Latest / The Learning Corner by Precursor / Episode #92: Working for Your AI Agent, Engineering Leaders Head for the Exit, What Capital Wants Now

Transcript

Episode #92: Working for Your AI Agent, Engineering Leaders Head for the Exit, What Capital Wants Now · The Learning Corner by Precursor

• 0:00
  Educating the market is kind of a loser's bet if you're an early stage company.
• 0:03
  How do you attach the thing you're doing with the thing that people already care about so
• 0:07
  that they pay attention to the thing that you're doing?
• 0:10
  And I've told a lot of founders in our portfolio, there's nothing wrong with your
• 0:13
  company except that nobody cares.
• 0:15
  It's just not that important.
• 0:16
  Yeah.
• 0:17
  And you just gotta understand that, like, there just might not be a venture audience because
• 0:21
  most venture firms just need outrageously large exits for the math to work.
• 0:25
  And if you're not one of those companies, you're literally not worth your time.
• 0:29
  It's the week of August 24.
• 0:31
  Welcome to the Learning Corner, a Precursor Ventures podcast.
• 0:35
  Welcome to the Learning Corner by Precursor.
• 0:37
  I'm Mia Farnham, and I'm joined by our GP and managing partner, Charles Hudson, where we will
• 0:42
  be talking through the articles and Goodreads that caught our team's attention over the past
• 0:46
  week.
• 0:47
  We're back in AngelList studio for a second week in a row, so we love being part of this.
• 0:51
  Thank you so much for everyone for making this happen.
• 0:54
  Our first piece this week comes from The Wall Street Journal written by Catherine Binley
• 0:58
  titled Startup Founders Are Working Harder Than Ever to Keep Up With Their AI Agents.
• 1:04
  The piece profiles a handful of founders who are discovering something paradoxical about the
• 1:08
  AI era.
• 1:09
  The more their agents can do, the more the founders themselves are working.
• 1:14
  From pulling all nighters to monitoring agent requests from an Apple Watch mid run, these
• 1:19
  founders describe managing AI agents in almost romantic terms.
• 1:23
  It's seductive.
• 1:24
  It's intoxicating and all consuming.
• 1:26
  The piece captures this growing tension in the startup world where the speed unlocked by
• 1:31
  agents is real, but so is the human cost of keeping pace with them.
• 1:35
  One founder summed it up really well.
• 1:38
  Quote, every minute that I'm not working, I'm missing out on not doing a week's worth of
• 1:43
  work.
• 1:44
  We've talked a lot about the importance of judgment and taste
• 1:49
  Yeah.
• 1:49
  A bunch of weeks in a row.
• 1:51
  This piece really isn't necessarily saying that these founders aren't leveraging those things,
• 1:55
  rather that they're feeling like the clear bottleneck on progress since their quote
• 2:01
  unquote workers never take breaks, and they do.
• 2:03
  They literally reference eight hours of sleep as being a bottleneck.
• 2:06
  Is this just becoming the norm for what burnout looks like in this new era for founders?
• 2:12
  Yeah.
• 2:12
  I just think when we talked about 996 a while ago as this sort of anxiety related cope Mhmm.
• 2:18
  I think some of that people know that these tools are always available, so it feels like if
• 2:23
  I'm not working all the time and I'm not giving my agents work to do, I'm missing out and I'm
• 2:27
  falling behind.
• 2:28
  Sometimes it's true.
• 2:29
  I think the other thing, and I've had this experience, sometimes you wake up in the middle
• 2:32
  of the night, or you wake up early, and you have an idea, and you're like, oh, I should
• 2:35
  just give it to an agent and have it start working on this thing.
• 2:38
  Or I find myself sometimes in line for coffee, I'm like, oh, have a thought.
• 2:42
  Let me ship this off to Hermes and have it work on this.
• 2:45
  It's not always healthy.
• 2:47
  But I understand, if you believe that everybody you're competing with, either directly as,
• 2:52
  like, a market competitor or more broadly in that marketplace for attention and money, is
• 2:56
  working all the time and has agents doing things all the time, it's natural to also feel
• 3:00
  like I should be doing the same.
• 3:02
  Whether that work all needs to be done, is useful, is well thought out, is a whole another
• 3:07
  question.
