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a16z, Anish Acharya: Is SaaS Dead? Do Margins Still Matter? Why We Are Not in an AI Bubble?

Anish Acharya is a General Partner at Andreessen Horowitz (a16z), where he leads consumer and fintech investing at Series A. He serves on the boards of standout portfolio companies including Deel, Mosaic, Clutch, Titan, and HappyRobot and has led early bets in companies like Runway and Carbonated. Before a16z, he founded and exited two startups—Snowball (acquired by Credit Karma) and SocialDeck (acquired by Google) and scaled Credit Karma's U.S. Card business to over 100 million members. ----------------------------------------------- Timestamps: 00:00 Intro 00:56 Why building an AI company requires being in San Francisco 04:01 The "SaaS Apocalypse" myth: Why "vibe coding" everything is a lie 05:18 How AI agents are finally breaking the lock-in of legacy software providers 07:41 Incumbents vs. Startups: Who actually wins the AI distribution war? 12:28 Why the developer tool market looks more like Cloud than Uber and Lyft 20:18 The death of the Chatbox? Why browse-based interfaces are still preferable 25:32 Why power users are 10x more valuable in the age of AI consumption 26:40 Do margins matter in a world of AI? 28:21 Why we are definitively not in an AI bubble right now 31:07 Why the Legal & Customer Support industries will have dozens of winners 37:42 Lessons from Marc Andreessen: Why the "quality of being right" supersedes process 42:59 Is "Triple, Triple, Double, Double" dead? 57:34 Open vs Closed Source 01:02:58 Is Kingmaking Real? 01:09:10 Quick-Fire Round 01:12:51 The a16z Playbook: How to win 100% of the deals you chase ----------------------------------------------- Subscribe on Spotify: https://open.spotify.com/show/3j2KMcZTtgTNBKwtZBMHvl?si=85bc9196860e4466 Subscribe on Apple Podcasts: https://podcasts.apple.com/us/podcast/the-twenty-minute-vc-20vc-venture-capital-startup/id958230465 Follow Harry Stebbings on X: https://twitter.com/HarryStebbings Follow Anish Acharya on X: https://twitter.com/illscience Follow 20VC on Instagram: https://www.instagram.com/20vchq Follow 20VC on TikTok: https://www.tiktok.com/@20vc_tok Visit our Website: https://www.20vc.com Subscribe to our Newsletter: https://www.thetwentyminutevc.com/contact ----------------------------------------------- #20vc #harrystebbings #anishacharya #gp #a16z #ai #vibecoding #saas

Anish AcharyaguestHarry Stebbingshost
Feb 9, 20261h 20mWatch on YouTube ↗

EVERY SPOKEN WORD

  1. 0:00 – 0:56

    Intro

    1. AA

      you have this innovation bazooka with these models. Why would you point it at rebuilding payroll or ERP or CRM? The general story that we're gonna vibe code everything is flat wrong, and the whole market is oversold software.

    2. HS

      I'm so excited to welcome Anish Acharya, GP at Andreessen, where he leads consumer and fintech investing at Series A.

    3. AA

      Now, an interesting topic that's not discussed is the cost of transitioning from one SaaS provider to another going dramatically down, so systems integration. I don't think we're allowed to believe in luck at Andreessen. We have to see a hundred percent of the deals in our domain, and that we win a hundred percent of the deals that we go after.

    4. HS

      [clapperboard clapping] Ready to go? [upbeat music] Anish, dude, I've wanted to do this for a while. We've been going back and forth.

    5. AA

      Yes, we have.

    6. HS

      And so I'm so glad that we can do this in person. Thank you for joining me.

    7. AA

      Of course. Thank you for having me.

  2. 0:56 – 4:01

    Why building an AI company requires being in San Francisco

    1. HS

      I'm diving right in. We were just chatting now-

    2. AA

      Yeah

    3. HS

      ... and I was saying, "I think it's better to build in, in London than in SF or in other places other than SF. Talent is cheaper. It retains for longer."

    4. AA

      Yes.

    5. HS

      "Uh, you don't have the promiscuity of people jumping from role to role."

    6. AA

      Yes.

    7. HS

      And you've built a company now, both in Canada and in SF.

    8. AA

      Mm-hmm.

    9. HS

      How do you reflect on what I just said?

    10. AA

      I disagree with you. I wish it was true. I simply wish it was true, and I want it to be true, and maybe it will be true, that it will be, you know, the whole thing that we always love to say to ourselves around sort of talent and opportunity not being... You know, talent is equally distributed, opportunity is not. The truth is that cities are the original network effect, and for technology, there is a network effect for builders in SF and for this moment in technology, right? Where so many of the secrets are these sort of things whispered down shadowy hallways, the benefit of being in SF is enormous. There's also-- we just talked about this, there's a selection bias quest- question: Do you care enough to make it happen in SF? You can make it happen anywhere, New York, London, Toronto, Tel Aviv, you name it, but there's something different about saying, "I'm gonna give everything else up and be singular in my focus and move everything to SF to make it happen."

    11. HS

      Are there any other locations where you think there is actually positivity associated with them being located there?

    12. AA

      Tel Aviv. I think Tel Aviv, you can be incredibly ambitious and uncompromising on that ambition and have a really, really good reason to be there. I think the other nice thing about the Tel Aviv ecosystem is that the country's so small, it's ten million people, that you can't possibly fool yourself into thinking that the domestic market is gonna be big enough for whatever you're doing, so you immediately go outside. Whereas if you're in London, there's sixty million people here, okay? And you might say, "Well, that's actually a lot of people." And you know what? There are parts of the market, like fintech, where the LTVs are so high that perhaps sixty million is sufficient.

    13. HS

      Mm-hmm.

    14. AA

      But for most mass-market products, it's just not sufficient, and if you end up starting focus on the domestic market, it's often hard to actually move on to a bigger market. So there are all of these reasons that it's just... It, it's not that it can't be done, and there are incredible counter examples, like Eleven. Um, but I do think that it is just that much easier in SF, and, and that's why that's where I focus.

    15. HS

      You said the word sufficient there.

    16. AA

      Yeah.

    17. HS

      Uh, yes, you can build a sufficient-sized business, say, in the UK, a three to five billion dollar business, [chuckles] say, as an example. Respectfully, when we look at companies being created today, three to five billion dollars just doesn't seem like it's interesting enough. Has the world of venture changed so significantly on what is sufficient for a venture outcome?

    18. AA

      I mean, three to five billion is an extraordinary outcome. Don't get me wrong. So in no way, no way am I, like, minimizing that, and, look, I do think that those types of venture outcomes stack to create really meaningful funds. So this is not about working backwards from venture economics, but the biggest companies in the world today are trillion-dollar companies. If you wanna build a trillion-dollar company, if that's your intish- int- intention, you've sort of got to start with a set of assumptions that can lead to that. If your intention is to build an extraordinary enterprise, and you build a three to five billion dollar enterprise, like, you are one of the few people in the world.

  3. 4:01 – 5:18

    The "SaaS Apocalypse" myth: Why "vibe coding" everything is a lie

    1. HS

      When we say about those three to five billion dollar companies-

    2. AA

      Yes

    3. HS

      ... yeah, I, I mean, I, I heard a brilliant statement, which is the SaaSacre, the massacre of SaaS companies- [chuckles]

    4. AA

      [chuckles] Oh, my God

    5. HS

      ... that's going on in, in kind of the public markets today. And, and when we look at it, essentially, investors are no longer confident that traditional enterprise revenue is sticky or durable. Are they right to question whether traditional enterprise revenue is sticky and durable?

