Building Enduring Value and Hitting Incremental Gains with Benchmark’s Sarah Tavel | E1983

It's hard like when you're a CEO there's A learned ruthlessness that ends up Happening which is that you have these Relationships with the people on your Leadership team and by the way your Leadership team has the people on their Leadership team y that you develop Relationships with that you want to be Nice it's you know five Temptations of a CEO is like an Incredible Book every CEO Should read it the thing about wanting To be liked is like an Achilles heel That we all as humans have it's a very Difficult thing to have a lot of these Hard conversations and so you have these Executives and they are not pulling the Company up with them they're being Pushed up when you have too many of Those it's one of those things that even One executive for too long who's being Pushed up with who were not having a Hard conversation really has these Ripple effects that you always look back And wish that you had made a decision Sooner and Faster this week in startups is brought To you by square space turn your idea Into a new website go to squarespace.com Twist for a free trial when you're ready To launch use offer code twist to save 10% off your first purchase of a website Or domain LinkedIn jobs a business is Only a strong as its people and every Hire matters go to linkedin.com twist to

Post your first job for free terms and Conditions apply and open phone create Business phone numbers for you and your Team that work through an app on your Smartone phone or desktop twist Listeners can get an extra 20% off any Plan for your first 6 months at open Phone.com Twist all right everybody Welcome back to this weekend startups Really excited to have Sarah Tavel back On the program she's a partner over at Benchmark uh I think she got there Around 2017 before that she was at Besser before that she was at Pinterest For a little bit and I think you found Out about Pinterest when you were at Greylock because you did the investment And then you joined the company right Sarah almost besser as when I found Pinterest and then from besser went to Pinterest that's your big win details Details yes that's your big win we'll Talk about yeah I mean incredible I Actually had dinner with the founder Recently really really sweet kid it's Great anyway just to give a little brief Intro here I think looking at Benchmark Looking at your career it's really been Interesting to watch how the Venture Capital game has changed you and I have Been in it actually about the same Amount of time about a decade or so and You know all these firms are raising Larger and larger funds and Benchmark is

Just so disciplined I read in the papers and the trades that You're just closing a fund I'm not sure If you can talk about it or not I know There's a bunch of rules around that but I think the latest fund is 425 yeah yes In my notes here it says back in 2004 Fund five for Benchmark was 400 million So a lot of discipline on having a Specific size fund and a specific type Of fund and so welcome back to the Program Sarah tavl how are you good to See you good to see you I love having You on every six months cuz you're Dynamic you're doing a lot let's start With the fundraise were you involved in It or is it just Benchmark is such an Institution now that everybody you just Send them an email and they're like yeah We're in and they just give you the Ticket size how does it work at a a Legendary fund we're very lucky to have A great group of partners that have been With us for a long period of time and so When you are not expanding the fund the The core fund it makes that process a Lot more efficient and so it was just Nice nice efficient process and we're Excited for the group that we have Moving forward do you get involved in it As a GP or is it just like so set up That you don't need to like do that part Of the the gig we're all involved in Some way you can think of as like divide

And conquer we just had our annual Meeting so it was all timed in a way That made it particularly easy what's it Like to be massively oversubscribed like That like you I get people when I go out To do my fundraising who are like hey Can you CH me to you know aoya Benchmark Whoever the over subscribe funds how do You deal with like the fact that you Have chosen a small fund size and you Keep it disciplined and obviously the World's changed a lot everybody knows What Venture is this isn't 20 years ago When the firm was founded it's a much Different world how do you deal with all That inbound and everybody trying to you Know join the party when you when you Got like you know this it's a small Dance Floor these are it's it's a Problem that I don't feel like I've Earned the right to have but we you know It's more it's a benchmark reality and It's the nice thing is that it's an easy Conversation which is that when we don't Expand our fund anything that we try to Give to somebody else means taking it Away from somebody else and and that's You know we we try to minimize any Changes that happen and so it it's a Very impersonal response is like it's Not you it's just our fun structure yeah And you never know you know we are we do Bring on new new groups every once in a While but we try to keep it a pretty

Stable uh group because we you know We're very grateful for the LPS that we Already have yeah it's a super Interesting I've had long talks with Bill who's mentored me a bit about it You know having like each one represent About 5% or so of the fund but let's Talk about portfolio strategy portfolio Management yeah $425 million you have Five Partners or six at the firm five Right now five okay so that's about 80 Million a partner is uh because you got Some management fees coming out that Obviously about 10% of the life of the Fund 80 million you guys like to do Series A's uh I think typically Typically series a first board member is Kind of what we aspire to got it so you Want to come in and have some discipline Some governance typically a 105 million Check I'm guessing in today's economics Yeah we we that's that's probably the Median you know we have ones that we Just did you know a pretty large Investment in a company called hn that's Definitely outside of our norm and then We have smaller you know companies that Are we're incorporating as part of our Investment that are on the smaller end Of that got it so each partner then if We're just doing this back of the Envelope math they're going to do what Five six bets per fund is that about the Ballpark yeah we always think of you

Know it's on average maybe one to two Per partner per year so that's a Three-year fouryear invest EXA that's That's that's been the norm got it so This kind of discipline means you're Investing you Sarah as a partner at Benchmark just so Founders get the idea Here six companies per fund yes how many New startups per week per month do you Meet with ballpark you know call it five To 10 got it so you're very selective 5 To 10 a week so if you seven a week you You work 50 weeks a year 350 maybe take A couple weeks off 300 you're meeting 300 to do two you bet on one out of 150 That you meet with is that about the Numbers if I were to break it down yeah That sounds right so for people who are Listening you say no 149 times to every Time you say yes and and this is the Discipline you need to have to be Successful Adventure in your mind it's The discipline that you have to have for Our model of partnering with Founders And so you know when we make a new Investment like I I just LED an Investment in a company we haven't Announced yet but it's in the AI space And we made the investment a few months Ago and I wouldn't be exaggerating to Say that I probably do five related Calls per week for that company we're Doing a lot of recruiting so recruiting You know calls with a recruiter first

Interviews closing calls you know uh I'm Interview like you know the founder Basically just wants you know my Judgment on people and so I'm very very Involved in all the hiring that he does Not to mention you know he and I talking All the time what's happening the time And so it's just it's a level of Commitment and engagement with a Founder Where every investment we make is really A commitment that we care a lot about The founder and we care a lot about the Company and so when you have that model Of partnering with a Founder you you C You just don't have it's not a c we Always talk about the dollars but it's Actually just you know number of hours In the day and our capacity because we Don't have a platform team right our Model at Benchmark is is that we just Believe that the core work of being a Partner to the founder especially in the Very very early stages of the company When a small change in the trajectory of A rocket ship can make a big difference That we don't want to Outsource any part Of that work to internal Consultants we Want to be the people on the calls doing The recruiting Ourselves and and that just creates a a Scarcity and it creates a very high bar For getting to yes as you're pointing Out but then when we get to yes it's a Very different level of commitment and

