Alex Rampell: The Best Founders Materialise Capital, Customers & Labour | The Future of Venture

1. 0:00 – 1:26

   Intro

   1. ARAlex Rampell0:00

      I think you wanna invest in people that can materialize labor, capital, and customers. We either wanna buy any percent, any percent, right, of something that is absolutely working, or high ownership of something that could work.

   2. HSHarry Stebbings0:11

      $15 billion. That is how much Andreessen Horowitz just raised. Today, I'm joined by Alex Rampell, where he leads their $1.7 billion apps fund.

   3. ARAlex Rampell0:20

      The best companies have hostages, not customers. In 2025, the ability to go create a software product is so easy. This can take weeks, which is bonkers. The battle of every startup versus incumbent is whether the startup gets the distribution before the incumbent gets the innovation, right? So probably of the unicorn class, I would bet that maybe 5% will ever be able to go public. If you win 100% of the deals, that's a very, very good sign, but if you're winning them with very low ownership, you're probably not testing how far you can go. The entire job of venture capital is to find, pick, and win investments. If they're good investments, the winning is very, very hard. We are buying out-of-the-money call options, and we hope they expire in-the-money. I don't necessarily think you can take it as a given that a small fund will outperform a large fund. Ready to go? [upbeat music]

   4. HSHarry Stebbings1:18

      Alex, dude, it's been eight years. I'm hoping that my question-asking ability has gone up in terms of quality in those eight years.

2. 1:26 – 4:15

   How to Do 5x on a $15BN Fund Pool?

   1. HSHarry Stebbings1:26

      Now, listen, I wanna start: $15 billion you raised today, and I was just looking at that, and I was wondering, in an age of venture today, do you have to go really big or go crafts and very small and boutique to win in venture today?

   2. ARAlex Rampell1:43

      Yeah, I mean, I think th- this is, um, uh, this sounds like a bad word when I say death, but there is this kind of death of the middle that happens to a lot of asset classes in general. In venture capital, it was a tiny, tiny asset class at the beginning. Um, right now, it's gotten bigger, but it's really more of the end state of a lot of these companies is huge. I mean, Sequoia used to brag about, I think it was like 20% of the market cap of the NASDAQ was Sequoia companies. Millions of pe- like, you know, Apple and Oracle and all of these, these amazing names. Um, they're very, very big, right? And companies go public much, much later today, so the ability to deploy more capital, more money into kind of venture capital, which is no longer, um... You know, kind of si- sidetrack here. Series D didn't exist in, like, 1992, right? It's like that was an IPO. Like, companies would go public. I think Amazon went public at, like, a $600 million market cap or something. Like, that was the norm. There was no Series I, Series K, Series, you know, W. You would just go pub- you'd raise, you know, Series A, raise Series B, raise Series C, then go public. Um, and consequently, venture firms back then were very, very small, but also the exits tended to be quite small as well. Right, like, if, if, if a very, very good scenario is you have a company that goes public at a sub-billion dollar market cap, it's like... And you get five of those a year, like, you, you can't raise lots of money, but now the opportunity is so much bigger. The five biggest companies on Earth are all technology companies. If you rewind 20 years, I think they were all banks. If you rewind 10 years before that, they were all oil companies. If you ri- rewind 10 years before that, they were all Japanese companies during, like, the Japanese stock market bubble. But, you know, the opportunity in technology is so much bigger, especially because these companies, you, you can- you could keep investing venture capital dollars later. Like, I think that's one of the main... If you look at the money that we just raised, you know, almost $7 billion of that is for the growth fund. And what is-

   3. HSHarry Stebbings3:34

      Listen, David George has got a big appetite, you know, and Ali's raising a Series T as we speak.

   4. ARAlex Rampell3:39

      [chuckles]

   5. HSHarry Stebbings3:40

      He's going through the whole alphabet.

   6. ARAlex Rampell3:41

      But, but th- this is the point. It's like, if companies went public after the Series B back in, like, the 1990s, and, like, the average IPO was $50 to $100 million of capital raised, you know, the, the, the strategy would be a little bit different, but the world has changed dramatically, and the opportunity size is so much bigger. And now you have technology companies that kind of pervade everything. It's like you're either... If you, if you are a large company today and you don't use software at your core, you're going to get eaten by somebody who does use software at their core and then kind of reverse engineers into whatever product or, or service that you promote.

3. 4:15 – 15:13

   What Two Groups of Funds Will Win the Next Decade in VC?

   1. HSHarry Stebbings4:15

      Every LP says the canonical wisdom and the theory of venture, as you scale, performance goes down. Do you legitimately think, then, that with the expansion of these markets, you can maintain 5X-plus net funds at scale?

   2. ARAlex Rampell4:32

      Well, I think the difference, though, is that imagine that you're an LP and you have a billion dollars to invest. Would you rather get- would you rather invest $50 million and get a 5X on that, or would you rather invest all billion and get a 3X on that? And the answer is, you'd rather get a 3X on a billion than a 5X on, you know, $5 million or, um... One of my good friends is this guy Mickey Malka at Ribbit. I was lucky to be an investor in his fund one personally, and it's like that was, like, a 55X fund, um, on... I think it was, like, an $85 million fund, but 55X! Like, that's insane. But, you know, at some point, um, you, you could ask Mickey this, too. It's like you're better off with, like, a 5X on, like, a very, very large fund. Like, the harder thing to do is to just return gross dollars, uh, period. Like, that, that's what LPs actually want. It's amazing to get 100. Like, I've, I've had two funds that I've invested in. One is Mickey. This other one is this fund called AngelPad, which was, uh, kind of like a third-rate competi- I don't wanna call it third rate, but it was like- it was not... You know, there was Y Combinator, and then it's like there was AngelPad. It was just, like, this, this small little experiment. That was 120X. I got 120 times the capital that I get, DPI.

   3. HSHarry Stebbings5:45

      How big was the fund?

   4. ARAlex Rampell5:47

      I think it was $8 million. Um-

   5. HSHarry Stebbings5:48

      That's impressive, though.

   6. ARAlex Rampell5:50

      It, it... But, but this is the thing: it's like, that's incredible. Your point is very valid. Like, can you get 120X on a $2 billion fund? Probably not. I'm, I'm, I'm willing to, uh, to bet you that you can't get 120X on that. But you can return far more dollars if you're very, very good. And this is the question that you originally asked was, and this is why I called it the death of the middle. Like, my view is, most asset classes, you either have to be a large generalist or a small specialist.... and the hard thing is to be like a mid-sized generalist, because then you're largely going to lose to, like, the big generalists or the small specialists. So like, you know, Ribbit, um, as an example, like, they really focus on fintech. That's how I know them well. Like, that's a specialty. They're not trying to do everything. Or, um, Kazek in Latin America, like, they are focused on a specialty, um, and they can be small. Like, they're not trying to do everything across the entire planet, because a lot of... Like, the, the entire job of venture capital is to find, pick, and win investments. If they're good investments, the winning is very, very hard, and the winning therefore goes to the person that is, like, the be- like, you, you have to sell. Like, this is a sales job. You know this, right? Like, it's like you have an entrepreneur, they're amazing. They don't come along very often, but this is the best entrepreneur you've ever met. You have to convince them to take your money. And how do you do that? You have to say, "I'm the greatest person in the world to help you, which means I have this amazing specialty, and/or," and this is why it's... It's not just or, it's and/or, "I have all these things that I can do for you. I'm connected to everybody on the planet, given the scope and scale of my kind of general- generalization," right? Like, on, on the big side. If I'm just like, "Hey, I kind of do a little bit of everything, and I don't really know that much about your business, and I'm not that big and can't help you that much," it's just you're gonna lose. That's why the death of the middle is what tends to happen for a lot of these asset classes. Like, um... And then LPs, you know, they want to chase returns. Um, it's also sometimes hard to reach LPs, so, like, you know, the, the big generalists kind of gobble them up, or the small specialists that, that generate very, very good returns will, will gobble them up as well.

   7. HSHarry Stebbings7:48

      I have so many things to say. The first thing I do just want to say is Mickey Malka, you mentioned. Mickey, when I was 18, helped me and agreed to be a mentor of mine 12 years ago, when it was-

   8. ARAlex Rampell7:58

      You're a great guy

   9. HSHarry Stebbings7:58

      ... completely not obvious. I had no idea why he spent time with me, and he's been incredible to me ever since. He always taught me, "You're never won or lost. You're only ahead or behind. Keep playing." [chuckles]

   10. ARAlex Rampell8:11

       Yeah.

   11. HSHarry Stebbings8:11

       And I love that. Um-

   12. ARAlex Rampell8:13

       He's-

   13. HSHarry Stebbings8:13

       ... uh, y- y- you mentioned that about kind of the scale of dollars, and actually, wouldn't you rather do two fi- five X on 250 than, I don't know, 15 X on 10 or whatever it is? Um, yes, but there's an opportunity cost of dollars, and for an endowment fund, they are able to put it into the smaller fund. And so do you accept with that then, that you just scale out of certain LPs, and it's no longer the best risk-adjusted place to put money then?