    6. AA

      I think software is completely oversold. I think it's a silly story. I heard it called SaaS Apocalypse today. It's very funny. Bloomberg is trying to get that to stick. Look, if you look at SaaS spend today, if you look at IT spend overall, it's eight to twelve percent of enterprise spend, okay? So even if you vibe coded your ERP and your payroll with all of the kind of risks and dangers that that entails, you're gonna save eight to twelve percent. You have this innovation bazooka with these models. Why would you point it at rebuilding payroll or ERP or CRM, right? You're going to take it and use it to extend your core advantage as a business, or you're gonna take it to optimize the other ninety percent that you're not spending on software today. So I just think that, of course, there will be secular losers. There are, like, specific business models that are now going to be disadvantaged, but I think the general story that we're gonna vibe code everything is flat wrong, and the whole market is oversold software.

  4. 5:18 – 7:41

    How AI agents are finally breaking the lock-in of legacy software providers

    1. HS

      Okay, and so we are actually overly negative-

    2. AA

      Yes

    3. HS

      ... and we are being too critical on these companies. How do we think about, then, the continuing negative growth that we've seen in a lot of these companies, the continuing seat contractions in a lot of your, say, CRM providers or Mondays of the world?

    4. AA

      Well, I don't know if that's what we're seeing across the board. Like, I looked at the data this morning, and if you look at, um, SaaS, public market SaaS companies, seventy-five percent have raised prices since ChatGPT was released. Seventy-five percent, and they've raised prices meaningfully.... The mean is eight to twelve percent, but there's a large group that have raised it twenty-five percent or more.

    5. HS

      Is that not because they have to, because they're not growing seat count, and so they have to grow revenue count?

    6. AA

      Price is a measure of product market fit, right? And if you have enormous competitive pressure, you are not raising prices. You're typically cutting prices. So I think, one, you've got this sort of un- uh, you know, this dissonant fact that prices are going up, right? Two, if you look at the incumbents today, like ServiceNow is not IBM. They're a highly capable incumbent. They just went public, and they raised guidance. So I think it's very easy to look at these things and say, "Incumbents, incumbents, incumbents." Like, again, like, they're not Sears. They're very, very capable, and I think they actually have a right to win and deploy technology in the context of these workflows. Now, will there be disruption? Of course. We've talked a bunch about, you know, companies that can now-- that were once priced on seats, which are now gonna be priced on outcomes, and, like, that is going to be a big drag. But I think for the majority of SaaS, it has so little upside in being rewritten and vibe coded and so much downside, why would you do it? Now, an interesting topic that's not discussed is the, uh, the cost of transitioning from one SaaS provider to another going dramatically down. So systems integration. If you and Alex said this funny thing, and I know you, you laughed, and I laughed too, which is that, like, some companies have hostages, not customers.

    7. HS

      Yeah, I love that statement.

    8. AA

      I love it, too. And if you actually have, you know, an SAP system, you are a hostage of SAP, and they need to do nothing after they win you as a customer, except the bare minimum. If you wanna switch to Oracle, oh, my God, that's like a multi-year high risk. It's probably gonna fail, and you're probably gonna get fired. It doesn't happen. But now, with coding agents, the complexity of transitioning from SAP to Oracle is dramatically lower, the speed, the risk. So that is how I think coding agents shows up in enterprise software, especially amongst public names. Decreased switching costs, more customers, less hostages, which is a positive incentive for the entire ecosystem.

  5. 7:41 – 12:28

    Incumbents vs. Startups: Who actually wins the AI distribution war?

    1. HS

      You mentioned Alex Rampell. I actually, [chuckles] sounds super weird. I actually think about Alex every day, um-

    2. AA

      I do, too.

    3. HS

      Yeah, well, there we go. [laughing] Um, because he says the most brilliant thing, which is, and I'm gonna butcher it slightly, but, you know, "Will the incumbent, incumbent acquire innovation before the startup acquires distribution?"

    4. AA

      That's right. Yeah.

    5. HS

      How do you think about who wins in this world? The, the public SaaS company who has distribution, be it a HubSpot or a Salesforce, who has millions of customers-

    6. AA

      Yeah

    7. HS

      ... Or, or is it actually the startup who has speed, agility, and incredible engineers?

    8. AA

      So if, if history is any guide, and, uh, you know, to reference Alex, he would say that it often is, you know, those who have actually studied history tend to do better than those who have not. Um, and what I would say is that when you have this product cycle, and you have a capable incumbent, what happens is they usually make their product better for their existing categories. So Microsoft will make a better word processor than they've ever made. Google will make a better search engine than they've ever made, and we're actually starting to see that, some of that anyway. What you instead see is the native categories that did not exist before the product cycle being owned by startups. So I think that's a little bit of what we're going to see. You know, if you said something like, uh, you know, software movies or AI movie making or a sort of AI-assisted movies, that's just not a category in which there is an incumbent, and I'm betting that a native company will actually win that. It probably won't be Adobe. Will Adobe make a better sort of Photoshop and Illustrator than ever before? Probably, right?

    9. HS

      You said there about kind of native being an opportunity. In terms of, like, kind of where opportunity sits in the stack, why do you think the application layer will create more value than foundation models?

    10. AA

      I don't know if it'll create more value, but I think that it is under-discussed how much value it's going to create, right? If you think of what the models are, so if we lived in a world and... You know, we were actually thinking about this a lot in 2022 and late, uh, early 2023, which is if you had a single foundation model company, which at the time was OpenAI, which was a whole generation ahead, right? Then they essentially were this unique supplier to everybody downstream in the innovation ecosystem, and they could do what you would do if you, for example, you know, controlled The Beatles, and you're the only record label that had The Beatles. Like, it's like, do you want The Beatles or not? You can charge ninety-nine percent of your customer's gross margin, and you do, and you actually tend to charge a hundred or a hundred and ten percent. So that actually was a big risk to the ecosystem. What has instead happened is we have all these foundation model providers. They're all innovating roughly in lockstep. Eighty percent of what they do, I think that they're actually substitutes for, and then there's the open-source models, which also do the same things. And then in the twenty percent, which arguably is where a lot of the value is, they are all specialists. So because you live in this world of multi-model, where for some use cases, they're substitutes, for some use cases, they're actually specialists, there's a lot of value in having an aggregation layer, and that is the apps company. So let me tell you two categories specifically. One is coding. I think that if you actually look at coding, you might know that, um, Gemini is great for front end, Codex is great for back end, right? If you're vibe coding your project, you probably wanna use both, and you don't wanna switch between two CLIs all the time. It's just a pain. So being able to use Cursor as a single way to orchestrate all the models is valuable. Similarly, for creative tools, right? We're seeing this specialization, fragmentation specialization, Midjourney and Krea with their Krea-1 model. These are the most aesthetically opinionated models, right? They create this incredible, beautiful imagery. Conversely, if you look at Ideogram, Ideogram is often used by graphic designers. It is intentionally not opinionated from an aesthetic perspective. If you're somebody who's working as a creative at a big company, sometimes you're doing graphic design, and sometimes you're just doing beautiful photography for print ads. You wanna actually have access to both, and to do that, you use an apps company.

    11. HS

      So I think we massively overestimate the durability of revenue of AI companies more broadly as well. I think there's a chance that Cursor loses half of their revenue this year with the cannibali- cannibalization of them by Claude Code. I don't know anyone who's not moved to Claude Code. Like, when I hear that someone's still on Cursor, I'm like, "Wow!"

    12. AA

      ... Yeah, I, I think the thing that we are underappreciating is that we assume, you know, efficiency is increasing, but ambition and number of customers is staying fixed. And I think this is one of the incorrect assumptions that keeps getting made around AI. It's like, well, what are all the people going to do? Where will all the jobs be? You know, it's like our ability to be ambitious for wanting more things always grows so much faster than our means. And in the same way, if you look at software, the desire and demand for software, both to make it and to consume it, is dramatically more than the supply that we have today, and I think there is a developer and developer-adjacent archetype for whom Cursor is going to be perfect. Codex as an app, Codex as a CLI, Claude Code, like, all of these products are going to find market fit and all grow. And if you look at any of the other markets, like creative tools, they're going to s- specialize and fragment in

  6. 12:28 – 20:18

    Why the developer tool market looks more like Cloud than Uber and Lyft

    1. AA

      their own directions.