That's that's the model this kind of Core belief that Venture just doesn't Scale at least this type of partnership With a Founder on the journey doesn't Scale and so that level of rigor and Discipline in selection uh then has to Meet the real world and things have Changed since the founding of Benchmark You got my combinator over here doing 500 bets and then they've got like a Little bit of like they put their extra 350 in at the note so they're kind of Getting themselves 10 12% of a company It seems like and then you have you know Some Venture firms that are you know Have 10 billion doar under management And they have a whole department for HR And they're doing all of that and was One Venture firm that just decided they Were going to be AWS this week as we're Taping and they were like hey you know What we'll just give you 10,000 20,000 Clusters so apparently Inu is setting up Uh they're standing up an IT department And they renting Clusters no one knows your product like You do but knowing how to build Something customers want is only half The battle you have to sell it to them And that's where Squarespace comes in Squarespace is the e-commerce tool that You need we all know Squarespace builds Beautiful websites right I say Squarespace you see beautiful stunning

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When they come back and say well hey This this firm has uh 20 people in their Recruiting Department Hey this person is Offering me a th000 gpus hey uh this Fund just gives me a a a note that's Open and they don't even want to be on The board and they don't want to be up In my governance yeah how do you explain This to Founders there are gives and Takes for every fund model and we all in A way I believe probably have some kind Of selection bias you know my experience When I was at Greylock which was where I Was before joining Benchmark was that I I had this realization you know Benchmark had an incredible recruit Recruiting team Dan ptio Jeff Martz and I remember being at Greylock and Thinking oh this is fantastic one of my Company saer was doing a cro search I Was like oh I have the best executive Recruiter in the industry of all the Venture firms so I throw that search Over to Jeff and then he ends up working With Francis the CEO on that search and Like Francis ends up playing this game Of telephone then he's talking to Jeff Martz he's sing up with me he's trying To give me all the context on the Candidates and it's more efficient for My time and it's way worth worse for Francis this time the CEO and what I Realize is that those platform teams are More about scaling the GP so the GP can

Make more Investments than it is about Scaling the founder and so our approach And and again some some Founders like And I I speak to some they say you know What I don't trust my myself for these Things I really want to have you know The extra help of a platform team I Think that's great they should they Should work with a fund like INRI in That case but there are the founders who Believe that they need to figure these Things out themselves in order to be Great at them and that they want a Partner through that who's going to help Them hire the best team around them to Be world class in all these functions And that's the the Deep work that we do And I think the selection bias that Emerges with the with the founders that We work with tell me about the portfolio Management you know the valuations of Silicon Valley have gone up the series a Space is the most competitive space so Great to be Benchmark great to have this Incredible history great to have you Know beoa have all these great things in The world but there's a lot more firms Now we got Sovereign wealth funds coming In we've got high net worth individuals They're backing a ton of VCS the number Of firms has gone up dramatically from You know 10 20 years ago there been a Little bit of pairing of it so that's Good it seems like that's healthy but

That does mean valuations have gotten Very high and the ownership percentage Has gone down so talk to me about how You think about as a firm hey we're Going to own instead of owning you know In the old days people used to own 25% In that series a 20% now it might be 10 And it's hard to get to 15 you may have To do that over two rounds so what's the Betting strategy you know I'm told I'm Not supposed to use betting anymore Supposed to say so the Gambler in me did You play poker yet by the way have you Gotten into it no I'm not I'm not a Poker player got it I'm told I need to Get into it I don't want to play poker With you I want to play poker with you For the first year I don't want to play Year three Sarah I'll just put it out There I'll gladly pay for the first 18 Months when you're Learning cost can be high of learning But tell me about how you think about That because man people seem to have Lost their discipline entry price really Matters first round of uh you know Uber Was 4.5 million post when I invested Thumbtack 4 or5 million Comm 4 or5 Million data Stacks 4 or5 million and Then I'll have like a YC founder come to Me no no sh no you know U shade on on YC But it is a bit of a competition there To see you know as one founder told me When they asked for a$2 million

Valuation said how'd you come to that Number they said oh well my friend got 15 so I wanted to beat him and I was Like ah okay very interesting that's how The value of the companies determine now And I told him like wow you know your Progress is great but these three other Companies you know the valuation was 15 And he said oh I'm only asking for five Million more and I said no no combined Was 15 combined for the three compies Didn't have an answer to that that Company no longer exists but let's talk About that because that is having an Issue is the ownership percentage and The valuation and the entry price and You just had your offsite you talked to LPS about this I'm sure it seems to be a Big topic so how do you think about it There's there's two I want to say one Thing on this and then I actually want To go back to our prior conversation Just fles out one point we always say we Have to play the game on the field And if there's a Founder with whom we Want to partner we're not going to let Numbers get in the way of partnering and So that often means that we're in the The ownership range that we target as a Fund but there are outliers for sure and And we're going to continue to make Those decisions on a case-by Case basis Because we make so few Investments it's Each time we do it's so case specific to

That unique founder and the unique space That they're attacking that you know we Able to kind of both play the game on The field but then also make those Decisions that end up feeling consistent At a fund level with what we what we Target um I just want to go back to one Other point though on on the prior Conversation because I I feel um I would Be remiss if I didn't I didn't flush out One thing which is that yeah you know When you have a level of commitment and A depth with a Founder you are You know I'm literally texting with you Know my the founders with I with whom I Work sometimes daily at the very least Weekly and you end up having just a Depth of experience and context with the Founder through you know all the Recruiting you do all the conversations You know the weekly one-on ones and then That also means that because you have so Much more context before because you're Shoulder-to-shoulder with the founder You end up being a better strategic Partner to the founder and a better Partner in helping the founder kind of Become the full expression of themselves And I think that actually is the work That we do that we get most excited About it's it's the reason you know Benchmark we could raise a bigger fund Right like obvious we could we could Play this game but then it becomes more

Transaction with each founder because You get into a mindset of having to make A certain number number of investment Every year you end up just not having The same capacity just because we're all You know governed by the same 24 hours In every day as everybody else there's No shortcuts there right there's no like Loophole and so that doesn't translate You know if you want to have that depth Of relationship with a founder and That's a big part of who we are as Partners and why we're here at Benchmark Is is that Lev that type of partnership With the founders we work Founders I Know that you're keeping a close eye on Your burn rate I am too in today's Venture Market every single hire you Make has to be perfect right you can't Make mistakes you got to keep that Runway as long as possible so that you Can run more experiments and you need Talented people to run those experiments And figure out how you going to get Product Market fit how you going to Scale your company and that's why you Need to use LinkedIn jobs as you know LinkedIn brings you the candidates that You can't find anywhere else LinkedIn Passed the 1 billion member Mark think About that 1 billion members and 70% of LinkedIn users don't visit the other Leading job sites this is a phenomenal Statistic they don't even go to the

Other job sites why because they might Not be looking and those are the best Hires but they're hanging out on LinkedIn doing professional development Checking in on their Network building Their network sharing content finding Leads all that great stuff bottom line There's amazing hires waiting for your Company on LinkedIn and nowhere else and They have a special deal right now post A job for free what R what a great price Linkedin.com twist that's right Linkedin.com Twi to post your job for free terms and Conditions course Supply let's talk About governance really bad Trend last 10 years governance board meetings not Cool VC should be treated like mushrooms You know you just keep them in the dark And you feed them Aur it's they're you Know don't trust them it's like really Bad I think toxic kind of philos that Spread this adversarial thing you know Don't give up a board seat whatever Right make your best argument here of Why governance is a creative important And just otherwise an advantage uh for Founders team members shareholders Etc I Think the biggest thing is that Governance creates a level of Accountability that every executive Joining a company wants in the CEO that They're they're Jo And and they're they're they're