   14. ARAlex Rampell8:39

       Well, I... But I, I, I think it's, uh... Obviously, you can't, you can't disprove a, an, an unknown future. Um, but I would posit to say that if you were trying to find, pick, and win the best deals, and, uh, and may- maybe you disagree with me, I'm like the kind of the small specialist, um, or a large generalist, but who wins the best consensus deals? Every now and then, there will pop up a non-consensus deal that everybody thinks is terrible. Nobody wants to- Sequoia doesn't want to do it, we don't want to do it, you don't want to do it, nobody wants to do it, um, and then it ends up being 1,000X, and then somebody who is not the best-known venture firm, you know, ended up winning that deal or be- being sold that deal, I should say, and then it ends up with a, with a great return. But a lot of the best deals will go to the best firms. Like, that's what's very different about venture capital than, like, private equity. Like, if, if you and I are trying to take a public company private, you know, you're KKR and I'm Blackstone, and we're both trying to, you know, take over RJR Nabisco or something like that, they're just gonna sell to whoever offers them the highest price per share. I mean, they have to. Whereas in venture capital, as you know, you have to win the hearts and minds of the entrepreneur and win that deal, and a lot of the best deals are somewhat obvious. Like, it, it's not surprise- like, everybody wanted to invest in Uber, everybody wanted to invest in Facebook. Like, it, it, it was self-evident that these were very, very interesting companies. May- maybe when the price gets high enough, there, there come some doubts in people's minds, like, "Ooh, I don't know if I want to invest at 87 million pre for the Series A of Facebook," but everybody wanted to do it at 20 million pre. There are a lot of companies that people don't want to do at any price. But the reason why I'm saying this is, I, I, I don't necessarily think you could take it as a given that a small fund will outperform a large fund. Um, now, I think it has the capability mathematically. Like, again, if you're, if you're Mickey and you invest in the Series A of Coinbase, and you have a very, very, very small fund, of course, you can generate a bigger multiple of that fund. Like, that, that's just, you know, algebraically true. But the best deals in fintech, like, Mickey gets to do them because he's a great firm. Um, and he has a much, much bigger fund right now. So I... That, that's the thing that I think it's hard to know. I mean, it's like, again, I, I agree with you algebraically, but I, I would put my own personal money, and I do, right? It's, like, I invest in our funds. Like, I would put my own personal money in funds that have, you know, kind of, uh, the small specialist or the, the big generalist, because I think that's where the best returns will be.

   15. HSHarry Stebbings10:59

       Can I ask you, when you think about the best returns, what is the multiple of your best return, give or take?

   16. ARAlex Rampell11:04

       For a single deal? There's a seed deal that I did that, uh, it's probably marked up at, like, 200X right now.

   17. HSHarry Stebbings11:15

       You said about consensus deals, and I immediately thought of actually an Andreessen deal, which is, like, Eleven Labs, which was the most non-consensus deal ever at seed, where it was like, you're competing with OpenAI, you're in London, it's a pre-seed. It was very non-consensus. When you look back at your best deals, have they been consensus or non-consensus?

   18. ARAlex Rampell11:37

       Well, I think... But if you look at Eleven, the entrepreneur was pretty consensus. Like, it's like, all right, Marty's super sp- like, that whole team is incredibly talented.

   19. HSHarry Stebbings11:46

       Sure, but the pre-seed and the seed, a lot of people turned down.

   20. ARAlex Rampell11:50

       Yeah, but I, I think our job, and, you know, and I say "our," right?

   21. HSHarry Stebbings11:54

       Yeah.

   22. ARAlex Rampell11:54

       Your job is... Tell me if you agree with me, is we find the smartest people in the world that have very high agency. Like, there's been this thing going around about agency. Uh, I love this term, right? It's like, agency, how do you define it? It's like, people will... They're not gonna be told what to do, they just take matters into their own hands. This is a very rare trait, right? Like, you obviously had this trait when you could have just done the, the normal thing for a 19-year-old to do, or however you were... You were, you were younger than that when you started, right?

   23. HSHarry Stebbings12:19

       I was 17. Yeah.

   24. ARAlex Rampell12:20

       Yeah, it's like-... what you did is not normal, right? Like, y- you had agency and said, "I am going to not do the normal thing. I'm gonna go, like, email every famous VC to death and get them to talk to me." And, like, yeah, it's pretty incredible what you've done. That's a very rare trait. You find people like that, that are hopefully experts in their domain. Um, and I think th- this is why the specialty thing that I mentioned is very, very important. I believe that, um, there is a certain level of consensus around who has agency and who is an expert in a domain. Like, if you, if you talk to an amazing entrepreneur, it's like, "Wow, this person knows everything about this. They've studied it for decades. They've read every book about it. They've talked to every entrepreneur who's tried this before." You have to give them money. Uh, that's our job. Our job is to find these people, give them m- it won't always work, for sure, but I, I, I actually don't agree that, uh, Eleven was a non-consensus deal. Like, if it was a high enough price, uh, if it was not a seed, if it was like, okay, it's a Series B, they have half a million dollars in revenue, and it's shrinking every month, yeah, of course, it's not gonna be consensus. But, like, on the entrepreneur-

   25. HSHarry Stebbings13:24

       That was gonna be my question, which is, like, at what stage does that no longer hold true? You know, the Series A partner who leads our Series A fund is like, "Ugh, the seed guys have it easy," you know. "Amazing founder. Great, let's roll the dice." For us, it, it's not quite enough. There comes that series... Is it the Series-

   26. ARAlex Rampell13:41

       Yeah, no, I agree. Like, at some point, reality, it, it converges with reality. And if, if my, my kids and I have been watching, uh, Silicon Valley, the show, and, like, there's that famous scene where it's like, "Wait," you know, they got... You know, the, the Mark Cuban character is on the phone, and he hears revenues. "No, no, you can't do revenue. You have to be pre-revenue because then you're a pure-play," right? It's like... So there is this element. I mean, the, the, the way to explain this financially is we buy out-of-the-money call options. You know what a call option is, right? We are buying out-of-the-money call options, and we hope they expire in the money. Because this is how I explain to people, like, why it is that a Series A that has a million dollars in revenue and is losing $10 million a year is, you know, worth $100 million. Of course, it isn't worth $100 million. What you're doing is you're buying 15 or 20% of the company and hoping that eventually, your call option expires in the money. Like, that, that's, that's the thing that you're doing. So once you... Eventually, that value converges on, like, the equity value. It's like: "Oh, what's the discounted cash flow? Blah, blah, blah, blah, blah." Like, once it gets closer there... And it's not a binary fit, right? Like, at the seed, it's like, okay, out-of-the-money call option, this guy or gal is very, very smart. I wanna buy 20% of whatever they're doing, and hopefully, it expires in the money, and, like, they're the smartest person I've ever met. Like, we do these deals 100 times a day. We will do them 100% of the time, right? Consensus, non-consensus, like, there isn't really anything to be consensus or non-consensus on, right? It's just like, this is a very, very smart person. It only becomes non-consensus, to your point, when the price goes up high enough. 'Cause I, I think most people have the same viewpoint of, this is a very, very high-agency person who has studied history. Like, th- there's

4. 15:13 – 20:35

   What Three Things Are the Best Founders Able to Do?

   1. ARAlex Rampell15:13

      a, there's a memo that I wrote internally for our firm about how to invest in people, and I think you want to invest in people that can materialize labor, capital, and customers. Especially today, where people get paid a fortune to stay at OpenAI or Anthropic or Meta or any of these companies, if you quit your job to start a company, and you can snap your fingers and five people follow you tomorrow for a 50% pay cut, that's pretty magical. Like, that doesn't happen every day. So that's the materializing labor. You also wanna make sure, this kind of goes into the consensus, non-consensus part, like, is this person really good at fundraising? Like, are, are they telling a good story? Can they convince people like me to give them money? Oh, wow, they really can! That means, hopefully, that N plus one, N plus two, N plus three rounds will be a little bit easier. They will converge on reality in terms of numbers, for sure, but they have the, the thing around raising money. And then this is more of an enterprise-focused thing, but can they get their first five customers, which is as hard, if not harder, than getting their first five employees because, um, you know, kind of imagine this company, Toast. You know Toast? It's the restaurant POS company.

   2. HSHarry Stebbings16:16

      Yeah, I love them, man. I do, I'm a vertical SaaS nerd. This is like-

   3. ARAlex Rampell16:19

      Oh, I know. I, I, I love vertical SaaS, right?

   4. HSHarry Stebbings16:20

      Mm.

   5. ARAlex Rampell16:20

      But, like, imagine that, that you're Chris at Toast. You start this company, and you go to a restaurant and say, "Hey, I want you to use my, my product." And the restaurant asks some very good questions like, "Okay, well, how much cash do you have left?" It's like, "I have a week." "Okay, interesting. How many other customers do you have?" "Zero." Like, that's impossible. How can you pull that off? If you are this rare breed of person that can materialize labor, capital, and customers, um... And then I have kind of two sub-appendages after that. I really, really like people that have studied the history of the space. And, and I say this because the best entrepreneurs that I've met, they have learned everything about the space. And, um, I, uh... To show what a great investor I am, when I was a, when I was running my company, TrialPay, I met with, uh, I think, I think Patrick Collison. I know a lot about payments. I've been doing, like, payment stuff since 1997 on the internet, which is, which is kind of early stages, uh, for, for internet, online acceptance of credit cards. Meet Patrick, and, uh, obviously, I passed on doing the seed round of, of Stripe because I'm a genius. It was called Dev Payments at the time. I was not in Andreessen Horowitz, so don't hold it against me. Uh, it didn't hurt our DPI, and, and luckily, the firm invested in them. But, uh, two things, you know, I, I asked Patrick, "You know, where are your customers gonna come from? Because everybody uses Chase payment things." He's like: "Oh, my customers don't exist yet." It's like the stupidest answer I've ever heard, but obviously, it was genius. Um, but, but number two, what really did impress me is that, you know, he knew everything about the history of the payment systems. I mean, I think, I think he actually went out to go meet Dee Hock, the founder of Visa. Um, John Collison gave me a book on, like, you know, one of those Springer yellow, you know, academic textbooks on the origins of the payment system. Like, just, they had studied history so much. Same thing for Vlad at Robinhood, studied history so much. Same thing for Apoorva at Instacart. Like, you know, went out to go meet the founders of Webvan. This is a very, very classic trait. On the other side, I will meet people that will start a company almost exactly like TrialPay or almost exactly like Affirm, and I know a lot about these two companies because I started them, right? Um, and they're like: "Oh, what, what was TrialPay?" Or, "Oh, I'd never heard of this." And it's like, come on, man, like, how are you- you're gonna spend 10 years of your life-... building this thing, and y- you really should study history. Brian Chesky at Airbnb studied everything about, you know, bed and breakfast and hotel industry in the 1800s. Like, this is a very, very classic trade. So, so j- let me just finish with this. So, so again, labor, capital, customers, study history, and then my favorite book of all time is The Count of Monte Cristo because it's a story of revenge. And the reason why this is so important, um, if you know the book, it's by Alexandre Dumas. Um, Edmond Dantes is wronged. He's sent to prison, uh, for, you know, bogus reasons, for supposedly being a N- Napoleon supporter for, like, 17, 18 years. Uh, eventually gets out, becomes the richest person in the world, but doesn't give a fuck, if I can use that language. Just does not care. He wants revenge. Like, he wants to destroy his enemies and just, like, conquer the world, or just really destroy his enemies. And you need that kind of motivation, because going back to fund size, if somebody offers you $100 million and you're an 18-year-old kid, that is transformative. You'd have to be an idiot to turn that down, or you have to want revenge or redemption. Revenge, redemption, kinda same thing. And I find a lot of the best entrepreneurs, they have that going. Like, they wanna prove they're better than everybody else. They, they had some childhood chip on their shoulder or, you know, they were wronged at their last company. You know, like Dave Duffield has this hostile takeover of PeopleSoft. Of course, he starts Workday, and he's like, "Fuck you, Larry Ellison." Like, there, there's always that kind of energy. So the Count of Monte Cristo thing, I, I don't know how to describe it, but, like, the motivation has to be beyond just like, "I wanna make $50 million," because if that's the motivation... And that's great motivation. You know, I'm a capitalist, like, we live in a capitalist society. If that's the only motivation, like, it's not gonna work for our fund size. So, like, we, we want it. I, I love seeing that, that fire, and, and again, like, a lot of the most successful companies that I've seen, they always have that. Like Renaud Laplanche starts LendingClub, fired from his own company. He's made tons of money, doesn't give a shit. He starts a, a competitor called Upgrade. No, no, no accident that the company's called Upgrade. It's like an upgrade over you MF-ers, right? Like, starts an up- start, starts Upgrade. Upgrade has a multiple of the marketcap. I mean, it's probably, like, worth ten times more than LendingClub now. So that, that's a very, very classic