    2. HS

      So when you think about market composition for that market-

    3. AA

      Yes

    4. HS

      ... and the kind of developer tooling, uh, space, does that look more like cloud, or does that look more like Uber and Lyft?

    5. AA

      I don't think it looks like Uber and Lyft, right? I think Uber, Uber and Lyft are the, to my mind, the most extreme examples of pure substitutes, and a lot of the sort of price has been competed away. You look at cloud, you sort of have this oligopoly, where they all actually have pretty reasonable margins, right? And, you know, you can squint and say, "Of course, they have their specializations, but they're roughly substitutes, and yet they've all done well." I think the, uh, the foundation model companies look a little bit like that, and I think in the apps layer, you're just gonna have people that want to consume the code they generate through a rich IDE, and those that wanna be closer to the metal, and that's probably closer to AWS, Google Cloud, than it is Uber or Lyft.

    6. HS

      So when we think about that, I think ... [sighs] How do you think about competitive investing? Like, it, it seems to me like it doesn't matter anymore. When, back when I started, um, it was a big problem. You didn't invest in competitors. Now everyone is investing in competitors.

    7. AA

      Yeah.

    8. HS

      Are we in a world where that no longer matters?

    9. AA

      I mean, when you think about a firm that's organized the way we are, which is we actually do stuff for our companies, it becomes very difficult to invest in directly competing companies because then you've got, you know, uh, the same resources, the same sort of Fortune 500 buyer, the same engineer that both companies want to hire, and I just like, I don't think we can run our business by investing in directly competing companies. Now, with that said, I think we're in a part of the market where companies are diverging very rapidly, so even companies that appear to be directly competing today tend to be not competing in, you know, twelve months, eighteen months.

    10. HS

      Going back and just before- to- you said about kind of the opportunity in the apps layer. When we think about that, one threat that's often posed to the apps layer is the models themselves providing products-

    11. AA

      Yeah

    12. HS

      ... whether it's, you know, OpenAI focusing on health now a lot-

    13. AA

      Yeah

    14. HS

      ... or whether it's Claude Code.

    15. AA

      Yeah.

    16. HS

      Or actually, I saw Anthropic do, you know, some Claude attachment to legal yesterday.

    17. AA

      Mm-hmm.

    18. HS

      To what extent is models invading the apps layer a credible threat to the verticalization of apps?

    19. AA

      Yeah, so this is such an interesting topic. So Granola, which we're not investors in, but I admire them a, a great deal, it's a great company, um, they've built a really interesting thing, and they were first, of course, to live meeting recording and transcription, which is awesome. They have been copied to the moon, right? Now, everybody has a meeting transcription feature. OpenAI released one within ChatGPT. Very cool. The thing about Granola, and I assume this is true, is that their vision is not to be a meeting transcription product. I assume it's to be a productivity suite, right? They're gonna build Word and Docs and Spreadsheet and all of these other products around that core primitive. Does OpenAI have the sort of prioritization, the resources, and the ambition in that direction to build all the feature surface around the primitive? So I think the models will often actually recreate the primitive and even do product marketing, which I think the Claude Legal stuff was, but if you have a market that demands a lot of feature surface, I just think the model companies are less set up to prioritize it.

    20. HS

      Do you not think if bundled into an existing solution with eighty percent of the features, the majority of people just go, "Ah, fuck it"?

    21. AA

      Pr- perhaps. I just think that the model companies have ambitions in so many directions that it's hard for them to prioritize building opinionated UIs for the legal community. I also think in many of these categories, again, being multi-model is important, and OpenAI is only gonna ever give you OpenAI models, right? Anthropic's only gonna give you their models. Same with Google. So if you are multi-model, rich feature surface, I think being an apps company is better.

    22. HS

      "Boring wins" is a statement that you said to me before when we were talking about kind of apps layers and where value will accrue.

    23. AA

      Huh.

    24. HS

      What do you mean by boring wins, and how does that translate to the next generation of iconic companies?

    25. AA

      Oh, did I say boring wins?

    26. HS

      Yeah.

    27. AA

      Oh, well, I ... Let me make the sort of exact opposite case. I think weird wins.

    28. HS

      Huh!

    29. AA

      Yeah, so I mean, h- here's something that's actually very interesting, which is the nature of these models is, uh, is very different than the nature of any technology we've had before. I'd say a lot of the technology we've had before, it's quantitative, it's sort of clinical. It can do incredible things, but it's sort of bounded in the range of s- you know, the, the feelings that it can sort of capture. Now we have this wild, non-predictable, emotional, very human technology, and sometimes it gets pointed in these directions that are very human, but perhaps uncomfortable to a big corporation, right? What is the human experience? It often involves disagreement, persuasion, sexuality, and we see that mirrored in some of these AI products. Yet, if you're Google or Apple, you have 1,000 committees that are explicitly designed to ensure there's never any persuasion, disagreement, or sexuality expressed in your products. So I think that there is a pocket that startups can really thrive in, which is building these weird products that really touch on many core aspects of humanity that the models can reflect, but the big corporations are uncomfortable-

    30. HS

      What's an example of like a weird-

  7. 20:18 – 25:32

    The death of the Chatbox? Why browse-based interfaces are still preferable

    1. HS

      How... Uh, the shittest question ever, but, you know, after ten years, I'm not embarrassed to ask shit questions, which-

    2. AA

      Go for it.

    3. HS

      [chuckles] How does the UI paradigm change in a world of AI?

    4. AA

      Yeah.

    5. HS

      Like, everyone's like, "Now, it's, it's all gonna be voice."

    6. AA

      Yeah. [laughing]

    7. HS

      Do you agree with, like, just the-

    8. AA

      Yeah.

    9. HS

      It's all voice.

    10. AA

      [laughing] I think... So voice is amazing for enterprise. I think that, uh, one, dynamic UIs and, two, chat UIs are overstated in consumer, and the best thinker on this is actually Eugenia, who founded, um, Replica and now Wabi. She's, she's great on this, and what she would tell you if she was here is that, "Look, most people don't wanna save time. They wanna spend time," okay? And the products are designed by the most high-agency people in the world. Like Sam and Elon are the most high-agency people in the world. For them, the optimal UI is a chatbox where you say exactly what you want, and, like, voila, there it is. But for many people, they are, again, looking to waste time, spend time. They want a browse-based interface. They're not quite sure what they want. They can't always articulate it. So I think that in a world where we have intent-based and browse-based, browse-based largely stays the same, and perhaps the future of intent-based is chat. I'm still a little skeptical.

    11. HS

      I think people are consistently concerned by, we mentioned it earlier, but defensibility, switching costs, durability.

    12. AA

      Yeah.

    13. HS

      When we think about moats and Alex's statement of hostages, not customers-

    14. AA

      [laughing]

    15. HS

      ... in a new world of AI, do we just accept that there's no defensibility or are new moats created?

    16. AA

      I, I think defensibility still exists and still matters. Like, networks are the gold standard, and they still are. You know, a network effect product is incredibly powerful. Now, look, you might argue that something like Moldbook is a new type of synthetic network that perhaps means there are certain types of networks that are less defensible than they were s- w- you know, once were. But something like an Airbnb, you know, you can have all the vibe coding in the world, like, their network effect is incredibly powerful. So, one, I think defensibility matters. Traditional moats still do matter. I do think that within moats like systems of record, there will be some who are more or less prone to disruption. So if you're an on-prem database, and there's no engagement layer, and there's not a lot of human workflows built around the so-called system of record, I think that you actually are at some risk. If you're the core system for a bank, you've got thousands of transactions per second, you've got hundreds of humans that interact with you, you have this incredible demand for accuracy, I still think that you're sort of as good as gold in terms of defensibility.

    17. HS

      Is there any forms of defensibility which were very prominent in the prior ten years, which are no longer as prominent?

    18. AA

      Yeah, I'll give you the opposite. I was always skeptical of the sort of data network effect.