• 3:08
  And I think in the piece, what's left out is remembering that you yourself are not an agent.
• 3:13
  Yes.
• 3:13
  Because your brain can atrophy over hours of time of overworking, and so, I guess, do you
• 3:20
  figure out, Charles, determine when's the best time to have an idea and just wait a little bit
• 3:26
  versus I need to run back right now and push this?
• 3:29
  It's really funny.
• 3:30
  One of our portfolio company founders and I were hanging out, and he asked me, what do you
• 3:34
  use for ticketing?
• 3:35
  And I was like, I don't have a ticketing system.
• 3:36
  I build all this stuff by myself.
• 3:38
  He's like, you need a ticketing system.
• 3:40
  I was like, why would I need a ticketing?
• 3:41
  Who's gonna fix the tickets?
• 3:42
  He's like, well, agent's gonna fix the tickets.
• 3:44
  And it's like, more importantly, you need a place to write down all of these ideas you have
• 3:49
  so that you don't have to immediately start working on them, and he was right.
• 3:52
  Before, I just wrote them down in Obsidian as as scraps.
• 3:55
  But now with tickets, it'll say, oh, you have these three tickets that are all kind of
• 3:58
  talking about the same thing.
• 4:00
  There's a theme here, and I just found the ability to write these things down and put them
• 4:04
  into a backlog or put them in a place where I could review them, has saved me from sometimes
• 4:08
  going down a rabbit hole in something that actually in the end, given an hour to step
• 4:12
  back, actually wasn't that important.
• 4:14
  Do you find that this is mostly relevant for you because you're both the customer and the
• 4:19
  founder of your own tools?
• 4:21
  Do you feel like if you have, like, one human in the loop, besides yourself, it would
• 4:25
  alleviate some of that?
• 4:26
  I think it'd either make it worse or better.
• 4:28
  I was talking to somebody who had the misfortune of building a CRM for their company.
• 4:33
  They got rid of HubSpot, and he felt really great about it.
• 4:36
  And I was talking to him this weekend, I said, what have you learned?
• 4:38
  He I don't have time to be a part time product manager.
• 4:41
  I'm like, what do you mean?
• 4:42
  He's like, all these people on my team who are using the CRM, they have all the stuff that
• 4:46
  they want me to build.
• 4:47
  Yeah.
• 4:47
  I was like, oh, you mean, like, new features?
• 4:49
  And he's like, yeah, I'm like, well, you're not a product manager.
• 4:52
  That's what you were paying HubSpot for.
• 4:54
  Mhmm.
• 4:54
  So that kicked off this huge conversation around the future of headless CRM and things
• 4:58
  like that.
• 4:59
  But, I do think no one ever tells you no.
• 5:02
  The agents won't tell you no.
• 5:04
  They might say, hey, this isn't that important, or maybe you should take a break, or that's
• 5:08
  quite a bit of work.
• 5:09
  But they'll almost never tell you no, I won't do this for you.
• 5:11
  Unless you've hit your usage limit.
• 5:13
  The article does reference unhealthy amounts of time put into just relieving the bottleneck,
• 5:20
  which can amount to, like, skipping meals or just not sleeping altogether.
• 5:24
  It made me think of the part of this, of just pushing things to production, is largely
• 5:28
  related to how long you can just be at your desk.
• 5:31
  Mhmm.
• 5:31
  And just hit yes.
• 5:32
  It reminds me of, I don't know, like investment banking.
• 5:34
  It's like, it's not necessarily the work itself when you're an analyst is all that difficult,
• 5:39
  but it is who can stay here the latest to push things out so that you're never the one that
• 5:43
  folks are waiting on for things to move through.
• 5:46
  Again, we balance so much conversation around judgment and taste, but this article
• 5:50
  specifically just focused on brute force of sitting in your chair and continuously hitting
• 5:54
  things so that things don't get locked up by you.
• 5:57
  One of the founders in the piece described working with AI agents as a drug, like using
• 6:01
  one.
• 6:02
  And another said he can't be present with people outside of work because the agents
• 6:06
  demand his attention.
• 6:08
  Where do you think the floor is here, or is it just the new baseline for early stage founders
• 6:14
  where we are today?