5. 20:35 – 32:15

   The Best Companies Have Hostages, Not Customers

   1. ARAlex Rampell20:35

      commonality.

   2. HSHarry Stebbings20:36

      My question to you, [clears throat] I wanna stage the question there 'cause there was so much to unpack. You said there about kind of you love them studying history, and you said about passing on Stripe. That was my concern, which is there is a level where you can know too much, and so, like, I think I know quite a bit about lending. Now, I know beginners, beginners compared to you, but I know quite a bit about lending, where it's quite easy for me today to see a lending business and go, "Ugh, fucking horrible. It's a hard market. I don't wanna be there. Look at LendingClub. Look at the market cap there." Very dismissive, as many were with Stripe when they knew payments. How do you prevent yourself knowing too much that it's a negative?

   3. ARAlex Rampell21:15

      I think this is a great question, and this is the number one thing that, that... So I, I do a couple things. Number one, if it's, like, an ad tech company, I know a lot about ad tech, I know a lot about payments, I will force somebody else to join me for the pitch that is like a beginner's mindset mind. Um, so I, I think that's one, is just, like, have a sparring partner internally that has that, you know, "what if it works?" You always have to be like, "What if it works?" So that's number one. Number two is, I, I like to ask the entrepreneurs, like, "What is different?" And the thing that's different... Like, the, the way that Patrick-- the reason why Patrick, um, and John made Stripe work, partially, is it's like they just believed that a great number of new companies will be created, and they're gonna pick the best product, and they're gonna have the best product. And actually, this informs a big part of my investment thesis now. I mean, I call it greenfield, but, um, there's a saying that I use a lot, which is, "The best companies have hostages, not customers." Right? It's like, you'll, you'll appreciate this if you're an enterprise SaaS guy, right? It's like the best companies have hostages, not customers. So if there's a company that has something marginally better than Workday, right? They're not gonna go... Like, Workday has hostages. They don't have customers. They're not gonna go be able to sell GE and say, "Oh, wow, I love you two YC kids. Like, I'm totally switching my HRIS from shitty Workday to amazing, you know, AI, whatever, YC Silicon Valley HRIS." Never gonna happen. But if the rate of new company creation is high enough, those new companies will pick the best product, and they're like, "Oh, wow, I could use Workday, uh, but I'm not a hostage, so I'm free. I'm going to pick this other thing." Like, I, I was the first investor in Mercury, um, the, uh, the, the, you know, SMB bank, and, like, until SVB failed, I don't think they s- they, they never stole a customer from SVB. Like, the... But if you're a brand, a- as long as the rate of new company creation is high enough, you can play this game that I call greenfield bingo, where it's just, like, you pick every software category, you build a better version of that, and then you've got a shot, and that's what Stripe was, right? I mean, like, that's why it worked. If the rate of company creation is very low, like, if I build a better EHR, like electronic health records company, um, it's just not gonna work because the rate of new hospital creation is too slow, right? It's, it's like you can't just, you can't just sell to the new companies, but you can do that for payment processing, right? You can do that for ERP. Like, you can do it for a bunch of other categories.

   4. HSHarry Stebbings23:32

      So you will look for greenfield bingo markets, where the rate of net new companies being created will supplant the slow, slow sales cycles of the larger enterprise customers, who will eventually switch?

   5. ARAlex Rampell23:44

      Or maybe they don't, right? It's like, who cares if they switch or not? Like, it's like, they'll hopefully die because they're using shitty software. Um, like, the, the fact that they won't switch is actually indicative of, like, their mantra on everything. Like, they, they want to use old technology, or they're hostage to old technology. Let's just sell into the future, and, you know, betting on the future is more fun. I mean, like, one of the things that's very, very challenging is you go start a company, you recruit 10 hotshot people from Meta, Google, whatever, and then they're bored to death. Why are they bored to death? Because they can't do anything. It's like they were used to making little tweaks that a billion people experienced every minute, of every hour, and now they're at a start-up, and the start-up, it's been one and a half years, and they've made one sale.... and that, that's, that's quite t- and then, like, you end up losing your talent because it's boring. Like, you can't actually do anything. So, you know, it's nice to have these markets that can ramp quite quickly, and you kinda want the market to be a tailwind for you. It doesn't mean that there's not value in kind of creating big companies that sell big... Or, you know, startups that sell, you know, big software products to big companies. You, you can do that. It's just, it's a much, much harder thing culturally for Silicon Valley, I think.

   6. HSHarry Stebbings24:55

      Shows are a bit like venture, which is the majority that you do are actually not very good, and then you get the once in a while episodes like this, which remind you why you love what you do so much. You know what I mean, when you meet that special founder.

   7. ARAlex Rampell25:09

      Oh, 100%.

   8. HSHarry Stebbings25:10

      It's so great when you have a show like this. My question to you is, you said hostages not customers. How should I think about that, then, in a world of Cursor or any of the foundation models, your Anthropic's or your OpenAI's, where they are customers, not hostages? They can switch very easily. The promiscuity of customers has never been higher. How should we think about that?

   9. ARAlex Rampell25:33

      It's, it's a really good question. I mean, I think this is where behind every technology revolution, and kinda go back to, like, silicon, then the personal computer, then the internet, then kinda internet 2.0, where you could write to the internet, things like, things like Facebook and Goo- uh, and YouTube, then mobile, then cloud. There's always been an infrastructure layer and an application layer. So, you know, you go back, like, the infrastructure layer for PCs was, I don't know, like Microsoft and Apple, like the operating system players. The infrastructure player for the internet was, like, Cisco and Akamai. Um, the infrastructure player for everything AI are all of these back-end model, right, you know, providers, and then there's the application layer on top. So if I do something... You know, we were talking about Ask Leo, right? Like, that's an application layer company. They lo- I mean, uh, if I were Vlad, I would love to be promiscuous with all the back-end models because I should be. And then the infrastructure players are like, "Oh, shit, you know, all of our customers are being promiscuous. Let's figure out how we specialise in a particular area." I imagine that, like, that's why Anthropic, I imagine, has gotten very good at coding. Um, but it's kind of the application layer tends to be a little bit stickier, but the problem is, you might have 9,000 competing companies at the application layer, in which case you'd rather be the infrastructure layer. But the infrastructure layer is pretty hotly competed as well right now. So I don't know. I mean, it's... I think the, the, the more relevant question for me is, in 2025, the ability to go create a software product is so easy. I, I published this chart with the help of, of my friend ChatGPT, of, um, how long it took VisiCalc, which was the first spreadsheet that came out in 1979, to lose to Lotus 1-2-3, and then how long it took Lotus 1-2-3 to lose to Microsoft. And it took about five years from VisiCalc to go from 100% market share, because they were 100% market share because they were the only one in the first, to 50% market share. It took about 15 years after that for Lotus, which had, you know, 70% market share in 1986 or something, to almost zero. Um, these, this would normally take a long time. In 2025, this can take weeks, uh, which is bonkers, right? Because all of these layers of past innovation have kind of like, almost like a Russian nesting doll, kind of concentrically dr- grown against each other. So because you have cloud and because you have mobile, everybody in the world has a smartphone in their pocket. All of those smartphones are connected to, like, you know, infinite computing in the cloud or near infinite computing with, with, like, a, a dearth of energy in the cloud. And now I build something marginally better, I can get into the hands of a billion people overnight, and that's just so, so different. But I, I think on the hostages point, if you build a system of record, right, like, it's just so hard to switch. That, that has not changed. But now I can go compete... I could build a software product in, like, two weeks that would have taken me two years. So that's going to massively increase the pressure on the application layer. So the best thing that you can do if you're an application layer company is hopefully, you know, have something that, you know, I hate to say it, but it's like you, you want to have hostages. You want to have all of the data in your company. Uh, you, you wanna have all of the data of your customer in your, in your product, and then just make sure that, you know... I mean, this is, I think, the thing that we talked about last time I was on your show. It's like this is the, the, the, you know, the battle of every, uh, startup versus incumbent is whether the startup gets the distribution before the incumbent gets the innovation, right? So what do you do? You go boring. You build the most boring thing possible. Nobody really cares about it. Nobody's that interested in it. I mean, this is why I love Vlad at, you know, Ask Leo is like, "Who cares about procurement? Ah, it seems kind of stupid." It's not attracting 9,000 competitors, but hopefully you get all of the data in there, and then you can build these interesting things on top. Um, and you're not gonna attract that much competition. Um, and even once you do, it's just, it's, it's kind of hard to switch. So I don't know if that answers your question.