Following and Reporting too and so There's there's just something that's Very healthy there when a Founder CEO Feels that level of accountability it it UPS everybody's game I will say though On the flip side that like it is a high Level of trust that you need to have With the with your board and and I and I Can imagine a world where when Especially during The covid Craze when We were all making commitments over Zoom You know you just had this like very Impersonal very transaction oriented way Of making decisions during that time That the founders didn't know with whom They'd be partnering they didn't like They they knew the name on the on the on You know on the the logo but what who is This person you didn't didn't have an Opportunity to have that depth of Relationship building before making this Type of commitment so I I understand Where that came from and then at the Same time look at how crazy the world Has been over the last few years and Really knowing who the person is who's Going to be in your corner during that Time is so important and I think as Founders have realized that and spend More time with the partners that they're You know potentially adding to the board It's actually in my experience so far it Softened some of the governance Obsession and it made it more about who

Is the partner joining the board and I think that's a super healthy movement In the ecosystem maybe you could talk a Little bit about Competing against this like recent crop Of lunatics who would use Governance valuation and secondary As Weapons since they didn't have uh say The Legacy the brand uh so they come in Hey I can't beat Sequoia hey I can't Beat Greylock I can't beat Benchmark I Can't beat Excel you know in terms of of Our offering so well where can we beat Them I'm going to do a term sheet where I'll raise the valuation okay fair Enough okay yeah I'm going to give the Founders you know each uh $2 million in Secondary products not even launched or Pre-revenue oh yeah and governance yeah We we we don't even need information Rights nonsense nonsense nonsense or Even the most pricious that I saw Typically winning the series B hey you Know what we'll uh we'll we'll buy Secondary from from you or we'll top you Up we we'll let you sell secondary and We'll top you up so it's like what's Going on here is just just like a bribe To close a deal and and this is let's Call it what it is kind of was a bribe In my mind I don't know how you feel About it I mean seems like some Secondary you know buy a house put it Down payment seems reasonable after any

Some number of years four five six seven Years seem reasonable in years 1 2 and Three how do you look at that weirdness And these lunatics that infected the Space my words not yours yes yes yes I Don't know if you are thinking Specifically of t but if we were to name Names Okay Tiger did a lot of this and I Think I remember hearing someone say Tiger may not have gotten a single Markup in that kind of crazy deployment Maybe they got a small number but a very Very small number relative to the total Investments they made and so Founders Are making decisions and in all of those Circumstances there were some Founders Who who opted in to that high price low Governance you know whatever bribe uh as You might put it uh decision and that Created a lot of challenges for those Companies and there were other Founders And you know we we engaged with a ton of These like every investment that we made During this period had these types of Offer you know competing offers and the Founders with whom we ended up Partnering it was like yeah this is Happening but that's not what I want It's very it was a very clear Optimization very clear like my I as a Founder I want to build the best iconic Company I can build and to do that I Want a partner and you know look this Stuff is really [ __ ] hard right like

It's so hard and and if you can do it by Yourself then that's great like all the Power to you but I'd like to think that Even like an Olympic Athlete still has a Coach and they still think they can get Better and that's a little bit you know That is our the bar that we set for Ourselves and some some Founders want That yeah and and it's not for everybody Uh but I think for the founder there is A there's a positive selection bias that We see of like the ambitious learn itall You know low ego just want to win Founder that is those are the people That were were dying to meet every day Yeah see I think this uh is the key Observation maybe the key Brilliance That the founders of the firm kind of Learned in those early years which is There's a selection bias yes if it's Really attractive to you to take that Payoff you know to not have another Board member to have this hundred Million dropped into the bank account With no governance and nobody going to Work with it and and no ownership of That bet you know what's going to happen Is that person going to be there when Stuff hits the fan yes and you know that Person who made that bet based on some Management Consultant report or whatever They made the decision on they're not Going to be there and when you lose that Person you know I remember somebody

Telling it to me when I was running Companies they're like yeah if you lose Your Rabbi a Time Warner like what are You gonna do like who's gonna fight for You I was doing the m&a actually which When I was selling webblogs Inc and They're like it's gonna happen you know Tley Onis will leave or somebody will Leave and you're not going to have your Rabbi there there's nobody to protect You and boom you're G to be out you got To really build consensus I like okay Okay I got it I got it you know I need To have like a strong connection and Hopefully multiple ones and that's Really what building this board is about When you get to that level I really like The Insight of hey if you're going to Hire an executive team and that Executive team thinks well the founder Is a god king or God Queen and they're Not going to like answer to anybody and There's some advantages there in terms Of moving fast and being bold but then There's also some problems there you Know you know they could just maybe you Just don't have the trust level there or The discipline level yeah and I'll add Like you know a lot of what I know we do At the board for the companies that we Work with is that we're often advocating For a little you know making a decision A long-term decision a little bit Clearer a little bit faster you know

Advocating for oh I noticed that a Certain you know your CFO is starting to Have some scaling challenges and maybe Like let's introduce that person to some Other great CFOs from whom they can Learn or maybe it's time to make a Decision on on finding somebody new in Those conversations like you and I both Know that when you already have somebody In the seat the last thing you want to Do unless things are really breaking is Create a huge amount of work for Yourself of having to have a difficult Conversation with that with that Executive having to then kick off a Search do all the work of the search do All the work of ramping up somebody new When you are like it's the it's the Important over the Urgent and a lot of What we do in the board is like believe That if you make a decision to hire Somebody new 5% sooner you make that Search 5% better and you close somebody 5% better whatever the percentages is Those moments compound for a company Yeah and and and it's just like again It's hard to imagine a Founder that Doesn't benefit from having a great Group of people around them their Executives and the board that's pushing Them to make the best decisions as Quickly as possible and that's what a Great board I think can do if you use Multiple devices and apps to run your

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Package you're easily hirable why do you Want 12 month Severance 12 month Severance at a startup yes I know and The whole I can just see it I see it man I I can see it happening right now in Manhattan from yes here in California I See that conversation from 200000 miles Away it's nuts it's nuts and it's just Hard for a firsttime founder Or a Founder who's just you know trying To get so much done and and when you're On the board and you see this for the Fifth the sixth the seventh time it's Just so obvious like this is not the Person this person is coming in with Those cuff Lings they want to do the you Know I I'll you know give me the $600,000 base and the 2% commission I'm Like how about $150,000 base and I'll Give you 7% when you hit a million and 15% when you hit 2 million like let's Make something awesome so you can make Twice that amount of money and they're Like yeah no I got to beat my base from The last time what what are the other Things you see inside these boards over And over and over again but that is just So critical in not flipping the car when You come around those turns I think There's maybe there's a couple things That come to mind for me one is is Sometimes it's just very clear that an Executive has reached their Peter Principle right like I'm a big believer

