Nikhil Basu Trivedi: Why 99% of AI Investments Will Go Bust | E1057

1. 0:00 – 20:45

   Intro

   1. NTNikhil Basu Trivedi0:00

      ... two things. One, don't look at the title on your business card. Just think about yourself as a venture capitalist. Find, decide when, help, and exit. And then the second one, exceptional companies deserve exceptions.

   2. HSHarry Stebbings0:13

      (instrumental music) Nikhil, I am so excited for this. We did this, like, seven years ago remotely, and so to have you in person is such a treat for me. Thank you so much for joining me.

   3. NTNikhil Basu Trivedi0:23

      Thanks so much for having me, man. Yeah. It's fun to have dug into the chats to see when we first connected. It was January of 2016. I cold outbound messaged you on Facebook Messenger-

   4. HSHarry Stebbings0:33

      (laughs)

   5. NTNikhil Basu Trivedi0:34

      ... which we realized, which is hilarious. Um, and it's amazing to see what, where you've come since then.

   6. HSHarry Stebbings0:40

      I mean, I, I look about 25 years older. It's, uh-

   7. NTNikhil Basu Trivedi0:43

      (laughs)

   8. HSHarry Stebbings0:43

      ... the venture game is having its effect on me. (laughs) . The thing I'd love to start on is I think we change how we invest so much, um, in time. And if you were able to call yourself the night before your first day investing-

   9. NTNikhil Basu Trivedi0:55

      Mm-hmm.

   10. HSHarry Stebbings0:56

       ... what would you advise yourself on that call?

   11. NTNikhil Basu Trivedi0:58

       Two things. One is actually p- a piece of advice one of my partners at Shasta gave me pretty early on, like probably in the first couple months, which is, don't look at the title on your business card, which at the time was associate at, at, at Shasta Ventures. Just think about yourself as a venture capitalist. And do as venture capitalists do, which is find, decide when, help, and exit. So the five components of our, of our day-to-day job in venture. And that advice I think was really profound. It, it sort of unleashed me, and, um, and it's the advice I give young people in venture today, which is, again, don't, don't look at your title, don't think about exactly what the role is. Just think about yourself as a VC. And I think you'll be better off for that. And then the second one that came to mind is exceptional companies deserve exceptions. And it's a mantra that I've tried to always have in my venture career, which is, yes, you have this model of how you want to invest, um, this dream idea of portfolio construction and the profiled company that you're looking for. But it, it's so often the ones that you consider an exception for, the ones that just blow you away, that feel like outliers that end up being the ones. And so I've always tried to have that in the back of my head, uh, which is at the end of the day, all of our, or all of what we're doing in our job is searching for the outliers and the truly exceptional companies.

   12. HSHarry Stebbings2:20

       So I, I do just have to unpack both actually. The first one you said there about kind of do your job as a venture capitalist, don't worry about the title.

   13. NTNikhil Basu Trivedi2:26

       Yeah.

   14. HSHarry Stebbings2:27

       So often founders are told, sorry, I'm going here, but I'm interested to hear your thoughts, "Don't speak to the associates. Uh, it's the GPs who make the decisions." And I'll be honest, I say that too, especially at growth, we don't have time for spinning cycles on associates. Like, just go to the GPs. I can introduce you to them. (laughs) Uh, do you agree with the advice on just go to the GPs?

   15. NTNikhil Basu Trivedi2:48

       I think it's case by case dependent. And there are so many folks who've grown up in the industry to become incredible investors, who started off at the bottom of the ladder at a firm. And so you just don't know who those people will be. I think that you're better off as a founder judging based on the actual conversation you have.

   16. HSHarry Stebbings3:10

       Mm-hmm.

   17. NTNikhil Basu Trivedi3:11

       Which sometimes may be a lot better with the youngest person on the team versus the managing partner of the firm.Uh, and sometimes it won't be. I always give people a chance, whether it's the founders who, you know, uh, come in through not that warm of an introduction or purely cold. Uh, I always try to review what they're saying, and I'll quickly write an email back saying, uh, "Not interested, thanks" if it truly is, is not a fit. But I've always kept that mentality. And I started at, at Insight Partners in New York, where I was bottom of the ladder as a summer intern, and then an analyst. And so I obviously have bias on this dimension. Um, but I do think that there are people who are really young in our business who are really thoughtful, and that a conversation with them might actually lead to some learning for you as a founder, and it may even lead to an investment, as it's done for me several times in my career on the venture side.

