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Now is the Time for the App Layer | OpenAI & Anthropic Won't Win the App Layer | Mike Mignano, USV

Mike Mignano is a General Partner at Union Square Ventures, one of the most iconic venture firms in the world, whose investments include Coinbase, Stripe, Etsy, Twilio, Cloudflare. Before joining USV, Mike was a Partner at Lightspeed, where he backed breakout AI companies including Granola and Suno. Prior to investing, he co-founded Anchor, acquired by Spotify. ----------------------------------------------- Timestamps: 00:00 Intro 00:57 Fear of Failure vs Thrill of Winning 05:34 Why Mike Left Lightspeed for USV 07:43 We're Past the AI Infrastructure Phase — Now It's About Applications 09:50 Is AI "Always On" the Future? 12:07 The Rebel Alliance: USV's Thesis on Open Weights & Human-Aligned Agents 15:07 What Happens If We Hit Recursive Self-Improvement? 16:17 The S-Curve Future: AI Plateaus & the Market Commoditises 18:28 Who Is Your Agent Actually Working For? 21:04 Engineering Teams Are Getting Smaller 25:18 80% of Enterprise Tasks Don't Need Frontier Models 26:00 China's Open Source Lead 26:39 Is There a $50B Company to Be Built in the Routing Layer? 29:49 USV's Long Bet on Energy Since 2021 32:37 "Don't Automate - Obliterate": How USV Picks What to Invest In 34:36 How Abridge Built a Healthcare Moat Over 8 Years 38:01 The Model Provider Threat to the Application Layer 40:17 Why Being First & Moving Fast Is the AI Product Playbook 43:35 Series A Valuations Are Now $80–150M Post 51:06 Biggest Investing Lesson: Never Project Your Own Ideas on Founders 52:30 Founder, Market, Product 54:45 Suno: Thesis-Driven Bet vs Granola 57:37 Suno at $5B 01:00:15 Is Traditional Media Dead? 01:02:23 Quick Fire Round ---------------------------------------------------------------------------------------------- Subscribe on Spotify: https://open.spotify.com/show/3j2KMcZTtgTNBKwtZBMHvl?si=85bc9196860e4466 Subscribe on Apple Podcasts: https://podcasts.apple.com/us/podcast/the-twenty-minute-vc-20vc-venture-capital-startup/id958230465 Follow Harry Stebbings on X: https://twitter.com/HarryStebbings Follow Michael Mignano on X: https://twitter.com/mignano Follow 20VC on Instagram: https://www.instagram.com/20vchq Follow 20VC on TikTok: https://www.tiktok.com/@20vc_tok Visit our Website: https://www.20vc.com Subscribe to our Newsletter: https://www.thetwentyminutevc.com/contact ----------------------------------------------- #20vc #harrystebbings #ai #mikemignano #usv #startups #applayer #openai #anthropic #tokenmaxxing

Mike MignanoguestHarry Stebbingshost
Jul 6, 20261h 11mWatch on YouTube ↗

EVERY SPOKEN WORD

  1. 0:00 – 0:57

    Intro

    1. MM

      We have never handed over so much of ourselves to a technology before than we're about to do with agents. As a startup, you need every advantage you can get right now.

    2. HS

      Today, I'm thrilled to welcome Mike Mignano, who is the newest general partner at USV, to the show.

    3. MM

      If I were the CEO of a startup right now, I would actually still be pounding the table to maximize token spend. We like to bet on businesses that literally obliterate markets and existing business models.

    4. HS

      He's also one of the early investors in Suno and Granola in his prior days. He's a former founder, having sold his business, Anchor, to Spotify many years ago.

    5. MM

      This era of building AI products is, in many ways, about being first and about moving really, really fast. I think traditional media, in many respects, is dead.

    6. HS

      Ready to go? [upbeat music]

  2. 0:57 – 5:34

    Fear of Failure vs Thrill of Winning

    1. HS

      Mike, dude, I am so looking forward to this. We first did our show when you were co-founder of Anchor.

    2. MM

      Correct.

    3. HS

      And, uh-

    4. MM

      10 years ago

    5. HS

      ... 10 years ago. I-

    6. MM

      I looked it up

    7. HS

      ... I was underage. And-

    8. MM

      [laughs]

    9. HS

      And I remember Anchor was, like, the hottest thing in New York and in startups at the time. And I was, I was legit 18, 19, and I was absolutely shitting myself before our show 'cause, like, you were the-

    10. MM

      Really?

    11. HS

      Yeah. You were the it boy of venture at the time.

    12. MM

      For a minute. Like, five minutes-

    13. HS

      Yeah

    14. MM

      ... maybe, at most.

    15. HS

      Well, now you get 20 seconds-

    16. MM

      [laughs]

    17. HS

      ... so I'd appreciate it. Um, dude, I, I wanna start, actually, with something that I ask a lot of great founders, but given your founding roots, I wanna ask it of you. It's are you motivated more by the fear of failure or by the thrill of winning?

    18. MM

      I think both to some extent. I think the fear of failure is very, very, very important. I actually strongly believe that great, great things, great companies, great products, great people come from constraints, and I think that failure is the ultimate form of a constraint. You know, you talked about Anchor. Somebody just asked me the other day, they said, "At what point in your life did you do your best work?" And I thought about it, and the, the honest answer to that question was, [laughs] I believe I did my best work when we were three months out of cash. When we were about to run out of money and when we were about to fail is when we did our best work. It's so clarifying to know that you're gonna fail unless you turn the thing around. And so I think failure can be an incredible motivator, but I also think that you have to have insanely ambitious mission that you're trying to accomplish, right? You want, you wanna win. You have this hunger to achieve something really hard and really, you know, impossible-sounding. So I actually think you need to hold both things in your head to be successful, and I, and I try to do that.

    19. HS

      We were talking before about, like, insights that we had years ago. Um, years ago with Anchor, you wanted a very natural, conversational style record and let people listen in, and I was always like, "Nope, we want manufactured." Um, [laughs]

    20. MM

      You were doing clips way before clips were cool.

    21. HS

      We were doing, we were doing clips. I was absolutely into the airbrushing of audio as we do today.

    22. MM

      Yeah.

    23. HS

      And we disagreed on that.

    24. MM

      Yep.

    25. HS

      What are your thoughts on that now?

    26. MM

      There's so much content, and the tools have gotten so much better that out of the box you can have a really, really decently sounding or looking podcast with almost no effort. And so if you wanna break out, you actually have to go above that. The baseline has to be excellence. The baseline has to be incredible editing. The baseline has to be, you know, a, a phrase that you used back, I remember, 10 years ago, insights per minute. And so now I'm actually a, a huge fan of insanely high production value when it comes to podcasts, when it comes to YouTube videos. Um, you know, we, we were talking a little bit before. You, you asked me about some of the content I've been producing and, um, you know, we've tried to do something very, very different where we actually break out of a studio, and we bring in multiple cameras and multiple mics, and we try to do something very, very, very high production value because I think that's the only way to stand out. So anyway, I think you were right.

    27. HS

      Uh, uh, but, but I mean-

    28. MM

      But it took me 10 years to agree with you. [laughs]

    29. HS

      Listen, I was totally fishing for that. I was right.

    30. MM

      [laughs]

  3. 5:34 – 7:43

    Why Mike Left Lightspeed for USV

    1. HS

      to make that move, dude?

    2. MM

      I decided to go to USV because I am from New York. Uh, I've always been in or around New York, and as a builder, when I was building Anchor in New York 10 years ago, I got to meet USV. And I had an incredible ex- despite them passing, had an incredible experience. Started a very, very long friendship. I ultimately became an LP in the funds, and I just really always appreciated their ability and their willingness to be really opinionated and to be very, very thesis-driven, even at times in which the market said it makes s- made sense to be very consensus-driven. And by the way, there have been times in the market, including recently, where being consensus-driven has been extremely valuable and extremely lucrative as a fund, so. But the way I like to work, the way I like to build, the way I like to bet is, is by being thesis-driven. And, and I recognize that Being thesis-driven can also be super risky, right? If you bet on a thesis and you're wrong, you miss and you fail.