   10. HSHarry Stebbings29:21

       It, it totally answers my question, but it leads to several more questions, which is the theme of this [chuckles] discussion, which is the speed with which it takes to compete with the incumbent has reduced, and you are able to take customers or market share quicker than ever before. With the extension of private markets, do we not have a liquidity problem then? When we look at, I don't want to pick on anyone, but, [chuckles] but fuck it, I will. Say, like a company like Snyk in the cybersecurity market, which has been going- it's now getting eaten away by new incumbents before it's had the chance to return shareholder money and liquidate. And so do we not have a fundamental challenge here, where companies that have not gone public yet or not provided returns to investors are already getting eaten away because that compression time is, is shorter?

   11. ARAlex Rampell30:07

       Yeah, I, I, I think this is a big challenge. I mean, if you look at all of the unicorns and how many conform to rule of 40, it's pretty small. Um, many of them are shrinking. So probably of the unicorn class, I would bet that maybe 5% will ever be able to go public, which is kind of shocking, right? But, uh... And then, because so much money has gotten into venture capital, you have this problem of... I mean, I, I, I will say on the record, I hate massive secondaries.... because it kind of turns you from the Count of Monte Cristo to, like, the, you know, whatever the opposite of that would be. Like, the, uh, I, I'm now gonna go vacation in a, a, you know, Côte d'Azur or something. Like, uh, you don't- that, that's going to now say, "I, I am now at a fundamental disconnect from my employees and my investors, because I'm rich and they aren't." Like, that, that's not a good setup. You kind of want everybody be- to be in the same boat. Um, and the, the reason why I mention that is, like, you have some companies where it's like, you know, founders taking a $50, $100 million secondary. It's like, that's- that's, that's fine if they just turned down a $10 billion acquisition from Google, and they're the Count of Monte Cristo, and they want to go for it. Like, okay, that, that, that can make sense to me, and if you offer that to all employees and all investors and everything else... I don't love the idea of it's like people are looking at this as spreadsheets. Um, and I'll, I'll, and I won't mention names, but, like, there was a, there was a fund in 2021 that did, like, a massive secondary into one of my companies, and, uh, I, I was really against it, which made me super popular with the founder, you can imagine. But, uh, they were like: "Oh, well, we own 4% of the company. We want to own 8% of the company because 8% is more than 4%." I'm like: "Dude, I totally agree with you. 8% is more than 4%, but you have now introduced moral hazard into the equation." Because if you give somebody generational wealth, um, y- you can hope that they're gonna kind of maybe... Like, the, the upside would be, like, they're gonna swing for the fences and go for it, right? Um, because otherwise, I would be happy selling for a billion dollars. Now it's like, "Fuck it, I'm gonna go for $100 billion." Okay, that- that's great. Now we're all aligned. But the other option is, now they don't care about getting liquidity for investors. They don't care about getting liquidity for employees. They're quite comfortable. Like, you don't wanna have

6. 32:15 – 37:18

   The Two Types of Deals You Want To Do In VC

   1. ARAlex Rampell32:15

      that setup. And-

   2. HSHarry Stebbings32:16

      I don't, I, I don't think that's actually the problem. I, I mean, this was with the greatest of respect. I think we assume the next strategic steps will be the same with that money versus without that money.

   3. ARAlex Rampell32:26

      Right.

   4. HSHarry Stebbings32:26

      And I think what we've both seen is the foie gra-ing of startups, and then-

   5. ARAlex Rampell32:30

      Right

   6. HSHarry Stebbings32:30

      ... they do ten things, not two things. None of them work. The team is disincentivized.

   7. ARAlex Rampell32:36

      Yeah.

   8. HSHarry Stebbings32:36

      They break up. Culture sucks, and suddenly-

   9. ARAlex Rampell32:39

      Well, that's, that's moral hazard. That's, that's the, that's the economic framing, right? It, it's moral hazard on both primary and secondary, to your point. Like, it- like, necessity is the mother of invention, so if you have $100 billion in the bank, when you really should only have $10 million in the bank, you're like, "Ah, I'll do 50 things. I'll have, you know, multiple layers of people that I don't need." And it's interesting, um, I, I find that a lot of people... When, when I, when I think about, like, the, the difference between conservatives and liberals, or people that believe in big government, small government, a lot of it comes down to the disconnect between more input is better output. Like, a lot of people just believe this. It's like, okay, you know, the IRS, the Internal Reve- Revenue Service, like, oh, you know, there's a lot of tax fraud. We need to hire more people, and if we, if we have more people, we're gonna do a better job of t- catching tax fraud. Or, like, oh, the military, we should have more people in the military, uh, because that way, we're gonna do a better job. Whereas actually, as you know, it's like sometimes there's addition by subtraction. Like, if I have a smaller team, there's less communication necessary. You're gonna come up with more creative ways of actually solving the problem. You're gonna solve it with technology. Whereas if you have on... If, if you just say, "I'm gonna solve it on the input layer, I'm gonna address... I'm, I'm gonna, like, address my constituents by saying, 'I'm gonna just allocate more money to this thing,' " you're gonna get a worse outcome. Versus, I allocate less money with great people. This is the key. So you can't just say, like, "I'm gonna, I'm gonna allocate less money and give you the worst people on, on Earth," and then... No. But it's like, you know, take, take tax fraud. I would rather have two people at the IRS than 80,000 people, but have those two people be the, like, you know, Noam Shzeer and, and some, some other, like, super genius. Um, because if Jeff Dean and Noam Shzeer are running the IRS, like, oh, my God, like, that would be so much more efficient, but the input cost would be, like, one one-hundredth this much, and there's always that disconnect.

   10. HSHarry Stebbings34:23

       I actually am in trouble with my team, 'cause I just tweeted today: "Series A is the worst place to be investing. Company progression is minimal. Price is four to 5X the seed price, and we're paying 150 to 200X ARR with little signs of product-market fit." Do you agree with me, it's the worst place to be investing?

   11. ARAlex Rampell34:44

       Well, I think the problem is that there's the nomenclature, which kind of varies company to company. So, like, when I started TrialPay, we raised, our Series A was $3.1 million on $9.5 million pre, um, and that was expensive. I remember, like, arguing with the partner at Battery. It's like, "This is the most expensive deal we've done." This was 2006. Uh, at SiteAdvisor, I think we raised $2.7 on $2.7 pre, so even lower. So that, you know, he- hence, hence he was right. So now you have a pre-seed, a seed, a seed extension, a seed extension two. Like, it... What is a Series A, right? There's not, like, this... Like, normally, a Series A would be, like, the first institutional round of money. Now, there's so much variance because, like, oh, there's the Series A, where it's, like, five superstars out of OpenAI, and they need tons of money for compute. No moral hazard on that. You're not gonna go spend money on people, you're gonna spend money on GPUs. That's one form of Series A. Another form of Series A is, like, I just did a Series A where the company had, like, $10 million of ARR when I invested. So it's just all over the place. So I, I think it's just hard to kind of cast a generality. Um, there are certainly ones where... Like, I used to call this the Series B trap, but again, I think the nomenclature has shifted. Like, I would have agreed with your team if you called it the Series B, because at that time, there was a seed, there was a Series A, and the only difference between Series A and Series B is that you increased your burn and built infrastructure and kind of scaffolding. So it's like I have a company, I have customers, I have signs of product-market fit. I know now I should hire an HR team and a marketing team, and all this other kind of shit that doesn't actually have any kind of impact on the, on the, you know, metrics of the company, and that was the Series B. And then it's like, why would I invest in a Series B, because I get half as much ownership and, and nothing has changed vis-a-vis the Series A?... So yes, there, there's a class of Series A's that look like that, but I would say, like, of the Series A's that I personally did in the last year, like, most of them have been like, "Holy shit! Like, revenue is really scaling, and these numbers are insane." Um, and, you know, those were, those were Series A's, and I get very excited about those. But it, it just- I think your mileage m- varies because the [chuckles] the nomenclature is all over the place.

   12. HSHarry Stebbings36:48

       Do you worry about the quick succession rounds? When you look at companies like a Relit or a Tacto, there's just, like, a, a week later, there's another term sheet for a Series B with, with literally no change at all, and it's buying the cool option.

   13. ARAlex Rampell37:01

       Yeah.

   14. HSHarry Stebbings37:02

       Do you worry about those rounds?

   15. ARAlex Rampell37:03

       Well, I did one of them, right? Like, I'm on the board of Relit. I did the Series B, and it was 60 days after the Series A, and that, that's unfortunate. I would've rather done the Series A or rather done the seed, of course. But if you find the winner, um, it's also very expensive not to do

7. 37:18 – 40:20

   The Importance of Founder/Capital Fit

   1. ARAlex Rampell37:18

      that deal. So it, it's-

   2. HSHarry Stebbings37:20

      That's really... And that's, that's so interesting. That, that... I'm so pleased, 'cause I, I'm so sorry, dude, I totally forgot [chuckles] that you did the Relit B. But, like, y- you gotta pay up for that. Going to the point, you've got to assume that the next strategic steps will be the same and be as focused, even though you have just foie gras'd the company. Sorry, probably not.