That when you know you as a CEO you want Your leadership team to like two-thirds Of your leadership team to be pulling The company up with them you know not Being pushed up by the company like yes You want those you know the culture Carriers the people who have been there For a long time who have a lot of Context and have the history of the Company in their minds like you need Some ratio of those people and by the Way those people benefit like through Osmosis by seeing see the way that the Executives who have seen what great Looks like who have been at companies And scale past the company that you're At right now like having those people And so one of the things that I see is Just it it's hard like when you're a CEO There's a learned ruthlessness that ends Up happening which is that you know you Have these relationships with the people On your leadership team and by the way The your leadership team has the people On their leadership team yeah that you Develop relationships with that you want To be nice it's you know five Temptations of a CEO is like an Incredible Book every CEO should read it The thing about wanting to be liked is Like an Achilles heel that we all as Humans have it's a very difficult thing To have a lot of these hard Conversations and so you have these

Executives and they are not pulling the Company up with them they're being Pushed up when you have too many of Those it's one of those things that even One executive for too long who's being Pushed up with who we're not having a Hard conversation really has these Ripple effects that you always look back And wish that you had made a decision Sooner and faster and so that's that's Like a huge one for me and the second One is just any orientation towards Vanity metrics you know like there are So many Times so many times when we can have Metrics as our North Star that feel good You know I always you know the lowest Comma denominator one it could be you Know M us for a social product it could Be actually revenue or gmv for a Marketplace these metrics what I always Say what you measure matters like they Can go up and to the right and still you Aren't creating the true enduring value And I always think of it as like if You're climbing a mountain you don't Want to go around the circumference you Want to just find the most you know the Most direct path but if you get if you Get lulled if your ego gets Satisfied by A vanny metric or or chasing the next Round you end up wasting a lot of energy Versus like having the clarity you need Of like that Future Path what creates

The most value for your customer working Backwards from there and you're avoiding You're avoiding this is like what people Who are avoiding the hard work do they Find a metric that serves them great Point yeah and you know like I remember In the early days of apps yeah in the Days of Comm and Uber and everybody's Talking about app downloads and then all Of a sudden these app companies come out Oh Venture firms care about app Downloads great hey give us you know $5,000 would get you to the number one Uh rank in the App Store and everybody In the early days of apps would look at The top 100 apps and they download them And they'd sample them remember when you First got your phone you're like I have Nothing to do I'm just going to sit here For an hour and download apps and play With them it was like the greatest thing Ever now it's like oh God dealing with Apps is like a a chore right my H Changed but I remember these folks and They would come to us and they'd say hey Give us five grand then they would hire People in the Philippines thatd have Banks of phones you can look at these Phones online they would download them All they wouldn't tell you how they were Doing it by the way all of a sudden You're number one you go to your board Meeting oh yeah look at here's our Cumulative downloads I'm like can I see

That by day and can you show me what you Paid for and what was organic you know Give me the source and you start getting Into this granular discussion you Realize okay FAL charts only go up into The rent that's how cumulative Works yes Yes we don't need cumulative here and Then where's the engagement how leaky is This goddamn bucket and you know it's it Really is cowardice and avoidance and When I I went to a high school run by Sarian Brothers in Brooklyn there was a Sign above the door and I always say to Pounders the truth shall make you free And when the truth is people are Uninstalling your app and just find out Why find out why it's too expensive the Design sucks what whatever it is find Out why right and that lanon book that You mentioned uh and he he did uh the Five dysfunctions of a team also Excellent also always I always give that Book both of those books to uh to found I'll add something though which is also True which is that a lot of times I Think Founders make the mistake of Playing to what they think the Venture Investor wants right and so performative It's a lack of intellectual rigor it's a Lack of kind of really going to first Principles of what is what am I building And what is like the most important Thing to measure it's instead kind of Just the surface thinking of oh I hear

VCS care about downloads as you as you Talked about or you know in marketplaces I I wrote a piece about um kind of Chasing gmv that a lot of Founders would Come in and they thought they had to Show a million dollars of gmv in order To raise their series a the challenge is That if you chase gmv back to my Mountain you know yeah the fastest way To a million dollar of gmv actually Pulls you away from building enduring Value if you're uh let's take a food Delivery company if you're you could get A million dollars of gmv by having 10 Cities with 100K of gmv or you could Have a million dollars of gmv by like Going deep in Ceda Rapids Iowa or deep Been New York City those three buckets Are very different companies and the one That actually I think would be most Interesting a million dollars in Cedar Rapids Iowa it's also the hardest Because there you're building liquidity Like you're really in order to do a Million dollars of gmv in Cedar Rapids Iowa you have to be really focused and Have like very strong product Market fit You're Building liquidity you're I Always think of it as like boiling the The thimble not the ocean and I I wrote A whole series on this called hierarchy Of marketplaces but like if you do a Million dollars of gmv in New York City Like you're just scratching the surface

Right you're you're they're picking off The cream of the you know the cream but You're you're just like scratching the Surface you have so much further to go In order to have true penetration of New York and then back to the 10 cities with 10 100K same thing like you're just Scratching the city like you haven't Really proven anything and so you know The there's there's you need to have That person and I think you know Tony D Dash did this fantastically of just like The first principles thinking what are We really building how do we build Enduring value and just trust that if You show that to a VC they're going to Get it versus playing the game that you Think you have to play in order to get That next round yeah it's um I have this Because you know we we we in way before A benchmark typically right we're doing Year zero companies like they're working On the products two or three people Sometimes they're not even Incorporated And I always tell them hey whatever the Numbers are just own them the Opportunity for Benchmark is that you Haven't figured everything out the Opportunity for squ you haven't figured Everything out so just own it and They're going to look and you know when They see spiky Revenue month over month They're going to understand you're Running experiments that's okay and if

You lose customers they're going to Understand you're trying to figure out Your ICP your ideal customer profile They know you're not going to know that Yet so yes you know In-N-Out Burger Kicked Tony out Tony was like doing the Hack and Stanley were putting In-N-Out Burger In-N-Out Burger doesn't allow Delivery you know like perfect example Of like hey you could really spike your Revenue by putting in and- out in your App you know illegally against their Terms of service you know and just Having somebody show up and buy it and Deliver because there's demand pent up There yes but you're going to get a Legal letter the second you get to the Thousandth order you know you're going To get to the Thousand order real fast I Can tell you that and that legal letter Is going to come smashing down and now You got to hire a lawyer and you got to Deal with all this nonsense and so like There there's no um there's no shortcuts Here so just own the numbers it's okay It's okay and my Lord the gamesmanship I See I don't know if you see it sometimes Where there was uh I remember in the Early right in the middle of the Y Combinator days it got a little weird And Tech Stars too because people Learned how the Facebook and Network Work and it was so magical I don't know If you remember this number I'm sure

