General Catalyst CEO, Hemant Taneja: Lessons Scaling GC to $40BN in AUM

1. 0:00 – 1:16

   Intro

   1. HTHemant Taneja0:00

      Our aspirations in venture capital is to be the best seed firm in the world. I actually have a strong belief that venture capital can't scale and performance at the same time. I deeply believe that. Just because we have more money doesn't mean there are more, um, Patrick Collisons or Sam Altmans that are gonna go build iconic companies. I lost a series A of Stripe, of Samsara, of Snap, and the first one I won was a series A of Gusto. Triple, triple, double, double is definitely dead. (laughs) I tell our investors, "Don't bring that to me." Going from one to three to nine to 27 is not interesting. You gotta go, like, one to 15 to 20 to 100.

   2. HSHarry Stebbings0:34

      Are you more bullish on the future of the States with a Trump administration or not?

   3. HTHemant Taneja0:40

      (inhales deeply)

   4. HSHarry Stebbings0:40

      Ready to go? D'you know what, Hemant? It is so good to have you here. Last time it was seven years ago. It wasn't in person. I've been so looking forward to this, dude.

   5. HTHemant Taneja1:00

      It's, uh, it has been seven years. Last time I was a little, little younger and you were a little skinnier.

   6. HSHarry Stebbings1:06

      (laughs)

   7. HTHemant Taneja1:06

      You've gotten fit, and you have no glasses, and I have my glasses right here.

   8. HSHarry Stebbings1:11

      Dude, I was much skinnier.

   9. HTHemant Taneja1:12

      Yeah.

   10. HSHarry Stebbings1:12

       I think this was before I fell into a protein bucket. (laughs)

   11. HTHemant Taneja1:15

       Yeah, you've done well. That's good. (laughs)

   12. HSHarry Stebbings1:15

       Uh,

2. 1:16 – 6:15

   Is Hemant a CEO or an Investor?

   1. HSHarry Stebbings1:16

      my question to you is, you have built now in the last 10 years one of the most defining firms that we have in venture. Do you consider yourself a venture capitalist or do you consider yourself a CEO?

   2. HTHemant Taneja1:31

      Harry, that's a great question. I, um, I carry the title of CEO and managing director for a very intentional reason, which is General Catalyst is a business, uh, but it wouldn't be a business if it wasn't venture capital at its core. So I am a managing director and a partner just like everybody else, uh, in our partnership, but I'm also the CEO. And that's the duality that it's gonna take to build an iconic, uh, institution in our industry.

   3. HSHarry Stebbings1:58

      Do you think GC is still a VC firm?

   4. HTHemant Taneja2:00

      GC is very much at the core a VC firm. Not only that, I mean, our aspiration is that we wanna be one of the best seed firms, uh, like you. I mean, that's, that truly is our aspiration because the earliest relationship with founders, uh, and that trust, uh, is the key to actually doing the best work and building the companies that matter.

   5. HSHarry Stebbings2:20

      When you look at total AUM, can you realistically put the hours in and justify that commitment to seed when it's a $200 million vehicle in a $25 billion pool?

   6. HTHemant Taneja2:35

      Culturally, um, um, this gets hard for, for VC firms as they scale. At GC, the thing we talk about is focus on the ownership and the relationship with the company versus the size of the check that you put in. And when you reorient yourself to think that way, we get that only at seed. And if you think about the last two years, you know, bringing on, uh, Jeannette and La Familia, Yuri and Wayfinder and Neeraj and, uh, Venture Highway, we've tried to really make sure at our core we remain very committed to doing the seed work with the same intensity and rigor that you do, uh, at 20 VC.

   7. HSHarry Stebbings3:16

      Oh, zero rigor here. Oh, no, we're j- w- we're just, like, blindfolded throwing darts.

   8. HTHemant Taneja3:20

      I didn't say a lot of rigor. I said the same rigor as you.

   9. HSHarry Stebbings3:22

      Okay, fantastic. I was, I was feeling bad for a minute there. (laughs)

   10. HTHemant Taneja3:24

       (laughs) No, but it, but it really, it really, uh, like, it's a genuine comment. Like, we, we internally talk about, uh, early stage venture capital as our core. And obviously we wanna leverage that core to have greater impact in the world, but if we don't do early stage investing well, we will lose the right to exist, and we're paranoid about that.

   11. HSHarry Stebbings3:41

       Do you worry about the transition of venture? You know, Doug Leone said that we've moved from a high margin boutique community to a low margin commoditized industry. Do you agree with that?

   12. HTHemant Taneja3:55

       Yeah. So, um, I think let me unpack that, uh, in a couple of ways. One is, if you think about the innovation in venture as the role of technology has scaled, all the innovation for the most part ends up being on the three axes, stage, sector and geography. Make the funds bigger, put them in different geos, put them on, uh, you know, in, in different sectors. Well, the reality is that role of the companies that we're building is becoming far, far more sophisticated in society. And so the innovation in industry was much more focused on how do we deploy more dollars and try to keep as much of the return as possible, where the reality should be how do we retool our proposition for founders so they can build the biggest companies possible? So when you think with that second lens, you have to innovate and you have to think broader than just that sort of fund formation mindset. And I think that is what allows you to break from, hey, going from high margin boutique, so smaller funds, better returns, to low margin, uh, you know, scale, which is bigger funds, lower returns. That's only happening because we're thinking about innovation in a constrained way in this industry versus being first principled about how do we transform our proposition for founders?

   13. HSHarry Stebbings5:09

       So many things to say there. Uh, you said that kind of bigger funds, lower returns. Do you disagree with that as a premise, then?

   14. HTHemant Taneja5:16

       No, I, I actually have a strong belief that venture capital, uh, can't scale and performance at the same time. Uh, I, I deeply believe that. And, and, uh, the reason is because just because we have more money doesn't mean there are more, um, Patrick Collisons or, um, you know, pick your favorite founder, uh, Sam Altmans, uh, that are gonna go build iconic companies. So we're actually in some ways fighting the zero-some game of founders that are naturally, you know, going and doing great things. So that's not necessarily gonna scale 'cause we have more money. But if we can create more tools to have more founders at the scale, then we can actually manufacture more outliers than the ones that naturally exist on power law.And that's, our mindset is, how do we actually expand, uh, the proposition to founders so that there can be more companies on the power law? That is a very different way to think about it than, "Do we have enough capital to get everything that's on the power law?"

   15. HSHarry Stebbings6:13

       If you accept lower

3. 6:15 – 10:25

   Explaining Returns to Different LP Classes

   1. HSHarry Stebbings6:15

      performance with bigger funds, respectfully, Hemal, what do you tell LPs when you go out and fundraise for early-stage venture funds and much larger funds, do you... Is it just a different LP class? 'Cause I'm sure you hear the podcasts and the shows and it's like, "Oh, well, they're just pitching sovereigns who just are happy with 10% and so it's graduating." Uh, is, that true?

   2. HTHemant Taneja6:34

      G- going back to saying that we want to remain early-stage venture at our core, I actually reject being in a business that has, uh, lower performance. So what we have done is if you look at our, uh, overall, um, you know, assets under management, we've basically said, "We're not gonna make our venture funds bigger." What we're going to do is actually keep the size of the venture fund where we think it can be to create elite performance, which to us is, you gotta at least, you know, uh, deliver four to 5X funds, uh, on the capital that you raise and sort of build bottom-up. Can you do that, uh, you know, in venture? And then we have Creation & Customer Value Fund, which are focused on other value propositions, other capital solutions for founders so they can do M&A more effectively, they can f- invest in sales and marketing more effectively, but don't scale the venture fund itself because that'll, that'll degrade performance. So that, that is the way we have architected our, uh, capital, um, uh, that we provide to founders.

   3. HSHarry Stebbings7:37

      When you think about where you intersect with them in the journey, as much as I love the, "Hey, we absolutely wanna be focused on seed and build that relationship as early as possible," when you have the capital supply that you have today, arguably, it's a much better proposition to just do a Kleiner (laughs) and put $100 million into Anthropic at $183 billion and play the large check at late stage, and actually ride that wave.

   4. HTHemant Taneja8:06

      I don't think so.

   5. HSHarry Stebbings8:07

      You don't think so?

   6. HTHemant Taneja8:07

      Uh, I- li- I mean, look, our, our best (clears throat) returns have come from seeding companies like, uh, Stripe and Anduril, or creating companies like Kayak and, uh, Livongo and Kimura and others. And so, w-

   7. HSHarry Stebbings8:24

      Livongo is insane, huh?