• 6:15
  Sometimes I think, and we think of this for 996 as well, a lot of it is chatter and just
• 6:20
  posturing a little bit.
• 6:21
  What do you think?
• 6:22
  I think being a founder is puts most people in an emotionally vulnerable position, where
• 6:28
  you're constantly anxious about whether the thing is gonna work out.
• 6:32
  Am I good enough?
• 6:33
  Am I working hard enough?
• 6:34
  Am I doing the right things?
• 6:36
  Am I taking advantage of all of the tools?
• 6:38
  And in some ways, like, AI agents are the perfect drug for an emotionally vulnerable
• 6:44
  person because they can work endlessly, they mostly are sycophantic and wanna please you.
• 6:49
  They can do just about anything you imagine or can articulate, and you know everybody else
• 6:55
  that you know claims to be using them, whether they're actually using them or not, it's
• 6:59
  another issue.
• 7:00
  And so I think it's in some ways, it's like the perfect storm for emotionally vulnerable
• 7:04
  founder who's trying to get a business off the ground and trying to find product market fit.
• 7:08
  It's it's kind of scary.
• 7:10
  Also different from actual human employees, you as a founder can run around being like, was so
• 7:15
  productive.
• 7:15
  You should have seen all the stuff I did.
• 7:16
  Your agents aren't gonna be like, we didn't really do that much.
• 7:20
  Just like ran in loops for hours.
• 7:23
  Our next piece is from Gorge Oros from his Pragmatic Engineer newsletter titled, Headed
• 7:29
  for the Exit, the Great Engineering Leader Career Break.
• 7:33
  The piece reports on a real wave of CTOs, VPs of engineering, and heads of engineering
• 7:38
  walking away from their roles, often with nothing lined up next, and digs into 10 common
• 7:44
  reasons why.
• 7:45
  The list runs the gamut, from founder mode making the CTO role feel low ROI, to equity
• 7:51
  grants that preference stacks have rendered nearly worthless, to a striking new pull
• 7:55
  factor, AI labs like Anthropic are now paying individual contributors a median of 1,250,000 a
• 8:01
  year in total comp, which is more than most executives earn at midsize startups.
• 8:06
  The piece also names a growing burnout pattern that threads directly with our first article,
• 8:11
  where the intensity of AI assisted work is producing real crashes, with one engineer
• 8:15
  describing months of late nights and nonstop prompting, followed by a hard collapse.
• 8:20
  There is a hopeful counterpoint in the story of Matt Boyle, who joined Gitpod as VP of
• 8:25
  engineering, helped it pivot and rebrand ONA, and watched it get acquired by OpenAI.
• 8:30
  It's a reminder that the right company with the right mission can still make the role feel
• 8:34
  worth it.
• 8:35
  The piece makes a pretty pointed argument that founder mode has essentially made the CTO and
• 8:41
  VP of engineering roles feel low ROI at most startups.
• 8:45
  It's funny because I look at the number of talent asks we get from our founders.
• 8:50
  They're all engineering related, but they're mostly for entry level front end and back end
• 8:56
  combined support, less on the leadership end because they're really just trying to ship
• 9:00
  things quite quickly.
• 9:01
  Is this a feature or a bug of how startups are being built right now across the market?
• 9:05
  Oof.
• 9:06
  Can I say both?
• 9:07
  Yeah.
• 9:07
  It's funny.
• 9:08
  Related to your other question, like, it be better or worse if I there was someone else
• 9:11
  using my infrastructure?
• 9:13
  I remember when I saw Gary Tan's gBrain and all of the reading these things about people
• 9:17
  shipping sixty, eighty, a 100,000 lines of code into production databases, you know, I would
• 9:23
  describe myself as a very, very, very junior software developer at this point.
• 9:28
  And I know the cost of mistakes, and that's mistakes without a power dynamic.
• 9:33
  Mhmm.
• 9:33
  And I read that one part where there's one that talks about, like, what do you do when your CEO
• 9:38
  just rage pushes 60,000 lines of code into the production database, feels great about it, and
• 9:44
  then you're kinda left to clean up the mess Yeah.
• 9:47
  And to deal with all the tech debt, all the things that could be imposed.