Pinterest had this similar effect they' Be like ha I have this new product and They just gave me 125k I got 12 weeks And then I got to meet Sarah and I gotta Meet per and I gotta meet this firm and That firm okay great here's what we're Going to do and somebody kind of shared This and it infected the whole ecosystem For five years we're going to spend $1,000 in week one 2,000 in week two 4,000 in week three you can see where This is going and there just magical I love it doesn't need to be cumulative Now right we got past the cumulative Chart act now we're on this and I said Huh that chart's so perfect and Page Views and signups everything so wow how Did you do that and then they be like Yeah you know just we got got figured Out product Market fit I'm like in 12 Weeks you got product Market fit while You're inside of tech stars and white Combinator wow that's fascinating and he Paid oh yeah we did a little PID Yeah where did you do the p on Facebook Okay go can you pull up the Facebook ad Manager let's take a look at it and talk About it and I would literally pick it Up with them and they would pull it up And I was using it too I understand how It works I've used it to do promotion it Was hilarious right so that enduring Values I love it so key this this is Where game knows game game knows G of

Course of course like all the tricks are There I appreciate a good hack do not Get me wrong great hack is awesome but Like you know the I I just want to go Over L only five I pulled it up here While we're talking in chat GPT just to Give myself a refresher let's do these Let's do these real quick choosing Status over results right CEOs May Prioritize their personal status and ego Over the success and results of the Company oh yeah that's and that's the Most dangerous one that's the most Dangerous one why well it's the one if You're oriented towards status then the Status Founders who have their Proclivity to status are the ones that Are most vulnerable to the bity metrics Because they are you know focused on how Do I look good how do I look good Externally and Internally uh in order to maintain my Status as you know unicorn founder or You know and they're the ones that play For those accolades and if you get Oriented that way if you're focused on The status which means your focus on the Vanity metrics the things that make you Look good you're just it's it's Incredibly difficult to build enduring Value as a byproduct of those two things It's so well said and I remember we Bring up this unicorn status that Infected the industry shout out to aen

Who's an awesome VC and I get her to Come on this PO every three years the Only problem with the Unicorn status Thing was it became like we didn't Really have like a black belt in our World like there was there was like you Know these these Founders want to hit Some Goal which is virtuous right I want to Hit the goal okay the industry told us Being a unicorn's the goal okay how do I Hack the Unicorn status so you know we Talked about the other two cumulative Charts whatever Facebook hack now here's The next hack okay I'm gonna take this You know $50 million at this crazy Valuation and it's got a 7x liquidation Whatever that whatever it's got Participating prefer and then they're Trying to do vanity metrics like you're Saying to get the vanity and the status And they're playing stupid status G Games the only game that matters is are You building a great team that builds a Kickass product that Delights users and You've just basically eyes off the prize Right yes yes absolutely you see in Basketball I don't you a fan of Basketball like I'm a fan of all sports In the abstract I don't watch anything I Mean like there's this whole thing where Like oh this this this guy in the NBA is A 20 and 10 you know get 20 points 10 Point you know he's like so consistent

Like and he plays for a team that Doesn't make the playoffs and like you You could be the the like you could be The best player with the most incredible Stats on a team that never makes it to The dance they never make it to the top Four teams eight teams 16 teams they're Always in the bottom but man this Person's got 30 points they oh they had A 50o game they never got there that's Like the perfect example of it okay Popularity over accountability CEOs Might avoid holding their team Accountable to te popularity and Harmony Man I got over this one a long time ago But I see this all the time and this is This is you know it's it's very holding People accountable is is really hard you Have to be and actually we it's I think We're we're starting from top down yeah But really you should start bottom up Because each one Builds on each other But it's it's related to this the need To be liked and when you need to be Liked that's the pop you know leads to Popularity then you aren't going to lean In on these hard conversations that Create accountability for your team and Going down to the fifth one choosing Invulnerability over trust CEOs May Avoid showing vulnerability which can Prevent the building of genuine trust Leadership team yes uh you know I I try To do this inside my own firm Sarah I'm

Like we cannot ride on my past victories It's great that we hit Uber it's great We hit Robin Hood it does not matter to Our LPS they've already gotten those Distributions we need to find the next One all of this history doesn't matter Where the podcast rank it doesn't matter If people want to take s with me we're Only as good as that next deal we have To take these Founders and figure out How to get them from 250k in AR to 2.5 Million or there's no fund we're a new Firm we're on our fourth fund we have to Fight to exist and man and they're like Oh you don't have it all figured out I'm Like have it all figure it out do you Know how hard this industry is like we Talk about how hard it is for a Founder I mean you hit a hit and then Everybody's like where's the next one Jesus you know like this is one of the Problems with hitting big hits like you Guys have hit or you hitting Pinterest Like what what was Pinterest p valuation And when did you invest in it it's it's Probably now I think it's more than a $40 billion company when did you invest What was the valuation I want to say Something like 35 or 40 maybe okay so Just just a THX you know maybe small Small Improvement yeah yeah thousand X 500x after dilution whatever I mean this Is incredible like it doesn't happen and Now do you ever have this like wake up

And like how do I top that yeah I mean I Think the the people I most admire Have that anxiety and I certainly do Which is that you're only as good as Your next deal and like there is nothing That hurts more in my heart and I just You know specifically within the Working World than somebody else making a better Decision than me or seeing a company I Didn't see and it being a great one and That's that is the paranoia I think we All have here is the one or two Companies every year that really matter We have to make sure we find those Companies um yeah you know and get to Partner I mean you think about it like Pinterest might be one of the great Non-consensus bets ever social shopping The entire category of social shopping Was considered stupid when you made that Invested that was the most idiotic Investment you could have made that year In most VC's mind oh a bunch of like Women at home making a a board of what They want to purchase in the face of Amazon and Walmart and Target and Facebook and Instagram are you dumb Sarah like why would you ever make that Bet when they're up against all these Things this see how did you make that Bet how did you make the non-consensus BET take us through it it's actually Funny I did a fireside chat with Ben Recently and he made a point and I and I

I hadn't thought about it before but you Know I was an early user of Pinterest I Just the first time I used that product I just it it felt like there was Something special here and this was During a time when Twitter was ascendant And and Twitter was just text Bas at the Time and so you had all these other Companies that were aping Twitter very Text based type uis and then all of a Sudden you know to use this product Where it was all about images and Actually essentially creating lists you Know when you pin something to a board That's basically a list it's just a Visual list it felt so different to me And I remember you know we went to go Meet the founders Jeremy LaVine and I in The palto office I just felt like this Had to be the hottest deal in Silicon Valley because the product was so Incredible you meet the founders they're So compelling the engagement data was so Compelling I I like couldn't sleep that Night I wanted to invest so badly it Just seemed obvious to me that this Would be the hottest company that Everybody was going to be competing for And I just you know I was just like Please please let this let this happen It turned out there was no other term Sheets and there were no other T sheets Because I was in New York everybody here Had shared this consensus view where you

Know all the gossip that goes around Everybody just started they got once Somebody accepts this idea that like is Just going to be a small Niche site it Became hard for other people to unsee That and I had actually just moved to San Francisco I wasn't in the gossip Networks I wasn't part of you know the Consensus View and so I had an outsider Jeremy and I had an outsider perspective On Pinterest and I think that is what it Took you know to to see it and so Everybody else and this is this was the Point that Ben made to me he's like you Guys you were out of the consensus Conversation and because of that had the Independence of of thought when you when You met the company and I think that's Actually the greatest risk that we all Have right now is that everybody talks About everything we all develop these Consensus ways of thinking and it's the Companies that are disruptive to those Views that end up being the outliers It's the great Paradox the the consensus That I see in my own firm with just 12 Investment professionals doing this like Siege Day stuff I had to create a tag in My database I I came up with 13 tags of Why we invest in a company and 25 red Flags that can also be pink like I don't Know the stupid stuff like the founders Paying for their apartment or like their You know giving themselves a draw but