   8. HTHemant Taneja8:27

      It was. (laughs) Uh, it was a great outcome for us and, uh, you know, that's something we built, uh, in our offices, really.

   9. HSHarry Stebbings8:32

      How much did GC make from Livongo?

   10. HTHemant Taneja8:34

       A few billion.

   11. HSHarry Stebbings8:36

       How big was the fund?

   12. HTHemant Taneja8:37

       Uh, it returned... Um, so Livongo sat in two funds. It returned one of the funds approximately 3 or 4X and it returned one of the other funds maybe close to 1X. I, I have to go back and look at the numbers, but I think that's about generally right.

   13. HSHarry Stebbings8:53

       Is, is that the best performing investment GC have made?

   14. HTHemant Taneja8:57

       Um, I think you would have to give that to Stripe still. (laughs) We've been invested in Stripe since 2010. That's a big position for us. So, so look, my, my point more is, um, for us, we obsess over either that the companies are getting incubated at GC or we're investing in, in the seed round. If we don't, we wanna be in the iconic companies, we will invest in them at growth stage as well, uh, and that to me is about believing in the companies that you think will compound for a long time. So, like, take Stripe as an example. We seeded in, uh, we invested in 2010 and I've in- f- invested in Stripe 14 times in the last 15 years. Just to give you a sense. Okay?

   15. HSHarry Stebbings9:37

       (sighs)

   16. HTHemant Taneja9:37

       So that's, that's one of our, uh, um, you know, uh, sort of p- core philosophies that when you think something's going to be compounding for a long time, be, be strong, uh, uh, sort of supporters of the company along the way. We invested in, uh, Helzing. You know, Jeanette had seeded that, if you remember, uh, uh, before, and we've in- uh, invested that in all the rounds that they've raised, uh, since then. If you look at Anduril, same thing. We seeded that and we've invested in every round that they've raised, uh, since then. So I think being part of these iconic companies and supporting them along the way, uh, is the reason to have the capital base. If we miss them at seed, we wanna catch them as early as possible and then continue to help them with everything we got, our entire proposition as a platform, uh, to now support these founders and, and help the- help them all the way to endurance.

   17. HSHarry Stebbings10:24

       Can I ask, when you're at your

4. 10:25 – 14:20

   Mapping Markets at Scale

   1. HSHarry Stebbings10:25

      scale, do you map out the industries that matter, the companies in them, and go, "We have to have a check in these regardless of entry"? Is that how you kind of map markets and capital injection?

   2. HTHemant Taneja10:36

      The business, for me, is about, um, sort of getting serendipity and intentionality right. So, you definitely won't know, uh, the industries that will become important in the future. So, I- I'll never forget, one of my big misses when Paul Graham asked me to look at the seed round of Coinbase and I said to myself, "A Bitcoin ATM? What is that?" Had no idea what this industry was about to become. Like, I mean, I- it- it still haunts me. And, and so, you know, at the seed, being very much focused on just backing the great founders and not over-intellectualizing what, uh, uh, the returns are, and this is really, uh, culturally what-

   3. HSHarry Stebbings11:15

      Did you meet with Brian?

   4. HTHemant Taneja11:17

      Yeah. And, and, an-

   5. HSHarry Stebbings11:18

      D- did you think he was amazing?

   6. HTHemant Taneja11:19

      He, he is amazing and, and, and, and, uh-

   7. HSHarry Stebbings11:21

      So it was purely the idea that you could be-

   8. HTHemant Taneja11:23

      It was when my, my, my little brain got ahead of, you know, uh, uh, sort of thinking (laughs) about the world. And so my point was, you definitely wanna, at the seed, not be industry-focused, to say, "We're gonna back founders regardless of our view of the world." Uh, and then I think the reality is if you thi- if you take a step back in the world, and you think about the tectonic shifts that are happening, the theme that we call global resilience, where every region is focusing on defense, energy, industrials, health, financial services, how to be resilient from a sovereign perspective, that does have impact on industries, that does have impact on how businesses are gonna get built. So we do look at it saying, "Are we in the right companies, uh, in the context of how the world is re-shifting in, in, in the contexts of industries?" So as an example, I'll tell you, you know, we...... I think we're the only, uh, uh, firm that's invested in (clears throat) a defense prime in US, Europe, and India. We did Anduril, we did, you know, invested in Helsink, and we invested in a company called Rafayne in India. Well, each of these regions needs to create an o- its own AI deterrent solutions, and they want to see indigenous industries emerge, uh, you know, from a resilience perspective, so we should make sure we're backing that theme. So it's, I think it ends up being be seren- embrace serendipity, be humble, that these founders are going to take us in, in, in the world in a way that we just don't understand, and then be intentional where we think there are large macro shifts happening so that we can, we can play, uh, certain sectors with a bit more of a thematic lens.

   9. HSHarry Stebbings12:54

      What do you think is the most significant macro shift today that not enough people are talking about?

   10. HTHemant Taneja13:01

       The most significant macro shift today that not enough people are talking about is thinking about jobs. I have gone, um, around the world, you know, we have a real focus on understanding how to help governments think about transformations, uh, and the transformation of any country, uh, we think is in four parts. One is, uh, how do you apply AI to deterrents? Because without peace you don't have capitalism and if there's no capitalism, then business can't really be a change vector, so you need peace. You need to think about transforming healthcare, because we just came out of a pandemic and we saw what it can do and we're still reeling from it. You need to accelerate diffusion of AI into business, because that's ultimately what's going to lead to your industries being competitive, and then if you get all that right, you have to think about jobs, because there is, uh, imme- uh, immense reskilling that needs to happen. People are starting to give lip service to it, but it hasn't hit pe- people yet. You know, uh, w- we were talking about this earlier, we have a lot of these AI transformations we're doing of these service businesses, these AI roll-ups, (coughs) as they're called, and I'm seeing this, I'm seeing what's going to happen with jobs as AI gets adopted to bring efficiency and productivity to these white-collar jobs all around the world.

   11. HSHarry Stebbings14:18

       What- what are you seeing there? Because, like,

5. 14:20 – 22:18

   No One is Talking About the True Impact of AI on Jobs

   1. HSHarry Stebbings14:20

      the MIT study was discouraging. You know, it's like 95% actually doesn't actually have much impact and I read it and I'm like, "God, this is a bit of a downer." So what are you seeing?

   2. HTHemant Taneja14:29

      Okay, so let me, let me back up. I, I do think there is merit to the, the MIT study for the following reason. When you think about transforming an enterprise with AI, you actually have to do four things correctly, okay? First is you have to get your data infrastructure ready so that your techn- your company can adopt AI. Your data readiness is huge, infrastructure readiness is huge. Second is you need models that understand your business. You have to train these models in the context of your secret sauce, your business. Third is you have to think about a workforce transformation, because now you're going to have humans and you're going to have AI, uh, working next to each other. Some humans are going to manage AI agents, some AI agents are going to manage humans. Imagine how the org charts have to change. And the fourth, for all this to work, you actually need courage at the top. The CEOs need to really get behind it to drive it. So the idea that all four of these things are happening in a company to make the, uh, uh, adoption of AI go from beyond just prototyping, uh, OpenAI or an anthropic model to really creating change in your business is very, very difficult. That's why these things are hitting a wall, but that's why this MIT study is giving you the signal that it's giving you. Now, one place where businesses already outsourced and let go of core operations was wherever they wanted to get label arbi- labor arbitrage over the last 40 years. So our whole thesis around AI roll-ups was everywhere you offshored for labor benefit, you're going to onshore for AI productivity. That's where we're seeing a lot of this. So we bought call centers. I'll give you an example. We bought a call center in Philippines, 3,000 employees in one of our companies called Crescendo. I think it's, it's going to have a huge change in this outcome. It's going to go down by quite a bit as this fully gets AI-enabled. And my first question to the team was, "Well, what are those people going to do in Philippines, and how many are there?" So every country that built their middle class off of offshore labor, how do we really help them think about reskilling those people to be more successful in the world of AI? This is what's not being talked about, uh, uh, enough.

   3. HSHarry Stebbings16:31

      Do you think this is a 12 or an 18-month problem or actually a 5 to 10-year problem? I always go back to Bill Gates, we underestimate, you know, the... overestimate a year, underestimate in turn.