• 9:51
  And if anything, learning how to code with AI has made me so much more respectful of, like,
• 9:56
  the craft of software development.
• 9:57
  It's speed, quality, or cost.
• 9:59
  Mhmm.
• 10:00
  And I think right now, we're running this experiment, which is like, what if we just went
• 10:03
  all about speed?
• 10:04
  What if we decided, like, speed is the most important thing?
• 10:07
  Quality, yeah, sure, it matters, but speed is the thing.
• 10:10
  And that felt like the through line in all of those interviews is everyone's like, we've just
• 10:14
  gotten rid of all the things that made me valuable as a VP of engineering, which was the
• 10:18
  ability to say no to things.
• 10:19
  Yeah.
• 10:19
  Or the ability to prioritize the roadmap, or the ability to, like, enforce some quality
• 10:24
  standards.
• 10:25
  Those things are not as important at the moment as sheer speed of shipping, and I think we will
• 10:31
  come back to a more normal state of affairs, where there's a better balance between quality
• 10:36
  and speed, but that is not where we are at the moment.
• 10:38
  And the prioritization on speed right now, I think, feels so experimental because we've
• 10:43
  never had a world like this before.
• 10:44
  It's usually come at such a premium Mhmm.
• 10:47
  Of you need to hire somebody, you have to interview them, you have to see if they're
• 10:51
  technically advanced enough to join your team.
• 10:53
  Now you can just start running.
• 10:55
  So we've never actually faced this before, and I think for folks who've grown up and become
• 11:00
  leaders across tech, and specifically with engineering, it's difficult to, like, learn
• 11:06
  this game and then advise people on what the strategy is as well.
• 11:10
  But across startups, especially in the early stage front, very little roles are being hired
• 11:16
  for people with that caliber of experience because they want people pushing things to
• 11:20
  production, as opposed to providing counsel on soundboard, mapping everything out, and then
• 11:27
  making sure everything is correct, which, as much as I'm an investor and I want people to be
• 11:33
  thoughtful about this and intentional, it's really hard to sit across the seat from a
• 11:38
  founder who knows how many competitors are building in a space that they are and tell them
• 11:43
  to wait four or five months to really be specific about what they're trying to build,
• 11:48
  and and hire somebody of this caliber to join the journey.
• 11:52
  I don't know if you've had to balance those conversations.
• 11:54
  We
• 11:55
  have.
• 11:55
  I think in the pre AI world, planning was at a premium.
• 12:00
  Mhmm.
• 12:00
  Because engineering cycles were expensive, because humans could only write so much code,
• 12:05
  and it took a long time, and if you built the wrong thing and you built it poorly, the costs
• 12:09
  were expensive.
• 12:10
  And so planning had this, like, huge, huge benefit Mhmm.
• 12:15
  Which I think favored experienced engineers who understood process, who understood
• 12:19
  architecture.
• 12:20
  And now we've gone to a world where I wouldn't say planning has zero perceived value, but
• 12:25
  planning's value has probably collapsed a 100 x.
• 12:28
  Yeah.
• 12:28
  So people are like, Well, what's the point of planning when I can just rip code?
• 12:31
  If I don't like it, I'll back it out, or redo it, I'll fix it.
• 12:35
  And I think what's lost is some of the, like, elegance of architecture, and some of the
• 12:39
  thoughtfulness of, like, anticipating problems, so that instead of having to fix things, you
• 12:44
  build them right the first time.
• 12:45
  Mhmm.
• 12:45
  But in a world where we're like, well, look, well, if engineering cycles can run twenty four
• 12:49
  seven and I can spin up more agents, what if I get the cost of fixing a mistake has gone down,
• 12:54
  and the question's like, well, now what's the role of planning?
• 12:56
  When building is cheap and fixing is cheap?
• 12:59
  I don't think the answer is zero, but it feels like the market is essentially saying, for most
• 13:04
  cases, the value of planning is far less than it used to be.
• 13:07
  And this still hasn't even touched the feature of when customers are paying for it too.
• 13:11
  Like, this is all just, like, running things through a simulation.
