Kill Tony. Um, the one that I've been really excited about is, uh,
This thing, Technology Brothers. Have you seen this? No, you need to send me the clips. I didn't know what it was. I think it's super smart. It's Jordy Hayes, John Coogan. And yeah, basically, so it's a traditional long form podcast. They publish a long, I think a long episode to Spotify, YouTube, wherever. But where I see it and where I expect most of the people who see it, see it is just in clips on Twitter. And all of the clips are
are built around reactions to tweets. Oh, sure. So all it is is tweet reactions.
Which is genius because it's just like a never ending supply of content inspiration. Like they'll never run out of stuff to talk about. Right. And secondly, every time they do a clip, there's like this built in growth mechanic where they tag the tweet, tag the person they're talking about. Right. Yes. And people are excited to be like featured on the show. Right. This I always remember this line from Keith Raboy.
when Quora came out and people were wondering, like, why is Quora interesting? And he said it's like, he's like, facts aren't interesting. It's a judgment on top of facts. So if you think about it, the judgment layer on top of a tweet, like the tweet is a fact, that person tweeted it. But like the reaction or the judgment of it is actually what people are most interested in. It's probably why you and I and other friends, we share links to tweets in our private chats.
Because the judgment and conversation from it and proof of the public thing. I also think that format reminds me of something on TikTok and Instagram where you see people do these reaction videos where they'll transpose their face on top of the content.
as a reaction. So I do think people like reactions. Maybe that's the comment of the comment section of a podcast, right? Where it becomes more interesting than the original content itself or like the remix of it. Yeah. I think you're going to see a lot more people doing this on podcasts specifically. I think you're totally right about TikTok and Instagram. But I think we're going to see this more in podcast form. I wouldn't be surprised if there were a bunch of podcasts, people talking about tweets over the next year. Yeah. It's free content.
It's free content. Also, you know, it's the first time, obviously podcasts in general, I feel like for a while have been sort of optimized for clips and social sharing. But this is the first one where I feel like actually the first class form, the first class citizen in terms of the format for this show is, is Twitter like is the clips. It's not the long form. I've actually never even listened to the long form of the show. Um,
I only see the clips and I look forward to the clips. Also, these guys are just good. They have like a, they just like a good aesthetic sense of humor. Is it like snark or is it like. It's snark, but it's also like, I get a sense of self deprecation. Like they're aware that they're being very kind of on the nose. Like the show is called technology brothers, right? Tech bros. So yeah, it's self-aware. I think is the point. So that's been a fun one for me.
Yeah. No, I've always wondered about that too. Like, you know, is it better to just do your clips as like short form pieces or is it better to like record a bunch and then clip out the good parts? You know, I, I don't really know. I tend to be more of like the, the purist of like, you have a conversation, people listen to the whole conversation, but like, yeah, we live in a clip culture. Yeah. Yeah, exactly. They're leaning into that. We've got a few minutes, one soda. Yeah.
Juan Soto. I mean, this will be irrelevant. Congratulations. Thank you. Yeah, it's one of the few times in my life I feel proud to be a Mets fan. This will be irrelevant to 99% of the listeners. But yeah, I mean, that was a big moment. Actually, this is a technology moment, and I'll explain why. So if you are a Mets fan or a Yankees fan or a baseball fan,
You know, you were aware that this Juan Soto free agent signing was the biggest moment of the offseason. And I have never seen so many baseball fans just be constantly refreshing Twitter to find out the news. You know, people were glued to Twitter on this like it was the election. It was crazy. And, you know, I was doing this, but I also know a bunch of other people doing this, just constantly searching Twitter.
for any hint or insight about where he might go. Is he going to go to the Yankees? Is he going to go to the Mets? You saw polymarket screenshots being blasted across Twitter constantly. It actually was a tech moment. It was pretty fascinating. I just don't think we'll see in baseball a free agent signing like that, I mean, for a generation, if not longer. I don't think... Well, one, he's...
By all accounts, he's rejected two to potentially three long-term offers over $400 million by the time he turned. Yeah, he had done this before he turned 26. So he was waiting and waiting and waiting and betting on himself till he had true free agency, right? So most people would take the bird in hand. I think the second thing is that you've had this bidding war
where you have now private equity or hedge fund types like Guggenheim with the Dodgers and Cohen with the Mets, where their pockets run so deep that like someone was telling me a lot of these franchises, most of them lose money and some of them make a couple hundred million dollars a year after expenses and operational expenses and things like that. So when you can dip into your separate bank account
and take on more losses to build up a franchise. His timing is amazing where he had these people compete for him. And then if you look at it statistically, he's already got eight years of experience, basically, in the major leagues, already in the two World Series, 1-1. And his offensive numbers compared to most people now, just over a block of time, basically blows everybody out of the water.
Um, that all, all that being said, I think it was a crazy deal. Like, I don't think I would have done that deal because baseball to me is more of a team sport. One player doesn't make it. And, um, I think you, he's not a great defensive player. Um, or maybe it could be, it just doesn't try who knows.
And so to me, baseball is one of these sports where like these mega deals don't really make sense. But they never have like this one doesn't. But, you know, neither did judges. Neither did Pujols. The Pujols deal from 10 years ago or whatever. Like they haven't made sense in a long time. Yeah, I just I just wouldn't do them. I would invest in younger players, shorter contracts. And and yes, like maybe splurge on a star here or there. And like.
I just think you're paying him for like five to seven years of service. Yeah. Yeah, totally. A hundred percent. And like, we really don't have any leverage over his performance. There's a great interview with Steve Cohen. I think it was done a while ago. I would, I would, if anyone's interested in what we're talking about right now, I would encourage you to check it out. And Samil, I would definitely encourage you to check it out where he gets interviewed about his motivations for owning the Mets and buying the Mets. And,
and how he thinks about spending. And he admits in the podcast that he views it as a form of charity. It is a public service to Mets fans. Which is great. Which is great. Which is great. And I mean, if he's got that passion and like it's a market and he wanted the asset and like, let's go. I also think Juan Soto like may not recognize like the scrutiny on him to perform will be. Oh, it'll be extreme. Yeah. And he'll have his down years.
But when he's having his up years, he will be treated like a king. Oh, yeah. Yeah. Just look at Lindor. Look at Francisco Lindor over the past year. I mean, that guy is now an all-time great Met because of one season. Yes. It's exciting. I mean, I think it is a seismic event in New York baseball for sure. All right, sir. Always fun. Happy holidays. Happy holidays. We'll do this again in a few months. All right, sir. Take care.
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