   4. HTHemant Taneja16:39

      I get this question a lot. So, uh, is this adoption of AI into businesses going to be fast over 12 to 18 months or 5 to 10 years? I would say this is a five-year problem, and I say that because if you go back and think about the physics with which these companies are getting built, the companies we're building, you have to put these teams together, they have to go get some customers they can demonstrate progress on, then they have to start accelerating growth. Only after a few years of that do you start to make a dent in the industry enough that it becomes a problem. And, and so just the diffusion has, of technology has its own physics, so it's not immediate, but I, but five years is also not a long time. And so what I'm seeing is that these companies are going to, enough of them are going to go start being successful in these different areas and they're going to start impacting jobs, jobs in a material way. I'll give you a really interesting anecdote that the CEO of one of the large consulting c- uh, companies told me. He said one of their big clients came to them and said, "We have 50,000 employees today. Draw up a plan for us that in five years we are 100,000 employees, but only 10,000 of them are humans, the rest are AI agents." This is, this is to be provocative, but they're sort of saying, "If that was going to be our plan, how do we get there?" This is the kind of stuff people are thinking about. Now, it's not going to happen in the next five years, but are organizations going to potentially change that much over the next 10 to 15 years? It's a non-trivial probability that can happen.

   5. HSHarry Stebbings18:03

      ... that's a very forward-thinking CEO and business leader. To what extent are governments prepared, thinking, and equipped for this labor change that could be there within a five-year period?

   6. HTHemant Taneja18:14

      I think not enough. I, I, I don't think... I think people are still grappling with, "What does AI really mean? Um, w- what is... how fast is it gonna diffuse?" They're not even thinking enough about rescaling. But I'll leave you with sort of one interesting thought on this particular topic. Imagine... We're in London today, okay? Imagine if every nurse, and every lawyer, and every accountant that works in London becomes a, uh, AI agent of some company in the United States in the next 10 years. You're gonna hollow out a lot of your labor, uh, productivity and give it to a US company or a Chinese company. What I would... My point is more about, like, it could actually hollow out the service sector just like we hollowed out manufacturing jobs for globalization before. So, getting every region to think about this, this is actually a point that, uh, you know, Jeanette makes with her European Champions Initiative a lot, which is, how do you retain productivity onshore in these countries so that while you do the AI transformation, you're maintaining vibrancy not only because your businesses got more profitable, but also because, uh, you're capturing the productivity gains onshore as well? The governments need to think about this as it's, as they are architecting this sort of next, uh, uh, phase of their, you know, transformation with AI.

   7. HSHarry Stebbings19:32

      Which government do you think is most impressive and which is most screwed?

   8. HTHemant Taneja19:37

      I find, uh, folks in Singapore to be very impressive. I recently went there, um, and I spoke at their National Singapore Day, and I was just blown away by the depth of thought, uh, that the, the, the politicians there have done. I have to tell you, the Prime Minister of Greece is very impressive. Uh, he's thinking about, uh, how do we really be pragmatic in deploying this? I've met with Prime Minister Sturmer here. I think I, I, I know there is some announcements being happening there this week as well around AI, so I know they're making some moves. But I don't, I don't, um, see enough of the, "Hey, let's think comprehensively about this." The answer I usually get when I talk to heads of states about diffusion of AI and this jobs issue that we just talked about is, they have belief that if it's gonna be that disruptive, the society will just slow it down, uh, because it's just not... You, you just can't have a world where, you know... I know in Silicon Valley we covered a billion-dollar employee with a s- uh, a, a company with a single employee, but you just can't have a world where that's what business looks like and people have no work. And so, at some point, you know, the interplay of business and society will sort of force it to be a more stable, um, uh, uh, scenario. That's what the governments are sort of taking faith in.

   9. HSHarry Stebbings20:47

      I didn't mean that as true. I think Adam Smith's invisible hand would tell you otherwise.

   10. HTHemant Taneja20:50

       Uh, I, I think market forces are way stronger than that. I agree with you. But I'm saying that's, that's a little bit of what they take comfort in, is that we have time to figure this out. And I don't think we have, uh, time, unless we're a lot more intentional about it.

   11. HSHarry Stebbings21:03

       I vehemently dislike government intervention. I'm like as free market maximalist as possible. Is that the same for you?

   12. HTHemant Taneja21:11

       I think, um, you can't make progress if capitalism is not working. But I do think capitalism is a privilege. I think if we create... If you think about what happened in the last 15, 20 years, um, a lot of the, the nationalism all around the world is because social media essentially, uh, struck a cur- uh, struck a chord with the core issue that all the technology productivity didn't really get passed on properly to everybody in society. It k- kind of created multiple multi-trillion dollar companies, but our own innovation ecosystem, how much did that capture and how much does society really capture? Actually, a small percentage. We look back and say, "Wow, venture capital, there's been a real boon in the last 15 years." But when you look at the overall value created in venture compared to the Mag Seven, it's noise. And, and so are you really creating a, uh, a world where there's opportunity and capitalism can kind of do its thing? You have to make sure you pr- protect that. That part of it, I do think government has to play a role in. Beyond that, you gotta be very free markets-oriented and let bottoms-up innovation, stuff that you and I do, let it go create the future. I mean, that's what you want to see.

   13. HSHarry Stebbings22:17

       Do you worry about

6. 22:18 – 25:33

   Is Hemant Concerned by the Concentration of Value in MAG 7?

   1. HSHarry Stebbings22:18

      the ever-increasing inequality of wealth? You know, uh, i- it plays in our favor in a lot of ways, but I look at so much of the next 10 years, and I just see the concentration of wealth to very small net worths, and I get very worried.

   2. HTHemant Taneja22:31

      I am worried about that. And, and, uh, the, the whole idea of, you know, can we build these companies that can focus on, uh, being the most profitable, the biggest, but also in a way that they're inclusive? That's something that, uh, I think a lot about. I, I, I do think we have, uh, we have this opportunity. There's this moment... If you think about the last five years, we've had wars, we had a pandemic, we, we had a situation where because of wars, we actually... US, you know, kicked Russia out of SWIFT. So, financial infrastructure got questioned. Every part of our... Uh, energy crisis happen. Every, uh, part of our, uh, sort of core pillars of so- society, where capitalism, you know, maybe is starting to break all through manifested over the last few years. And then AI comes along as an answer to all this. So now, the choice we have to make is, are we gonna build these businesses in a way that the value accrues to very, very few, or can we actually do it with a mindset of abundance where everybody benefits? And that's a choice that we have in the way we set up the companies of the future. And I do worry that if it's not a mindset of abundance, uh, then that's not sustainable in the very long term. We won't feel that in the next 10 years, and you and I will make a lot of money. Uh, our funds will do great, and our t- our partners will, you know, uh, uh, generate great returns. But what do we, what do we create on the other side? And I think that's the thing that we have to think hard about.

   3. HSHarry Stebbings23:51

      I- is it actually a choice though? If we think about, say, your OpenAI, your Anthropics, you know, I know you're an investor in Anthropic. You know, when we think about th- the value that they generate, um, those returns will go to a very small handful of people. Like, is it a choice that we're concentrating the returns and wealth?

   4. HTHemant Taneja24:08

      (sighs) Look, I think, uh, I think about innovation in AI in two parts. One is, every region's trying to figure out how to become leaders in core infrastructure and, and we're racing to it. And, and there's not gonna be many, but there weren't that many clouds. There's not gonna be that any, that many AI model companies that actually, uh, uh, become at scale and potentially be even bigger than what these cloud companies became. I think that's current course and speed, that's probably what's gonna happen. But what happens on top? What's the ecosystem we're building and how it interplays, uh, uh, with, uh, consumers across the board? What happens to healthcare? What happens to education? What happens to opportunity itself? How are we thinking about those, uh, things... Is there a level playing field so that there can be a vibrant, diverse ecosystem that gets built on top? That's what I think a lot about or is it gonna be... Uh, so for example, is the Amazon of healthcare gonna be, you know, an ecosystem, lots of companies and, and sort of a more resilient system? Or it's gonna be like some company that comes along and they just controlled healthcare? The latter's not good for us. And so how do we create a level playing field for startups, for founders, so that opportunity can manifest into new successful businesses everywhere? Versus it's gonna be a few concentrated ones. I think that to me is the place where policy has to create conditions, where it allows for, uh, uh, opportunity for many as opposed to opportunity for a few. That's the role governments can play, uh, uh, you know, when it comes to technology.

7. 25:33 – 33:06

   Has Trump Done More to Hurt or Help the US?

   1. HTHemant Taneja25:34

   2. HSHarry Stebbings25:34

      I've been very public on my concerns around the Labour government in the UK and what it's done for the UK so far. It's, uh, the fastest exodus of millionaires out of any country. It's terrifying. Um, are you more bullish on the future of the States with a Trump administration or not?