    3. HS

      Well, the, well, the trouble is a thes- thesis, thesis-driven can also be conventional. And, and so, and so what I'm actually worried about is that what if the winners of venture and what if venture is just from this point out consensus-driven?

    4. MM

      So I think that we are coming out of a time in the market where we have undergone-- we, we have went through a massive infrastructure build-out in AI. We've had these new companies, these new, these companies building these brand-new technologies which has, which have required vast amounts of capital to build out the infrastructure. And obviously, I'm talking about the labs. I'm talking about OpenAI, Anthropic, xAI, SpaceX, et cetera. And those required a lot of capital, and they produced magical technology that has generated billions. We're, we're about to see trillions of dollars in value. Um, but now that infrastructure is built, and it reminds me a lot of the early days of the inter- of the internet when we built out fiber and we built out broadband, and then we had these new technologies to play with. And the internet came along, and an application layer came along and took advantage of that new technology.

  4. 7:43 – 9:50

    We're Past the AI Infrastructure Phase — Now It's About Applications

    1. MM

      To me, it feels like we are back in that mode right now where we've got this infrastructure and now it's time for the applications to be built. And I think there's gonna be so many applications, so much software, uh, that you're not really gonna be able to make a bet unless you know what you're looking for. And I think that's what USV has always been great at, knowing what they're looking for and placing the bet when they see it.

    2. HS

      Brendan McCaw said the other day, uh, we will see much greater value accrue in the next 24 months at the infrastructure layer than we will at the application layer. Agree or disagree?

    3. MM

      I think there is still value to be created and accrued to the infrastructure layer. We're not done. The build-out's not done. Um, but I also think now that we've got, uh, enough new toys at the technology that we will see massive value crea- creation in the application layer as well.

    4. HS

      Do you think the future of AI is always on? Sam Altman is suggesting so more and more in his kind of verbiage. God, it makes me excited for Nvidia if [laughs] the future of AI is always on. Do you agree with that?

    5. MM

      I do think that we're entering a world in which context is increasingly valuable for the labs and also for the application layer, right? And so I think we will see products and businesses increasingly try to push us further and further along the edge to an always-on world. I mean, I can remember 10 years ago when I got, you know, an Alexa in my home and thinking to myself, "Wait a minute, this is, this is always listening for the wake world-- for the wake word?" And now we've, I think to your point, we've kind of moved past that, where, you know, let's say you're in a meeting. Uh, in-- you know, you're, you're, you're having a meeting. You're having a-- You're in a conference room. I think, you know, more often than not, I'm hearing somebody say, "Hey, I'm Granola-ing this," right? So I think we are moving more and more towards that world, for better or worse.

    6. HS

      Do you think the multi-stage funds deliver an amazing pre-seed and seed product? Because I, I... Okay, so I say this. I, I, I think you're probably also-- and there's no problem with this, but I think you're a little more protective of your brand than me. I don't worry about upsetting

  5. 9:50 – 12:07

    Is AI "Always On" the Future?

    1. HS

      people.

    2. MM

      [laughs]

    3. HS

      I-- The worst place to be is a $50 to $100 million seed fund. You will get crushed by the large funds who are able to write large checks and lead rounds, but you're also not small enough to be collaborative. Very difficult middle ground to be in, I think. Do you agree?

    4. MM

      I think the best funds in the world at doing seed are really, really good about building their networks and meeting amazing people. I think you've been doing a good job recently at empowering a new class of entrepreneurs here in Europe and in London, uh, with very, very, very early-stage seed checks. So I think you have to build a great network. I also think to do seed well, you have to put your ideas out there into the world. You have to show the market what you're looking for. You have to b- be willing to take a stand and take a position and say... You know, I, I just put out a, a, a post yesterday about, uh, the Rebel Alliance and saying, "Hey, at USV, we're really interested in the Rebel Alliance," this new univer- this new universe of open weight models and open source harnesses and distributed compute and agents, right? Human-aligned agents. And I think when you put things out into the world, you're, you're sending up a bat signal that's telling these early-stage founders that maybe haven't gone out into the world yet with a product, "Oh, this is the VC," or, "This is the person," or, "This is the team I should be talking to." So I think you need a great network, I think you need to ship your ideas, and I think you need to be willing to take bets on people, which again, I think you've done a, a good job of with your program.

    5. HS

      Can I ask you on the-

    6. MM

      Sure

    7. HS

      ... kind of sh- shipping ideas, and this is why I love asking Advice Bun, is what if the ideas aren't fully formed? What if I'm just wrong and, and then I get a deluge of companies and actually the thesis wasn't what I thought it would be?

    8. MM

      I think that's totally okay.

    9. HS

      It is?

    10. MM

      I think much like building a startup or building a product, I think if you're investing, you also have to be willing [chuckles] to put yourself out there and take a risk and, and place a bet. Now listen, you can hedge that bet a little bit. You can place a counterposition bet in something else maybe to offset the risk of that. But I think you have to be willing to put yourself out there if you wanna succeed at anything in technology, whether it's a startup or a venture capitalist.

    11. HS

      Open weights, open harnesses, open models.

  6. 12:07 – 15:07

    The Rebel Alliance: USV's Thesis on Open Weights & Human-Aligned Agents

    1. HS

      Ding, ding, ding, ding. We're gonna do a prediction round. Fun.

    2. MM

      Okay.

    3. HS

      We-- I told you we had this like truth or like donate round with Chia.

    4. MM

      Sure. Yeah.

    5. HS

      This is a new prediction round. The model landscape in five years' time, what does that mature-er, not mature, but mature-er market look like in terms of composition? The players, their weightings, what does that look like?

    6. MM

      You know, one future is that the labs, especially the ones that are starting to approach something that feels like super intelligence, once they reach it, uh, if they reach it, once they reach it, we will have some form of recursive self-improvement such that we hit this exponential- ... growth of intelligence. And, you know, the h- the, the thinking goes that whoever gets there first will run away with it, right? Once you reach recursive self-im- self-improvement, you're gone. No one can catch up. And I think that is, uh, yeah, that's, that, that's not necessarily the future [laughs] that I am hoping for.

    7. HS

      For everyone who doesn't know-

    8. MM

      Yeah

    9. HS

      ... what is recursive self-improvement?

    10. MM

      This is, this is, this is self-improving AI, right? This is, this is super intelligent AI that can do its own AI research, right? So once you have it, once you deploy it, it can just continually re- improve itself on the exponential forever until it plateaus, until it self-limits in some way. And by the way, we don't, we don't know what that self-limiting factor may be. It may be that for some reason these architectures, you know, the transformer architecture, let's say, doesn't scale past a certain point. We don't know if that's going to happen. It could be that, uh, the model needs, uh, s- some amount of data that it can no longer access, right? There's a limit to the amount of data. It may mean that we can't keep up with the hardware infrastructure build that we need to, to keep, uh, recursively self-improving. So in the, in the past, in the history of new technology adoption, I mean, if you study them, they actually all follow S-curves, right? They have a slow takeoff, then they have what feels like an exponential ramp up, and then they plateau for some reason, like we just discussed. And that's potentially the second future for AI, right? We, we reach some plateau in terms of intelligence, and I think if that happens, then the technology might start to look somewhat more like a commodity, right? If it plateaus, then we're at a point where all the other labs can catch up, and they can all have the same technology. And if they all have the same technology, then we're gonna have a lot of competition. We're gonna have a lot of competition on, in terms of price, in terms of product experience, um, and in terms of the various components that make up the new intelligence stack.