   3. ARAlex Rampell37:40

      Well, but this is where I think the motivation of the founder is very, very important. So going back to, like, I mean, Nick, uh, who's the CEO of Relit, I mean, I think he does have a bit of the Count of Monte Cristo in him. Like, and it's like he doesn't wanna go take this money and go spend it on extravagant things. Um, so I, I think you have to make sure that there's kinda, like, founder capital fit. Nobody ever talks about that. It's like, "Okay, if I give you a billion dollars, what will you do with it?" And 99 times out of 100, the answer is going to be bad news. And not, not even bad news around waste, but just bad news in terms of mindset. Like, it's another form of moral hazard, where it's like I'm never forced into making hard decisions because I have infinite capital, and you kind of want to force people into making hard decisions. And, like, I lived this. I mean, I've, I've tweeted about some of these things, uh, during my, my painful existence at TrialPay, where, you know, uh, I think we had to lay off 70% of the company, and then we eventually turned it around and sold it to Visa, and there were all sorts of tough times therein. But, um, you know, y- you, you run into these, like, very, very challenging scenarios, and it's like option A is bad, option B is bad. You have two, two choices. You're at a fork in the road, and, uh, there, there's a funny exp- expression by, by Yogi Berra, this famous baseball player in the, in the US: "Uh, when you come to a fork in the road, take it." It's like, what, what does that mean? He said all these, like, things that make no sense. But, you know, what a lot of entrepreneurs don't realize is that the worst option... You think you have two options, but there's a third option, which is making no choice at all. That's the worst option. You're better off, like, just choosing something, and both of them are bad, right? It's like, this option is very bad, this option is very bad, so therefore, I don't wanna make any choice at all. But you're better off making a choice [chuckles] and committing to something. And if you have infinite capital, you could just kinda continue this, "I'm not gonna make any choices. I'm just gonna sit here and just, like, all right, well, I have more money. You know, my, my ARR is more driven from the, uh, interest on my, my giant $100 million cash reserve." If you ha- if you've... And sorry for, for rambling on this, but, like, this kinda goes to, like, founder capital fit. There's a certain type of person where it's like, I give you a lot of money, and I know you're still gonna make decisions very, very quickly. I know it isn't going to distract you, and really, it's just benefiting me. I hate to say it selfishly, but it's benefiting me as, in that now I'm on the cap table. I own part of this amazing company, and it's not gonna fuck up the company. Um, but, like, the, the standard, it's like the, the moral hazard is the number one thing. It's like, now it's going to fuck up the company, either with too many- too much primary, or it's like, "Oh, I know, I won't, I won't mess with the primary. I'll just buy secondary." It's like, that also has, you know, existential risk, as I mentioned, for a certain class of person. There are other CEOs that, like, you know, one of my, one of my CEOs did a very, very big secondary in 2021. Like, he, and the company is, is hit on some tough times, but, like, he has stuck it out, and, like, he's doing a phenomenal

8. 40:20 – 44:01

   Multiple Successive Rounds Are Dangerous… Here is Why?

   1. ARAlex Rampell40:20

      job.

   2. HSHarry Stebbings40:20

      How do you get comfortable about growing into that price that you have well overpaid for? So again, we're, we're super candid, and this is where I love where I'm at in my stage of life now versus where I was at eight years ago, 'cause it wasn't kind of the same. I lost to Seema on your team for Ask Leo. She's amazing. You guys are amazing. Hugely well-deserved. Um, you guys did not pay more than me. I hate this bullshit VC thing where it's like, "Oh, they overpaid." No, it was, like, the same. You just beat me fair and square. Well done. I reflect on that, and I'm like: You idiot, you should have paid 300 and doubled them. Because when I map out 18 months' time, I looked at their revenue projections, and in 18 months' time, when they need to go raise, their revenues would have been so much that I could still see a 3X on that 300. What an idiot. That's how I get comfortable with paying up for something. How do you get comfortable preemptively paying up so much?

   3. ARAlex Rampell41:18

      I mean, I think it's the same, it's the same math, but it's, it's dangerous on both sides, right? It's like, um, I always have this speech that works, you know, maybe one time out of 100 that I give it, which is kind of like the Spider-Man speech of like, "With great capital comes great responsibility, and if you raise it too high of a price, you're fucked," because I lived this. Let me tell you my story. I raised it this price for my Series C. Then I had, like, Google that wanted to buy me, but it was, like, at the same price, so therefore, it tanked the thing. And then, uh, my next round, everybody asked me what was the price of my last round, and nobody wants to invest. Like, I, I go tell this story, um, I can introduce the founder to 10 other founders that, that have lived the exact same thing. It's like, I wish I hadn't raised my round at such a high price. But w- who starts a company, right? Like, let, let, let's just think about this for a second. The people that start a company are irrationally exuberant. Like, if they thought that the company was gonna fail, if they thought they had a 0% chance of raising a Series B, they wouldn't start the fucking company, right? So that's why the speech doesn't work, um, because I always tell people like, "Hey, you know, the reason why you shouldn't raise your Series A..." Like, there, there is a deal that I guess we should have done, candidly, because, like, this company just raised it, like, a billion-dollar-plus valuation, but we turned it down. Company had, like, less than a million dollars in revenue, and they wanted, like, a $200 million, you know, whatever, post-money series. It was just so crazy. I was like, "Look, you guys haven't started a company before. I have." Um, not to, like, pull the, the old bald guy card, but, like, you know, uh, more old than bald. The old part is relevant, the bald part isn't. But, like-... you're Series B, like, even if you have $20 million in revenue, you're fucked! Like, you have to be able to walk into a room, the number one question you're gonna get is, "What was your last round price?" And people should be wanting to compete to pay three times that price. Like, they will have, like, "Oh, my God, what will it take to do this deal?" And if you say, like, "Hey, my la- my Series A was raised at a billion, and I have a million dollars in revenue," you have ended the conversation. Nobody want- the psychology of that round is all wrong. So I give this speech, and it just doesn't work, unfortunately. But, but I think, I think the smart entrepreneurs, they kinda have this risk-balancing thing. It's like they're irrationally exuberant, that's why they quit their job and started the company. But they realize, "Oh, wow, there actually is a good point around, like, my whole team now says we have $100 million in the bank, they're gonna be wasteful. That culture is something that I don't want. Yeah, I guess I would want the option of maybe selling the company for a billion dollars and having, you know, Salesforce come in and say, 'What would it take to buy the company? What was your last round price?'" Because I will tell you, 100% of the time, in every M&A conversation, in every fundraising conversation, the number one question, the first question is, "What was your last round price?" And if it's, like, insane, they're like, "Ooh, that's not good. I..." And then, then, as an entrepreneur, you're like, "Oh, no, no, no, but I would take a discount because my company sucks." Like, you can't say that. It just, it, it just destroys the entire conversation. It's just

9. 44:01 – 57:19

   The Importance of Ownership in Deals

   1. ARAlex Rampell44:01

      game over.

   2. HSHarry Stebbings44:01

      We, we mentioned kind of the, uh, the relate element in the successive rounds. I hope it's not too forward and you can say, "Dude, don't want this in there." Um, by all means, I'm not a journalist. But, like, you do the successive B because you lose the A. When you sit down, and we're sitting down as a team, how do we reflect on that? When you reflect on, like, a relate review, what was the takeaway from that when you sat down?

   3. ARAlex Rampell44:26

      Well, I mean, th- there are a lot of deals that we, we lose because we're not willing to kinda go the distance on price. I mean, that, that is a common thing, where it's like, did we really lose it? Like, th- this has happened to us a number of times. It's like, all right, we wanna do the deal, and this is, yet again, like, consensus and non-consensus, a lot of times the difference is just on price, um, or ownership, right? Like, if we had shown up and said, "Hey, we'll do 10% of this company for an A round," like, we could win every deal. It's actually, I think one of the, one of the competing elements that has shown up... I'm, I'm interested to watch how, uh, Standard Capital does. This is kind of the YC offshoot-

   4. HSHarry Stebbings44:59

      10%.

   5. ARAlex Rampell44:59

      Where... Yeah, it's like, um, I'm going to take 10%. Like, that's very, very bad for big funds, because in or- in order to make the math work for a big fund, you have to have high ownership, and you know that your ownership will get depleted or will, will get diluted over time as option pool expansions happen, even if you take your pro rata in every single successive round. So, I mean, we can win all these deals, but a lot of times, um, you know, I, I, I am much more preoccupied with ownership, um, at the A, because we're buying an out-of-the-money call option. And, and the reason why I, I kinda tell this story is because, uh, you know, th- there's, there's something that I've used as a benchmark, which is, if you're hiring people, and 100% of the people say yes to your job offer, what can you infer from that? Number one, you could infer that you're the greatest hiring manager of all time. But number two, you might be overpaying, right? Would you agree with that? Like-

   6. HSHarry Stebbings45:52

      Sure

   7. ARAlex Rampell45:52

      ... i- if you only get 50% or 20%, like, how do you know to test this hypothesis? And if you win 100% of the deals, like, that's a very, very good sign. You should try to win 100% of the deals that you wanna do, but if you're winning them with very low ownership, you're probably not testing, like, this kind of efficient frontier of, like, how far you can go, and you want to have more ownership, right? Like, that, that's our objective. Like, the founder wants less dilution, the investor wants more ownership. Like, the, the two are, like, kinda perfect complements of each other. And, um, but w- eventually, you realize, like, "I don't wanna be a fucking idiot." Like, this is the answer to your question, right? It's like, "All right, I wanted 20%, uh, in an A round for a company that doesn't have that much traction because, you know, I'm, I'm at Andreessen Horowitz, and I've got this big fund and everything else." Um, but... And then it's like, "No, no, no, they're, they're gonna do a 15% round or whatever." It's like, "Oh, fuck that, I don't wanna do that deal." Um, and then it's like, holy shit, they've run away with the market. This is the market leader. I'm not going to be stupid, right? I'm not gonna just say... Th- this is why, actually, by the way, I love talking to investors, because investors, like most humans, do not have the capability to admit that they were wrong. Like, they just wanna, like, say, "I'm right," um, say, "I'm right," and say... If you're an investor, like, you're just gonna lose money all the time. The most valuable insight that you can have as, as an investor is the self-reflection to say, "I'm an idiot." Um, and if I'm, if I'm a hedge fund guy, it's like I get to sell. It's like, "Oh, I thought I was a genius, you know, buying Herbalife," blah, blah, blah. Like, "Oh, wow, this company's not good. I'm gonna sell everything," versus, "No, I wanna prove to the world that I'm right." Well, I'm gonna lose all my money. So it's the same thing here, but for upside. We can't sell, but we can say, like, "This is the winner. I want to be in the B at a lower ownership, because, like, this is the fucking winner."