   18. HSHarry Stebbings4:05

       Now, I often find actually that they're some of the most researched and thoughtful, because they've had the time to actually map out a space, and they can actually provide a lot of value back to founders-

   19. NTNikhil Basu Trivedi4:12

       Yeah.

   20. HSHarry Stebbings4:12

       ... where they haven't had the time to do competitive analysis on pricing and everything-

   21. NTNikhil Basu Trivedi4:15

       Mm-hmm.

   22. HSHarry Stebbings4:15

       ... in between. So totally get you there. On the exceptional companies deserve exceptions.

   23. NTNikhil Basu Trivedi4:20

       Mm-hmm.

   24. HSHarry Stebbings4:21

       Is there one company or a situation that just most stands out to you? You've invested in the Canvas of the world and many other great companies. Is there one where that was very much the case?

   25. NTNikhil Basu Trivedi4:31

       Yeah. I mean, look, I think the Canva investment for us at Shasta was an exception on so many different dimensions. And so it's obviously the one that stands out for me personally. You know, the company was based in Sydney, Australia. It was raising, um, a convertible note at a $25 million valuation cap. Um, it had no revenue yet. It had a bunch of early signs of product market fit actually, like, you know, uh, several hundred thousand monthly active users of Canva who were using the product really aggressively. It was growing 30 to 40% every month. It broke a lot of the traditional rules. And, and so, you know, we thankfully decided to make that investment. But there were all sorts of reasons to let it go.

   26. HSHarry Stebbings5:11

       Dude, I mean, just-

   27. NTNikhil Basu Trivedi5:12

       Uh-

   28. HSHarry Stebbings5:12

       ... for the context, it's a, like, married couple as co-founders-

   29. NTNikhil Basu Trivedi5:15

       Yes. Well, they were-

   30. HSHarry Stebbings5:15

       ... who are fantastic.
2. 20:45 – 37:05

   What is Footwork VCs Strategy?

   1. NTNikhil Basu Trivedi20:45

      and, and so...

   2. HSHarry Stebbings20:46

      The hard thing is though, dude, I- I agree with you totally on all this.

   3. NTNikhil Basu Trivedi20:49

      Yeah.

   4. HSHarry Stebbings20:49

      But at the stage we invest, I find they're well past that by that point. Do you know what I mean?

   5. NTNikhil Basu Trivedi20:54

      Yeah.

   6. HSHarry Stebbings20:55

      Because that's the A round by the time they've got.

   7. NTNikhil Basu Trivedi20:58

      Now, I should be clear about this, which is, at Footwork we do... We- we only lead rounds, we only do early stage. Uh, we lead seeds and As. So we've made 11 investments so far, we've done, uh, five series As and six seeds. I think our average initial check is about four and a half million, and the range has been two to nine million.

   8. HSHarry Stebbings21:17

      Mm-hmm.

   9. NTNikhil Basu Trivedi21:17

      We've done sort of later seeds and earlier As, precisely because we love this stage that I'm talking about. Where there is a little something that's working, where the founders can articulate why and have a bunch of unique insights, and where the why now is strong, and where they have a big vision for what it can become. But there may be some level of market risk. Y- you know, it may not be clear how big it can become. We, of course, try to assess that and ask that question over and over again. I wrote recently, this is the question that keeps me up the most, like, "How big can this company be? Can it be one of the ones?"

   10. HSHarry Stebbings21:47

       You wrote this in your billion dollar...

   11. NTNikhil Basu Trivedi21:49

       Yeah.

   12. HSHarry Stebbings21:49

       Yeah. I- I- I-

   13. NTNikhil Basu Trivedi21:50

       That's right. Yeah.