    11. HS

      Okay, so if we go on the route one, recursive self-improvement, and it leads to this kind of exponential advancement, is that done by an OpenAI or an Anthropic or a leading model provider today, or is that done by a Recursive or one of the

  7. 15:07 – 16:17

    What Happens If We Hit Recursive Self-Improvement?

    1. HS

      many others going after it? I was literally for two hours in Shoreditch yesterday with one. Uh, it... Or is that done by an entirely new company focused on recursive itself?

    2. MM

      Yeah. I th- I think it's probably done by one of the labs that already has all these advantages, these vast compute advantages. They already have models that are at the frontier. They have the infrastructure. They have the chips. So I think it's probably done by one of them. That said, there are a bunch of amazing researchers working on incredible new architectures that maybe haven't broken through yet, but maybe they can. Maybe they're building something that is better than the transformer, right? There are a number of these labs out there, thinking machines, safe super intelligence from Ilya and Daniel. I think if I were to, to bet, I would, I would say the labs that already have the advantages, but that doesn't mean there isn't a new architecture being worked on in a lab somewhere that could leapfrog all of it.

    3. HS

      Okay. Number two is that actually we have less of this kind of exponential and more of a linear style. When you look at that kind of more mature market-

    4. MM

      Yeah

    5. HS

      ... on the S-curve basis, what does that composition look like in terms of market between open and closed and Anthropic and OpenAI?

  8. 16:17 – 18:28

    The S-Curve Future: AI Plateaus & the Market Commoditises

    1. MM

      I think in that world, enterprises and, and, and individuals are probably optimizing for a couple of things. I think they're probably optimizing for cost, right? They're starting to think about the trade-offs between intelligence and spend and how they can optimize their token spend. So what does that mean? It probably means, you know, leveraging things like open weight and open source models. It probably means leaning into things like the routing layer to optimize the token usage towards, you know, the, the model that maybe gives you the most bang for your buck rather than always just token maxing and picking the most powerful model. I think the other thing it looks like is choosing tools and products and, you know, uh, one of y- you know, hate to use the new, the new buzzword of the past six weeks, harnesses that are maybe a little more human aligned. And-

    2. HS

      Can you help me? What the fuck is a harness?

    3. MM

      [laughs] A harness-

    4. HS

      No, seriously, I feel so bad for that.

    5. MM

      No, I know.

    6. HS

      Do you know, on, on X, I really want to do grok what is a harness, but I know everyone-

    7. MM

      Yeah

    8. HS

      ... will be like, "Oh, harness."

    9. MM

      I think of the harness as the application that tightly, tightly couples with the model. So in the case of, you know, Claude, it's like the Claude desktop app, and I would say specifically Claude Code and Claude Cowork that are sort of having this, this loop, this, this flywheel of product and model sort of engagement. Um, you know, some other harnesses that I think people are pretty excited about are, are things like Hermes. I consider Hermes a harness that you, that takes over your Mac Mini. I don't know if you've set it up yet. Um, Pi from Irondale is another great harness, European company. Um, so-

    10. HS

      Someone, someone legit called a harness after, like, one of the greatest fashion brands.

    11. MM

      What's that?

    12. HS

      Hermes is, like, a fashion brand.

    13. MM

      Oh, right. That's... Well, isn't that Hermès?

    14. HS

      Well, it's spelt the same, dude [laughs] .

    15. MM

      [laughs] Good point. So a- anyway, I think, I think having products, agents, harnesses that are human aligned and aligned with your own goals and incentives, I think is gonna be really, really important. I think people are going to be a little more self-conscious about the incentives of the model they're using. Obviously, the incentives of the models that come out of the big labs are to make the lab's models smarter, better,

  9. 18:28 – 21:04

    Who Is Your Agent Actually Working For?

    1. MM

      faster. And you might, you might think to yourself, "Hey, if I'm outsourcing all of my agency and all of my personal information and these goals and my credit cards and all these things to an agent, I want that thing to work for me. I want that thing to be completely aligned with my incentives." Um, you know, I published a thing a few weeks ago, a few weeks ago on X called, um, Who Is Your Agent Working For? And- That was the big idea we were trying to get across with that, and that I think in the future, as you become more and more comfortable handing over the keys to an agent, you're want- you're gonna wanna know that it's working for you. So I think that's a little bit like what that second future looks like.

    2. HS

      I have to say, I think people will get incredibly comfortable handing over the keys in the same way that we got incredibly comfortable putting our credit cards online, using Apple Pay, finding our, our husband or wife online. Um, and I think that will be de facto in five years.

    3. MM

      I, I, I think there's a chance you're right, but I-

    4. HS

      But I, I don't think anyone gives a shit about privacy other than hardcore technologists, and I know that's blunt and I'm gonna get killed for that.

    5. MM

      No, no, no, you're not. I, I think there's a good chance you're right. Uh, you know, if we're just thinking in terms of bets and probabilities-

    6. HS

      Yeah

    7. MM

      ... I think the history of the internet and personal computing suggests that you are right, Harry. But two things. First is I think we have never handed over so much of ourselves to a technology before than we're about to do with agents. Yes, you're right. We browsed the web. We used Chrome. We used, um-

    8. HS

      But it didn't do shit for us.

    9. MM

      It didn't do shit for us.

    10. HS

      Yeah.

    11. MM

      Right. We, we still got to control it, right? Yes, maybe we, we, we let these companies learn about our interests and the things we care about, but it wasn't out buying stuff for us, right? It wasn't out sending very personal messages to family members and loved ones. It wasn't a second self, right? It wa- it wasn't us. I think now we're gonna be doing stuff like that, and it might just make us think a little bit more about the incentives of the model that are doing those things for us. That's number one. Number two, I'm not sure that every model and every agent needs to be superhuman aligned. I'm not sure every person needs to care about it. I just think enough people have to care about it such that one player or a few players keep the others in check, right? I think we need market forces where a couple of good actors keep the rest of the other actors in check. So I, I, I think it's possible now. Is it gonna happen? I don't know. History says it won't, but I think it's possible.

  10. 21:04 – 25:18

    Engineering Teams Are Getting Smaller

    1. HS

      Do you think Dario's had a massive own goal in terms of marketing and messaging? He, he's been saying about labor displacement for years. "Oh, everyone's gonna be unemployed." And telling your customers they're gonna be unemployed is always a bold statement.

    2. MM

      What I see in Anthropic is I see an extremely mission-driven company, and I believe that mission-driven companies can be very, very successful. And Anthropic, you know, love 'em or hate 'em, there's no doubt they've been extremely successful. I think at the time of us recording this, they're the most valuable privately held company in the world.

    3. HS

      You know, I think core to the will they continue the exponential revenue growth that they've had is percent of spend in terms of developer salaries on tokens, and Marc Benioff said that he spent $300 million on Anthropic, which equ- on specifically for the dev team, which equates to 3.8% of dev salaries spent on tokens. Now, if that goes to 20%, Anthropic's grossly undervalued, that exponential revenue will continue, and well done everyone who's invested and all their employees. Great. If it goes to 100%, holy shit, this is just so much more big, larger than we ever thought-

    4. MM

      Yeah

    5. HS

      ... it could be. But if it stays or if we see migration to open models, it's a very different game.

    6. MM

      I think it's a risk. I think there are two schools of thought playing out right now w- with regards to token spend. I think one school of thought, which we're seeing, and I think when I really think about it probably applies more to the incumbents and the big companies, the Salesforces of the world rather than the startups, is that if every employee is just spending like crazy on tokens, the fundamentals of these businesses are gonna be in trouble. They're just too big, right? There are too many employees at a Salesforce or, I don't know, a Microsoft such that every employee can just have an unlimited token spend budget. So I think we're gonna see a lot of those companies start to constrain their spends, and we've seen mentions of things like these on X recently.