   8. HSHarry Stebbings47:32

      But if I was your partner, I would be pushing you with all my might to take the 10% at the A and have a higher win rate, specifically with your profile of fund. Because I get it in other funds where you don't have the ability to follow on and lead the B, the C, the D. You may even not be able to do the pro ratas, in which case I, I get that thinking. But when you can, why are we not having a higher win rate and doing 10%?

   9. ARAlex Rampell47:57

      Well, I mean, th- th- this is actually one of the things that we looked at, um, because I, I kind of feel like my job here is kind of quasi portfolio manager. So I, I run our apps fund, right? So we have, we have seven different funds, and my job is to make sure that, like, that fund is as successful as possible. Um, and, you know, w- we're winning the right deals, that we... And it's like, if we just say, "Hey, everybody, win every single deal. Just win every deal, doesn't matter, that's all I'm gonna optimize for," and we end up with 5% checks in every Series A, like, you know that's not gonna work, right? We can win every deal that way. W- what is the fr- how far on this curve can you go? Um, and it's the, again, it's the exact inverse conversation that an entrepreneur is having, where it's like, "I want a tier one investor. I want, you know, an amazing specialist, or I want whatever I want on... You know, this person I want on my board. What is the least amount that I can give up to get an amazing person?" And they would love to get 5% A round deals done, but they're like, "Oh, wait a minute, like, that's not gonna work." And like, that, that's the, the tension between the two. So I, I agree with you, but I think, you know, where do you... It's like Zeno's paradox. You know what that is, right? It's like-... you will never get to the destination if you go halfway each time. Like, is it nine percent? Well, why not just do it at nine percent? Why not do it at eight per-- Like, wh- wh- where do you draw the line on that? And I think-

   10. HSHarry Stebbings49:09

       I would do, I would do the simple maths of where do I think... And this is a very dangerous and bad answer to your question, because the biggest mistakes in venture have been when you underestimate market size, and you don't see what it can be. But I'd sit down with you, and I'll go: "Okay, ten percent entry, five percent on exit, assuming a fifty percent dilution. Do we think this can reasonably be a fifteen billion dollar company?" If so, that is a number that returns the fund with comfort.

   11. ARAlex Rampell49:36

       I know, but the problem is, it's kind of garbage in, garbage out. It's like, you can always say that for something, because otherwise you're like: "Oh, wow, I underestimated the size of the black car market," you know, hence, I'm not gonna do-- It's hard. I mean, the way that I do it, just kind of to be pithy about it, is like, we either wanna buy any percent, any percent, right, of something that could work, that, that is absolutely working, or high ownership of something that could work. If you really kind of draw a line of, like, the... You have to bifurcate the market. It's like Facebook, um, if you look at that round, I think Greylock put twenty-five million into Facebook at a, um-- Actually, I think the round was maybe twenty-five million at five hundred. I think that was the B round for Facebook, be- split between Meritech and Greylock, but that was absolutely working, right? So it's like, are they getting ten percent? No. Are they getting five percent? No. Like, but it's like the market winner, and things can go wrong, but, like, holy shit, it's absolutely working. And, like, I don't see that many things that look like that, but when they-- when you do, you throw away all the rules. Or it's like, this is not working, but this person looks like a super genius. Um, they have high agency, they can get-- they can materialize labor, capital, and customers, but it's not working yet, right? So, like, I have to have high ownership in order to take, to correspond with that level of risk, and those are the two types of deals to do. The danger is, you say every-- you can say: "Oh, well, this has a million dollars of ARR, and they're ahead of the number two player that has nine hundred K of ARR, therefore, it's absolutely working." Now, you have to have a high bar on the absolutely where... Like, this is, this is crushing. This is the fastest-growing company we've ever seen. It probably comes around once every decade. Throw away the entire rulebook, and you should be fine owning five percent of that company because it's, it's an absolute winner.

   12. HSHarry Stebbings51:08

       I'm so pleased that you said about the fastest-growing company that we've seen. We've never seen growth rates like we have today, and I'm a little bit stuck, if I'm honest, and so I'd love your advice. When we look at companies going from one to twenty to thirty to forty, there's actually quite a few that do that today. Before, that was completely unheard of. How much weight should we place on revenue growth today versus not? And is there a world where these companies that are going from one to three or four, three or four ICs to be good, are left behind?

   13. ARAlex Rampell51:40

       So if, if you want to know the, the three investment theses that I have for our fund, um, I- I'll tell-- I mean, this is exactly what I told LPs, and, and we'll answer your question in a second. I think we have, we have three. We have one, which is we invest in system... Like, I call it greenfield bingo, and most of the green- like, these are existing software companies, but selling to new companies as opposed to s- you know, selling to the hostages that will never leave. They tend to be systems of record, right? Like, the re-- or vertical operating system. So, like, the reason why Relt, I love that company so much, that's never gonna grow, like, zero to a hundred in, like, a month, but it is very, very sticky revenue. Like, once you're on... Like, NetSuite has hostages not customers, they're not gonna leave. You know, if this can s- if, if Relt can sell into every new company, like, they're gonna do great. The revenue growth will be slower, but it will be so sticky, and they have infinite option value on adding, like: "Hey, do you wanna have a collections AI agent that runs on top of, you know, overdue invoices," blah, blah, blah. And that's, like, optionality on top of your sticky system of record. So number one is greenfield kind of systems of record. Number two, and this goes to the fastest-growing companies in the world that you're talking about, is, like, software that does the job of labor. Like, these are new... This is, um, like, I'll give you an example. Like, we have a company called Eve. They sell into plaintiff attorneys. What is the dominant software product for plaintiff attorneys? It's called Microsoft Office, right? Like, there isn't one. There's so many category. Like, what's the dominant software for, like, manicures? Like, there is-- you could pick all these areas where there's no greenfield bing, there's no, there's just nothing. But because the, the thing that you're selling is effectually, effectively in lieu of labor, or, uh, like... And the, the way that Eve works is, if you're a plaintiff attorney, and you get paid on contingency, you're not charging by the hour, um, you have a case where you will, with one hundred percent certainty, win a thousand dollars, right? Will you take that case? The answer is absolutely not, because it's not worth your time. So you turn down all the small-ticket cases because you want the big-ticket cases. But now you have a software product that can do all the work and help you win all the small-ticket cases, like, you're absolutely gonna do that. These are the things that scale like crazy, right? Because instead of hiring somebody for eighty thousand dollars a year that I cannot hire, I can now hire this software product for twenty thousand dollars a year, and before, I was paying zero dollars a year for software. Those are all the things that are hyper-scaling. But to your point, if they don't eventually back into a system of record, like, if it's something that just does, does, like, outbound phone calls with an AI agent, and it's a thin wrapper on, you know, OpenAI or Plus eleven Labs plus something else, it will attract so much competition, it won't be sticky. So the, the conversation that I have with every entrepreneur that has one of these companies is, like, how are you going to make this sticky? How, how are you going to, you know, pardon my language, get the hostages, right? How, how do you hold these customers and make sure that if, you know, if you are... I'll, I'll give you an example. Like, I'm a, I'm an investor in a company called Salient, which is probably the market leader in kind of outbound loan servicing for autos. And this is the conversation I have with Ari. It's like, what if Talliant shows up? You know, the, the competitor of Salient, the, the make-believe competitor of Salient. Like, how do you keep your customers? And they say: "Hey, we're gonna do it for fifty percent cheaper." And I loved his answer, which is: "I'm-- this is my wedge, right? I, I recognize that this is, this is, you know, n- not super sticky if we're just making outbound phone calls, uh, and combining these, these different layers of the stack, because we're not the infrastructure layer, but we are going to back into a software product." Um, and that's... A- I love that answer, and it's true. Like, that's what they've done. So that's, that's my answer to your question, is you have, you have... I mean, again, the-... they might not be able to pull it off. Like e- every company that, that says they're gonna do this, they might not be able to pull it off. But you have to back in this mega revenue growth, that largely is predicated on doing the job that people would do before, and that's why you can grow so quickly, into sticky software product that is not that dissimilar from software products of yesteryear. Um, and then i- if you want to know, like, the third thing that we're doing... So it's like, number one is, you know, greenfield bingo. Number two is, like, software that does the job of labor. And number three, um, I wrote a post about this, but I called it the walled garden. And, um, there are... Uh, and I'll give you two examples of this. There's a company in Europe called Vlex. And Vlex was started by this entrepreneur, um, who, uh, basically bought up every legal record in Spain. Um, and then start- you know, like, like physical legal records at the courthouse, put them into, like, digital form, and then started selling them to law firms. And I think he, he got this to, like, something like $20 something million of ARR after 25 years. Um, but then added AI, and it grew, like, something like 5X. I mean, so something crazy. Why? Because OpenAI... Let's just say, OpenAI is purely se- it's a sentient being. AGI is here. OpenAI has done it tomorrow. Five- GPT-5.5 is here. If they don't have... If you say, like, "Hey, help me draft a response to this, like, Spanish court case law," like, they don't have the data, right? They can't do that. Or OpenEvidence has done this for, uh, for health data. Like, A- you know, AGI is here, OpenAI has it. Amazing! I tore my Achilles. What do I do? I'd rather have GPT-3.5 plus infinite data of everything around medical science, which is walled garden that OpenEvidence has, versus, like, sentient being that has no data whatsoever. So that's also a very, very powerful way of building something sticky. So if you, if you find a company that has grown like this or grown like this, but just cannot be removed, either because of the data that they have that is unique to them, which is, you know, hon- honestly, my hope with Ask Leo! Or has, um, you know, kind of sticky system of record, like, it's just not going anywhere. Versus other ones, like, you might take a flyer. It's like, wow, this has grown from zero to 100. They make outbound phone calls, and they're like, you know, 11 labs, plus this, plus that, and it was all built in Lovable, and it's amazing, but like, uh, that- that's, that's a harder pill

10. 57:19 – 58:46

    Is Triple, Triple, Double, Double Dead?