   3. HTHemant Taneja25:51

      Look, uh, I, my, uh, belief is that US is very well positioned. We have energy, we have AI, we have the largest market, we have the largest entrepreneurial ecosystem. Um, you know, in a lot of ways we're very well positioned and, and I think in the short term, in some ways, we're actually increasing our moats if we, you know, really focus on everyone investing in the US and creating, you know, more capital and whatnot. To me, I look at the mandate of companies where we fund. When we fund companies, whether it's in Europe or in US, I always think about it as, "Hey, you need to go win your market and then you need to become a global leader." And the thing I worry about, uh, in the US today is mostly what is the sentiment and the appetite of the world to embrace companies coming out of the US and let them be global leaders? And I think that's where there's gonna be work to do because we're doing this one-time reshift with tariffs and everything on, hey, we need to realign, uh, commerce and, and trade. Uh, but we were also the, the keeper of the world order in a lot of ways. And as we are disrupting that, um, you know, what is the relationship gonna be with European countries and, and, and how well positioned with the American companies B2B global leaders? That's the place where I think rubber meets the road. In our ecosystem, I'm talking about sort of companies funded in our world, founders. How will they become global leaders, uh, given that there'll be more friction? That, that to me is the place where, uh, you know, there'll be some challenges.

   4. HSHarry Stebbings27:17

      When you walk around London now, as I do with my mother every weekend, all we see is Anduril posters, uh, on the sides of buses and on the sides of bus stops. I always send it to Matt Graham, like, "Thank you for, (laughs) for decorating London with American-"

   5. HTHemant Taneja27:32

      Yeah.

   6. HSHarry Stebbings27:32

      "... uh, posters." Which actually look incredibly British and, uh, wonderful.

   7. HTHemant Taneja27:35

      By, by the way, I love your post with your mom. I think that's, that's a great thing that you do every weekend. And I enjoyed your last post about breaking the idea of 90% of your time you spend with your, uh, parents is before 18. That was an amazing, insightful comment.

   8. HSHarry Stebbings27:48

      I find it incredible that people-

   9. HTHemant Taneja27:49

      Yeah.

   10. HSHarry Stebbings27:49

       ... just accept that. And it's like, but you could-

   11. HTHemant Taneja27:51

       Yeah. Yeah. Oh, that, that was great.

   12. HSHarry Stebbings27:51

       ... you could change that. Um, I really appreciate that. Um, but when we go to that, you know, when people become global leaders, the element that's inserted is competition. Because when you back multiple geographic leaders, suddenly Anduril comes into Helsing's path. Is the age of not having competitive investments over? And when you're at your scale, do you just have to embrace that you're gonna be in multiple players in the same space?

   13. HTHemant Taneja28:16

       Look, I think when we, uh, invest in these companies, um, we always want to see that they will be the leaders in their own market. Uh, I, I have a, we have a lot of confidence Helsing with this mission, its execution, uh, its access to capital, talent, uh, should be the, the company that gets disproportionate share of, uh, defense in Europe. Anduril is doing that in US. We think this company Raft is gonna do that in India, that we invested in. And then, uh, they should go and be competitive, uh, in the global ecosystem. If... Also, I actually think maybe there's a new innovation in partnerships. We, we have not innovated partnerships ever. It's, it's sort of the same boring old metaphors. And the question is, you know, could these companies all think about, uh, engaging? I'm not... I- it's not, it's not what's happening yet, but are there these resilient ecosystems that get created where they have, you know, special advantages because of where they sit in which ecosystems and they can leverage each other, uh, to gain more global share, uh, as well? So I'm, I'm sort of very keen to see while on one side we've created some structured inflation because of the, the need for global resilience. On the other side, I am curious, is the playbook gonna change in how you become, uh, market leaders in this next phase?

   14. HSHarry Stebbings29:30

       You mentioned kind of on the geo side, it's like it's race for infrastructure. And I find there's this often rhetoric that's like, "Hey, it's like China versus the US and it's like the war for AI." Do you agree with that, like race for AI? Is there a destination? Is there a winner? Like what does that mean?

   15. HTHemant Taneja29:49

       Look, uh, uh, the way we see it, we are in a bipolar world for sure. There's the... Despite all the recent, uh, turbulences around, uh, uh, tariffs, uh, and, and relationship between the different regions, US, Europe, India, very aligned in terms of core, uh, uh, values. And I do think it's gonna settle down to be a place where, uh, you know, AI gets developed with a common set of values.... I think the Chinese system is different. And the race, to me, is only in the context of which, uh, AI is better, because capitalism will force the adoption. Now, think about DeepSeek and the open source models that have come about, um, uh, uh, you know, the, out of China. People are using them in the US 'cause they're better. And so, (clears throat) and now the question is, you know, which, which AI ends up ... And, and there's not much difference between the ... I think China and the US are very comparable in where they are, uh, uh, in AI today. There's a few months' lead here and there. I'd even argue there's always a second mover advantage to people building on top, so, so I think they're pretty comparable. Uh, it is important that you see AI infrastructure, uh, in, in the West, uh, gain market share in businesses, uh, and, uh, and, and, and be more pervasive. It's equally important to make sure it's done in a way that, you know, the, the, the compute productivity is captured onshore in each of the geos so it doesn't leak from a lot of the places to sort of a single company or a single country, 'cause that creates imbalance. You wanna be inclusive, uh, and abundant in your mindset with AI, uh, creation. But is the competitive dynamic something we need to worry about in terms of, you know, companies coming out of US versus China? Yeah. I mean, that's, that's, that's driving a lot of, uh, you know, where the value's gonna be, w- our ability to compete globally.

   16. HSHarry Stebbings31:36

       In terms of second mover advantage, really interesting element. Are you ... Do, do you primarily believe that just because distillation and the benefits that we saw DeepSeek have as a result of being second?

   17. HTHemant Taneja31:47

       I think it's, um, uh ... And you're, you're seeing this in different use cases. Take customer support, for example. When new models come out, uh, when you ... If you started building your company when you were in the ChatGP- G3 era versus 4 versus 5, you just have more tools at your disposal, disposal. So the go-to-market advantage you may have created in a year, uh, having started on GPT-4s versus 5 might be anemic compared to the technology advantage that you have if you start in the GPT-5 era, the choices you make and how fast you can move, uh, because the models are stronger. 'Cause it's like you're getting this put in force, uh, unfair advantage, uh, and, and, you know, are you really gonna sort of re-architect everything you did and take a step back or, or not 'cause you actually have good momentum? So what's happening is that, is the, the, the good and greater companies getting created with each new model, and does the mo- more companies that start later end up, you know, having some advantages because of technology? And the question is can, can you not be bogged down by technical debt, even though technical debt used to be on the order of a decade of coding, not a year of coding? Can you actually overcome that and make sure you remain well-positioned, uh, on the new sort of technology stacks or not? That's the advantage that I think second mover companies could theoretically have in, in, in these different, uh, verticals.

8. 33:06 – 42:01

   GC’s Anthropic Investment: Upside from a $60BN Price

   1. HTHemant Taneja33:06

   2. HSHarry Stebbings33:06

      You mentioned kind of the evolution of models there from, from phase to phase. Anthropic is a big position for you. Can you talk to me about your first entry point into the company and the thesis that you had on first entry?

   3. HTHemant Taneja33:21

      Yeah. Um-

   4. HSHarry Stebbings33:22

      You've gotta thank Ishan for this one. (laughs)

   5. HTHemant Taneja33:24

      (laughs) Yeah, okay. Look, we, we invested in Anthropic only, um, uh, you know, less than a year ago at the, at the $60 billion round, where we saw that, uh, the use case around coding was becoming an interesting application that was gonna distinguish them. These models started to become distinguished. Obviously, everybody wants to do everything, but OpenAI is, to me, is more of a consumer company with ChatGPT. I know they have enterprise ambitions, Codex, et cetera. I get it. And, and Anthropic kinda became an apps company in the, in the cloud world, with, with, you know, with coding as a use case. And were showing really good traction. That was a time for the first time we felt, um, are we really betting on these companies with tremendous valuations, tremendous burns, tremendous dilution, uh, towards some, you know, abstract AGI goal, or they're actually gonna be businesses? So I actually think risk adjusted, that was the round, uh, that was interesting, uh, to do as a, as a, as a, uh, you know, somebody who studies investment decisions. And companies say, "Where did people get lucky, and where did they actually make a great call?"

   6. HSHarry Stebbings34:27

      Why do you think that was the round that was the best?

   7. HTHemant Taneja34:30

      Because that's when the, the use case that was gonna draw, uh, them in and build a relationship with the enterprises became very clear.

   8. HSHarry Stebbings34:38

      Mm-hmm.