    19. HS

      Huh.

    20. AA

      You know, that was, like, this thing that got thrown out a lot when you couldn't think of what moat to say. Um, but today, if you look at companies that have proprietary data sets, and not just proprietary, OpenEvidence is a good example of this, but live. Proprietary and live is a very, very powerful moat, where you can put-

    21. HS

      When you say live, what do you mean?

    22. AA

      Like your health data, for example, right? That's a sort of live and ever-changing source of data. Now, there's a question of how proprietary can that be? But once you actually have data like that or perhaps live data about a product that's running, um, now you can put a relatively commodity model in front of it and get much better results than the most cutting-edge model that does not have access to the proprietary or live data.

    23. HS

      Okay, so we have actually relatively the same forms of defensibility that have existed before-

    24. AA

      Many

    25. HS

      ... that will continue to make-

    26. AA

      Many.

    27. HS

      I'm, I'm always trying to understand... I, I, I feel very kind of insecure right now as an investor 'cause I'm trying to understand what holds true from the prior decade and what doesn't, and I need to change my mind on. Um, you know, when the facts change, I change my mind. When we think about a lot of the forms of defensibility remaining true-... I was always taught that margins matter. [chuckles] I, I walked with my mother around London, poor woman, and I'm always like: "Mom, margins matter!"

    28. AA

      Yes, I can imagine you holding your, your hand-

    29. HS

      Poor- yeah, yeah, poor mom.

    30. AA

      Handheld, yes. Yeah.

  8. 25:32 – 26:40

    Why power users are 10x more valuable in the age of AI consumption

    1. HS

      I, I, I-

    2. AA

      Does that make sense?

    3. HS

      Yeah, it does. Um, Jason Lemkin's a very good friend of mine-

    4. AA

      Yeah

    5. HS

      ... from SaaStr, and he said to me, I say, a brilliant statement. He said, "For the best companies, inference is the new sales and marketing."

    6. AA

      Yeah, I love that. A hundred percent correct. Yes. Yes, I also think that power users are so much more powerful than they ever have been. Like Andrew Chen used to say, pre-AI, and I love this, like, "Power users are just users," and it was true because even if they got a hundred X more value, they typically didn't pay a hundred X more. Like, you look at Spotify, great European company, the very best Spotify SKU with the highest bit rate music, totally lossless, all the pods, all the videos, family plan, everything, was twenty, twenty-five dollars a month. So there was a belief that the price ceiling for consumer products mass market was twenty to twenty-five a month. You look at Grok Heavy, it's three hundred a month, ChatGPT, two hundred a month, Gemini Ultra, two fifty a month. So we're seeing ten X higher prices paid, and you have consumption revenue on top of it. So for the power users, they're paying incredibly high subscription rates plus consumption revenue, so the S&M costs of acquiring those users are, are very wisely invested, and I think this is an important point that's changed.

  9. 26:40 – 28:21

    Do margins matter in a world of AI?

    1. HS

      But you're telling me then, for my team, when I'm looking at margins with the investing team, that we should have the same high bar that we carried, or we should have greater elasticity to lower margins?

    2. AA

      So first of all, it's typically a lot of organic traffic. One, I would look at your M one, you know, your sort of month one as, um, traffic, not truly acquired users, because it's organic and it's free to acquire. And then second, I would take the look at the sort of margin cost of those users' free trials and sort of just say, "Hey, that's CAC," and that's okay. And then look at the margin profile of people who convert and say, "That's the sort of durable margin profile of the product and the business." Does that make sense? So you're sort of unbundling the CAC-oriented margin spend versus the durable margin, which is what's associated with your power and paying users.

    3. HS

      It totally does. The challenge becomes if you're trying to work out a CAC to LTV metric that you can kind of oscillate around-

    4. AA

      Yeah

    5. HS

      ... it's very difficult to get an accurate sense of LTV in such a changing landscape where you're not sure of the durability.

    6. AA

      Yeah.

    7. HS

      Is the LTV twelve months, or is it forty si- forty-eight months?

    8. AA

      Yeah, well, I, I think that retention really matters, and if you take a look at the best AI products, you know, even if, if you look at M two as the new M one, right? Because, again, you're getting a lot of sort of tourists who come in at M one, you're not paying anything for them.

    9. HS

      And so M one means month one-

    10. AA

      Month one. That's correct.

    11. HS

      Yeah.

    12. AA

      If you look at M two sort of as your first month for some of these products that are acquiring a ton of top-of-funnel traffic, then you apply the same high-retention bar you ever applied to them, you know?

    13. HS

      What's an M twelve that would make you very excited?

    14. AA

      I mean, [chuckles] the like, the bigger, the better, but certainly, fifty percent is solid, right? And if you're sixty, seventy percent, I mean, we're, we're very, very happy.

  10. 28:21 – 31:07

    Why we are definitively not in an AI bubble right now

    1. HS

      Okay, so we have that in terms of margins. I do wanna touch on... You said, "bubble." No, I'm not in that camp. I like to attack-

    2. AA

      Yeah

    3. HS

      ... things while I'm there.

    4. AA

      Yeah, yeah.

    5. HS

      Why are you not in that camp?

    6. AA

      Well, and I-- there's a, a little quip that I like to use, which is like: It's not a bubble, and it's good that it is.

    7. HS

      [chuckles]

    8. AA

      Um, and I'll tell you why. Look, uh, this is not my area of focus or expertise, but one, you look at OpenAI's recent investment, uh, uh, announcement, sorry, which is that they're at twenty billion of top line, and the way that they got there is they three X'd capacity, and they three X'd top line. So every time they bring on capacity, all of that supply, that inference supply, is one hundred percent spoken for, and we're seeing that story happen over and over again. Whereas in previous, you know, sort of so-called bubble periods, you saw this incredible build-out of supply far ahead of demand. So, so far, we're not seeing that, right? Two, if you actually look at the prices that customers are paying, they're going up. So you're not seeing the sort of price compression that you would get from a typical overbuild of supply, right? And then three, as I said previously, even if there is subsidization, there's always gonna be some distortion subsidization. It's a sort of intelligent subsidization that's mostly being paid for by big tech and the labs, and it benefits consumers and startups. Like, God bless, I'm all for that.

    9. HS

      I, I do a show with Jason Lemkin and Rory Driscoll, um, and Rory said something brilliant, I think, which is like, "This will all work out if we see the transition of spend from the twelve percent SaaS budgets that we operate in today, transition from that budget to the human labor budget."

    10. AA

      Mm-hmm.

    11. HS

      Do you think we will see that transition?

    12. AA

      I mean, we're already seeing it. I think DG was on the show talking about C.H. Robinson, right? Like, we're seeing a lot of companies start to see-... the productivity improvement from this new technology. I mean, how can they not, right? This is not just coding agents in which this is showing up. You talked about voice. Voice is the wedge into the enterprise. Voice agents are so powerful, and by the way, I think that the, the, uh, the near-term story of a lot of voice, I know we talked about support, you talked about sort of customer support, that's interesting. But the more interesting thing is why is support an isolated function? Why is it? And let's go through it. It's you typically have had sales, support, operations, and collections. You know, who is the person that's really good at customer support? Empathetic, they're a listener, they really understand the product well. Who is really good at sales? They're more of a yapper, they're a talker, they're high energy, they're very cha- charismatic. You know, they're sort of good at the upsell. They're always in a good mood. You've got these two different human archetypes for these two different roles. We've typically organized the enterprise around these two archetypes, right? But now the models can be either of those people at any time. So the most sophisticated companies are starting to take support, sales, collections, operations, bundle them all together with one broad goal, like CAC improvement, and I think that is gonna be the 10X on productivity, more than saying, "Hey, we're just gonna take cost out of customer

  11. 31:07 – 37:42

    Why the Legal & Customer Support industries will have dozens of winners

    1. AA

      support."

    2. HS

      How do you think about competition within markets? I'm jumping around so much, but I'm just fascinated. You brought up customer support.