    1. ARAlex Rampell57:19

       to swallow.

    2. HSHarry Stebbings57:19

       We're... [sighs] I'm so honest these days, dude. I'm too old and ugly to not be honest. We're in this business called Allo in Germany. It's like a Toast for Europe, but a little bit better specialised for the European market. And they've got great numbers, um, like 5X from, like, 500K to two and a half million. Dude, raising their Series A, like, you know, eight or 10 on fifty-ish, um, memory serving me correct, was a bear, was fucking horrible. And I was just like, "Oh, my God, the triple triple double double is so dead." Like, we're in Lovable as well. That obviously is a completely different fundraise journey. Is the triple triple double double dead for those-

    3. ARAlex Rampell57:56

       I don't think so. No, no, I, I, I think, um... I mean, it might, it might be harder for a certain set of people that are maniacally focused on, like, growth over everything else, but, like, what really matters is growth and stickiness. And the triple triple... If you're a triple triple double double with, like, you know, terrible retention data, like, okay, that- that's gonna be very hard. But if you actually have, you know, again, system of record, or in that case, it, you know, sounds like vertical operating system, that should not be hard. If, if you find the r- I mean, like, I, I would do... I, I, I love those things, right? Like, I would much rather have a slower growing, you know, permanent system of record that will never get ripped out than the fastest growing thing on the planet, that has 9,000 competitors, that are all built in Lovable by 17-year-olds. It's like, I, I, I think there's no comparison. I mean, there, there are plenty of people that would be attracted to both, would be my answer. I'm, I'm surprised that it- that was- it was as challenging as you, as you portray

11. 58:46 – 1:08:42

    Advice on Selling Companies

    1. ARAlex Rampell58:46

       it.

    2. HSHarry Stebbings58:46

       We got it done, but I was surprised too by, by how challenging it was. Cassie, you mentioned about selling companies, that I spoke to David George before the show, and he said one thing he, he's never talked about publicly, and I think that he's a phenomenal master on, is advice on selling companies. Ask him about that. I know it's a bit broad and random, but I do wanna touch on it because David said I had to. What's your biggest advice on selling companies, having seen so many and living it yourself?

    3. ARAlex Rampell59:11

       Yeah, so I'd say a couple things. Um, you know, this is a very highly choreographed dance, so you can't just say: Oh, I should ra- like, so if you're raising money, um, you're like, "Oh, I should raise money. I have the best metrics ever. I'm gonna talk to five firms, and they're gonna compete to the death over winning my deal." Like, that was my experience with my Series B at TrialPay. So it's like, oh, so it's like... And, and kind of corp dev is like, I'm either raising money or selling my company. It's the same thing, right? No, it's completely different. Um, if you're selling your company, you have to spend, you know, in many cases, years, like, just getting to know people at the potential acquirer. It's never the CEO, unless you're like, you know what, you know, Jan Koum at WhatsApp. Like, let's just say that you have a company, you, you do something amazing, um, somebody at Salesforce should buy it. Um, you would rather go public, but you're like, ooh, you, you kinda see the writing on the wall, like, "I'm going to hit a wall in a year and a half." What you should start doing then is, um, I kinda call it a background process. Like, if you know what cron is in, in Unix terms, right?

    4. HSHarry Stebbings1:00:13

       Yeah.

    5. ARAlex Rampell1:00:13

       It's like you should have a little cron job, where it's like 5% of your time as CEO should just be, like, getting to know people at the three or four companies that might buy you. You never go say, like, "Please buy my company." That- that's DOA. You don't wanna spend time with the corp dev people, because most people are like, "Oh, corp dev buys companies." No, they don't. They execute transactions. Like, if Salesforce buys your company, you're not working for the head of corp dev, right? Like, you're working for, like, this, um, this SVP who needs- who has some hole on their personnel or, you know, ne- needs, like, revenue growth in order to get their bonus. There are all sorts of internal mechanics that are going on there. So it's just this highly choreographed dance of just, like, making sure that you get to the right people in the company, you know, hopefully doing it years in advance, not just going to them when you need to sell your company. Because there are two independent variables here. It's like, when your company is doing... Like, the best time to sell, by the way, is your company's doing great, like, this is the... Like, the rocket ship is, like, 100X year-over-year growth, and they wanna buy, right?... but rarely does that intersect. A lot of times it's like: "Oh, shoot, we started going like that. Now we wanna sell, but nobody wants to buy this falling knife." So it's hard to perfectly choreograph this, but, like, the, the main piece of advice, and I wrote a whole Twitter thread on this, I think, but it's like spend time with, you know, three or four companies, uh, hopefully kind of under the... Not under the guise, because honestly, like, when I did this at, at TrialPay, I wanted, you know, Visa to be a partner of mine. I wanted PayPal to be a partner of mine. It was not wasted time. It's like, "Hey, you know, PayPal, you should put, you know, on your receipt page, you should put, uh, coupons that we do for this post-transactional product that we have," and just spend as... Like, I was spending so much time, because if I got that deal, right, I didn't, I didn't give a shit if they bought us or not. If I got that deal, it's worth so much money to us, it's worth so much money to them. Unfortunately, um, or fortunately, depending on your point of view, they're like: "Oh, wow, this is so valuable for us. We have to buy that company," right? And, like, that's, that's often... But it's like that movie, my favorite movie is Inception. How do you incept this idea? And again, uh, in that movie, it happens overnight on, like, a flight, whatever, from Australia or something, but it, it really needs to happen probably, like, a year and a half, two years in advance. And a lot of entrepreneurs, they make the mistake of, "I have to go impress the corp dev person." Wrong. "I have to only interact with the CEO." You know, sometimes, right, like, you know, we, we hosted a dinner for the CEO of Visa, and I sat Zach at Plaid, right next to Al Kelly at Visa. Okay, that worked until it didn't, right? Because of the, uh, the Justice Department or something. But, like, you know, s- th- th- that can, if it's sufficiently strategic, you know, these $5 billion acquisitions that don't happen very often, but, like, you know, a $500 million to a billion dollar acquisition, like, that can happen at not the CEO level. Um, and you just have to spend the time and invest the, the time and resources beyond... Like, and by the way, this is, this is the same advice that I give people on fundraising, right? It's like, this background process, if you're the CEO of a company, your number one job is don't let the company run out of money, right? Which either means you become profitable, which is great, or you raise more money, which is, you know, not as great, but, like, hopefully leads to, to, to being profitable, and/or you sell your company. So you probably should spend 5 to 10% of your time, you know, meeting investors in a very casual way, right? Um, so that they know you, and they know that you're a very strong entrepreneur, and they can, like, just invest on the spot versus... Like, this is how I raised my Series D at TrialPay. I spent so much time with the Greylock guys, as an example. I pitched them, like, after I'd met Reid, like, 20 times, and it's like he knew me, so he, he, he knew that he trust... Like, you know, he's investing in me as opposed to, like, a random dude that shows up, you know, "Oh, I should raise money because I'm running out, and I'm growing. Let me go pitch five part..." Like, they never would have done the deal otherwise. So it's like, at, the background process is key.

    6. HSHarry Stebbings1:03:58

       Before we do a quick fire round, I just have to ask, you mentioned one element being the labor displacement in the kind of, one of the three kind of pinnings that you have. I completely agree. My friend Jason Lamkin said this year will be the year where we see the demonization of technology leaders, and that we see labor displacement materially showing up in labor markets. Do you think that's true, and will we see labor displacement in labor markets materially show this year?

    7. ARAlex Rampell1:04:23

       I'm not sure about that. I think in certain areas, for sure. Um, I mean, in, in general, like, I, I could even click up a notch, which is, if you think about SaaS, right, like, broadly speaking, I think there are kind of three types of SaaS companies right now. There are the ones that are almost impervious to everything that's happening with AI, and if anything, it's a huge tailwind because they're gonna start being... They, they have the distribution, they're gonna start adding features, and that's things like Workday and NetSuite and these things where it's like they have the hostages, um, never going anywhere. On the other side, you have things like Zendesk, right? Where it's like, how many licenses per seat do you need of Zendesk if now every customer support ticket can be answered automatically? You need zero license. Like, their revenue could go down 100%. These are very, very different. And then you have things in the middle, like Adobe, where it's like, ooh, maybe I... Now, whenever I want a logo, I just go to ChatGPT. I don't go to, like, the graphics team. So maybe you'll need fewer graphics designers. Maybe you'll need, you know, Zendesk, you'll need fewer customer support people. That probably is true, right? Like, there're gonna be certain areas that will get hit harder than others, but what technology has always done is, you know, people shift into other jobs, or maybe some people will be 100 times more efficient. I think you'll have some cases where labor... Like, now that, you know, take, take the Eve example that I gave you, um, "Wow, now I can do 100 times as many cases or five times as many cases as I did before. I'm gonna hire three more people." Like, or, "I, I, I can now be in business by myself because the software helps me do X, Y, and Z." I think a lot of that stuff is gonna start happening, where-

    8. HSHarry Stebbings1:05:55

       I... Dude, I, I so respect you, but when you look at, like, a Decagon, like, in the customer support, it's clearing out. When you look at, like, a Harvey, another business that you're in-