Not doing proper accounting now it could Be a sign this unethical founder or just Naive and just hasn't gotten their Accounting together we can fix it if It's a ping flag if they're like going To Vegas and buying chips you know like Obviously you know you there's a there's A different thing going on here maybe it Makes them more attractive if they're Lunatics but putting it all aside the Non I had to create two different tags In our database and these are now my Joker cards basically it's like the Blank tile in and I've never talked About this I'll talk about it here Because I want your feedback it's like The blank tile in um Scrabble you know You get that blank tile you going to Probably win the game so one of them is Uh an outlier founder and the other is This is a outlier idea and I just told Anybody you okay one of the things we Like is product velocity we like world Class design uh we like four business Four specific business models that you Like ftech Marketplace consumer whatever SAS it's all obvious stuff but you can Throw that trump card down you throw That blank tile down and say outlier Founder outlier idea and that is worth Like five tiles I don't have a number it If we don't understand the idea or we Can't get consensus around it it doesn't Fit it's not like SAS it's not like a

Marketplace and the three companies that Fit that a cap company a meditation Company and a stock trading app for Millennials who live in their mom's Basement and it's free to trade you told Me those were my three biggest wins I'm Be like this makes no sense social Shopping you don't actually do the Shopping here you just take a picture And put it on a board it's your vision Board wait wait but you don't actually Ship the product no no no just just Place where you put a bunch of stuff That you're interested in like it's such A great bed and isn't it so wonderful When you are the non-c it's so rewarding To be the non-consensus believer I this Is part of the pleasure Center I think So many of us have is to make you know I Know when I invested in chainalysis Which was my first investment here at Benchmark the this was a time when the Ico craze was happening yeah and Remember everybody who is interested in Tokens or in crypto were investing in These icos which were essentially white Papers uh nothing no code written most Of the time a very big valuations and Then here we were investing I I there's A quote that the founders of chainalysis Made fun of me for that I said it was Like a meat and potatoes uh SAS company In in crypto but and and people you know Said like what Sarah what are you doing

Investing in a SAS company it's like all About tokens now yeah it's you know Incredible Founders who saw an Opportunity in a market that no one else Was seeing with like a real Network Effect like there was a real Dynamic to The company that they should dominate Their you know their vertical when you See those types of opportunities you Meet those typ those Founders you just Feel so lucky um and and there's nothing Like I you know I know for the last Company that I I mentioned like I just Remember thinking we need to be in Business with this person you can Announce it here by the way Sarah it's Totally not yet not yet okay chip your Cards you can't blame for trying I'm Always trying to get a little something Here know I know well I I don't know if You know My Philosophy I hate announcing Companies oh yeah tell me more why I am The anti-hype person I think I wrote a Whole blog post on why hype uh kills Companies particularly in consumer but I Just think that hype it creates an Expectation from your customer ahead of Where the product reality might be it Catalyzes your competitors to be aware And respond to you and it may you know Announce to a bunch of Founders that are Thinking about an idea to to go after That hey here's something interesting And so you know the the biggest reason

To do it um there's you know in B to B Is like maybe the legitimacy is Important for your your customer and so There's there's a reason to do it there And you know potentially for recruiting But I think you can get the benefits of You know benchmark as an investment as An investor through the one-on-one Emailing you know have it on your Website do whatever you want to do but The announcement more often than not is An ego thing as opposed to a building Enduring value thing and and and there Are outliers like you know I heard um The mraw founder Arthur talk about the Brand for mraw being important because a Developer isn't going to try 20 Different Foundation models they're Going to have a small number that they Want want to they want to try and so Having the brand having that legitimacy Helps with the kind of shelling point of Making that decision that is true you Know that is also true but again Case by Case but by and large I try not to Announce uh for as long as possible I Think it's wise there's a time to Promote you're talking to a a hype man Here on the program I'm kind of like the Flave of flave of the industry let's go You and I can be the Ying Yang on that Zct well I do think there's a time to Hype but you're right you do not want to Poke the tiger and have Zuckerberg wake

Up one day and be like oh you want to Take our business okay next door here we Go yes yes oh you oh you you do want to Okay great we're launching threads you Know like you just don't want to wake The sleeping tiger you know like it's Like over here we found oil it's like oh You found oil in that little you own Three acres great I'll buy the 300 Around you I drink your Milkshake game over yes uh not not fun For a founder let's talk about a couple Trends here as we wrap up and I try to Keep this to 75 minutes with you because You agreed to come on every 6 months uh And I'm going to hold you to it because You're one of my favorite guests and uh This is no it's good for me because I Get to talk to somebody who I think is Really smart I think that these are the Conversations sharpen your blade a Little bit right like I think you yeah I Always think like smart people it's good To just hash out what you're thinking at The moment all right inperson work you And I have talked about this we both Think there's an advantage I was talking To somebody and they just said like if There's a venture firm I think I was Talking to an LP there's like if there's A venture firm and they only invest in People with fully in office companies Can you let me know because I want to be An LP in that fund and I was like huh

We're probably pretty close to That yes talk about it talk about it Because like I just saw a pritsker media Told everybody to come back Michael Dell Told everybody to come back and a bunch Of people resigned and he said Resonation accepted you know and like I Think now we're at I think it's I think We're kind of at four days a week you Want to you know [ __ ] off on Fridays [ __ ] off on Fridays [ __ ] off Fridays go For it but other than that like can we Least be here four days a week what's The case here in terms of advantage for Startups specifically especially the Ones we invest in early Stitch most of The time the companies that we invest in The founders are already you know if It's a five person company they're Already managing the biggest company They've ever managed the biggest team They've ever managed and I just believe I post about this that being remote is Like trying to run a race with a Parachute tie to your back you just you Get slowed down on every interaction There's just so much more friction Everything gets slowed down and you talk To experienced Executives experien you Know people at other companies and they All feel this too that like when you're In the same room the kind of the Throughput of conversation is so much Higher the being able to nip things in

The bud it's not a oh let's schedule 30 Minutes on your calendar to to do Something it's just everything is faster The velocity is better the culture is Better you get to know each other PE That you know then retains people There's just so many things and so I Think you know if you're starting a Company you've got to be all in you know This is why do it why do it it's so There's so many easier things to do than Start a company and and and and a Venture back company specifically like If partnering trying to partner with the Most ambitious Founders and those Founders are going to want to be in the Place with the most ambitious people and And shoulder-to-shoulder with them in Their office and truly that happens you Know if San Francisco may have got had a Dip during the covid years but like I Think very clearly it is back and the Best place to do that is here right now Sure um at least in the United States Yeah absolutely it's a lot of executives Are you using this as a um commitment Test now I've heard this from a lot of Them uh now they will make exceptions Elon I talked to him about it like he's Like if you are like world class and There's you're one of one and you live At Lake Tahoe and you do something like You know in Assembly Language on like Some chip like okay fine everybody else