   9. HTHemant Taneja34:38

      And, and could scale, and it has. We ... When we invested-

   10. HSHarry Stebbings34:41

       What was their revenues?

   11. HTHemant Taneja34:42

       Um, it was at the end of last year, so it was, you know, under ... I think it was under a billion, if I recall. And they're gonna grow. They've publicly said that they're gonna grow, you know, nine, 10 times that. That's not the forecast we modeled. I mean, they've done way better than we thought, which is amazing. Uh, and, and, and it's, it's a, it's an incredible team. Very values-oriented, very execution-focused.

   12. HSHarry Stebbings35:02

       How much did you put in at 60?

   13. HTHemant Taneja35:05

       Uh, we put in a few hundred million.

   14. HSHarry Stebbings35:07

       Few hundred million. And then you do another few hundred million at 180?

   15. HTHemant Taneja35:11

       Yes.

   16. HSHarry Stebbings35:12

       Yeah.

   17. HTHemant Taneja35:13

       I think you would. By the way, I, I would-

   18. HSHarry Stebbings35:14

       I would argue too.

   19. HTHemant Taneja35:15

       I would actually argue-

   20. HSHarry Stebbings35:16

       I, dude, it was 5X oversubscribed.

   21. HTHemant Taneja35:17

       Anthropic this round probably was the cheapest round I got done this year on a, on a multiples basis. Which company, uh, was raising capital at, you know, 20 times ARR? They're all raising capital at 50 to 100 times ARR. And at a scale that's like 10 times bigger than any of those companies that are raising capital. So like, risk adjusted, if you think about it, and, and I should say and risk adjusted carefully because durability of everything in the models is highly unclear, so-

   22. HSHarry Stebbings35:44

       (laughs)

   23. HTHemant Taneja35:44

       ... in that cohort, I would say that was the best price round you coulda done. So I don't, I don't ... I'm not surprised it was 5X oversubscribed.

   24. HSHarry Stebbings35:53

       Dude, risk adjusted. Fuck it. That, that, that went out of the window years ago. (laughs)

   25. HTHemant Taneja35:57

       That's right. Right, right. Yeah, that's, yeah, that's true.

   26. HSHarry Stebbings35:57

       Welcome to Landship.

   27. HTHemant Taneja35:59

       I eat risk for breakfast, so I'm-

   28. HSHarry Stebbings36:01

       That, that, I mean-

   29. HTHemant Taneja36:01

       I'm with you. (laughs)

   30. HSHarry Stebbings36:01

       Th- that, that is the caption for it. Um, when you look then out, do you put another few hundred million dollars into the next round?
9. 42:01 – 46:29

   Does Revenue Growth Matter in a World of AI

   1. HSHarry Stebbings42:01

      The hard thing is that growth is great until it's not great. And at some point it does reduce and reduce and reduce, and one billion goes to nine billion, which is an insane, I mean, nuts, nuts numbers we've never seen before.

   2. HTHemant Taneja42:13

      Unprecedented, yeah.

   3. HSHarry Stebbings42:14

      And what is it next year? 27? We should be 3X. We sh- we should be great still. But at some point growth does...... reduce. And then there's the core business that sits beneath it. The thing that I worry about is our ecosystem today is so pr-

   4. HTHemant Taneja42:31

      But, but hey, can I just interrupt for a second? Let's say it's 27.

   5. HSHarry Stebbings42:33

      Yeah.

   6. HTHemant Taneja42:33

      I don't, I don't know what the number is, uh, they have shared and they've always done better than they've said by the way too, but let's say it's 27.

   7. HSHarry Stebbings42:39

      You're not also Anthropic's CFO. Not, n- (laughs) not-

   8. HTHemant Taneja42:41

      Yeah. (laughs)

   9. HSHarry Stebbings42:41

      ... not a spoiler alert. (laughs)

   10. HTHemant Taneja42:42

       Yeah, yeah. Yeah. I get a caution. Uh, but, but if you think about it, that business, which will still grow 200% to go from let's say nine, let's say nine is the number this year and 27, you, you, that's, that's tremendous growth and, and you put any multiple on that, that is, that is a very valuable company. Think about tech- technology multiples on, on that kind of a growth. That's a really valuable company. I, I think significant headroom because the market size is so large even from there, that they can maintain good growth. Doesn't have to be this crazy growth. But they only, they only priced it at 20 times this year's ARR. So 20, 20 times 27. If you take-

   11. HSHarry Stebbings43:20

       What is 20 times 27?

   12. HTHemant Taneja43:21

       ... take the same multiple, you know, which-

   13. HSHarry Stebbings43:22

       Let me see.

   14. HTHemant Taneja43:22

       ... y- you could get in public markets with-

   15. HSHarry Stebbings43:24

       550?

   16. HTHemant Taneja43:25

       Something like that. My point is that it, so that's half a trillion dollar company, like by the end of next year. I'm not saying that's what it's gonna be, but if they hit their numbers, I don't see why, uh, that won't happen. Just from a, I'm just saying public market comps. Like that's, that's what those things are gonna be valued at.

   17. HSHarry Stebbings43:40

       I, I completely agree. Does margin not matter anymore today?

   18. HTHemant Taneja43:43

       Margin matters, absolutely. And, uh, and I actually think that's another place where they've done a good job. And, and the, the reality is that when you think about the ROI in the coding space, you're doing the work... There's, uh, a coding agent that's essentially a replacement of engineering, right? You start with low-end, uh, sort of engine, junior engineers to more senior engineers. Even a junior engineer makes 80 to 100 grand a year. So your pricing power there is actually pretty significant. And, uh, you know, you, you, if you're truly doing that kind of work, um, margins are not gonna be an issue. And margins already are, are not an issue for, uh, Anthropic. They have a good command, they've been very disciplined about how they've, uh, they built, built their business.

   19. HSHarry Stebbings44:25

       Do you worry about the competitive nature of the landscape when you look across at, at Codex, but then you've also got your Cognitions and then you've also got your Cursors, and then you've got your kind of on the lower more consumer and your, your Lovables, your Replets.

   20. HTHemant Taneja44:38

       Great. I'll take you back to the clouds. You could use the same logic in the clouds to be like, "Hey, they're going to get commoditized." You know, you've got three, you'll have three probably, you know, like there were three big telcos in every geo. There are probably three big clouds, probably three big AI models and just, you know, I'm just sort of-

   21. HSHarry Stebbings44:54

       Yeah.

   22. HTHemant Taneja44:54

       ... empirically saying that. Uh, think about the margins that the cloud companies have. They're like 70s. So, so I, I do think these companies will all figure out the margin structure really well, and add scale because there's so many different ways they can add value to hold onto that margin. And they're all g- kind of getting specialized into, like, different areas where they are gonna be doing that. And so, um, you know-

   23. HSHarry Stebbings45:16

       There are, but there's only three cloud providers, really.

   24. HTHemant Taneja45:18

       Yeah. But I think, I think-

   25. HSHarry Stebbings45:19

       And, and when we look at the plethora now that we have in terms of-

   26. HTHemant Taneja45:22

       Today.

   27. HSHarry Stebbings45:22

       Yeah.

   28. HTHemant Taneja45:22

       Today. But I think, but I think that's gonna shrink. I don't think everybody's gonna make it. And then-

   29. HSHarry Stebbings45:26

       So you think there's gonna be a real shrinkage in those products?

   30. HTHemant Taneja45:28

       I think you'll have a couple global ones and a couple of sovereign ones in every geo. I mean, that, that probably, uh, i- is what'll end up sort of happening in, in AI in my, in my view. And, uh, not everybody's gonna make it. Uh, we have a lot of other models that have been funded, different approaches as well. We'll see what happens to those. Is there like a new architecture that emerges? But it's not gonna be that many. But think about the size of the market. You're talking about the labor market. It's the AI market, you know, and so-
10. 46:29 – 56:38

    The Risks of an AI-Driven Economy

    1. HTHemant Taneja46:29

       of.

    2. HSHarry Stebbings46:29

       The economy is so on the AI hype wave, or not hype wave but, like, AI momentum wave, um, 'cause, uh, a lot of it's not hype. And when you look at the concentration of, like, shareholder value accumulation, it's just solely predicated on mag seven pretty much at this point. Um, do you worry that we hit a speed bump and when we hit a speed bump in the AI train, I mean, literally the world kind of crashes (laughs) given how much is predicated on that? Or do you think that just won't happen because we are on such an exponential upswing?