    7. HS

      We've seen Meta, Uber, Microsoft this week.

    8. MM

      Totally.

    9. HS

      Yeah.

    10. MM

      I think if you're a startup, the calculation probably looks a little bit different. Your organization is smaller, right? So you're not gonna have a situation where you have 5,000, 10,000, 50,000 employees just spending out of control. You can, you can more tightly control the spend. But also, I think as a startup, you need every advantage you can get right now. And so if I, you know, if I were the CEO of a startup right now, I would actually still be pounding the table to maximize token spend on the, on the right things, right? Definitely with coding, maybe not with other things. Just for simple tasks like summarization or, you know, operations type work, I'd probably be leveraging Sonnet or something. But if, if I'm at a startup and I'm coding, I wanna be using the frontier. I want every advantage I can get against Salesforce.

    11. HS

      And so if you are the best dev, are you gonna go to a big incumbent who are gonna give you a budget and really constrain your abilities in terms of model usage, or are you gonna go to a startup where fundamentally they say, "Hey, it's a free-for-all. Be your best self"?

    12. MM

      I think you're gonna go to a startup, especially the startups right now that are mission-driven, especially the startups that are mission-driven, which by the way, I don't know that we've really been in that mode for the past couple of years. Yes, Anthropic's been mission-driven, but there's so much money and capital sloshing around the valley in this ecosystem, I think a lot of companies haven't needed to be mission-driven. I think now they will, and it's gonna work to their favor.

    13. HS

      Do you not think we enter a world though now where Fable will come back in some rejuvenated form one way or another, where Fable comes back and newer and better models come back, and you just have the 100X engineer, and you pay for that token spend, which is enormous, with the replacement of the 10 other mid engineers?

    14. MM

      I do think eng- engineering organizations are going to evolve. Um, I don't know exactly what it looks like yet, but I think you will increasingly have- Probably somewhat smaller teams of higher caliber and higher quality engineers, because I think a lot of the lower level tasks increasingly can be delegated away to agents.

    15. HS

      In terms of the open ecosystem, when we look at it today, what percent of enterprise workflows do you think can be done

  11. 25:18 – 26:00

    80% of Enterprise Tasks Don't Need Frontier Models

    1. HS

      with open?

    2. MM

      80% of non-coding tasks in the enterprise can be done with models that are not at the frontier. I think if you're coding, you probably wanna be leveraging frontier models, but I think things like, you know, um, summarization or the generation of docs and briefs and things like this, I, I, I don't think you need to be at the frontier, and so you probably can leverage open source models. I think a lot of the open source models we're seeing are catching up faster than they were previously. So, um, I, I don't know that you need to be at the frontier if you're not coding.

    3. HS

      China have the best open source models. It's unbelievable to see the rate and the evolution of that open source ecosystem. Is that concerning, do you think?

  12. 26:00 – 26:39

    China's Open Source Lead

    1. MM

      I think, look, I think startups and teams go where the incentives are. I think as we shift to a world in which this Rebel Alliance might actually have a fighting chance, we're gonna see a lot of smart teams going more and more towards open.

    2. HS

      I'm really intrigued. You said about the routing layer. Do you fundamentally think there will be $10 to $50 billion companies built in the routing layer, or do you think, candidly, your inference providers like Fireworks or Baseten eat into that? Or candidly, if you wanna go a step above that, you've got Nebius who sits on top. When I had the founder of Nebius on, he's like, "We need..." I'm not gonna put on his accent 'cause I'll sound like a Bond villain, then he'll fucking kill me. But like, "You need to eat all of the stack."

  13. 26:39 – 29:49

    Is There a $50B Company to Be Built in the Routing Layer?

    1. MM

      I do think routing is interesting and important right now, right? I think, again, as enterprises are trying to optimize their token spend, they wanna make sure that the model they're using is the right model for the job, not only in terms of its capability and what it can get done, but its cost. And so you're gonna have companies that are singularly focused on this, companies like OpenRouter, uh, out of New York, which is doing some really interesting work. And then you're also gonna have companies that are leveraging, uh, other parts of the stack for their products that build their own routing layer, uh, as an opportunity to monetize. Actually, we've talked to a number of companies building at various different levels of the stack that when you talk to them about their business model, they talk about building a routing layer and monetizing the routing layer. So I think it's a really interesting area that has a lot of opportunity, and a lot of different companies are gonna go after it, uh, because they see the potential.

    2. HS

      How do you monetize a routing layer without becoming just a commodity pipe?

    3. MM

      It's a good question. I think a lot of companies right now are thinking about, you know, charging a small margin on top of it, and I think to your point, that might not be a great business model. Um, I put out a piece on X about this a few weeks ago, and a number of people chimed in with some of their ideas. And one interesting idea I heard was this notion of almost a bounty model at the routing layer, where the m- where the routing layer gets, um, gets rewarded for choosing the right model, right? So if you choose the most efficient model or the best model for a certain task, that's when they collect a fee, and I thought that was kind of an interesting idea. Haven't necessarily seen it built out yet, but I thought it was a pretty interesting idea.

    4. HS

      I think it's hard to see that $50 billion company built in routing alone, I have to say.

    5. MM

      Maybe. Uh, on the other hand-

    6. HS

      And then you-

    7. MM

      ... you know, we've seen time and time again in the enterprise, in infrastructure specifically, that these infrastructure companies, they become deeply embedded in the developer work- workflows and in the developer ecosystems, and you just can't rip them out because it just becomes the gold standard. So maybe somebody will build that routing layer that every developer d- adopts and never wants to remove.

    8. HS

      Would you say it's unfair of me to say that USV missed the model game?

    9. MM

      I think USV was playing a different game, and that's actually been the history of USV. USV-

    10. HS

      Is the game not unbelievable returns in generational defining companies?

    11. MM

      [laughs] So USV, again, I think has never been afraid to take a position, and I think USV maybe, uh, did not invest in any of the big model layer companies. Um, but what USV now has been doing for a number of years, and, and I'm, I'm a big believer that we haven't seen the full circle of this narrative play out, is they've been betting on energy. And they've been b- they've been betting on energy since 2001. Um, and the idea has been for a long time now that [clears throat] no matter what model wins, if you believe in AI and if you believe in intelligence, there's going to be an energy layer underneath that is gonna be needed to power these

  14. 29:49 – 32:37

    USV's Long Bet on Energy Since 2021

    1. MM

      things. And over the time since 2001, we've, we've learned that we only need even more energy than we thought, and we need more portability of energy than we thought. And so, um, you know, energy is a big theme at USV. It was starting in 2001, and it still is to this day in 2000-- or 2026. Did I say 2001? I meant 2021.

    2. HS

      How do you think about investing in energy given the CapEx intense nature of it? You know, we're investing in a company called Fuse Energy, which I think is incredible. I'm so happy with. But it, it, it's a CapEx intensive business-

    3. MM

      It is

    4. HS

      ... in terms of, like, the energy space.

    5. MM

      It is, but I think there's also a lot of innovation happening. And where there's innovation, you can, you can find early teams that are doing science experiments before anyone else is thinking about them. USV a few years ago, uh, invested in a great company called Radiant, which is building small nuclear reactors that literally come off of a factory line, you know? And it's gonna be one of the first companies in the world to test, um, in the dome in the United States, um, for, for nuclear energy. And so I think there are a lot of interesting models and ideas happening on the edge of, of innovation, and I think those are the best places to bet as a venture capitalist because in the earliest days, they're actually not that- Um, capital intensive

    6. HS

      Do you know what story I fucking love? Boom Supersonic

    7. MM

      Crazy

    8. HS

      Yeah. Like turbo, like you know. Don't get me wrong, we all love Concorde-

    9. MM

      Yeah

    10. HS

      ... and Blake. I love flying too, dude

    11. MM

      Yeah

    12. HS

      Game on. But like, it's like, but there's this massive business in turbines for AI.