• 13:13
  But the moment you start introducing people into paid versions of what you're offering, you
• 13:18
  running experiments day to day to compromise on quality and not doing the planning, like, that
• 13:23
  really can collapse your value.
• 13:26
  One piece that stood out to me was the fact that these leaders are feeling that their
• 13:31
  original skill set isn't as valued in a setting as founders require everyone to be completely
• 13:36
  AI pilled across the organization, or that they're sitting in organizations that have not
• 13:41
  evolved with the market, and so they feel like their skill set will become atrophied if they
• 13:46
  sit there any longer.
• 13:47
  So it's almost like two sides of the range.
• 13:50
  Is the answer always to leave the current role though, if you're in either bucket?
• 13:58
  And I guess you could expand that to not just leadership, but if you're entry level as well.
• 14:02
  Most people can't do AI transformation.
• 14:05
  Either they themselves don't know how to do it, or the organizational antibodies will get in
• 14:09
  the way.
• 14:11
  And I do think there is something to be said for starting from scratch, But again, I don't
• 14:15
  think starting from scratch means you throw away every best practice that worked before.
• 14:19
  I do think it is easier to build AI native products with people who have fully embraced
• 14:26
  AI.
• 14:27
  Yeah.
• 14:27
  And if you go to an AI native startup, you're, by definition, surrounding yourself with people
• 14:31
  who've said, like, we're going to build this way.
• 14:34
  And I think what's hard for some companies is, like, you know, you've got 10 people in the
• 14:37
  org, three of them are AI pilled, three of them are AI curious, and four of them are like, this
• 14:42
  feels like a total joke and a waste of time.
• 14:45
  And depending on the configuration of any given team, you might get maximum AI throughput or
• 14:49
  you might get maximum AI resistance.
• 14:51
  Mhmm.
• 14:52
  This is something that's come up in our portfolio company.
• 14:53
  Some of the more mature ones were like, hey, if we didn't go hardcore in AI, we knew we had a
• 14:58
  lot of engineers who were thinking about their future.
• 15:00
  And if we didn't lean into this and give them the chance to build and develop these skills
• 15:04
  here, we were gonna lose them.
• 15:05
  I've been involved in a handful of our portfolio companies where I told them, You
• 15:09
  might need to think about reorganizing the leadership of your engineering team to put
• 15:13
  people who are more front foot AI in charge, because the leader's gonna set the tone and
• 15:17
  gonna dictate the pace at which this stuff gets implemented, adopted, used, and just a general
• 15:24
  policy and tone on it.
• 15:25
  And we've had a couple companies where it took switching a leader to get them to really
• 15:29
  embrace the technology.
• 15:30
  And then on the other side of this, if you are, like, a seasoned engineering leader at, like, a
• 15:36
  large scale, call it, like, a Fortune 500 company, and you know things are moving slowly,
• 15:40
  do you leave and abandon all that and go run back into startup world?
• 15:45
  And I'm talking about people who have, like, thirty plus years of experience.
• 15:48
  Like, is that what you do?
• 15:50
  Or I don't know.
• 15:51
  You just call it what it is and then decide what to do.
• 15:54
  Like, I think it's really interesting reading the article, walking through different people's
• 15:58
  perspectives on what's important to them now, and, like, what do they want their career to
• 16:01
  look like in the future, and and what will actually matter from a skill set and trying to
• 16:05
  hedge what's the best decision.
• 16:06
  I think big companies are trying to do tech transformation too.
• 16:10
  That's why Anthropic and OpenAI and all these big labs have these forward deployed engineer
• 16:15
  consulting teams, and they partner with the Deloitte's.
• 16:17
  So maybe the real answer is, if you stay at a big company, the opportunity is to learn how do
• 16:22
  you do AI transformation in a scaled organization.
• 16:25
  Yeah.
• 16:26
  And that's just probably a different answer than how do you build from scratch an AI native
• 16:31
  startup.
• 16:32
  And you might conclude, hey, I've been in big companies for thirty years, the idea of going
• 16:36
  to a two person startup isn't something I want to do.
• 16:39
  Lean into the chance to learn, well, how do you actually get a 10,000, 30,000, 50,000 person
• 16:45
  company to adopt AI in a meaningful enough scale that it actually impacts the business.