Like I'm in the office get in the office Let's go to Travis from Uber about it He's in office for his new company and He said to me you know what you have to Be there and it's just a momentum thing To get people out of this once you get The momentum switched he said it's Really it really starts to work true but If you don't have the momentum and the Senior team doesn't come in then nobody Else is going to come in and it just Starts going the other way and so you Just have to have this like uh fortitude Consistency I don't know what the word Is uh and it's one of those things that The more senior you are more likely it Is that you want to work from home you Know you have kids you know there's you Have a nice house yeah exactly got a Couple of nice houses yes yes I mean Zuckerberg's having a real problem with This because Lake Tahoe Kawai he's got All these incredible houses and I know People in his Circle and he's zipping Around with like a pot of people and He's got his own teachers and everything It's like public knowledge or whatever But you know it's like he he's not in The office so people are like wait a Second we have to come back to the Office you're not in the office it's Like and then he's flying Executives out To hang out with him at his ranches or Whatever like more power to him but you

Know it does it is top down yeah and I Think the the important thing then is Like you're you know every great company Has to have a way of getting young Hungry people uh incorporated into the Culture learning through Osmosis from the more senior people who Have seen it before and it's just so Hard to do that in a remote World let Talk about this like SAS pricing Headwinds I think you've invested in Some SAS companies I got a bunch of SAS Companies we've seen like two or three Years of just man this has been brutal Not only have the multiples come down Not only were they overfunded and Burning too much money then you get Their customers are consolidating their SAS vendors from 50 to 20 and some CFOs Somewhere is like yep you're in the 60% That we're cutting and and then you have People saying I'm going to build ripling Or whatever you know as like oh you Don't need expensify you have ripling We're going to just knock that product Off and put 70% of it into our product Good enough you can cancel that so There's a lot of headwinds and then on a Per seed basis I have a bunch of Companies are like yeah we didn't lose The logo we just lost 30% of the logo What what happened oh they did a layoff They did a rip yeah they don't I mean we Can't sell the product to employees who

Aren't there anymore then you know There's this usage thing starting to pop Up people sell them Bas on usage you and I talked about that last time with one Of your BPO kind of companies AI compies May talk a little bit about that the General pricing change like we may not Be calling the SAS maybe I don't know You know so I wrote a piece so there are A few things happening here to to Unbundle certainly just on the multiple Side growth for these companies as you Allude has come down a lot and there's a Number of reasons for that consolidation Saturation and of course AI you know Starting to to nip into the perit model Pricing like you know it's kind of Classic if you're Zenda You have to you you don't want to be Vulnerable to an innovator's dilemma but In an AI world where you're starting to Have people automate the tickets which Means fewer seats are necessary how do You adapt your model so that you can be Kind of consistent with the kind of the Clear direction of momentum and of the Kind of Technology where the where the Puck is going I personally get excited By companies right now now that aren't Actually selling software in the way That we have always thought about it I Talk about kind of non-consensus view I Wrote a piece you know that you were Alluding to maybe a year or so ago just

About how I believe that AI companies You know AI native companies you know Should get out of the mindset of selling Software where you're selling it to an Existing employee for their existing Workflow and you should be thinking About like what does it look like to Sell the work instead the the finished Product where you are you know taking All the friction really of of working With a person in that particular Instance having somebody adop adapt to a New technology and instead you're able To automate those work products in a way That it's just a very different kind of Consumption based way of charging for The the product that actually is Relative to the cost of the human who Would have otherwise done the work as Opposed to to increasing productivity of That head count and so it's a very Different mindset you know yeah instead Of selling a 10% productivity Improvement where you have to get Everybody to adopt to the software You're selling a 95% productivity Improvement yes there's going to be some You know on the edges improvements that Happen at the company but by and large You are taking that work off of their Plate and selling it as a service almost To to the company that model I believe is is the future for these Kind of AI companies building B2B

Products there are other it's not to say That that's going to be the exclusive Future there's certainly going to be so Many other other companies that get Built that look more like software or Are more like infrastructure where then Internal teams in these Enterprises are Building their own applications or Leveraging the technology themselves in Different ways But it just feels like it is a paradigm Change that's happened and we're going To see more a lot more consumption based Pricing in these companies moving Forward I kind of like it better uh you Know the per se model you know it felt Fair and it felt much more competitive Than the client server model where you Had this like buy a couple of servers You got buy licenses it was just all too Complicated got simpler and then Consumption is even simpler and I think You know if there's any Trend it's you Know this trend of better cheaper faster Simpler yes right like some some Combination of that malstrom you know And that is like actually the area that I get most excited about now which is Like if you think you know we we have a A few Investments companies like deel And and hen and some others where what They did is they built a product that Removes all the friction of working with A human to do something and by doing

That very much unlock the market Opportunity for that so let's take deep L as an example dbel is an investment we Made several years ago maybe six or so Years ago and it is you can think of it Most simply as AI translation it's the Best AI translation in that's available Right now and you know head-to-head test Again and again their translations come Out ahead they you know I was at Pinterest I remember one of the first Jobs I had to do was to translate Pinterest into all these different Languages and then All exactly localization and I hired a Bunch of Translators uh through upwork and had to I find them manage them pay them figure Out ways to get thousands of hours of Work it's just such an annoyance and and Also it was like you know okay in two Weeks we'll get the trans translation Back type thing now with something like DL you have an API and you're able you Know there's a custom Library so you can Have you know the things that are Specific to your company and it is Instant and when you do that then all of A sudden the things that you would have Otherwise not bothered to translate Because it wasn't worth the cost or it Wasn't worth the effort you just do it Instantly yeah this is a super Interesting Trend it's like uh this

Wasn't worth it before exactly because We were pricing it at translating Something for $2 per minute so $128 an Hour to translate a podcast made no Sense then descript probably using yes This product all of a sudden it's just Like yeah well when you upload your Video we do a transcript and YouTube Does a transcript and this does a Transcript and it's just like Transcripts are now table stakes and so We invested in a company called podcast Ai and they were kind of automating Podcast I said can you just make this a Website because I I'm on WordPress right Now shout out to my guys over there Matt Mullen Brian Alvi and I was like and I I Was going to hire all these people to do Translation and to do transcripts and They're like yeah we can set up your Website here it is and literally in two Days they sent me and I said oh okay how Many episodes are you and they said all Of them they said well this at the time 1,400 episodes of this week serup like Yeah yeah we just pointed at the RS fre B we did them all how much did that cost He like I think it was like $400 like What like yeah you know it's like 50 per Episode or something so we just did it For you I was like this is the greatest Product ever and so now they sell this Product for 500 bucks a month and you Can just in podcast a die does