   14. HSHarry Stebbings21:50

       I remember reading it in the research for this. And then I thought instantly to... We d- you know, do a show called The Memo, where we review the investment decision-

   15. NTNikhil Basu Trivedi21:57

       Mm-hmm.

   16. HSHarry Stebbings21:57

       ... of multibillion-dollar companies. And we've had, you know, Jeremy from Snap, Alfred... Or, Jeremy on Snap, Alfred on Instacart, Byron Jita on Twilio. The best of the best on the best companies. Every single one said, "We massively underestimated how big the market would be."

   17. NTNikhil Basu Trivedi22:12

       Yeah.

   18. HSHarry Stebbings22:12

       And so I kind of lead back from that thinking it's just a way to come to a wrong decision, trying to do market scenario planning.

   19. NTNikhil Basu Trivedi22:20

       Well, so a couple things. One, this is precisely why I underweight market. Does that make sense?

   20. HSHarry Stebbings22:24

       Mm-hmm.

   21. NTNikhil Basu Trivedi22:25

       Like, I- I weight market third on the, the three that you asked me about, because I just think it's the hardest one to assess and predict for myself.

   22. HSHarry Stebbings22:32

       Mm-hmm.

   23. NTNikhil Basu Trivedi22:33

       And I think when you look at the investments you just described, and some of the very great ones, that was true, um, for- for those investors as well. You can imagine and dream the dream that the product market fit that this company has, the- the- the team that's building it, can expand the market beyond your wildest dreams, can actually create a whole new market. Those are oftentimes the most special companies. And so again, if you think about (laughs) my- my thinking around this, it comes back to, well, this is, this is exactly why I underweight market in the analysis.

   24. HSHarry Stebbings23:06

       I always think you've got to be directionally correct. Do you know what I mean?

   25. NTNikhil Basu Trivedi23:09

       Mm-hmm.

   26. HSHarry Stebbings23:09

       And what I mean by that is, like, Canva rode a brilliant wave of content creation-

   27. NTNikhil Basu Trivedi23:15

       Yeah.

   28. HSHarry Stebbings23:15

       ... of solopreneurship-

   29. NTNikhil Basu Trivedi23:16

       Yeah.

   30. HSHarry Stebbings23:17

       ... of marketers within companies, and every company being a brand needing content.
3. 37:05 – 46:02

   Section on LPs

   1. HSHarry Stebbings37:05

      for Footwork?

   2. NTNikhil Basu Trivedi37:06

      We had three things that we thought about when we raised our first fund. And we actually ranked LPs based on these three dimensions. And they were, one, what's just the quality of the relationship with the people? We really tried to prioritize people who we'd built relationships with, who we really liked as humans, we wanted around our proverbial dining table as a firm in, in this first fund. Uh, second, we thought a lot about just, uh, are these people who have seen what world-class looks like, and will they push us to be world-class? Uh, which is what we want in, in, in our firm. And third, we thought about the mission, uh, values of the institutions themselves, and whether they were institutions that we are really excited to make money for and be partners with. And so those were the three, uh, dimensions that we prioritized. We, we assigned like a one through five rank on each of those. And then at a macro level, we were really lucky in our first fund. We had about 450 million of commitments for $150 million fund. And we ended up raising $175 million and realized that's incredibly fortunate for a first-time fund. But what we thought about as we were constructing the full LP base was just having a little bit of diversity across both check size-

   3. HSHarry Stebbings38:19

      Mm-hmm.

   4. NTNikhil Basu Trivedi38:19

      ... and type of LP. And so we wanted, y- you know, a nice mix of, uh, of, of LPs where, uh, you know, there were a few at the $20 to $30 million level out of 175. A bunch at sort of the $10 to $20 million level, a bunch at the $5 to $10 million level, so there was diversity-

   5. HSHarry Stebbings38:36

      20 to 30 is quite a high concentration in a $175 fund.

   6. NTNikhil Basu Trivedi38:39

      Yeah.

   7. HSHarry Stebbings38:39

      How do you think about concentration limits that you are comfortable with?

   8. NTNikhil Basu Trivedi38:42

      We don't have a single LP who's more than 20% of our fund.

   9. HSHarry Stebbings38:45

      Mm-hmm.