    13. MM

      Yeah

    14. HS

      What a wonderful world

    15. MM

      We, we have a bet in a company called Roon. Amazing company. Have you heard of Roon?

    16. HS

      No

    17. MM

      They're building micro data centers that sit directly next to generators, wind- you know, wind farms and things like that, to solve the portability issue. How do you get the energy as close as possible, as quickly as possible to the compute, to the data centers? And so, you know, I think we're, we're, we're on the lookout for things like this that are sort of innovating the model of energy and portability of energy

    18. HS

      Isn't this just like the joy of capitalism? I met Panthelassa, you know, this company that does data centers-

    19. MM

      No

    20. HS

      ... at sea

    21. MM

      Oh, wow

    22. HS

      Um, and it's just like fundamentally to Adam Smith's invisible hand, kind of the market solves itself-

    23. MM

      Yeah

    24. HS

      ... in terms of we got an energy crisis, and then you get Roon and Panthelassa and Elon building data centers in space

    25. MM

      It's crazy

    26. HS

      Fucking love-

    27. MM

      It's awesome

    28. HS

      Isn't it-

    29. MM

      It's a cool time. It's a fun time to be investing

    30. HS

      It is, and this is why I get really pissed off with a lot of European entrepreneurs who are still building SMB accounting solutions

  15. 32:37 – 34:36

    "Don't Automate - Obliterate": How USV Picks What to Invest In

    1. HS

      What does that mean, don't automate?

    2. MM

      Well, you just talked about automation and you talked, I, I think you were talking about SaaS in a sense. I think there have been amazing companies built that automate existing workflows, existing processes. Um, but at USV, we like to bet on businesses that obliterate, that literally obliterate markets and existing business models. And so, you know, we're-- we, we actually don't do a lot of enterprise investing for this exact reason. Enterprise investing often requires selling to a middleman, you know, selling to, um, selling to customers or building things that just make existing businesses faster. We want to invest in businesses that literally reinvent the way something is done. Take Doctronic as an example. Are you familiar with Doctronic?

    3. HS

      No

    4. MM

      USV led the seed in Doctronic a couple of years ago. At the time, it seemed like a crazy idea. It was the idea of AI putting a doctor in literally everyone's pocket. Now, we could've invested in AI that make medical practices faster or more efficient or help you with, you know, insurance claims, or-

    5. HS

      That's what I did. [laughs]

    6. MM

      ... we can put doctors in everyone's pocket and totally reinvent the model with AI. So I think that's what we're talking about when we talk about obliterate, don't automate

    7. HS

      Doctronic, doctor in your pocket, da, da, da. It reminds me of education. Sorry, I didn't mean that disparagingly. That's awesome. I'm like-

    8. MM

      Yeah. [laughs]

    9. HS

      [laughs] But it reminds me... Sorry. Education kind of reminds me of the same actually. And do you know who the biggest winners are in both education and in, um, uh, medicine in most cases?

    10. MM

      Who's that?

    11. HS

      It's the horizontal players.

    12. MM

      Mm.

    13. HS

      It's YouTube

    14. MM

      Mm

    15. HS

      And my worry is, especially with like health, ChatGPT is second most used thing-

    16. MM

      Maybe

    17. HS

      ... is health. And so my question to that tide is not tied to Doctronic, it's how do you think about where model providers will go and eat into the application layers and not kill

  16. 34:36 – 38:01

    How Abridge Built a Healthcare Moat Over 8 Years

    1. HS

      our lunch?

    2. MM

      May- maybe. We just talked about Abridge. I think you had Shiv on here recently

    3. HS

      Yeah

    4. MM

      Abridge has been working on this problem for close to 10 years now, and it's given them a massive advantage. It turns out in highly regulated industries like healthcare, you can't just walk in the door and, and say, "Hey, we're gonna do healthcare now." You have to actually build relationships, build partnerships, clear through regulatory hurdles, and that ends up being a form of a moat. And so, you know, USV invested in Abridge, I think in 2018, right? Eight years ago now. And it took that company, you know, five, six, seven years to hit this inflection point now where this product is being used by so many doctors in so many different healthcare systems because they were able to clear those hurdles. And so, look, I think we can say that we live in a world where the labs and the hyperscalers can take over any product in any market, but the reality is that's been the story of technology and innovation since the beginning of time. There are always going to be startups and founders and entrepreneurs that specialize and do the really hard things before anyone else has thought of them that end up prevailing. I mean, just take Spotify, which we talked about at the beginning, right? Spotify went up against a, a behemoth. It's a classic David and Goliath story, and they could've be k- could've been killed 50 different ways along the way, but they specialized, and they did the hard thing early and often, and now they're obviously the winner. So I hear you, uh, that the labs can kind of go into any application layer, but not only do I think that that's not true, I also just think it's not really fun. And what fun can we have as venture capitalists if we don't believe that startups can take down the Goliath?

    5. HS

      I'm also not sure if it's as binary, even if they do. You know, you saw Claude and Anthropic dedicate an entire team to design and to go up against Figma. Figma's still a business that does multiple billions in revenue, and there's still multiple players in the space

    6. MM

      Great product. Yeah

    7. HS

      Great product. It's not-

    8. MM

      Trusted brand

    9. HS

      Uh, trusted. You know, my biggest mistake also, especially on the developer landscape, was I thought that there would be like a runaway, and of course Claude has run away and done amazingly well. But Lovable's at 500 Million AR, Cognition is, Replit is, uh, you know, Anthropic Co-Codex is crushing. They've all crushed

    10. MM

      There usually isn't a market winner that takes 100% of the market or, you know, 80, 80% of the market. Usually what you see is that the market winner takes something like 30% of the market Right? Which means the 70% remaining is totally up for grabs. And if the market's big enough, that can produce some really large winners.

    11. HS

      Can I ask you, do you see different deals at USV to the types that you saw at Lightspeed? I'm not saying bad or worse. Do you just see different?

    12. MM

      I think that when, you know, going back to what we talked about earlier with Seed, I think if you put yourself out there in the world, you're gonna see deals that match those themes and ideas. Not to say I didn't do that at Lightspeed. We did that at Lightspeed as well, but to the point earlier about being very focused on energy, right? We're now being very focused on this Rebel Alliance. We're gonna see a lot of those companies come to us. And I think when you're small, you kinda have to pick your spots. You have to have constraints and focus on a small number of things. And so I think to the extent that we see things different, it's because we focus really, really deeply,

  17. 38:01 – 40:17

    The Model Provider Threat to the Application Layer

    1. MM

      and for a period of time, we may only look at a couple of different areas that we have theses on.

    2. HS

      What are you unsure of right now that is worrying you? Like, to my point earlier, um, I think a lot of people are concerned by the intrusion from model providers into the application layer, where investors in Agora, Anthropic are, are very openly suggesting they wanna come into legal. I think that's fucking moronic for multiple reasons [chuckles] . When you're chasing AGI to be like, "Ah, we're gonna go after your lunch, Clifford Chance or Slaughter and May." Doesn't make much sense.

    3. MM

      Look, I, uh, as much as I say that there's always gonna be opportunity for startups and that, you know, one model or one camp- company can't, can't do everything, of course, you still worry about competitive threats. Um, you know, I, I, I'm... As you know, like, I, I partnered closely with, uh, Granola when I was at Lightspeed, Suno as well. I mean, those are two startups going up against massive, massive incumbents. Granola in particular, you know, OpenAI launched a directly competitive product, right? Notion, a very well-funded startup, launched a directly competitive product. And so I, I do worry about that, but I think again, that's, that's always been the worry when you're building in startups.