Everything for your podcast including The timestamps so this when we publish This episode it'll have the timestamps It'll summarize it it'll say the major Themes we talked about and then the next Step it will be linking to things and Then it's going to take your two other Episodes and Link them together so here And it's doing it all Automatically W and then the next piece Is anybody can go in and highlight a Section so they can highlight is talking About lon's book and say make a clip and Then it makes a clip ready for Tik Tok With the text over it now that process Was 30 hours of work that I just Described and it's now zero hours of Work whoa and this is like what is so Fun about this another company that we Invested in hey Jen my partner Victor's On the board Joshua incredible founder Like if you went to the website for haen Oh you would think man how big of an Opportunity can this company be it's Like they create these avatars for you Where it looks like a h it looks you Record yourself or you use one of their Available models and you write text and Then it it act it like lifik makes it Look like you're saying those words and The bias in our brains and this is you Know reminds me a little bit of like you Know Uber Airbnb like so many of these Companies initially get very very

Underestimated Because the opportunity they're going After initially is small but the value Proposition is so compelling that it Blows open what that use case could be And and the creativity that happens once That something like that is possible and So you know at hn it started out with These avatars and used to be like who Would have a video of themselves on the Website no one it just was never worth The time to film yourself do all the Production it's a oneoff you have to go Through all that effort all over again To do another video but instead you can Have something like hen where all you Have to do is write some new script and It automatically gets updated so great For training you think about like the HR Department does some training or like I Don't want to say an MLM but let's say You got a sales team at scale you know You got thousand people working at Toyota dealerships and you got this Great training person who trains them on To sell the new Prius now you just you Don't have to hire a video crew to go do That all over again for the new Prius And the 17 new features or what about The 1,600 you know little things that for The mechanics now you got some mechanic Who's been in there and it just the Mechanic will teach you stuff man that

Is like mindblowing it's just amazing This are you more enthused than ever About Ai and as an investor are you in The triout of Despair where where are You at are you gidy where where are you At you know giddy is close like I you Know we're just deeply optimistic um I Love it and gidy up I think this is one Of those things where you could imagine That this is like the internet that came And then the window opens and if you're Not there at the very beginning of that Window then like you missed your you Missed your chance or the App Store Happens and then all of a sudden it's a Gold Rush land grab whatever you want to Say and and then you know good luck if You come later I think what we're going To see in AI is just a rolling thunder Of opportunities that get opened up each Time uh you know any of these Foundation Model companies makes an improvement to Their model new things that weren't yet Possible become possible you know there Are things like Laden see for voice well I mean so many companies and you speak To them and and the voice The Voice Models and it's still there's still just A little bit too much latency for it to Feel like a human or you know some of The reasoning or memory there's a There's a bunch of things where you Still feel the constraint of where the Technology is in terms of what use cases

Become possible y but as we progress From you know four to five as new Research comes out out that you know Makes these things on the edges better I Think new use cases are going to Continue to be opened up and so there is Just like this thing of like it we're we Are still in the early Innings we're AB We're still meeting companies that have Completely orthogonal approaches to Building Foundation models and so you're Just reminded that this is still wide Open and and keeping optimistic and Almost naive in believing that every Company still has an opportunity to Disrupt the incumbents uh is a really Fun fun place to be it's definitely talk About the game on the field I think you Described it pretty accurately which is It's anybody's game you know you start Looking at these foundational models and It's like oh my God chat GPT opening Eyes run away with it you're like Actually nope I'm using this Claude Minstrel or whatever it is like their Last version I'm like oh that's actually Better you know and then I go to this Other one I'm like oh that's actually Better and then I do like I just cut and Paste the same prompts into three of Them and I'm like wait no that one did Better for this oh wait this one does Better citations oh this one does better Tables oh this one does better

Visualizations and I'm to keep up with It it reminds me of the 80s when I was First you know uh like a young adult in Like 1983 8485 I was 13 14 15 years old Yeah I was 13 14 15 years old I was Obsessed with PCS and I was a pie of Sport specialist I used to get PC Magazine in a magazine called bite and They became so thick and you would just Go Page by page it was like my Vogue There would be 300 Page magazines 200 Page magazines PC Magazine got so big The US Postal Service said we can no Longer let you send this as a magazine So they're like oh okay I guess we'll go From monthly to weekly so that we could Lower the number of EDS but you would go Falcon computer you know Eagle computer Oak computer and it would be like a Different page with them selling a PC There there were a thousand people Selling PCS and you know it wasn't like Today where it's like oh well you can Get a Mac or you can get a dell and You're done or Surface and you're kind Of done but we were in that face it Reminds me of exactly that like just People in garages just figuring stuff Out and then one of them's going to be Dell and look at Dell today or look at Apple today right like where you start It's not where you finish what Michael And I I text with Michael Dell all the Time I talk to him all the time and he's

Invigorated he's still at it well I me We're talking about 40 years later yeah And that company's doing better than Ever AI has been the greatest gift to The incumbents that's for sure yeah um But I I absolutely agree I mean I the Halflife on any opinion on AI is very Very short because it is the type of Thing where I was joking with a friend Of mine who is that anthropic I was when They came out with qua 3 I was like man I thought you guys were gone you know Road kill what a friend like I thought Your company was toast man you I can set Your resume around for you and they They're back in the game and and then Gemini comes comes out and they have a Million token context window and you're Just like it was just every and then of Course then then open AI comes back and They have 40 and so you know there is no Resting on laurels here there you know We are also at a time when you just Think about the tremendous amount of Investment that's going into these Companies going to nidia's balance sheet Crazy and consumers are the big Beneficiaries it reminds me a little bit Of um you know the food delivery Wars Early on where so great you remember how It was like and they were fighting for Each incremental point of market share And so if your order was 10 minutes late And you let them know they'd refund the

Whole order right it it's all consum Huge beneficiaries we're we're going Through something similar now yeah where You know open AI is pricing these things Below cost is my understanding on at Least on the consumer side of the Business for sure for sure we are as Consumers in a golden age where this These products are unbelievably Expensive to get to where they are still Very expensive to run and so powerful And it's at at our fingertips uh that is A really fun time I changed when I open A new window in my browser I hit this a Little tip for folks if you you have to Become AI native Yes means you just have To be using it every day multiple times A day I open a new tab or I open my Browser it opens up to the chat GPT Window for and I just do everything There first and then when I was talking To you on the show I just typed in Lan Onlyi you know five whatever and five Dysfunction five this and and I said in Five sentences so I get now when like I Have producers of the show they spend Two hours on the notes I got the notes Here but in real time you'll say Something I top it type it in there and I'm like oh yeah that was the one I Forgot that or I put in tell me about The I just put social shoing 2010 to 2015 and it was like oh wolo the Wish and I was just like oh wow yeah

Fancy like all this great stuff and like Yeah and who who won right like and I Think it was like fate a comple that you Know your your jockey was going to win That race like it was not clear at that Time uh listen you're amazing thanks for Coming on again you got it again folks 75 great minutes Sarat tavl uh you can Subscribe and you will to her substack Right now just Sarah t a v l substack You'll find it there and she doesn't do A lot of interviews so we'll see her Back here January 10th and we'll do our We'll do our this is how this is what I Do with my great guests I just lock them In come anything there you go I love it January 10th she'll be back with her 2025 preview let's let's make it fun for The next one let's talk about what we Expect in 2025 be like we'll kick off The year with our predictions and ideas Uh all right we'll see everybody next Time bye-bye