    3. AA

      Yeah.

    4. HS

      I, I tweeted it the other day, and I tweeted it before, I just can't get my head around this market. There are, like, 50 providers with over 50 million in funding, 10 with over 100 million, and I would- I'm very much of the Peter Thiel school of thought that, you know, competition is for losers, and we want to have monopoly markets. With your Decagons and your Sierras and your Intercoms and your Polos-

    5. AA

      Yeah

    6. HS

      ... and I can go on and on. Fuck, I don't know. [laughing]

    7. AA

      Well, the question is, how do you define market? Okay, now, this is an important point, right? So I would argue that in many cases, what you're calling a market is actually an industry. Let's look at legal. Many great companies have been funded, um, and there's still room for another dozen, and I think the reason for that is legal is a $500 million ... It's sort of infrastructure for capitalism, broadly. Is there gonna be one company that wins the entire market of infrastructure for capitalism? Of course not. That is an industry, not a market, and you're gonna have dozens of winners that all specialize. Just as in legal today, you've got dozens, dozens of specializations. So I think in many of these markets, we are talking about it as if it is one market, when it is much, much bigger, and all the companies will specialize in their own directions.

    8. HS

      Well, it's a $500 billion market if you assume that we eat their market, not we're an attach to it, correct?

    9. AA

      Correct, yeah.

    10. HS

      And we are an attach to it.

    11. AA

      I mean, that's, that's an open question. I don't think that we're in the eight to twelve percent anymore, right? Fifty billion legal software traditionally, I think we are gonna be somewhere between the fifty and the five hundred, and I think closer to the five hundred than the fifty.

    12. HS

      What does that look like? That means, like, AI native law firms? That-

    13. AA

      Possibly. I think it means dramatic productivity increases for lawyers, dramatic productivity increases for programmers and engineers. Like, I think that the, the difficulty of doing 100% of a job is really, really high. It's this thing of, like, pretty easy to get to sixty, seventy, eighty percent. So I do think that's why a 20% productivity increase, so far we're seeing it show up more as, you know, a four-day work week than 20% less jobs.

    14. HS

      Yeah.

    15. AA

      Because jobs as bundles of tasks don't set themselves up to be 100% automated so far, right? You can do all the customer support you want, but sometimes you gotta take the customer out for a steak dinner, and so far, the models are not doing that. [chuckles]

    16. HS

      They're not. We, we mentioned-

    17. AA

      [chuckles]

    18. HS

      ... like the $500 billion TAM. Do you do TAM analysis when, when investing?

    19. AA

      I ... Here, here's what I think. I think we tend to consistently underestimate how big the markets are and consistently overestimate how easy it is to go from zero to one, right? I think when you squint, you can take something that's not working and say, "I can see how it will work," and that is why, s- in my mind, seed investing is, you know, it's, it's its own sort of art. I focus very much on the Series A, 'cause I believe that the having shipped something and having sold something is such a dramatic signal. Um, to me, that is actually the, you know, the, the optimal point in terms of information provided/entry, ownership, um, and price. Whereas at the seed, it could be anything. Very, very difficult to get something working. Once you do get something working, I believe these companies tend to be even greater and greater versions of themselves for a long time to come, and then I think the mistake that many venture capitalists have made is just not estimating the market to be as big as it is.

    20. HS

      I'm enjoying this so much. I, I have really three things I want to dig into there.

    21. AA

      Great. Yeah.

    22. HS

      Um, you said about markets and underestimating size. Um, our dear friend Alex at Deel, I, I met him at the seed round, and he told me about, you know, Deel, and I was like-

    23. AA

      Yeah

    24. HS

      ... "Dude, you're brilliant."

    25. AA

      [laughing]

    26. HS

      The payroll and so on.

    27. AA

      I'm sorry, brother. Deel and Eleven, I'm sorry.

    28. HS

      Fuck off. [laughing]

    29. AA

      [laughing]

    30. HS

      I didn't tell you earlier-

  12. 37:42 – 42:59

    Lessons from Marc Andreessen: Why the "quality of being right" supersedes process

    1. HS

      Um-

    2. AA

      Well, this is... You know, I'll tell you a funny thing. So, um, when I first started, I remember sitting- I s- I spent a bunch of time with Marc and Dixon and everyone, so I remember sitting down with Marc and saying, "All right, Marc, what's the process? Like, tell me exactly what the process is." And, uh, you know, and, and Marc said this maddening thing, which is, "Just be right a lot." And I was like: Marc, what is...? Of course, be right a lot, but what else? What is like... And of course, like, you know, there, there's a bunch of things that we talked about, but ultimately, like, having reflected on that, I think his view is, like, your process doesn't matter as long as you're consistently winning. When I started my career at Amazon as an engineer in 2003, they had a very similar thing. I think it's still a part of their kind of leadership principles, which is that you're consistently right, and I remember being 23 or 24 years old and just finding it to be maddening because, like, well, why are you right? How are you right? But this quality of being right sort of supersedes the why or the how or all of our very intellectual mental models of how long it can sustain.

    3. HS

      And you said, like, just win and the importance of winning. Um, what we said downstairs, I, I, I lost to a wonderful colleague of yours, Sima, in a, in a company, Ask Leo in Germany, in the Series A. Um, and I reflect on this a lot, um, a lot. [laughing]

    4. AA

      [chuckles] I can tell it's on your mind.

    5. HS

      Um, yeah. Um, when you reflect, what was your most painful loss, and how do you reflect on that?

    6. AA

      I haven't lost a deal.

    7. HS

      You've never lost a deal?

    8. AA

      I've never lost a deal.

    9. HS

      How long have you been at Andreessen?

    10. AA

      Six and a half years.

    11. HS

      Huh?

    12. AA

      Yeah, yeah.

    13. HS

      D- do you, do you worry about that? I mean this in the nicest way. Like, I, you know, I asked-

    14. AA

      Yeah

    15. HS

      ... I asked Rampal about this 'cause, you know, he lost the A of Relate.

    16. AA

      Yeah.

    17. HS

      And then did the B, which is great and fantastic. Well done him.

    18. AA

      Yeah.

    19. HS

      Um-

    20. AA

      Yeah, perhaps risk aperture is not high enough if you're-

    21. HS

      Mm

    22. AA

      ... never losing deals. Maybe, I don't know. Like, I think that there is a process by which you can be a part of most important companies that you wanna be a part of. I think that there are some very difficult pre-existing conditions to overcome, like somebody has a very healthy, successful relationship with a past investor.

    23. HS

      Fucking impossible!

    24. AA

      You're just never gonna overcome that, right?

    25. HS

      Yeah.

    26. AA

      And by the way, like, having been that, I think, healthy and supportive past investor for many people, I would never expect those founders to go work with someone else. It's just-

    27. HS

      What do you do in those situations when they're like this: "I love you, but, like, yeah, I've known these guys for ten years. They backed me before"? Do you go, "Hey, we're gonna be the collaborative partner and try and nestle in now?"

    28. AA

      Yeah.

    29. HS

      Or like, "We'll just peace out and not take part in this round?"

    30. AA

      I, I think that there are no games to be played, and I think this is the magic of being in this business and being at Andreessen Horowitz. You know, when I started, I had this nervousness around, like, maybe it's a sales job. But I've realized if you just sort of show up with the right intentions, and, like, you know, you have to assume that they know everything you know. Of course, they do. We live in this era of very, very sophisticated individuals and founders, and you respect that and say, like: "Look, I wanna, like, respect the relationship that you have. With that said, like, our mission is to be a part of every important technology story that happens. If there's a way to be a part of it now, great. If not, like, let us get to know each other and earn the right to be your lead investor at the next round," and sometimes that's the right thing.

  13. 42:59 – 57:34

    Is "Triple, Triple, Double, Double" dead?

    1. HS

      Um, I have a lot of enterprise SaaS companies-

    2. AA

      Yes

    3. HS

      ... that do double double or triple triple double double.