    3. HTHemant Taneja47:01

       Well, um, I, I, I don't think it's gonna be, um, that it's a speed, speed bump that spirals us down. So for the simple reason that with every new model, uh, with its capabilities, there's a certain amount of that content of, uh, white-collar jobs, the 10 trillion that you mentioned, that is now doable. And what, the speed bump's not gonna i- reverse that. So I think I, I have this sort of visual in my mind where we're kind of cumulatively taking more and more of the labor content and AI is better than us in more and more of it. And over time it's gonna be most of it. And when robotics comes, it'll be all of it. Uh, and so in that context, you know, a lot can be already been done and we have the energy, we have the compute to be able to support that. The question is the really frontier stuff, what are we gonna do with that? And I think you could see speed bumps there. The speed bump could be that the architecture doesn't scale and you need these world models to take on or some of the, you know, uh, uh, new architectures people are developing that are non-language oriented that could maybe, uh, would be needed. So I think it could, the frontier could slow, but I don't think this transition of labor or melting of labor into productivity is necessarily gonna, uh, slow 'cause the economics are way too compelling for that, uh, to not happen in my view.

    4. HSHarry Stebbings48:14

       You mentioned, uh, geo winners in some respects. You mentioned Mistral. Uh, I love Arthur, I think the world of him. I'm obviously a proud European. A lot of people are going, "Huh." It feels like they've been left behind.... calling a spade a spade. Do you think sovereignty is enough of a reason for Mistral to be a winner?

    5. HTHemant Taneja48:33

       It's a, it's a great, um, uh, question. So, you know, Jeanette's on the board there and we talk a lot about it. We've had many conversations and, and meals with, uh, Arthur about this as well. You know, I, I think, um, uh, I look at that company and I see Arthur's growth from a scientist to a CEO. And, uh, remember it's, it's a two-year-old company. And, and, uh-

    6. HSHarry Stebbings48:56

       D- do you want to hear a funny story?

    7. HTHemant Taneja48:58

       Yeah.

    8. HSHarry Stebbings48:58

       I got introduced to him by Jean-Charles and Alain.

    9. HTHemant Taneja49:01

       Yeah, sure.

    10. HSHarry Stebbings49:01

        And I was the first VC he ever met. And he took a video call with me on a park bench in Paris, and I said, "Dude, I'm, I'm, I'm gonna give it to you straight. I've never had such a bad pitch, and you are competing against Sam Altman, the mother of all fundraisers. This is not gonna end well." And now I see him pitching and I'm like, "Well, fuck, he changed." (laughs)

    11. HTHemant Taneja49:24

        He changed. Uh, but I think this is the point. Not, not only in his ability to, uh, uh, aggregate capital. He stayed focused on doing really disciplined work in the way to build models, and, and I think there were compute constraint and capital constraints so they fell behind, but I think they, I think they've caught up. Like, everything I hear now is that their models are now again sort of, uh, they're investing. He's figured out how to aggregate capital. I mean, you saw that. And he's also figured out that his relationship with customers needs to be a lot more commercial than, "If you build it, they will come." And so what I see... And so I, I am bullish on what they will do, uh, uh, even though I was anxious about it, because he, he and his team are growing up. I think they're learning how to be, uh, in this, uh, in this competitive world. And if... And by the way, there were no... If there were two companies not existing in this world, OpenAI and Anthropic, you would say this is the hottest startup in the world, in terms of how fast they're scaling and what they've accomplished and their valuation and progress. It's just you have the overhang of these two monsters that, you know, got, uh, the flywheel going with capital and, and, and, and products and so on. And that's why we say it's just interesting. I actually think they'll build a pretty compelling business. I see a lot of, uh, interest from companies in Europe, but all over the world, that want an open source player. Like, who else is truly dedicated to open source that is doing it in a way that enterprises care? It's not Meta. They're not an enterprise company. I- it really is, in the West, it's really Mi- Mistral today.

    12. HSHarry Stebbings50:52

        Can you name to me success stories where sovereignty was the number one driver of their success? Is... Um, I don't mean that as tricky. I'm, I'm really-

    13. HTHemant Taneja51:00

        Well, many companies in defense. All the US defense primes were built off of sovereignty. We were the biggest, you know, um, allocator of, uh, uh, spend in defense, and that's what Lockheed Martin and, you know, Raytheon and Boeing, that's a lot of what it was. And then sovereignty also dictated who and which countries they sold to and what nag or state department gets involved, but like, it was all dictated by them. I think AI is that strategic a technology.

    14. HSHarry Stebbings51:27

        Does revenue growth matter anymore? You know, we just had the founders of, uh, Makor on the show. Uh, no-

    15. HTHemant Taneja51:31

        Yes. We were the s- the s- uh, we led the seed there. (laughs) I-

    16. HSHarry Stebbings51:35

        I know. That's Max, isn't it?

    17. HTHemant Taneja51:35

        ... did an amazing job. Yeah. Yeah, yeah.

    18. HSHarry Stebbings51:37

        Yeah, yeah. 1 to 500 million in 17 months.

    19. HTHemant Taneja51:41

        Unbelievable.

    20. HSHarry Stebbings51:41

        Well done. Uh, thrilled for you. (laughs) Uh, like, does it matter anymore though? Because every week there's a new 1 to 100, 1 to 500. How do you think about that?

    21. HTHemant Taneja51:52

        It's, it's a great, uh, uh, question, Harry. What the, the internal conversation I had about this was E- of course it matters, but the normal has changed. We used to think about, hey, you go... Like, when we did Samsara and, uh, you know, Gusto and some of these growth companies-

    22. HSHarry Stebbings52:06

        Triple, triple, double, double.

    23. HTHemant Taneja52:07

        ... that are like... Yeah, yeah. Triple, triple. There you go. Triple, triple, triple, double, double, right? And, uh, you look at these companies and say, wait a minute, going from 1 to 3 to 9 to 27 is not interesting, or 1 to 5 to 9 to 27 is not, you know, uh, whatever the math, is not interesting. You gotta go like 1 to, you know, 15 to 20, uh, to 100. And they're all, on a revenue basis, more interesting than the stuff we thought was the most interesting, uh, you know, five years ago. But that's big- that speaks to the, the, the way value concentrates in the hands of a few companies. That speaks to the fact that these technologies underneath are so high leverage that they're potent in making these companies grow fast when you actually get a product right. That's what's going on. Durability is a question. Like, the thing that's unknown is, you know, we never had so much scale without kind of just taking durability for granted. And what's the question that we all grapple with today? You know, Lower Bill is an amazing company. Anton's done a great job. Is that, uh, gonna be around? MerKor is an amazing company. The people that are naysayers, that's what they say. The, the people that believe in it, like, you know, we have a huge, uh, conviction in MerKor. We think there's... Uh, you know, we have our own thesis. So it's sort of everybody's kinda grappling with this and, uh, you know, we, we all have our theories and some people will get lucky. And, and I do think some of these companies that grow really fast in this, uh, will also not be around, you know.

    24. HSHarry Stebbings53:31

        So funny, I, I'm very good friends with Rory O'Driscoll from Scale, who I think is one of the-

    25. HTHemant Taneja53:34

        Yeah.

    26. HSHarry Stebbings53:34

        ... most brilliantly-

    27. HTHemant Taneja53:35

        Yeah.

    28. HSHarry Stebbings53:35

        ... strategic but un...

    29. HTHemant Taneja53:37

        He's, he's SaaS OG.

    30. HSHarry Stebbings53:38

        Yeah, exactly. Um, and I learned from him a lot. And he said like, "The go-to market's fundamentally changed in the world of AI, where bluntly it's a case of, you just go into a market, scream the loudest in the room, gain mindshare, and deliver from there." And your Harveys, your ABridges are great examples of that. Do you agree with them?
11. 56:38 – 1:01:45

    Lessons from Covid-Era Market Shifts

    1. HTHemant Taneja56:38

       uh, in the zeitgeist.

    2. HSHarry Stebbings56:39

       I've never felt so much uncertainty in what I do. You know, I am trying to understand. It almost feels like COVID where we had these highly transient categories that were created, and it's like, "Do they remain and we actually just do exercises at home all day on Pelotons, or, or do we go back to gyms?" You didn't know what would be enduring strong markets and not, and I feel that is the case here. Have you ever felt such uncertainty in investing, and what would you advise me?