    4. HS

      Is the worry not for Granola just breaking into enterprise? Like, like traditional enterprise. Like Notion have found it incredibly hard to break into traditional enterprise. These are startup and venture-funded products, which is amazing, and you can get to 500 million in revenue, but you need to be 5 billion in revenue.

    5. MM

      I think the nice thing about Granola, what it really has going for it, and one of the things that I, I believe has helped that company in enterprise penetration is being really focused. Right? They're just doing notes. They're just doing notes. I think there are other companies, startups selling into the enterprise, that try to do, you know, many different things.

    6. HS

      But dude, I think you gotta do more.

    7. MM

      Maybe, but I think you wanna get your foot in the door, and I think when you wanna get your foot in the door, you wanna sell one thing. And once you're in, then you can, you can expand horizontally to different categories. But I think if you come in expanded really, really wide, now you have to convince the enterprise to give up all these different things,

  18. 40:17 – 43:35

    Why Being First & Moving Fast Is the AI Product Playbook

    1. MM

      right? You gotta give up your Gmail and your Google Docs and your Google Sheets and your calendar, right? And this and that. Whereas if you're just doing meeting notes, it's like, "Hey, we're just gonna be your second brain for your company," right? "We're not gonna do anything else. We're just gonna be your second brain. Oh, and by the way, we're the best at it."

    2. HS

      Do you not worry about the enduring wave of Microsoft and bundling, whether it's Teams that crushes or whether it's, you know, Copilot, that it's... I mean, these products are-

    3. MM

      Yeah

    4. HS

      ... Microsoft has built a business on doing 65 to 70% meh products-

    5. MM

      I-

    6. HS

      ... but with the power of bundling, beat the competitors.

    7. MM

      I do worry about that, of course. Absolutely. We saw this play out with Slack. By the way, Slack is still around. It's still a massively valuable product. But yes, I do worry-

    8. HS

      And like 27 bill... I love the way we say this. It's like 27 bill... I'll, I'll take it.

    9. MM

      Yeah. I do worry about it. What I've also learned about AI products and Granola is that context is extremely valuable, right? If Granola gets inside of your organization and everyone in the organization starts using it and producing and accumulating all of this amazingly rich and valuable context, that's not something you as an enterprise wanna give up. You don't wanna give up that context. You've built out this incredibly rich history of information, um, that actually helps you work better. So I, I, I think, I think this era of building AI products is in many ways about being first and about moving really, really fast.

    10. HS

      You know what worries me is just, like, the meh of such large outcomes. And, and again, this all sounds incredibly disparaging-

    11. MM

      [chuckles]

    12. HS

      ... and it's not meant at all because, fuck, I'm a podcaster, so incredible disclaimer.

    13. MM

      And a VC.

    14. HS

      But my point being, like, when you have a SpaceX that's 3 trillion, j- Elon Musk made more money overnight than Warren Buffett has done in his entire career.

    15. MM

      Credit to him.

    16. HS

      Credit to him. Well done. God bless capitalism.

    17. MM

      What an amazing entrepreneur.

    18. HS

      Amazing entrepreneur. God bless capitalism. But my point is, like, when you have the outcome sizes of Anthropic and OpenAI and the trillion-dollar companies, the kind of... The company that does 500 million in ARR are [sighs] tough.

    19. MM

      I think it all goes back to what are you optimizing for? What's your mission? What are your constraints? We talked about VC early on, um, before we stepped into the studio here. USV has always had small funds. It's the game we like to play, and, you know, you can be very successful in terms of what you're trying to accomplish as a venture firm with a small fund. Now, maybe it's, maybe that same model can't work if you have a $10 billion fund, but we're playing a different game, and I think you're playing a different game too.

    20. HS

      I sp- A hun- I would not do venture without media. I said to my LPs the other day two things that really ch- shocked them. Um, I said, "You can't do Series A unless you have a $400 million fund today. Absolutely no chance."

    21. MM

      Well, Series As are expensive now. They're, you know, they're 100 million post. Um, there are 80 million posts. There are occasionally 150 million posts. And so yeah, if you wanna write a check into a round that size and get decent ownership for your, your f- your fund, you have to have a slightly bigger fund than you had three years ago.

  19. 43:35 – 51:06

    Series A Valuations Are Now $80–150M Post

    1. HS

      Are you being more elastic on ownership?

    2. MM

      I think it depends on stage. I think at the, you know, the way we think about at USV is at the, the Seed and Series A stage, ownership is important, and the reason is the outcomes are bigger right now. You talked about it. And the companies that end up doing really, really well raise a lot of capital a lot- very, very quickly, and the valuations get very high. And in those later rounds, it's actually very, very hard to buy ownership, especially if you're a small fund. And so you have to get that ownership early on. And Seed at the Series A-- Seed and Series A are kind of the rounds where you can do that. Now, once a company sort of crosses that chasm, maybe into the Series B or to the Series C, and you can identify them as being market leaders and potential generational companies, then I think it matters less. Then it's just about getting capital into those companies and underwriting it as a cash-on-cash type outcome. Forgetting about percentages, just imagining, okay, if we put $25 million into this, you know, what can the multiple be on that? Is it a 10X? Is it 100X? Is it 1,000X? [laughs] If it is, you know, if it's something really big like that, then you don't really need to think about ownership.

    3. HS

      We just did a deal together, uh, and by the time this comes out, it'll be announced. I actually got a message from the founder overnight, which is why I'm able to talk about it. Paul at FOMO.

    4. MM

      Oh, nice.

    5. HS

      Yeah.

    6. MM

      Yeah.

    7. HS

      And you guys did that round later.

    8. MM

      Later for us.

    9. HS

      Yeah, and that was why I asked that question.

    10. MM

      Yeah.

    11. HS

      But you saw the size of market, and for people that don't know, it's the next-generation trading app in many respects.

    12. MM

      Yeah.

    13. HS

      Um, I guess you saw that multiple expansion at the entry price you came in at.

    14. MM

      Th- that's a perfect example. You know, we, we saw that where it was, and we said to ourselves, "How big can we see this getting? We think it can be a lot bigger than it is now." And so for this one, we're not gonna be ownership focused. We're just gonna, we're gonna put a check in. You know, we, we may not be able to bet every round from here out because, again, we have constraints to the size of our funds. Uh, but we think there's enough opportunity and enough upside from here that it's worth it.

    15. HS

      Should you do it if you don't think there's, like, a mega outcome? I know that sounds strange.

    16. MM

      I'm not sure. At, for, for us, for USV at the later stages, if we don't think that there's a gigantic outcome, it probably doesn't make sense for us to bet.

    17. HS

      But even should you do it early if it's not a gigantic outcome is my kind of question.

    18. MM

      Look, I think in general, you always wanna believe that the things you're betting on are playing in large markets with very, very large surface areas, and we're gonna look at every company that way. But I do think that because our funds are smaller, similar to yours, there's probably more downside protection for us in that model than, say, at a larger fund where you have to multiply billions of dollars. For us, the fund that we're investing out of now, the core fund, it's a $275 million core fund. And so you can, you can multiply that a lot easier than multiplying, say, several billion dollars, especially if you get the same type of ownership that a, that a larger fund is getting.

    19. HS

      I think it will be the best time ever, though, for the very large platform funds, and I think they'll be able to deliver venture-like returns because of the expansion in outcome sizes. Do you think that's true or not? When you look at, like, a Thrive-

    20. MM

      Yeah

    21. HS

      ... I mean, their numbers are better than 90% of seed fund numbers on their growth, growth vehicle.

    22. MM

      Yeah.

    23. HS

      When you look at... I mean, you know, they have made a precursor phenomenal. We, uh, the OpenAI fund obviously are incredible. Like, they are getting venture outcomes on multi-billion dollars.