    4. AA

      Yeah.

    5. HS

      Um, is the world of triple triple double double dead, and do we all have to be Lovable or Apptimize and Eleven Labs to get funded?

    6. AA

      I don't think so. I mean, I think that a lot of it is depend... It's calibrated to your part of the market, so product velocity plus business velocity. I do think that you have to be top quartile compared to your peer set, right? And I think there are some markets that are consumer-led or bottoms-up, where you can just see this explosive growth, and that is awesome. It's extraordinary to see. But look, if you're selling an ERP, you've got a much more cautious customer. It's a much more high-stakes sale. If you're selling payroll, now, granted, in the case of payroll, Alex and team have done a tremendous job of what should be like a slow-boil sale and turning it into a fast-boil sale, and they've got some very specific ways that they do that, but typically, that is an industry that moves on slower cycles. So I think that there is just physics to some of these markets that mean triple triple double double is phenomenal, but there are other markets in which, especially with these new primitives, you can go, like, 10 to 100 or 10 to 200.

    7. HS

      So you bring on triple triple double double to partnership, and they won't shit on it?

    8. AA

      Absolutely not. No, no. Yeah, look, I, again, I, I think that these are all heuristics that we use, and we throw it around. First of all, I wanna say, like, I respect the difficulty of getting to a million in revenue, dude. It is so hard. Like, getting anyone to pay you anything that's not, you know, a family member or friend is hard, and then going from 1 to 5 or 10 is super hard, and 10 to 100 is tremendously hard. So, one, I think that it's... I, I hate it when investors are, you know, very flip about this. Um, and then, two, no, look, I think it's all about the sort of assumptions that the founder is making, the data as a way to validate those assumptions and the kinda direction, the what if it works, what is the sort of direction of the curve? What's the area underneath it, right?

    9. HS

      Totally, yeah. Yeah.

    10. AA

      And by the way, sorry to interrupt, there are companies that are area under the curve companies, where it may be a much more complex, sort of slower growth story, but the area under the curve is much more significant than companies that have very high slope, but potentially have challenges with defensibility.

    11. HS

      Super interesting. So you're saying that, like, the, the length of the start line, as Des Trainor at Intercom says, like, "It takes a very long time to build-

    12. AA

      Yeah

    13. HS

      ... like in a Figma," and Figma, for, like, three or four years was kind of in the build process.

    14. AA

      Absolutely. Yeah, area under the curve. And what do you have today with Figma? You have an N of one network effects product, right? That, by the way, is sort of ahead of where I think the market is going in terms of moving from products focused on execution, which today are being subsumed by coding agents, to markets focused on thinking, right? And I think a lot of the thinking work is going to be done in products like Figma. I'm not sure that Dylan and team saw that ten years ago, but I think they're well positioned today.

    15. HS

      Area under the curve-

    16. AA

      Yeah

    17. HS

      ... companies, how does the world change for them today, and do they still hold inherent value of fundraising early? Like, how does that change? 'Cause it's difficult to sell.

    18. AA

      Yeah. I mean, I think the challenge for area under the curve companies is that, you know, you've got to have enough momentum that you can continue to fundraise. You've got to have enough subs- enough substantiality that your customer loves you. They're willing to, like, pay you upfront. They're willing to expand with you. So it, it has its own idiosyncrasies and difficulties, but I think often, some of the most significant companies are these area under the curve companies, and they're... Look, they're these, like, 20-year overnight success stories. Um, and those are... I, I think that those are underestimated in venture lore. The, like, 1 to 100 companies are extraordinary, and we all love to be a part of them, but we may talk about those and lionize those, uh, perhaps sometimes at the expense of the area under the curve companies.

    19. HS

      You said you very much focus on the Series A. We mentioned some of the pricing kind of differences there. I, I get in trouble with my team constantly for tweeting things, and they're like, "Oh, Harry, you make my life so much harder," and I'm like: It's too easy otherwise. [laughing] Um, and, uh, I, I say that Series A is the hardest place to be investing right now-

    20. AA

      Yeah

    21. HS

      ... because essentially-

    22. AA

      I already said that, yeah

    23. HS

      ... you have a million in revenue, very little signs of product market fit, honestly, at a million in revenue.

    24. AA

      Yeah.

    25. HS

      Um-

    26. AA

      I disagree, but go ahead.

    27. HS

      You're paying 100 to 200 X ARR, and, uh, it's incredibly competitive. Uh, the price-to-progress ratio is incredibly mismatched between a 25 million seed. Um, why am I wrong?

    28. AA

      Yeah. Well, okay, so first of all, I think, as an investor, you have to decide what kind of risk you wanna take, okay? So that is what we're paid to do. So let's talk through what are the different types of risk. So the first risk is one that you mentioned. That is competitive risk. Can I win this process or not, okay? The second risk, uh, and this is a, a, maybe a slightly less good risk to take, but I think still a fine one, is pricing risk. Did I overpay? And again, I think the way that shows up is the difficulty of the next round based on your entry price, right? Maybe the third risk is, uh, team risk. Can this team actually go the distance and try... Like, you know, can the company be- can they be big enough to fulfill the company's ambitions? 'Cause I think the founder themself can attenuate or amplify a company's destiny, right? The company can't be bigger than their ability for it to be big, okay? The fourth one, I think, is a little bit of geographic risk, and maybe this is less true today, but, like, is a Silicon Valley team gonna do this? And the fifth is fundraising risk. This is a non-consensus deal that actually has no other investor interest around it. That is not to say that you need investor interest, but if the team has a difficult time fundraising, no matter how good they are as sort of product and technology, they're not gonna get the opportunity to sort of see their vision through. So I think taking competitive risk, can I win, and pricing risk-

    29. HS

      When you say... Sorry, can I win, you're saying, can I win as an investor winning the deal?

    30. AA

      Yes, against the other VCs.

  14. 57:34 – 1:02:58

    Open vs Closed Source

    1. HS

      Can I ask you one thing that we haven't discussed, which I want to, is kind of open versus closed? It's a big question. A lot more use open than actually they say publicly, I find, and there's a lot more willingness than ever to use open.

    2. AA

      Open source?

    3. HS

      Yeah.

    4. AA

      Yeah.

    5. HS

      How do you think about the distribution in terms of open versus closed and how that looks in the next kind of twenty-four months?

    6. AA

      That's a good question. So I don't think we're at a point in the cycle where, um, companies are focused primarily on cost optimization, and I think that is one of the reasons to choose open. You know, which is like, get an open source model, host it, and then have a cost benefit as a result. I do think there has been some interesting properties of open models like Kimi K2. You know, I, I believe that they didn't post-train it to sort of, um, you know, restrain what it could say. As a result, it was just a lot more interesting in terms of text generation in many directions. So it had this sort of interesting product characteristic that a bunch of companies built around, a bunch of companion companies in particular. So I think there are these idiosyncratic reasons we choose the open models for, um, for product quality. But in most cases, I think companies are thinking about maximizing the sort of direction of ambition and their ability to fulfill it versus taking cost out, and closed is still a bit advantaged there. Now, the nice thing about closed is they, too, have been cutting their costs, right? So granted, closed is more expensive than open in many cases, but the cost of actually a token on GPT-4o has, you know, g- gone down a hundred X since the model was released.

    7. HS

      You said that we're not in the period of cost optimization, which I, I agree and think it's a very interesting point. Jason Lamkin said to me... Yeah, he, he's a real builder with one of your tools, actually, with Replit.

    8. AA

      Yeah, yeah.

    9. HS

      Uh, I think he's literally, like, one of their top users. It's insane what an incredible-

    10. AA

      Amazing

    11. HS

      ... power user he is.

    12. AA

      Amazing.

    13. HS

      Um, but he uses ElevenLabs as part of the voice for one of his games.

    14. AA

      Yeah.

    15. HS

      And he said, "This will be the year where we see the true substitution of AI products based on price." He's like, "ElevenLabs, I'm-- I love it. It's amazing."