• 16:51
  Yeah.
• 16:51
  And that's a skill set that doesn't collapse just because brand new tech has been released
• 16:55
  in Yeah. Our
• 16:56
  Our Well, last read this week comes from Yoni over at Slow on his Substack 99 d titled What
• 17:03
  Capital Wants.
• 17:04
  The piece is a take on what the current fundraising environment actually demands from
• 17:08
  founders right now, and the answer is both simple and a little bit daunting.
• 17:13
  Growth investors have essentially converged on one bar, show a credible path to a
• 17:17
  $20,000,000,000 company with you as the emerging winner.
• 17:20
  The piece also makes the point that category based investing has quietly died, where fintech
• 17:25
  investors no longer just wanna be fintech investors, health care investors no longer
• 17:30
  wanna just do health care, and everyone is chasing whatever the current wave of conviction
• 17:34
  happens to be.
• 17:35
  He closes with three paths for founders navigating this moment, find true believers,
• 17:40
  educate the market, or find a way to attach yourself to the things capital already knows it
• 17:45
  needs to do.
• 17:47
  He mentioned the Internet hype chart that we talked about a couple weeks ago of category
• 17:51
  winners not being funded in a period where there was the most heat around them.
• 17:56
  Ultimately, this turns into the phenomenon that he supports, which is that seemingly category
• 18:01
  investing is over, and everyone just wants to be in the current thing.
• 18:06
  I've never had so many conversations with my friends who work at a generalist fund, just
• 18:11
  like call it what it is, but don't wanna say that that's the thesis.
• 18:14
  Yeah.
• 18:14
  They've created like every orientation of what you could say without saying the word
• 18:18
  generalist.
• 18:19
  How can you turn this into advice for founders who are building out their lists of possible
• 18:23
  investors to go pitch in front of, and be realistic that there's hidden meanings and
• 18:28
  things that investors are looking for.
• 18:30
  I think investors change strategies faster than founders can keep track.
• 18:34
  I We announced our second nuclear investment this week, and someone called me and says, I
• 18:39
  wanna see more of the energy deals.
• 18:41
  This is someone who is at a specialist venture capital firm that couldn't be further from
• 18:45
  energy based on
• 18:46
  Yeah.
• 18:47
  Everything they've done for the last fifteen years, and I was like, wow.
• 18:50
  And I think if you think about everything we've talked about with concentration, this is the
• 18:54
  natural endpoint, which is, okay, if there's only a very small number of companies that are
• 19:00
  gonna matter from a return standpoint, if your strategy keeps you out of those companies, it's
• 19:04
  a bad strategy.
• 19:05
  Mhmm.
• 19:06
  And so I never met more people who are like, Wait a minute, thought, like, Nope.
• 19:10
  We went from SaaS to crypto to AI to robotics.
• 19:16
  We are on that pipeline train.
• 19:18
  And as much as I think it's cynical, I also think it's realistic.
• 19:23
  It's it's think venture is realizing that, hey, being in a lane that doesn't produce
• 19:29
  breakthrough huge companies is not a way to remain relevant in venture today, and it puts
• 19:35
  your firm's strategy at risk.
• 19:37
  So, to me, the only two answers are, everyone is an AI firm because AI becomes a meaningless
• 19:42
  term because AI is everywhere and encompasses everything.
• 19:46
  Or that this is a temporary blip where people just say, God, I I have to now rebrand my
• 19:51
  health tech firm as a space and defense firm.
• 19:53
  Yeah.
• 19:53
  And yeah, I've met a lot of people who pivoted, and they're like, We've been interested in this
• 19:58
  category, it's just we're reframing what we do, and I'm like, It's also just okay to change.
• 20:02
  Totally.
• 20:02
  It's okay to just change, and I find it hilarious that when I started precursor twelve
• 20:07
  years ago, two things people told me is, you have to focus on ownership, and you have to
• 20:11
  have a sector focus, otherwise you'll never make it.
• 20:15
  And I'm like, well, appears right now, like, neither of those things.
• 20:18
  Mhmm.
• 20:19
  But one thing I liked about Yoni's article is, like, it presents three choices, but I think
• 20:23
  for most founders, you only have one.