   10. NTNikhil Basu Trivedi38:46

       Um, and I think in general, we thought we don't want one, two, three LPs having the majority of our fund and having therefore out- outsized, uh, control in our thinking or our decision-making in some way.

   11. HSHarry Stebbings39:01

       And so w- we have that. And then in terms of like types of LPs-

   12. NTNikhil Basu Trivedi39:04

       Mm-hmm.

   13. HSHarry Stebbings39:04

       ... we have obviously those corporates, there's pension funds, there's fund of funds-

   14. NTNikhil Basu Trivedi39:08

       Yep.

   15. HSHarry Stebbings39:08

       ... there's high-net-worth family offices, all of the different types. How did you think about that? And do you agree with the common wisdom of, you know, "Oh, endowment funds, they're, they're so stable." Is that true?

   16. NTNikhil Basu Trivedi39:18

       Yeah. Yeah, so we, we wanted some diversity. And I think we have about 15 institutional LPs. We have six university endowments. Uh, y- you know, I think three other foundations. So we're a little bit weighted towards endowments and foundations.

   17. HSHarry Stebbings39:31

       Mm-hmm.

   18. NTNikhil Basu Trivedi39:31

       But we have a bunch of fund of funds, and we have a couple family offices as well.

   19. HSHarry Stebbings39:35

       Mm-hmm.

   20. NTNikhil Basu Trivedi39:35

       And so we like that mix because while the endowments are great names and, uh, they are long-term oriented, there's still some level of risk of having an entire endowment-based LP base.

   21. HSHarry Stebbings39:48

       Mm-hmm.

   22. NTNikhil Basu Trivedi39:48

       Uh, because they may all sort of have the same denominator effect issues at the same time. They also perhaps tend to be more aligned in what they care about. And so we i- in general like the diversity. And that's what we prioritized.

   23. HSHarry Stebbings40:04

       To what extent are LPs sheep? And what I mean by that-

   24. NTNikhil Basu Trivedi40:07

       Mm-hmm.

   25. HSHarry Stebbings40:07

       ... I mean, like, you have some blue-chip, blue-chip endowment names that I'm sure we both know.

   26. NTNikhil Basu Trivedi40:11

       Yeah.

   27. HSHarry Stebbings40:11

       And people generally follow when they do it. Is that true?

   28. NTNikhil Basu Trivedi40:15

       Yeah. Yeah. Look, I think that there's, especially in a first fund, there's a handful of LPs around the world, at least that I know of and have met, who are truly independent-thinking, who will truly raise their hand and say, "We're willing to do a first-time fund, and we're willing to be the first commitment or the first big commitment." That group of LPs is very small. Um, it's probably... I don't know, what do you think? Do you think it's 10 LPs, 15?

   29. HSHarry Stebbings40:41

       Yeah, yeah. E-

   30. NTNikhil Basu Trivedi40:42

       Something like that, I would say.
4. 46:02 – 49:11

   Strengths and Weaknesses in VC Funds / Anaylzing Self and firm as VC

   1. HSHarry Stebbings46:02

   2. NTNikhil Basu Trivedi46:02

      My worst right now that I feel is, is on the sourcing side. You know, I think when you're a duo investing at seed and A as a generalist firm, it's impossible to see everything you wanna see.

   3. HSHarry Stebbings46:15

      Mm-hmm.

   4. NTNikhil Basu Trivedi46:15

      I think it's hard, too, when you have started a firm and you have other responsibilities, to be able to purely focus on sourcing companies.

   5. HSHarry Stebbings46:23

      Sure.

   6. NTNikhil Basu Trivedi46:23

      We do calendar audits, and, and, um, uh, Catherine and Rachel, who are our operations folks at Footwork, uh, actually send both Mike and me every week. Uh, what does our calendar audit look like for this c- this, this week that's just passed, and what does it look like for the upcoming week? And the main, the single metric that we're focused on there is, are we spending more than 50% of our time on meeting new companies and sourcing new investments? I firmly believe you have to spend the majority of your time on those things to be able to find the next great one. And the beauty of our business is the next one can be the one, right? The next one can be the one that changes everything and, and the trajectory of the firm. And so-

   7. HSHarry Stebbings47:01

      So you're gonna peel off boards, 'cause you're not gonna be able to keep that ratio.