    16. AA

      Yeah.

    17. HS

      "It's too expensive. It's too expensive." This is the year where we've moved from trying things to, "Shit, it works-

    18. AA

      Yeah

    19. HS

      ... but it's too expensive." Do, noth- no comment on ElevenLabs.

    20. AA

      Yeah.

    21. HS

      But do you agree that we're gonna see this transition in mindset from, "Shit, it works," to-

    22. AA

      Yeah

    23. HS

      ... "Shit, it's expensive?"

    24. AA

      I don't think so, 'cause I think what we keep seeing is, as the models get better, downstream players' ability to take those capabilities, productize them, and raise prices, has outstripped the raise in costs, right? So the incremental cost increase, potentially, and in many cases, not a cost increase, but it's, you know, not, not a cost decrease, uh, is so far outweighed by what the new capability unlocks. Like, like coding agents, right? What you can do with coding agents, Claude Code came out last February, is dramatically better. Is anybody here saying, "Well, I should go back and use Sonnet 3.7 because it's cheaper?" You know, or, "I should use something other than Opus 4.5 or Codex 5.2?" Like, nobody is saying that, because the capability is so much more powerful, it really, like, sparks your imagination in the other direction. What more can we do, rather than how do we make the existing thing cheaper?

    25. HS

      It, it is interesting. Um-... I remember when he said it, he's, he's got, like, a startup game, and he's like: "Dude, I'm terrified that people are gonna use it 'cause I'm gonna go bankrupt." [laughing] I was like, "You'll be-

    26. AA

      Well, but, okay, so but this is actually a fun topic, which is that the fact that these s- products have costs are a very good thing. But the key is, what it means, then, is Jason's gonna have to figure out his business model early. So this field of dreams investing, where a company builds a free product, and they're like, "Someday we'll figure out a business model," that's not viable. It's like, no, you have costs today, the way that every small business in the history of small businesses has had pre-software. So the fact that these companies have costs actually forces a business model hygiene that I don't think existed across the board 10 years ago, and that's a good thing.

    27. HS

      If you were Eleven Labs, would you not just say, "Fuck, subsidize, cut prices, own market. This is a land grab. Don't risk churn by price for the next year or two"? They've raised $500 million. They could have raised five billion more.

    28. AA

      I, I, I think the general- there's so much more to be done at the frontier, and there's so many more categories and capabilities that those things unlock. That's just a better use of time, right? Today, again, we talked about 8 to 12% of enterprise spend is on SaaS, right? How much of consumer disposable income is spent on software today? A few hundred dollars a month, maybe. We're going to asymptote to 80 to 90%, I believe, for consumer spend and enterprise spend. The way we do that is by pushing the frontier, not by cutting.

    29. HS

      80 to 90% of consumer spend?

    30. AA

      Well, uh, the sort of discretionary spend. Of course, there's gonna be, you know-

  15. 1:02:58 – 1:09:10

    Is Kingmaking Real?

    1. HS

      it's super interesting. Do you agree with kingmaking today, in terms of the belief that, you know, as I think you know, but, like, an anointed winner, do you think kingmaking is real?

    2. AA

      One, I think an example of where there is a very positive, uh, sort of catalyst in their investor base for enterprise companies is YC, right? YC is an awesome place to start an enterprise startup that sells to other enterprise startups, and they've got these sort of, like, good vibes within the community that makes it easier to sell into even much bigger, more established YC companies. So I think that's a good example in which picking the right investor is actually a big benefit. You know, a lot of what we do is connect companies that are small but have really important product and technology to the Fortune 500 and 2000, but we can't force them to buy that technology, right? And again, you have to assume that the buyers, especially these days, have perfect information. So I think that the right investor can be a catalyst, but I don't think that you can take a product that would not otherwise be the winner and anoint them the winner.

    3. HS

      Do you agree that the best founders you work with don't need their VCs?

    4. AA

      I think the best founders that I work with know how to maximally leverage their VCs. And look, I think there is a set of founders who perhaps would never need their investors, but I do think that the best founders, how to... You know, kn- know how to sort of, uh, extend their success and increase their momentum by leveraging the right investors. Like Alex does, right? Dude, I mean, I basically have a sales quota with Alex, you know? And DG would say the same thing. And Ben, he's even calling Ben, saying, "Hey, Ben, can you help make this introduction to XYZ?" Like, he knows how to get the best out of Andreessen Horowitz, and all of the... It's not just the investors, the entire team shows up for him that way. Could he do it without us? Of course, he could.

    5. HS

      What advice would you give, then? We have so many founders that listen. What advice would you give to founders on how to have maximum value extraction from an investor base? [chuckles]

    6. AA

      Yeah. Well, first, pick an investor that does stuff, I think, number one. I think number two is-

    7. HS

      How do you know? Everyone says they do.

    8. AA

      Well, I... The best way is to talk to other founders, right? You should talk to other founders. Like, I, I think the second thing is, again, the VC can't distort the market, right? All they can do is make all the introductions, and I think the best thing, Marc talked about this, is when you're small, the VC sort of gives you power, right? That's what you want. So the VC basically takes your brand, which is not big, and they lend you their brand. So you're not XYZ company, you're an Andreessen Horowitz company. Now, over time, your brand becomes much bigger than Andreessen Horowitz, and that is great, but they can help bootstrap you and create credibility in conversations, but you still have to have the best product technology go-to-market to go win the customer.

    9. HS

      Totally agree with that in terms of I, I think, the lending of brands, I think is how you've described it before-

    10. AA

      Mm

    11. HS

      ... is phenomenally valuable. Can I ask you, when we think about kind of the lending of brands, who's the single best founder you work with?

    12. AA

      Alex is just such a beast in terms of his go-to-market instincts, his product creativity, and just his responsiveness. The guy's nuts, you know? Alex is 100% working all the time. It's, it's just incredible, his stamina.

    13. HS

      I've got a fun story. If we have-

    14. AA

      Yeah

    15. HS

      ... Project Europe, which is like the Thiel Fellowship for Europe. Um, it, uh, hi- basically back 18-year-olds, uh, with a big dream-

    16. AA

      Yeah

    17. HS

      ... and technical capability.

    18. AA

      Oh, yeah. Jake was telling me about this.

    19. HS

      Yeah, it's amazing.

    20. AA

      It's cool. Yeah.

    21. HS

      Anyway, I pinged Alex on a Sunday morning, uh, 7:00 a.m., saying, "Hey, they want an intro to a sales rep on your team."

    22. AA

      Yeah.

    23. HS

      "Who's the best person?" He's like: "Intro to me, please." I'm like: "Dude, it's like a, like a $1,000 deal."

    24. AA

      Yeah.

    25. HS

      "Like, he's not worth your time." He's like, "No, no, to alex@deel.com."

    26. AA

      That's what I mean.

    27. HS

      I'm like- [chuckles]

    28. AA

      Yeah. He's, he's, he's so impressive. But look, there are other founders who have, you know, specialists in their domain, like the Clutch guys I mentioned, who are deep technologists who know how to apply to product, like Crea or the Happy Robot team. So there's just so much to learn from all these individuals, and, and I know it sounds trite, but I'm privileged to work with them.

    29. HS

      No, the Happy Robot guys, I, I wish I was invested in that team.

    30. AA

      They're amazing, man.

  16. 1:09:10 – 1:12:51

    Quick-Fire Round

    1. HS

      Dude, I could talk to you all day. I do want to do a quick fire round with you, okay?

    2. AA

      Okay.

    3. HS

      Are you ready for this?

    4. AA

      Okay. Okay.

    5. HS

      What's the most memorable first founder meeting you had? It doesn't have to be, like, the best founder, but the most memorable first founder meeting you had, and why?