• 20:24
  Educating the market is kind of a loser's bet if you're an early stage company, like, you
• 20:28
  won't.
• 20:29
  Finding the true believers is great, but not reliable.
• 20:32
  The third thing is the only thing that's available to most people, which is how do you
• 20:36
  attach the thing you're doing with the thing that people already care about so that they pay
• 20:41
  attention to the thing that you're doing.
• 20:43
  And I've told a lot of founders in our portfolio two things.
• 20:46
  One, there's nothing wrong with your company except that nobody cares.
• 20:49
  Yeah.
• 20:50
  And they're like, what do you mean?
• 20:50
  I go, nobody cares about your category, nobody cares about this market.
• 20:54
  It's just not that important.
• 20:56
  Yeah.
• 20:56
  And you just gotta understand that, like, there just might not be a venture audience.
• 21:00
  And second, I think funders have a hard time grasping this.
• 21:03
  $5,000,000,000 company is the minimum.
• 21:06
  That's, like, the minimum interesting scale for a venture backed company.
• 21:11
  And really, what Yoni said is true.
• 21:13
  People are underwriting $20,000,000,000 plus outcomes.
• 21:17
  And in many cases, you are far better off being an infinitesimally small probability
• 21:23
  $20,000,000,000 outcome than you are a high probability $5,000,000,000 outcome.
• 21:28
  Because most venture firms just need outrageously large exits for the math to work,
• 21:31
  and if you're not one of those companies, you're literally not worth their time.
• 21:34
  I just have a lot of empathy for founders too, are billing at their earliest stages, because I
• 21:37
  was even thinking about handful of the exits or acquisitions that have happened over the last
• 21:42
  handful of of weeks, or the Hugging Face potential deal that's at, like, what,
• 21:46
  13,000,000,000?
• 21:47
  I don't think when anyone started that, they were like, this market is worth 10 plus billion
• 21:51
  dollars, but it evolves over time, and I think that's never been more important to founders in
• 21:56
  the first meeting with investors pre them doing anything and setting out a roadmap of, like, I
• 22:01
  need to showcase how this is 5,000,000,000 plus market.
• 22:06
  That's hard.
• 22:07
  There used to be a time with an early stage venture where you could say, this is where it
• 22:10
  starts.
• 22:10
  This is what I think it could grow to.
• 22:12
  But you could be a bit more measured on what you're thinking.
• 22:15
  I just hop off a conversation with a founder who's building within forestry and agriculture,
• 22:19
  and technically, the value of that market is uncapped.
• 22:22
  But where we were focusing
• 22:23
  Yeah.
• 22:24
  Was, and so that's the conversation I had to have, was if we focus here, I think you have to
• 22:28
  be realistic on what that market size is and communicate that, and be ready for some
• 22:32
  investors to just say no.
• 22:33
  Yeah.
• 22:34
  You could also just venture into the land of building out this more elaborate story, which
• 22:38
  speaks to the third one, of like where this could go.
• 22:40
  Now, is that what your intention is and what your dreams and hopes are for the company?
• 22:44
  I don't know.
• 22:45
  I'm not you.
• 22:46
  But that's a new dynamic that I think every founder is existing in.
• 22:52
  And it's even for the folks who sit outside of consumer and CPG, which I know are the ones who
• 22:55
  feel the most out of favor here, it touches all of them.
• 22:58
  I also just feel like if you started a company two years ago, precursor, pre open router,
• 23:04
  like, the world has, like, literally changed why you were building.
• 23:07
  Yes.
• 23:07
  And you're like, Oh, well when I started this company, I knew I needed a multi billion dollar
• 23:12
  outcome.
• 23:13
  And now, the world has found me I need a multi tens of billions of dollars outcome.
• 23:18
  No fair?
• 23:18
  And I'm like, Well, yes, it isn't fair.
• 23:20
  The goalpost shifted dramatically.
• 23:23
  And I think what we're gonna see is just a continued churn at the bottom end of the market
• 23:29
  of companies that get started, that make real good progress, but they don't look legible to
• 23:35
  series a and series b and future investors, and they're just gonna say, this is a great
• 23:39
  500,000,000 to a billion dollar company.
• 23:41
  It's just too small.