   8. NTNikhil Basu Trivedi47:04

      Yeah. Yeah.

   9. HSHarry Stebbings47:04

      ... uh, uh, keeping 'em.

   10. NTNikhil Basu Trivedi47:04

       And so tha- that's certainly something we're gonna have to figure out. And there's lots of things we're gonna have to do to figure out how to scale this firm. Um, but again, I would say sourcing's where I feel weakest at the moment. I think conversely, on the helping side, uh, I feel like while we don't talk about the great platform that we have and we don't have a bunch of people that support our companies, Mike and I really do the work. And we try to really be there for the founders that we work with. I do think it's at a different level from others. And, you know, I think when you only make a handful of investments every year, when each one really matters to you because you're leading those rounds, you can deliver that type of, of really personalized support. And th- that's so much of why we've built this firm. And I do feel really great about that d- that dimension. And, and I think y- you would find it in the references you do with our founders, which to me is one of the most important metrics.

   11. HSHarry Stebbings47:57

       Do you buy the platform value-add services generation that we saw?

   12. NTNikhil Basu Trivedi48:02

       Look, I think there's a handful of firms that have done it well, but every firm getting a head of talent and, you know, a head of-

   13. HSHarry Stebbings48:09

       Well, it's just also if we just break down a head of talent more, like, that's a great example. But, like, if you're hiring a head of developer relations and a company re- comes to a head of talent, that is a fundamentally different hire to a CMO. What you need to be able to discern-

   14. NTNikhil Basu Trivedi48:21

       Yeah.

   15. HSHarry Stebbings48:21

       ... between... They are not gonna be the same. They're not gonna be the same network.

   16. NTNikhil Basu Trivedi48:24

       (laughs)

   17. HSHarry Stebbings48:24

       So at the end of the day, they're writing a JD and working the process with a firm.

   18. NTNikhil Basu Trivedi48:29

       Yeah.

   19. HSHarry Stebbings48:29

       S- s- not that great. (laughs)

   20. NTNikhil Basu Trivedi48:31

       No. And it's a muscle that the great companies build themselves.

   21. HSHarry Stebbings48:34

       Yeah.

   22. NTNikhil Basu Trivedi48:34

       And so there are a handful of firms that have platform offerings that have moved the needle. Um, but most of those platform offerings are about scaling the firm themselves (laughs) versus about actually scaling companies and, and, and really helping companies, uh, get to the next level. That's certainly my firm belief.

   23. HSHarry Stebbings48:55

       Can I ask you one, one more before we do a quick-fire? I think you learn a lot from your biggest hits and your biggest misses. When you think about that, what would you say is your biggest hit, other than Canva-

   24. NTNikhil Basu Trivedi49:06

       Yeah.

   25. HSHarry Stebbings49:06

       ... which you shared about? What would you say is your biggest hit, and how did that change your mindset on what good investing is?

5. 49:11 – 57:22

   Biggest Wins and Losses

   1. HSHarry Stebbings49:11

   2. NTNikhil Basu Trivedi49:11

      I actually think my biggest hit right now, um, at least as I-... can best predict it, um, is not, is not Canva. Dollar gains perspective and on an IRR basis as well. It's a company called The Farmer's Dog, which is in the pet food space. And i- it's, uh, subscription service for fresh pet food. It's doing fabulously well. Uh, and I, I love it because not many people know about it. Uh, and I-

   3. HSHarry Stebbings49:39

      I do.

   4. NTNikhil Basu Trivedi49:39

      ... love this thing.

   5. HSHarry Stebbings49:39

      I invest in a UK c- like alternative. It was a tough business. (laughs)

   6. NTNikhil Basu Trivedi49:45

      (laughs) Um, and so, it's two things. First, that some of the best businesses are incredibly simple, and they're simple to understand, um, they're actually simple to build, um, but they're based on unique insights, and I think that that's gonna be the story of The Farmer's Dog once the story fully, fully gets out. And the second is, the pet category is a fabulous category. And there are some markets where the tailwinds are just so strong-

   7. HSHarry Stebbings50:19

      Mm-hmm.