    24. MM

      W- w- we think that we are coming out of a period where there has been a massive infrastructure build-out and very, very capital intense companies. Um, I think that firms, large firms that were able to invest in those very capital intensive companies have done phenomenally well. But again, I think we're also now playing in a world where there w- will be a proliferation of startups and apps at the application layer that are less capital intensive. And for those, again, I think you're gonna need to know what you're looking for, and I think you can, you can get in those companies at more modest check sizes. Now, I don't think you can have a fund that's in the middle to do that. I think you need to either be on the, on the large end and play the consensus game or be really small and really opinionated and multiply a much smaller fund.

    25. HS

      Are you elastic on price? You know, I, candidly, we, we've lost two deals in the last year.

    26. MM

      Mm-hmm.

    27. HS

      Um, and listen, we got outbid. Um, I don't know if we would've won if we'd paid the same price. I hate people that say that as a-

    28. MM

      Yeah

    29. HS

      ... but by, like, two or 3X, we bid 150, and another we got b- outbid by 300, another we outbid 400. Should I have just paid?

    30. MM

      I, I talked to my partner, Fred Wilson. Gotta shout out Fred, one of the, one of the GOATs, and I asked him a question. I said, "What is, what is the biggest lesson you've learned in VC?" Actually, I asked him, "What are a couple of the biggest lessons?" And one of them was never pass on price. So Fred says never pass on price. I think in reality, there's probably some nuance. Just to bring it back to the USV strategy, I think for us, again, if we're investing a little bit later stage, we need to really believe that it's a market winner, and the multiple can be very, very, very high. And in that case, I think we can be a little bit more elastic on price. But I think at the earliest stages, especially when we're investing out of our, you know, our, our small funds, um, I, I do think there will always be a limit for us on price just because otherwise we can't make the fund math work.

  20. 51:06 – 52:30

    Biggest Investing Lesson: Never Project Your Own Ideas on Founders

    1. MM

      You, you can't project your own ideas on the founder. Sure, you can offer ideas, of course, if the founder wants. But especially as a f- as a former operator, you know, you often think, "Oh, I, I know how this business should be built," or, "I know how this product should work." And I think that can really, really get you into trouble. You know, one of my, uh, former partners, uh, Jeremy Liew at Lightspeed, I, I made this mistake a few times and, and he called me up one day and he said, "Hey, I, I think you're, you're, you're projecting as a former founder." And he's like, "In my experience, that's very, very dangerous and very risky." And I think it was a great lesson. Um, the reality is, even if you have great ideas and you think you know the answer, even if you're right, by the way, the reality is it's the founder's company, and they may wanna build it a completely different way. And not only that, if you project your ideas on a team that you're evaluating, um, you might get it completely wrong, right? You might look at a business and say, "I know what this company needs to do. It needs to do A, B, C, D, and then it's gonna win." But if you make your bet based on that evaluation and that judgment, and that team doesn't do those four things, you made a bad bet. So don't project. Don't project. You have to really believe in the team and the team's judgment and the team's ability to execute on their own plan. So that was a, that was a big lesson for me as a former CEO.

    2. HS

      Founder, Market, Product.

    3. MM

      There you go.

    4. HS

      Rate them one through three.

  21. 52:30 – 54:45

    Founder, Market, Product

    1. MM

      When I first started this job, I would've said product, market, founder. I've completely flipped that. Now founder, market, product. Um, I think that the founder is the most important thing. Um, at the end of the day, most startups, especially early stage startups, they're gonna pivot in, in some form or another. What's most important is are they resilient? Can they execute? Can they adapt to change?

    2. HS

      When you get founder reads wrong, what do you not see that you wish you'd seen?

    3. MM

      I often see communication as a, as a big hurdle for, for founders. I think one of the hardest things you can do as a leader is communicate effectively, because I think communication touches every part of company building. Uh, it's part of recruiting, which as we know, is one of the most important things you could do. You have to be able to communicate your mission, your values, why you exist, what you're trying to accomplish. Um, you have to communicate to investors, right? If you're not a great communicator, you're not gonna be able to raise capital. You're not gonna be able to put venture dollars into the business. You need to be able to communicate your product vision to your team, right? How can you align the team around building the perfect product if you can't communicate it? And you have to be able to tell your story to the market. When I think about some of the, the, the mistakes I've made in evaluation, it's, it's, it's maybe been on communication. That's probably been one of the biggest.

    4. HS

      What do you think the single biggest mistake in venture is you've made in terms of miss? I would say mine probably is one that you gave me, which is... Well, two of yours. I, I, I turned down Suno when David Frank at Founder Collective introduced me at the seed. Um, you know what the lesson was there? Really interesting. And I hope Mikey's okay with me saying this. I'm sure he is. Um, it, uh, it was a 250K check or a 200K check.

    5. MM

      Mm.

    6. HS

      And so the ownership was, you know, 1%.

    7. MM

      Yeah.

    8. HS

      And I was like, "No, I need to be high ownership."

    9. MM

      Yeah.

    10. HS

      "My LPs tell me high ownership." And Granola honestly was a lack of imagination. Chris, I saw, was great, but, like, it was a very unformed idea.

    11. MM

      Yeah.

    12. HS

      And I was like, I can't just-

    13. MM

      Founder

    14. HS

      ... I can't-

    15. MM

      Founder first

    16. HS

      ... W- Founder only thing.

    17. MM

      Yeah. Yeah. [laughs]

    18. HS

      When founders, the, the other two don't exist.

    19. MM

      Yeah.

    20. HS

      Terrible mistakes there for both. Ironically, both were f- You know, you did very well on, so congrats.

  22. 54:45 – 57:37

    Suno: Thesis-Driven Bet vs Granola

    1. HS

      What do you-

    2. MM

      Two different motions, by the way.

    3. HS

      Sure.

    4. MM

      Granola for me was a pure founder bet. Pure founder bet. I knew Chris. I've known Chris now for 15-plus years.

    5. HS

      He's also not an amazing seller. I'm just gonna give it, uh, and be blunt. He-

    6. MM

      But I knew Chris up close.

    7. HS

      That's the-

    8. MM

      Um, you know, I, I... So when I was building Anchor, the, the Socratic office, Socratic was his previous startup, was right behind ours. And we did a few meetups together. You know, we've gotten our, we got our teams together for a few happy hours, and I, and I t- you know, we, I, I would talk to him as another founder, and we would share our struggles and, you know, get advice from each other. And I w- I just, I was like, "This guy, I know he can do it. I, I've seen him. I've seen him do it." Pure founder bet. Suno was something very different. Suno was a pure thesis-driven bet. For me, the thesis came from actually the days of Anchor and seeing what it meant for a product to democratize a creative medium, and music had never really been fully democratized before AI. So I went out and I met with every team Building AI for music. I went out and I hunted down every team [chuckles] and then, and then of course, I met Mikey and the team and I was like, "Wow, this is an incredible team." And, and then the founder-- n- then the founder lens came on and I was like, "This is an incredible team."

    9. HS

      How obvious is it when you meet a founder that you want to invest?

    10. MM

      Um, with Mikey and the Suno founders, it was immediate. I, I met Mikey-

    11. HS

      Is it normally immediate?

    12. MM

      Um, not always. Not always. With Suno it was. Uh, Mikey and I sat down, uh, at a restaurant in, uh, n- near my home in, in Hoboken, New Jersey. He-- His, his family's in Jersey, so we met up, uh, in Hoboken and, um, we just immediately hit it off. Like just instant, instant connection and, you know, I immediately recognized how, not only how smart he and the team were about the models they were building, about their vision for the world, but also how passionate they were about the problem. Mikey is a former musician, and so I felt like he could deeply, deeply connect to this idea of how do you make music creation, expressing yourself, creativity, how do you make it easier? And so, um-

    13. HS

      When you're doing Suno at $5B, what are you underwriting that to?