    9. ARAlex Rampell1:06:05

       I, I, I don't disagree with that. I'm saying it's not uni- like, that's why I kind of gave the, the example of, like, the three types of SaaS, right? It's like you're gonna have some totally impervious, and I'm talking about SaaS, not people. If you flip that to people, it's like, all right, the users of Zendesk are probably going to go away, therefore, that labour market might get decimated. 100% agreed. Um, on the other hand, it's like, if I'm United Airlines, and now I don't need as many customer support people, because now every answer kind of auto-answers itself with AI, well, you know what? I should probably take care of my best travelers better and give them, like, a personal human that will be really nice to them and remember their birthday, and then they're gonna buy more first-class tickets from me. I might reallocate some of that labor to other things because I'm making more money, and I no longer have this cost. I mean, Tony Hsieh, uh, who, you know, sadly departed, who ran Zappos, you know, he had this whole thing, which I think is actually correct, which is, I'm going to turn cu- most people think of customer support as a cost center. They should think about it as a revenue center. You should love your customer and make them love you. There's the story that he would tell around, like, you know, there was somebody who had something really bad happen and was on the phone with the customer support person. Uh, I think her husband died, or some- something bad that had nothing to do with the shoe order. You know, Zappos sends that guy, or that, that woman flowers, right? And, like, does so... Like, doing things like that, making your customer love you-... is something that you can now focus on once you take away the cost center element of something like this. Or if I'm a law firm, again, I agree with you, like, you probably don't need people doing this tedious work, and the number of people doing the tedious work will fall off a cliff. No, no disagreement, but I would not be surprised to see smart companies start reallocating them. Uh, like I actually gave a, I gave a talk to, um, the exec team at, at JPMorgan about this, right? They're like: "You know, what, what, what part of our business is gonna be, you know, least touched by AI?" And I said: "You know what? Wealth management," right? Because what is wealth management? It's... Yeah, yeah, it's like hopefully like getting good returns for the, the dollars that you have with us, but it's really like that relationship guy or gal. And, like, the woman that was running wealth, she was like- she, she, like, stood up in the audience like, "Yeah, yeah, yeah." But it's true. It's like if you have a high EQ and you're good at playing golf with people, like, you're gonna start hiring more people like that because that's how you get more customers. And you, you kinda re- sometimes there will be an opportunity... The upskilling is not like, "Hey, everybody should learn how to code." The upskilling might be like stop doing tedious work, like answering, you know, like, looking at knowledge base and then, you know, typing that back with lots of typos into, like, the, the, the email response in Zendesk. But actually start going into, like, you know, send customer flowers, like, do- get to know that customer really well. Go visit them at their... Like, whatever, for the high-value customers that you just couldn't do before.

12. 1:08:42 – 1:13:26

    Quick-Fire Round

    1. HSHarry Stebbings1:08:42

       Alex, I could speak to you all day. I know you do actually have to work as well. Uh, I wanna do a quick fire round with you. I'm just gonna give you a couple of quick statements.

    2. ARAlex Rampell1:08:49

       Sure.

    3. HSHarry Stebbings1:08:49

       What have you changed your mind on most in the last 12 months?

    4. ARAlex Rampell1:08:52

       I've probably changed my mind on... Well, as I mentioned, you have to be able to change- like, it's more of companies where we didn't do the- we didn't do, like, the early round, and then it's like, I'd rather be rich than right. That's, that's what we often talk about. It's like, "All right, I wanna be right." So we've probably done a couple deals where it's like we passed, you know, round N minus one, we end up doing round N, but I don't think I've changed my mind on that much. May- maybe I would say, like, this idea of private equitizing venture capital. I, I wrote a piece... I was probably the first one to talk about this in 2023, around how what you're gonna start doing is, um, you know, you could buy a company and then add AI to it, and, you know, I think General Catalyst is now... Like, a bunch of firms are now doing this. And I was, I was the first person to talk about this, and I, I, I called it barbarians at the gate with an AI. Um, I've probably become more bearish on that, just because it feels like just a founder-market mismatch. Um, so that's probably the thing that I've changed my mind on the most.

    5. HSHarry Stebbings1:09:50

       What product does Andreessen not have today that you would most like Andreessen to have? You mentioned GC having, like, the fund there that does that roll-up play. They've got the, like, consumer performance marketing fund, I can't remember what that's called. But what product do you not have that you'd most like to have?

    6. ARAlex Rampell1:10:04

       I, I, I probably think, um... I don't know if we would ever do this, but, uh, something around credit for a lot of our companies. So, you know, we have equity products, but we don't have debt products. Um, and they have very different return profiles, obviously. But every one of our companies, they need... You know, General Catalyst actually has one of these. They have a credit fund. Um, so either for customer acquisition or if you're fintech and doing lending. So that, that would be interesting, but in general, we just kind of, we listen- we, we don't wanna be at odds with our entrepreneurs. Like, there's a very solid reason why we don't have that, which is like: "Oh, you didn't pay back the bill? I need to go foreclose." Like, that's a... As a venture capital firm, like, you can earn 1,000X on a, on a winner. You, you don't really wanna, like, kind of beat up the, uh, the companies that are struggling, and that's kind of what the credit instrument needs to do, but I, I think it's a good product.

    7. HSHarry Stebbings1:10:51

       What piece of investment advice has most stuck with you? So, like, Josh Krishna once told me, "If you're willing to take less, don't do the deal. If you're willing to go from 10 to 7%, like, yeah, sure, I... Yeah, why not? Don't do the deal." What would yours be?

    8. ARAlex Rampell1:11:05

       I think it really is find high-agency people, uh, that know the history of the space, that can materialize labor, capital, and customers, that are The Count of Monte Cristo, and don't second-guess anything. Just, like, give them money, be their best partner, and go, versus, you know, question the market, question the this. I, I think it really is. I've just become 100% convinced this is entirely about people, 100%, at every round, by the way. It could be a D round, it could be an E round, it could be an A round, it could be a seed round. Now-

    9. HSHarry Stebbings1:11:32

       Can you please tell Martine Casado? 'Cause he fucking tweeted and then took the piss out of me. 'Cause there's this, you know, the graph where it's like it starts here, and then goes up here, and then goes down here, and it's like you start here, it's all about founder, and then you end here, it's all about founder, and here is when you think you're smart on no market and product. [chuckles] And he was like: "You're an idiot." Like, it's not that.

    10. ARAlex Rampell1:11:53

        It's, it's, it's all about founder. I mean, you, you have to... Again, it converges on reality at some point in time. Like, this is gonna be a public company. You can't, like, tell everybody in the order book of the IPO that's undersubscribed, like, "No, no, no, the founder's really good." Like, yes, of course, it has to converge on reality, but I, I think it's like, it's [chuckles] ... It is, like, materialize labor, capital, customers, like, that, that's, that's kinda it for me, with the right motivation, which is The Count of Monte Cristo.

    11. HSHarry Stebbings1:12:14

        Penultimate one: What's your biggest miss, and how do you reflect on it? Like, I missed Deal seed round, another one of yours. Fuck, I reflect on that.

    12. ARAlex Rampell1:12:22

        Uh, so it probably was one of the first rounds of Plaid, which I subsequently corrected myself for by doing the Series C of Plaid. So I think we invested at $2.4 billion for the, for the Series C, and I was debating a $5 million difference with Zach for the Series B. Um, I think I wanted to do it at 130, he wanted 135, and I think Goldman was willing to pay 200, but he was willing to work with me because of, you know, my, my fintech. And it's like, "No, no, 5 mil..." Like, that was just so stupid, right? Um, and luckily, I, I, I was willing to admit that I was stupid and did the next round, but, uh, you can see the difference on... Uh, this is why it's so important to, to do two things: to correct yourself if you're wrong and not be proud about it, but also, if you really believe that this can be a huge company... And I, I was, I was burdened by what has been, to quote the great Kamala Harris, of, uh, you know, oh, wow, Yodlee, which had predated Plaid, that went public and had a terminal valuation of $600 million. So, like, of course, this, like, 130 versus 135 or whatever the hell we were talking about was very material, but it was so stupid.

13. 1:13:26 – 1:15:08

    What is the Future of Venture Capital

    1. HSHarry Stebbings1:13:26

       I love that, "unburdened by what has been" memo. That is... Yeah. Final one for you, dude: What does Venture look like in five years' time? When we look at the $15 billion that you raised today, I mean, it is obscene to even think that would happen five years ago when we go back. What does it look like five years out?

    2. ARAlex Rampell1:13:45

       I think it ends up eating even more of the world. So, um, this is kind of going back to, to Mark's essay around software eats the world. That, that largely has happened. As I mentioned, like, the five biggest companies on Earth, they're technology companies, which was un- uh, like, unthinkable in 2005. Like, technology companies were little service providers to big companies, like banks and oil companies, right? So I, I think this momentum of kind of everything becomes a software company, it, it kind of goes into this, like, thesis too, that I mentioned around software does the job of labor. You're gonna have all of these areas where it's like there is going to be, like, you know, Toast... Vertical SaaS proved this, or kind of V1. It's like, oh, how is Toast worth $20 billion? You're gonna have a lot of things like this, where it's like brand-new markets that have grown like crazy. Um, AI is now allowing software and technology to do so many things that it didn't do before, and this is before even things like robotics. Like, if robots actually work, wow, like, now you've expanded the market like a, another 100X. So I, I just... I, I'm just so bullish on the ability of technology, um, to create enduring value. So, uh, you know, my, my, my guess and my hope is that it's gonna go up and to the right.

    3. HSHarry Stebbings1:14:55

       Dude, I told you, this is like Venture. You have most shows which are like, "Eh, fine," and then you have the once in a while, which are truly special. Thank you for being my truly special show.

    4. ARAlex Rampell1:15:04

       Yeah.

    5. HSHarry Stebbings1:15:04

       It really is rare to have one like this.

    6. ARAlex Rampell1:15:06

       All right, and hopefully I'll see you in London soon.

Episode duration: 1:15:18