   8. NTNikhil Basu Trivedi50:19

      ... in multiple different ways, that there's a lot of opportunity for, for, you know, i- incredible enterprise value and, um, I think that that's the case for The Farmer's Dog.

   9. HSHarry Stebbings50:30

      So, okay, that's the winner. What about a miss, and what did you learn from that?

   10. NTNikhil Basu Trivedi50:36

       The first one that comes to mind that I've reflected on a few times over the last year is, uh, Figma. You know, I spent time with Dylan Field in the very early days. I was actually one of the early interviewers for the Thiel Fellowship Program-

   11. HSHarry Stebbings50:47

       Mm-hmm.

   12. NTNikhil Basu Trivedi50:47

       ... which he was in. And I remember going on walks with him in Palo Alto, and a little bit like you actually, he was mature for his age. Now, I'm trying to think back to our first meetings-

   13. HSHarry Stebbings50:57

       Uh-huh.

   14. NTNikhil Basu Trivedi50:57

       ... in, in San Francisco and London. You were mature in certain ways, you were immature in other ways.

   15. HSHarry Stebbings51:01

       Mm-hmm.

   16. NTNikhil Basu Trivedi51:02

       But, Dylan (laughs) was really mature in a bunch of different ways, like the way he was thinking about, um, the need for perfecting the product before getting i- it out there. Um, the opportunity to, to go after, uh, Sketch and others that were in that, in that market already. But also just on life-related stuff, like I remember asking, him asking me about my relationship with my then girlfriend, now wife. How we make decisions together, and how, how we communicate, and what's good about our communication, what's poor in our communication. All sorts of stuff like that where I think he was about 20 years old-

   17. HSHarry Stebbings51:35

       (laughs)

   18. NTNikhil Basu Trivedi51:35

       ... at the time, maybe even younger than that. I don't think I've still seen anyone at that age be able to think about those things, in sort of work and personal life at the level that he was thinking about. I've reflected on that a bunch of times, because I wish I could've been in both Canva and Figma. (laughs)

   19. HSHarry Stebbings51:50

       Why did you not?

   20. NTNikhil Basu Trivedi51:53

       This comes back to my bias around wanting to see some early signs of product market fit before investing, and Figma did not have a launched product before its first couple venture rounds.

   21. HSHarry Stebbings52:03

       Oh.

   22. NTNikhil Basu Trivedi52:03

       So I give the folks that did those rounds, I think, uh, Jon Lilley at Greylock and Danny Rimer at Index-

   23. HSHarry Stebbings52:09

       Yeah.

   24. NTNikhil Basu Trivedi52:09

       ... if I'm not mistaken, I give them a ton of credit, because they saw the specialness, I think, in Dylan, and in that market opportunity.

   25. HSHarry Stebbings52:16

       And were willing to wait, 'cause there were a couple of years where it was like, "When's he actually gonna-

   26. NTNikhil Basu Trivedi52:19

       That's right.

   27. HSHarry Stebbings52:20

       ... release something?"

   28. NTNikhil Basu Trivedi52:21

       Th- they were willing to do it and then be patient enough.

   29. HSHarry Stebbings52:23

       Yeah.

   30. NTNikhil Basu Trivedi52:23

       And I think there were multiple rounds. Um, uh, I think I talked to Jon Lilley at Greylock about this. M- multiple rounds that, that Jon was involved in before the product even launched, um, which is incredible.
6. 57:22 – 1:08:22

   Quick Fire Round

   1. NTNikhil Basu Trivedi57:22

      you that. (laughs)

   2. HSHarry Stebbings57:22

      Um, I wanna do, (laughs) I wanna do a quick fire round, my friend.

   3. NTNikhil Basu Trivedi57:24

      Mm-hmm.

   4. HSHarry Stebbings57:24

      So I say a short statement, you give me your immediate thoughts. That sound okay?

   5. NTNikhil Basu Trivedi57:27

      Okay. Let's do it.