    3. HTHemant Taneja57:03

       Yeah. Um, it's a great, uh, question, and, uh, and I'll give you the same advice that we follow here at, uh, GC. This is peak ambiguity, okay? And so, uh, everything we do to support founders, everything you do, you know, you were showing me a lot of your cool ways of supporting founders, get them excited, all the products and the solutions we have created to support the founders. The question is, to what end? And, and I think having a true sense of, uh, long term set of principles that, uh, you believe in is all ... In a world of ambiguity, that's all you can lean on. The way you navigate ambiguity is by having, with a- uh, having a true north. So like, in the US, we have this enormous movement towards transforming healthcare post-pandemic into ... And so everything we do in healthcare, we go back to saying, "Is this decision gonna make it proactive, affordable, accessible or not?" In Europe, the work that, uh, Jeanette is doing is very much about Europe's resilience with AI. So everything we do, we sort of look at it and say, "Is this gonna make the economy here more resilient, uh, and sort of this investment decision or this relationship decision or this partnership decision, or not?" And, and sort of having that kind of a sense of, you know, where you're going, uh, so you're directionally in that, in, in sort of, in, in, uh, aligned with your values is the only thing you can lean on. And there's so much uncertainty. It's, it's so difficult, and I feel bad for investors that are learning in this era because the signals to determine if your decisions were right or wrong, you, you, you, you in some ways have none. You have this ... Again, you have this great revenue growth to lean on, but no durability. And then you have this, y- you know, uh, constant-

    4. HSHarry Stebbings58:43

       And then you have great margin structures but shit revenue growth for triple triple double.

    5. HTHemant Taneja58:47

       But shit revenue. So it's like it's just not ... Uh, and, and so you, you, you have to be values oriented. You have to have a sense for, "What am I really trying to do?" And you know, at, at GC we say we build deep relationships with people, we build enduring companies, and we're doing that to transform industries, uh, across the world. And so we have w- uh, and, and what does that do? It gives our founders access to talent, access to, um, you know, policy sophistication, access to distribution, and access to differentiator capital. And we're doing ... If we give founders all of that, and we have a set of values with which we want to march down these industries, w- I think we'll be okay. We're trying ... We're, we're having ... We're trying to take faith in that, and I, I, I would sort of s- have everybody think about that, 'cause I, I do think we are building the future. It's an amazing time. Uh, uh, we, we will shape what this, you know, society is gonna look like for probably 100 years. I mean, this shift is as big as what electricity was, you know, 100, 150 years ago. We get to shape it. But I think we get ... We have to make those decisions. What do you want this to look like? And I think that intentionality should always be in the back of our minds as we make the short term decisions, as we deal with FOMO, as we deal with, you know, uh, um, sort of, you know ... How are we scaling our business? How are we supporting our founders? What are the kinds of things we choose to do and not to do? Because there's way more opportunity than anyo- what anyone o- of us can do. You need a true north.

    6. HSHarry Stebbings1:00:10

       You continuously mention the exponential market size or the insane market size that we have. It makes me think of a ... Uh, fuck, this is where I wish we could edit video more efficiently. But it's either a Buffett or a Munger quote that it's better to buy a great business at a good price than a good business at a great price. Is there any point in being price sensitive if markets are a trillion dollars?

    7. HTHemant Taneja1:00:32

       You know, one of my partners, uh, Joel Cutler, used to say, "Price only hurts once." It's like buying a Gucci bag. Price only hurts once, but then you never regret it. (laughs)

    8. HSHarry Stebbings1:00:40

       It's true. Whenever I see my mother-

    9. HTHemant Taneja1:00:42

       (laughs)

    10. HSHarry Stebbings1:00:42

        ... with a Chanel bag, I'm reminded of the dent it caused. (laughs)

    11. HTHemant Taneja1:00:45

        Well, well, I think, I think there's actually wisdom in that comment, even though it's a cheeky comment, which is that, uh-... first of all, when did we ever get price right? I mean, I l- I have been doing this for 25 years. We've seen all these models. I am yet to see some investor, in at least in our firm, ever nail price in the way they thought it was going to be. It's, it's usually worse than that, and all, we make all the money when it's better than what we thought. So, if it's g- if money's all made and what's better than we thought, like, you know, using price to pass, I, I tell you, people, investors use price as a reason to pass because they couldn't gain conviction elsewhere and it still makes them sound pragmatic. And, and I, I gen- I get very ticked off when somebody says, "I love this company but I don't like the price." I'm just like, "Well then, you don't know if you love this company." You're just, you're just taking solace in trying to be like I'm a price-disciplined investor, 'cause you didn't really understand the potential of this company to see what it's actually going to be. And, you know, it, because if it's going to be destined for greatness, then, then jump in. Be in it.

    12. HSHarry Stebbings1:01:44

        What

12. 1:01:45 – 1:07:54

    Investing in Capped Upside Companies

    1. HSHarry Stebbings1:01:45

       about, what about if it's a capped upside company? Okay, let me just walk you through this. There's a data... I'm just making this up. Uh, a super interesting data providing company and you're like, okay, this is a, this is a good business and I can easily see a two to four billion dollar outcome here, either to a strategic or as a public company, and I'm getting in at 80 million pre. Okay. That's a, that's a great way to make a lot of money. It's a potential 25 acts on an early stage check, and in a $10 million check that can return my fund almost. Great. But if it's 140, it's very different to 80. The multiples hit-

    2. HTHemant Taneja1:02:17

       A hund- a hundred percent right, but we say these things, it's a capped upside company. What does that, what does that mean? When, when I invested in Stripe, all the guys that I called at New Payments were like, "This is a niche thing. Like, why are you doing it?" I could do not. And I was like, "You know, I, I just don't want to listen to this, this, the experts about what they think their industry is, is or is going to be." Markets expand, also. So, the, the, the humility in this business also is just understanding we don't know what's going to happen in the future. Uh, and so, you know, if it's, if it's truly a captive site, then you shouldn't be doing it anyways. It just, that's not a price question. Like you, we're in the business of trying to build and back companies that can become, you know, enduring, sort of very, very large businesses. That's like a precondition. And, and, eh, you know, it, it, it's just n- it's just I feel like people get stuck, uh, uh, either because the companies are just completely mediocre and they're not even going to be worth two to four billion, or they're actually great, and you're not willing to stretch because you're not willing to believe what the world's going to look like.

    3. HSHarry Stebbings1:03:21

       I always think of Peter Thiel's biggest investing mistake which was not doing the next round in Facebook.

    4. HTHemant Taneja1:03:26

       Yeah.

    5. HSHarry Stebbings1:03:27

       When did you not do the next round in a company that with the benefit of hindsight you're like, "Oh, I should have done."

    6. HTHemant Taneja1:03:34

       I-

    7. HSHarry Stebbings1:03:34

       And what, what did you...

    8. HTHemant Taneja1:03:36

       I, I, I don't think we have time for all my mistakes.

    9. HSHarry Stebbings1:03:38

       (laughs)

    10. HTHemant Taneja1:03:38

        Uh, but I'll t- I'll give you a re- very recent, uh, example. We have a company that's, you know, a decacorn now, and actually, um, called the investor who led it at GC, saying, "Congratulations. You're going to make over a billion dollars on this investment. And you're an idiot because you d- you gave up not m- making the second billion. You gave up making the second billion. Why? Because you didn't double down." And, and, and I think, uh, that is where you can get a lot of it wrong. Right? I mentioned earlier in Stripe I've invested 14 times. Uh, you know, it, that's what it takes. If you're in the best companies, you really should be, uh, buying into them constantly. In fact, that's the reason to scale capital. The reason to scale capital isn't, uh, to be a low margin business. It's because you want to have capital for the very best ones and really lean into them, 'cause that's, that's ultimately where you, you know, drive, uh, you return your best businesses. And that requires courage, conviction, belief, uh, in, you know, in how markets are going to change.

    11. HSHarry Stebbings1:04:41

        Do you worry about capital concentration limits?

    12. HTHemant Taneja1:04:44

        I think I have invested in, I don't know the exact number, probably over 200 companies, and I don't know, 60, 70% is like 10 companies, over 25 years. Capital concentration is the way you, you drive return.

    13. HSHarry Stebbings1:05:02

        Which single-

    14. HTHemant Taneja1:05:03

        You just gotta be right. (laughs)

    15. HSHarry Stebbings1:05:04

        (laughs) Which single company are you most capital concentrated in?

    16. HTHemant Taneja1:05:07

        Stripe. It's about a billion dollars.

    17. HSHarry Stebbings1:05:11

        Is cross-fund investing concerns bullshit? LPs often worry about it, don't like it.