    6. AA

      [exhales] I mean, [chuckles] yeah, so it's probably the, the guys at Crea, just because, you know, we-- they'd been so mysterious. We've been unable to get a hold of them for nine months. They've been making all this noise on X with their sort of creative tools and their models, and, we know, there's so much anticipation meeting them. We all-- It was Thanksgiving week. We all sort of flew in. Marc was there. And just to see these two guys walk in, total badasses with their matching kimonos, with their Celsius drinks, and just hold the room by being these deep, authentic technologists and product people, it's just not something that I'd seen before, and there was so much of a set-up to the meeting that it's [chuckles] it's one I'll never forget.

    7. HS

      Marc, Ben, DG, who's the best investor?

    8. AA

      I mean, they're all extraordinary. I... Yeah, let me tell you the strengths. So, like, Marc is the guy that can just tell you... One, he'll paint a picture of the future, but two, he knows everything about everything else outside of technology. He's read every book. He's memorized them all. He's got these incredible stories. Of course, he invented the consumer internet, so he is just-- his, his storytelling ability is extraordinary. Ben, like, to me, I mean, Hard Things was the first honest business book, okay? And I always say about business books, like, the business model of business books is selling business books. It's not making you better. Most business books are full of shit, and Hard Things is the first one that was, like, authentic, and if you've read it as a founder, you're like, "Oh, my God, somebody finally sees me." So just his sort of stories of wartime and navigating these inflection points and his ability to contextualize that for whatever you're going through, totally unmatched. The thing about DG that's so special is, a lot of us are sort of these founder investors. We are, like, learning how to be investors through the lens of being a founder. DG is a pure and highly, highly seasoned investor. He has this sort of pure-play investor clarity that I tend to learn a ton from. He, he, to me, is, is, is so, so interesting at the growth stage in the same way that Dixon is interesting at the early stage. So much of our b-- so much of our best thinking is Dixon and also DG.

    9. HS

      What's been the hardest decision that you've had to make in the last two to three years?

    10. AA

      I mean, to me, a, a big decision was, uh, coming into investing and not being a sort of hands-on builder anymore. I, I wasn't sure, um, 'cause I'd... You know, I've had some incredible investors. I've had some investors that, you know, just weren't the best, and sometimes through no fault of their own, sometimes they're sort of early career, and, and sometimes, you know, they, they just were disengaged in a way that I never wanted to be. So I was uncertain about whether I wanted to move into investing, and I remember [chuckles] sitting down with Ben, and I was, you know-- who was I to ask Ben questions? But I'm like, well, I guess, like, I'm not sure anyway, so let me just be direct with Ben. I'm like: "Well, Ben, how do you prevent bad behavior? You know, investor bad be- how do you prevent the sort of high anxiety? How do you prevent, you know, the person that's disengaged?" And he's like: "Well, in the near term, we don't measure you based on returns. We measure you by going and talking to every one of your founders every two years, doing a three sixty on you, and if your founders say you're telling them the truth, you're showing up, you're doing the work, you're being responsive, regardless of how those companies are performing, then you're doing a great job. If your founders say anything other than that, regardless of how the companies are performing, like you're looking for a job elsewhere." And by the way, we do those. We do these GP three sixtys every two years. It's always a little terrifying, but the incentives are all structured in the right way, and that, that moment and the answer to that question is, was that which I knew, like, hey, this is- this is not a VC like every other VC I've seen out there. This is like a company.

  17. 1:12:51 – 1:19:52

    The a16z Playbook: How to win 100% of the deals you chase

    1. HS

      I remember someone from Andreessen telling me, and I'll, I'll keep- I can't, I can't actually remember who it is, so I'm not actually being deliberately coy. It might have been Brian, it might have been DG, it might have been Alex. I really can't remember. But they said, like-

    2. AA

      [chuckles]

    3. HS

      ... I'm sorry. As they said, like, "In Andreessen, it's totally unacceptable to lose a deal-

    4. AA

      Yeah.

    5. HS

      -but it's very acceptable to not have seen it, and it'd be great."... Is that fair?

    6. AA

      To not have seen it?

    7. HS

      Like, random company does very well. We never met them. We never had the chance to meet them.

    8. AA

      Hmm. I don't think so. I don't think we're allowed to believe in luck at Andreessen. We have to see 100% of the deals in our domain. Now, look, yeah, I think it is acceptable to make a decision based on the information you have and have the decision be wrong. Like, you invest in a company, it doesn't always work, and that's okay. That's the business. But the expectation is we see 100% of the deals in our sector, and that we win 100% of the deals that we go after.

    9. HS

      That was very clear. There was no, uh, [laughing] No, I love it, dude.

    10. AA

      Yeah.

    11. HS

      Okay, good. [laughing] Uh, good. Right. That, uh, ends that conversation. [laughing]

    12. AA

      Sorry to scare you.

    13. HS

      Yeah. All right.

    14. AA

      I mean, hey, look, there's- some things are ambiguous, but that part is not.

    15. HS

      No, there- no nuance.

    16. AA

      [laughing]

    17. HS

      Good. I hate nuance. "It depends" is the worst answer. Um, you can invest in one seed firm. Which seed firm do you invest in?

    18. AA

      All right. Um, I think Brompton's pretty special-

    19. HS

      Hmm

    20. AA

      ... at what he does, actually, at Abstract.

    21. HS

      Well, I agree. Why? Why?

    22. AA

      Yes. Yeah. He's w- I mean, one, he's a cold-blooded capitalist-

    23. HS

      [laughing]

    24. AA

      ... you know, which is awesome. He just has great instincts, and I think the seed-- to me, the seed stage is the hardest stage at which to invest because it's, it's easy to make one great seed investment, but it's hard to have a system, I think, for doing great seed investing. 'Cause there is... Even when the people are amazing, there just isn't anything there yet. There is no product, the true seed. There's no product, and there's no go-to-market yet. Now, post-product, pre-traction, that gets easier. Post-product, post some traction, that gets a lot easier, and I call that a Series A. But at the true seed, it's just hard to be right a lot, and he has consistently been right a lot. So when I sort of look at a seed manager I respect, I don't know exactly what his witchcraft is, but it's working. He's right a lot.

    25. HS

      What have you changed your mind on most in the last twelve months?

    26. AA

      I think the thing that surprised me about this product cycle... You know, I was building my, my first company in the mobile product cycle, and, um, in the mobile product cycle, the, the sort of like w- who, the anointed winners in 2008, 2009, were not the eventual winners. So we had this cycle where you sorta had the Friendsters, and then two or three years later, you had the Facebooks, right? In this product cycle, what's actually interesting is a bunch of the early leaders from '23 and '24 have maintained their lead. You know, we talked about Harvey. That's a really impressive company. You know, Gamma is a really impressive company. Cursor is a really impressive company. Like, the companies that were early have so far continued to actually be dominant, and that's something that I've sort of changed my mind on. I think in '26 we're gonna see a whole new set of categories, 'cause my- Can I share my view on where we are in the market?

    27. HS

      Yeah.

    28. AA

      I think that late '22, November '22, was ChatGPT. '23, a lot of the kind of obviously good ideas, and that's not to denigrate them, they were obviously good, were started in some of '24. In the end of '24, reasoning models started working, so even the ideas that were obviously good but not working, suddenly, many of them suddenly started working with the advent of o1 and DeepSeek. '25, those companies scaled, so now we are starting to see, for existing markets, which is like customer support and the evolution of that, chat, creative tools, code, we have these early leaders. Those markets are somewhat established. It's gonna be very hard to be, like, another customer support or coding tool today. Conversely, we're gonna see a set of AI-native categories, I think, emerge in 2026. Knowing what we all know now, what company would you build? That is the operative question, and OpenClaw and Maltbook are just the beginning of that. Like, those are ideas that were inconceivable two years ago. So I think that the, the thing for, that I learned over the last 18 months is, like, hey, maybe the early leaders will just be the leaders, and over the next 12 months, I'm gonna pay a lot of attention to who the early leaders are in the sort of new native categories.

    29. HS

      How significant is Maltbook? Everyone's very excited by it.

    30. AA

      Yeah.

Episode duration: 1:20:02

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