   6. HSHarry Stebbings57:28

      So what have you changed your mind on in the last 12 months?

   7. NTNikhil Basu Trivedi57:30

      AI as being a very, very interesting category. I honestly don't know if there's great AI first opportunities for us at Footwork to invest in. And that's because of just the insane hype cycle around it at the moment.

   8. HSHarry Stebbings57:45

      Do you not think ... I, it's, uh, that is too good (laughs) of one for me to not say, you know. Do you not think though, that bluntly, people always overestimate adoption cycles and underestimate like long-term value adoption?

   9. NTNikhil Basu Trivedi57:58

      Yeah. I, I think that's right. I think-

   10. HSHarry Stebbings57:59

       So, so I, for, for us, I think there absolutely will be amazing opportunities, but we don't have to shoot the fund out in-

   11. NTNikhil Basu Trivedi58:05

       Exactly.

   12. HSHarry Stebbings58:05

       ... 12 months on it.

   13. NTNikhil Basu Trivedi58:06

       Yeah.

   14. HSHarry Stebbings58:06

       It could be (laughs) three, four, five years out.

   15. NTNikhil Basu Trivedi58:08

       Yeah. And I, I just think we over rotated once again very, very quickly towards excitement here. And again, I'll admit at the very beginning of playing around with ChatGPT and, and, and other products, Midjourney, I was very excited just like everyone else. But as I've thought through the venture investments here, uh, I, I, I don't think there's a lot of AR- AI first, AI enabled companies that are gonna be for us in this phase. And yet I do believe-

   16. HSHarry Stebbings58:37

       Because they're too expensive.

   17. NTNikhil Basu Trivedi58:39

       Too expensive, and, and there's just so much competitive noise. And there's also so much that I think, for example, in the large language model world, the, the LLMs themselves will serve as a use case versus an application layer on top of those LLMs. So for example, you know, I've heard there are several companies now that have grown rapidly in ARR, and have now started declining in ARR, um, as retention actually starts to, to affect these businesses. Because there's churn from folks who just try out products built on top of these LLMs, 'cause they're interested in the novelty of them, but then, y- you know, churn away. And there's also just the reality that as ChatGPT itself gets better, in leveraging GPT-4 and other models, as an example, it, it, it, it serves those use cases that some of the application layers on top of ChatGPT and GPT-4 have tried to serve.

   18. HSHarry Stebbings59:32

       Well, I think people are forgetting novelty enterprise buying, which is like-

   19. NTNikhil Basu Trivedi59:35

       Yes.

   20. HSHarry Stebbings59:35

       ... there's a lot of AI companies, as you say, you have Walmart, McDonald's, Porsche, and it's like, you know, two people in their design team testing it out with the 10-K.

   21. NTNikhil Basu Trivedi59:42

       Yes. Yes.

   22. HSHarry Stebbings59:43

       And that is not the same as enterprise wide roll-outs. Okay. What would you most like to change about the world of venture?

   23. NTNikhil Basu Trivedi59:48

       People talking about AUM as a metric. I think AUM is the stupidest thing to talk about as a venture firm. Because back to what we were talking about earlier, small funds outperform larger funds. And so, you really shouldn't be talking about how much capital you've raised. I'm okay with people talking about how much capital they've returned and how much enterprise value they've created. But I just think talking about the aggregate size of all the funds that you've raised is a complete vanity metric.

   24. HSHarry Stebbings1:00:17

       I think the enterprise value of like portfolio companies is total bullshit though, too.

   25. NTNikhil Basu Trivedi1:00:21

       Hmm.

   26. HSHarry Stebbings1:00:21

       Just so I could invest in, you know, Figma and the series E.

   27. NTNikhil Basu Trivedi1:00:24

       Fair enough.

   28. HSHarry Stebbings1:00:24

       And then it's like, "We've created $35 billion." And you're like, "Come on, you put in 500K in D."

   29. NTNikhil Basu Trivedi1:00:30

       Fair enough. Fair enough.

   30. HSHarry Stebbings1:00:30

       I, I've seen some ... Do you know what I mean though? (laughs)

Episode duration: 1:08:22