    18. HTHemant Taneja1:05:15

        Well, I, I, I think, um, a cross fund I- is, is an important consideration. We do think a lot about before we cross fund, but we do cross funds. But you want to make sure you have done enough, uh, uh, capital to work in the fund that it's in, where you feel uncomfortable by the risk you're taking before you cross it. If you really believe in something, you want to make sure that becomes one of your largest positions in that fund before you go to the next fund. But you also, you know, I, I try not to have more than 10 to 15% in a single company, uh, in a fund. So at some point it does. If it's truly a great company, you will be forced to cross 'cause, eh, you know, you, you, you should have multiple funds benefit from that.

    19. HSHarry Stebbings1:05:56

        Totally get you and agree. I always remember Brian Zelman saying, "Capital concentration limits are the enemy of great venture returns, which is why we'll often have 30% in a single company." And I thought-

    20. HTHemant Taneja1:06:05

        Yeah.

    21. HSHarry Stebbings1:06:05

        ... "Wow, I ne- I need to get more courage." (laughs)

    22. HTHemant Taneja1:06:09

        Yeah, yeah. I mean, concentration i- uh, is key to being, uh, great at investing. I, I genuinely believe that.

    23. HSHarry Stebbings1:06:15

        When companies go public, you have the choice to distribute or not. How do you think about whether you are better placed than your LPs to manage those positions once going public?

    24. HTHemant Taneja1:06:27

        I always look at it as, uh, it's a variety of things. One is, will our time matter? Uh, i- i- if our time continues to be spent on this company, will it matter in terms of, uh, uh, you know, compounding from here or not? So some of the ones we started, for example, that would make sense, you want to stay on and, and do that. The other thing I look at is, um, um, you know, uh...... how long should we hold it to make sure we drive the best returns for that fund? Is this the company that should be compounding, uh, most, uh, you know, to keep generating returns and driving performance, given our commitments to the LPs? Because a l- a lot of the LPs will have their public sleeve and their private sleeve. You give them stock, they'll sell it. Uh, and, and, and, it's like programmatic for them. So what we want to make sure we give it to them at a point where we really captured enough value. So that's another factor we think about, uh, in that context. And, uh-

    25. HSHarry Stebbings1:07:18

        Which suggests you do think you're better at managing it than them.

    26. HTHemant Taneja1:07:21

        Well, I think, uh, well, they don't m- they may not be managing it, is what I'm saying there. I think, I think they, they-

    27. HSHarry Stebbings1:07:28

        But by selling it, they're manage- they're managing out of it.

    28. HTHemant Taneja1:07:30

        Because that's programmatic, uh, that in their private sleeve, they're just not going to hold it, and the, the privates team is basically told that once you get stuck, you sell. And, and also, the other thing is, you want to, you know, in our lead, companies where we lead, where we go public, we have a lot of stock. So you also have to be measured in how you distribute stock, because by doing too much at one time, you'll, you could also hurt the price of the stock, which hurts the rest of it. So I think there's also a pacing question of

13. 1:07:54 – 1:15:54

    Navigating Secondary Markets

    1. HTHemant Taneja1:07:54

       how do you li- liquidate?

    2. HSHarry Stebbings1:07:55

       How do you think about navigating secondary markets? You know, when we look at, you'll, there's a very strong chance that we have a trillion-dollar private company in an OpenAI of the world. How do you think about navigating secondary markets when public market, uh, is, is sometimes not there?

    3. HTHemant Taneja1:08:15

       Well, look, I think for the very best companies, private markets behave like public markets. There's a secondary market, you can liquidate, so your shareholders can take liquidity, employees can take liquidity, you have access to credit, you can do M&A, your stock's val- you know, your valuation's believed. When they have talked to very bit of Stripes, the SpaceXs, and the, I think, OpenAI is going to get there, uh, Entropic and so on, right? So the very be- uh, the Databricks is getting there slowly. So the very best, that's what happened. Then there's the very good companies, not th- but not the, let's say, the top 10 or 15, uh, uh, private ones, not, not the magnific- magnificent private 10, if you will.

    4. HSHarry Stebbings1:08:48

       (laughs)

    5. HTHemant Taneja1:08:48

       For them, uh, uh, going public and, and getting validated actually could be more helpful. It may be that the secondary market, uh, isn't behaving as well, or they can't do M&A as effectively, or they need to access a lot more capital than they can just being in the private markets. And I think those decisions are what ultimately then push you to go public. And then there is the, as I said, this bloated set of companies that are good companies that will compound at 20%, 25%, maybe f- maybe forever, that have no access to public market, they're, 'cause they're too small, they're not a billion-dollar company growing 30% a year that the public markets, you know, would be excited about. And, and they're too slow, uh, for venture to fund. And that's the purgatory where we need innovation, and that's where the customer value fund resides to, like, help these companies get to that scale so they can go public someday.

    6. HSHarry Stebbings1:09:36

       Is the extension of private markets not an increasingly harmful thing to the distribution of wealth in society? When we look at, like before, it would be your Fidelities, your T Rows, and the pensioners of the world, my grandparents would pay them 20 bps, 30 bps, 40 bps. And now with the extension of private markets, you get money and get 220.

    7. HTHemant Taneja1:10:00

       It's, it's an enormous, uh, issue. I'll tell you a little story. When I, when I published my first book, Unscaled, in 2018, I had the leadership of Vanguard come by. And they talked about, "Look, uh, Main Street doesn't have access to this asset class." So I spent a lot of time in 2018 saying, "How do we do that? How do we actually give retail access to our funds?" Now, with 401 (k) changes and some of the 40 Act, uh, evolution, you actually can do that. So I fully expect that you will start seeing products that give retail access to the best companies in, uh, in technology. And, and, uh, we will definitely, uh, engage in that because it's the right thing to do. Do you-

    8. HSHarry Stebbings1:10:39

       Do, do you agree with that? Like, when I saw the LaFontes talk about this, I was like, "Oh, wow, guys. Well done." But, like, and, and then part of me is like, "Well, isn't that what we want, the democratization of access?"

    9. HTHemant Taneja1:10:49

       Yeah. Look, I think, I think everybody wins in this. You open up large pools of capital for, uh, investing in technology. But you also open up large pools of opportunity for people that don't have it otherwise. So, like, it doesn't... We don't need to look at it as, "Oh, we're doing it, uh, because it's, uh, it's nega-..." I think it's good for the world and, and, and, and we should, uh, we should do it. And, and if you're oversubscribed, make room for it. That's the main thing, which is that, that's where this matters, which is when you have more capital than you want to take on in a fund, would you let it in or not, right? And what I'm saying is that we, we, we should be making room for this.

    10. HSHarry Stebbings1:11:23

        Do you think fee structures need to change?

    11. HTHemant Taneja1:11:27

        Look, I think I am very much, uh, focused on performance as the number one thing. Uh, that's why I said in the beginning that, uh, you know, I measure us as how good a seed firm as we are. In the context of everything we do, is like, is our core right? Are we doing the highest risk, highest reward work? Are we helping founders in the earliest stages? And, and, and, uh, uh, so you want to stay high performance. And if you want to stay high performance, then your incentive should be much more focused on generating, uh, carry and, and making it a prosperous place for your team than generating fees, uh, uh, you know, which, which to me is, uh, uh, I, I think that can be a, um, a distraction.

    12. HSHarry Stebbings1:12:08

        You said about carry?

    13. HTHemant Taneja1:12:10

        By the way, we, in our, just to say, like, in our, in our business, we don't distribute any fees. We invest everything back in the business. And, and that's a deep belief that we don't want to be in the game where the partners of the funds at General Catalyst want bigger and bigger funds because they can take, you know, bigger and bigger distributions. Even if we, whatever fees we get, we invest it back in the business.

    14. HSHarry Stebbings1:12:30

        I'm so sorry to be so blunt, but don't partners make, like, three or five million bucks?

    15. HTHemant Taneja1:12:36

        Less than that.

    16. HSHarry Stebbings1:12:38

        Do you worry that you're not gonna get the best partners? 'Cause they are getting that at alternate funds.

    17. HTHemant Taneja1:12:42

        Uh, depends on if they're focused on performance and salary. I think that, that to me is a, uh, a filter. And my commitment is that you go deliver, you know, your dream and you'll make more money than anywhere else. And, but it's gotta be aligned. We gotta be focused on performance and value creation versus, uh, you know, being rich and fat and happy salaries. That is just not the culture we want.

    18. HSHarry Stebbings1:13:01

        Do you think that is the same or reflective of the rest of the venture ecosystem?

    19. HTHemant Taneja1:13:04

        I have no idea.... I, I, I pay no attention to it.

    20. HSHarry Stebbings1:13:07

        You don't?

    21. HTHemant Taneja1:13:08

        No. No.

    22. HSHarry Stebbings1:13:08

        Do you not pay attention to your competitors?

Episode duration: 1:38:04