• 23:42
  And those founders are gonna scratch their head and say, do you know how life changing that
• 23:46
  outcome would be for me and everybody in my company?
• 23:48
  And the VC is gonna say, that is both true, I don't care.
• 23:51
  Yeah.
• 23:52
  For founders who are trying to convince investors about the market and get them on
• 23:58
  board, what would be your advice?
• 24:00
  One is, you tell people the story that, hey, the thing I'm working on is going to be the
• 24:06
  next thing.
• 24:07
  The open weight, open source stuff became really important when people started to care
• 24:11
  about the cost of AI.
• 24:13
  It was, I think, predictable that at some point people would care about cost.
• 24:16
  So you had to be around and be in business to be open router or to be open coder, to be
• 24:20
  whoever you might be to take advantage of that trend.
• 24:23
  So one thing is I didn't get to tell people, we are the next hill.
• 24:27
  Like, hey, we're doing security and compliance for AI agents right now, nobody cares as much
• 24:31
  as they should because there's so much desire to push this stuff out, But any day now, CFO is
• 24:37
  gonna get involved.
• 24:38
  Mhmm.
• 24:38
  The chief investment security officer is gonna get involved.
• 24:41
  We are the next event horizon for this category, or you just have to find the small
• 24:46
  set of VCs who are just not totally ad built.
• 24:49
  I would say there's maybe 20% of our industry who's like, I'm open to things other than
• 24:53
  enterprise AI.
• 24:54
  I wanna see things that don't fit that mold, either because I know how to get those
• 24:59
  businesses financed, or I have some other reason to believe that I can help those
• 25:03
  companies succeed.
• 25:03
  Or I'm just patient enough to see how that works.
• 25:06
  Yeah.
• 25:06
  My last question is, when you're talking to other folks who are shifting around their
• 25:10
  strategy on the investor side, and talking about being more generalist, and not being very
• 25:16
  specific on, like, what within generalist land they're focusing on?
• 25:20
  Do you think more of that play is for founders or for LPs of just I find a lot of people are
• 25:25
  like, we're generalist.
• 25:26
  But like, right now, we're really focusing on defense, deep tech, etcetera.
• 25:30
  And I'm sort of like, I'd wish you'd like, change their theses on their website every
• 25:35
  single day, it feels like, and I'm sort of like, is it signaling for founders, or is it
• 25:38
  signaling for the fundraising cycle?
• 25:40
  I assume most of this is done in the name of both.
• 25:44
  Yeah.
• 25:44
  But I think if you go into an LP meeting, let's say you're a health let's say an you're
• 25:48
  education fund, and everyone goes, like, well, where are the big exits in education?
• 25:53
  All the action seems to be in enterprise AI.
• 25:56
  You have to say, don't worry.
• 25:57
  The exits in education are coming.
• 25:59
  Or you have to say that, hey, AI is gonna transform education.
• 26:02
  It's gonna create a bunch of companies that don't matter.
• 26:04
  Or you have to say, you know, everybody's learning about AI right now, so therefore, AI
• 26:08
  adoption is an educational theme, and so this is an extension of our strategy to invest in AI
• 26:14
  harness companies and, like, you know, and token counters or whatever it might be.
• 26:19
  And I think in the name most LPs wanna make money, and they're trying to compose this is
• 26:23
  irony.
• 26:24
  LPs would always tell me before, specialist managers so that I can create my own portfolio.
• 26:29
  I want a health fund, a fintech fund.
• 26:32
  I'm like, well, everyone's doing the same thing now, so no matter what strategy you thought you
• 26:36
  were backing, you're probably backing AI.
• 26:38
  Yeah.
• 26:38
  I assume more of this energy is going into marketing these firms to LPs, because I think
• 26:44
  you can change LPs' minds faster than you can change founders' Mhmm.
• 26:48
  Well, are out of time today.
• 26:50
  Thank you, Charles.
• 26:51
  Thank you, Angelus, for letting us hop in again.
• 26:53
  Thank you to our subscribers for jumping in as well.
• 26:55
  Please like and subscribe and share with friends, and we'll talk to you all next week.
• 26:59
  Thank you.
• 26:59
  Bye.
• 27:00
  Bye, everybody.