    14. MM

      So we believe that Suno has, you know, I'm, I'm using this term loosely, but unlimited upside potential. Um, you know, if you look back at the history of media on the internet and you think about the generational platforms that truly democratized a medium, right? YouTube, TikTok, um, you know, Twitter, Facebook to some extent with writing and publishing. I mean, these are insanely valuable platforms-

    15. HS

      Does, does Suno not-

    16. MM

      And you don't, and you don't really think about the upside of them.

    17. HS

      Does Suno not have to move from a tool to a platform then?

  23. 57:37 – 1:00:15

    Suno at $5B

    1. MM

      So I probably would've said yes when I invested. First of all, I, I, I do think it is a platform, but I think you're asking about something different. You're asking-

    2. HS

      A consumption platform.

    3. MM

      Yeah, you're talking about do you need a creator side and a consumer side, similar to what we saw play out on, on, uh, Spotify as an example. I think when I originally invested, we thought that it did. Now I'm not so sure that we understood what Suno could be back then. What is happening now in Suno is what, what, what Mikey and the team have been saying for a while and what I now believe, uh, it's that it's literally a new behavior. The team calls it creative entertainment. People are coming into Suno, they're making music for the pure joy and entertainment value of making music. You know, previously, like let's say on Anchor, you would make a podcast for the purpose of getting distribution and eventually monetizing it, right? Now AI has made music creation so much fun that you're making music to make music, and I think it's actually not too dissimilar to what we see with Claude Code or Midjourney, right? Or some platforms that are making it easy to make games with AI. You have no greater aspiration for this content, right? You're not trying to become a hit game developer. You're just having a lot of fun making games on your computer, and we see that a lot in Suno.

    4. HS

      What myths... Uh, brilliant, but you should be a politician.

    5. MM

      [laughs]

    6. HS

      I ask you what myths. I'll tell you about my two greatest hits. [laughs]

    7. MM

      [laughs]

    8. HS

      Thanks, dude. [laughs]

    9. MM

      So one company that I would've loved to invest in a long time ago, which we didn't at Lightspeed. We, we met them a few times, um, and I think we could never really wrap our head around, um, kinda price. Also at the time, where they fit in the market. Now I think with the, the benefit of hindsight, um, I really regret not ever having the, having had the opportunity to invest in Substack. I really believe in Substack. I realize it's not your traditional sort of AI company, but I think, you know, over the past eight years, and I think the trend is continuing, I think we're moving more and more and more towards a world of self-publishing and people, um, controlling their own destiny in terms of media and what they create and what they publish and how they monetize it. And I think no company, maybe other than X, has done a better job of that than Substack. And so, uh, that's a company where I, you know, I love the founders. I love the purpose behind the company. I love the product and the platform. Uh, unfortunately never got a chance to invest.

  24. 1:00:15 – 1:02:23

    Is Traditional Media Dead?

    1. HS

      Is traditional media dead?

    2. MM

      I think traditional media in many respects is dead. I think, you know, one of the-

    3. HS

      I, like I go to these large-

    4. MM

      Yeah

    5. HS

      ... houses, your, your Times' of the world-

    6. MM

      Yeah

    7. HS

      ... your Skies, and dude, they have these insane production-

    8. MM

      Yeah

    9. HS

      ... places for pods that I know no one listens to, and the teams are ridiculous and, and it's all like, "Guys, you don't get where this game has gone."

    10. MM

      I probably underestimated just how big independent media could become. When we built Anchor, you know, we had this vision of democratizing audio and giving everyone a voice, and I would say by the time I left Spotify in 2022, I, I'll admit I kinda thought the opportunity was baked. I was like, "Okay, it's, it's done. It's done. You know, we've got YouTube, we've got Spotify, we've got, you know, whatever, we've got X." Um, it's gotten so much bigger since then, and that was only four years ago. So much bigger. I mean, every traditional, um, TV show or, you know, media personality, e- everything has made the leap over to self-publishing or independent media. I mean, I think you're a model example. [laughs] You've been doing this forever. But also just like huge names that were on some of these large, uh, media organizations that just made the leap and now they just have a YouTube show or they just have a show on Spotify. And so like I don't even think we've reached the peak yet. I think, I think television is still in the process of being massively unbundled.

    11. HS

      When TechCrunch Europe shut down and now Wired Europe shut down, I... coalesce the best writers in Europe, and I had 10 million bucks from very rich billionaires to bring together the next generation. And then I sat down with my investing team, and they're like, "Why the fuck are we doing this? We have no editorial control on them, just like OpenAI don't on TBPN, and we can't influence it."

    12. MM

      Yeah.

    13. HS

      "What's the point?"

    14. MM

      Yeah.

    15. HS

      And to your point, editorial freedom is everything.

    16. MM

      It's, it's amazing. It's incredible. Again, which is why I love Substack and why I like X and why I like YouTube and Spotify. I think these platforms are amazing.

  25. 1:02:23 – 1:10:50

    Quick Fire Round

    1. HS

      Are you ready for a quick fire round?

    2. MM

      Sure.

    3. HS

      Single best first founder meeting you've ever had and why?

    4. MM

      Brynn Putnam, CEO of Board. Have you seen Board? Tabletop gaming console. Just announced, uh, Series A a few weeks ago from, from USV. Um, when I met Board, when I met Brynn, I was blown away. Uh, force of nature founder, such clear vision, such deep domain expertise. So prior to Board, which is a beautiful tabletop display, uh, Brynn was the founder and CEO of Mirror, the, the mirror, uh, workout device-

    5. HS

      Oh, wow

    6. MM

      ... which she sold to Lululemon. She took that domain expertise and said, "I know how to build a tabletop gaming console now with the same hardware and the same supply chains," and just crushed it. When I met her, I walked out of that meeting and I thought to myself, "I have to invest in this company."

    7. HS

      One of the single greatest exits also.

    8. MM

      [laughs]

    9. HS

      You have to give her credit.

    10. MM

      She's, she's brilliant.

    11. HS

      Yeah.

    12. MM

      She's brilliant.

    13. HS

      Um, you can invest in one seed fund. Which seed fund do you invest in?

    14. MM

      I'm a big fan of what Matt Hartman is doing with Factorial. Uh, Factorial is a fund... Do, do you know Matt, and do you know Factorial?

    15. HS

      Dude, I met Matt years ago when he was at BetaWorks-

    16. MM

      Yeah, of course

    17. HS

      ... with John.

    18. MM

      Yeah.

    19. HS

      And I went to BetaWorks.

    20. MM

      Yeah.

    21. HS

      And I remember they had a company called Poncho. Do you remember Poncho?

    22. MM

      Yeah, of course I know Poncho.

    23. HS

      Yeah.

    24. MM

      Weather. You, you mentioned weather- chief weather officer earlier.

    25. HS

      Yeah, dude. I'm like, "Oh."

    26. MM

      Poncho's the original chief weather officer.

    27. HS

      Yeah, yeah, yeah, yeah.

    28. MM

      Yeah.

    29. HS

      And so I remember them doing BetaWorks together.

    30. MM

      Yeah. Matt's brilliant. So Matt has innovated on a completely new model of venture where he arms angel investors. These are not scouts. These are angel investors. He arms them with additional funds on top of their own capital, which, uh, then Factorial obviously then, you know, monetizes through carry and whatnot. But the brilliant thing about that model is now he's got all these great angel investors part of the Factorial network. You know, these are people like Clem from Hugging Face, like real angel investors. So I think that's brilliant. Uh, second answer I would say, tied for, you know, my favorite seed fund, has gotta be Haystack. I'm just a huge fan of Samil and, uh, Divya and the work they do. It's an, an incredible fund. Obviously, they've produced some generational outcomes.

Episode duration: 1:11:01

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