Oren Zeev: Why AI Growth Expectations Are BS & Won't Last? Why GPs Shouldn't Tell LPs Their Strategy

1. 0:00 – 1:38

   Intro

   1. OZOren Zeev0:00

      I think this notion that only growth matters is a very dangerous one, and I've seen this movie many, many times. We humans are not truth seekers, we are self-validation machines, meaning that-

   2. HSHarry Stebbings0:11

      Today, we have one of the most prominent solo capitalists in venture, Oren Zeev, who now manages over a billion dollars. [upbeat music]

   3. OZOren Zeev0:17

      In every one of my funds, I'm the biggest LP, every single one. By the way, I pay myself zero. I don't see anything, which is very unusual. I don't know any VC in the world that has zero income from the management fees. So I tell LPs I only have one rule, and that rule is that I have no rules. Listen, AI is the biggest change ever in the history of humanity. It changes everything, and whenever there's change, there's opportunity to make things better and to build huge amount of value.

   4. HSHarry Stebbings0:42

      Has what you look for changed in the last twenty-four months in the dawn and the wave of AI that we're looking at today? [upbeat music] Ready to go? [upbeat music] Oren, it is so good to have you back on the show, dude. It's been several years since we last did this, so thank you so much for joining me, man.

   5. OZOren Zeev1:12

      Yeah. No, it's my pleasure. I... As you know, I was skeptical that I would be able to, uh, bring anything new to this conversation. You insisted, but, uh [chuckles]

   6. HSHarry Stebbings1:21

      I, I insi- I insisted because I... last time we actually did a show, I don't think I was a very good interviewer. And call it a lack of humility, but I hope that I've improved as an interviewer. I think now is quite an hard time to be investing. Again, I'm gonna use the next hour as an advice session for me as an investor because I think I have a lot to learn from

2. 1:38 – 3:43

   Why the Best Investments Always Look "Wrong" at the Start

   1. HSHarry Stebbings1:38

      you. Now is a weird time because a lot is uncertain, and so when we look at picking investments, that is our job, that's what we're paid to do in a lot of ways. Why do so many of the best outcomes look wrong or weird at the time where we when we invest?

   2. OZOren Zeev1:54

      Look, I think if they're long... If they, if they look weird and they look wrong, then probably there aren't gonna be fifteen or twenty or a hundred other startups doing it. So you're probably gonna have two or three years without real competition, and you have a chance of really building something, um, you know, a real moat. Now, [chuckles] if you're wrong, it's not gonna help you. Y- you know, it, it... But if you happen to be right, then the- these are some of the, the greatest outcomes. Uh, and, uh, you know, and, and again, this is not- this is really some level of contrarian plus being right. Um, that's the, uh, ingredients, uh, typically of, of, of, of great outcomes.

   3. HSHarry Stebbings2:36

      I get you. The challenge that we have today is the level of competition has changed so much. You know, when, when we first met, you know, ten years ago, there was always one or two competitors. Now, for every company I meet, there's legitimately eight to ten at a minimum.

   4. OZOren Zeev2:50

      Yeah.

   5. HSHarry Stebbings2:52

      What do we do when the level of competition has increased to the extent that it is?

   6. OZOren Zeev2:56

      I, I try to avoid it, to be honest. I'm, I'm in the Peter Thiel camp, I, [chuckles] I guess. Uh, I, uh, don't like to go in where everyone else goes, um, and have ten, twenty compet- uh, competitors from the get-go, because I think the chances of building a market... I, I really want every investment to, to, to become a market leader, and the more competition there is early on, the, the, you know, just the, the smaller the chance. So I try to avoid it. Every now and then, uh, I find myself in such a sit- a, a situation, okay, but I don't like it. So I, I just, you know, just try to... I, I try to avoid it, and I try to do things... To me, if everyone is doing something, it's a reason not to do it, not a reason to do it, you know?

3. 3:43 – 6:57

   The AI Tsunami: How to Spot Beneficiaries vs Victims

   1. HSHarry Stebbings3:43

      Can I ask you, has what you look for changed in the last twenty-four months, in the dawn and the wave of AI that we're looking at today?

   2. OZOren Zeev3:52

      Not so much, surprisingly, because I think the fundamentals are the s- the same fundamentals. Yeah, we have, of course, a tsunami wave that changes everything, which I think creates a lot of opportunities, because basically, every single industry business is going through change. And whenever there's change, there's opportunity, and there's a lot of value being created, and there's a lot of value being destroyed, and there's a lot of value being shifted. The, the, the one thing maybe you could argue that changed, I don't know if it's twenty-four months or thirty-six months, is that every investment, I have to ask myself: Is this company a likely beneficiary of AI or not? The answer is not... Well, if the answer is that they're a victim of AI, obviously, it's a, uh, easy, easy answer, but even if the answer is neutral, then still the answer is probably no. So I have to- so I just have to ask this question, which is a question I wouldn't ask four years ago, right? Four years ago, I would look at an opportunity, I wouldn't ask myself, "Is this a beneficiary of AI?" Uh, but in the past three years, absolutely, I have to, um, uh, ask this question.

   3. HSHarry Stebbings4:57

      If we were to reflect that back on one of your best investments and one of your most concentrated positions, which obviously went public in Navan-

   4. OZOren Zeev5:05

      Mm-hmm.

   5. HSHarry Stebbings5:06

      -would you say that Navan is a beneficiary of AI?

   6. OZOren Zeev5:09

      Hundred percent. I am not sure that the market, the public market yet sees it that way, based on the [chuckles] valuation. So I, I... You know, [coughs] I think that, this is my theory, that in general, um, the market feels or believes that many, some or many of the software companies, the incumbents, are gonna get disrupted by AI, and I think the market is right about that. I think that the market is not yet at the point where they discern between the ones who are gonna be negatively impacted and the one that are gonna be positively impacted. So I think that most software companies are, are getting somewhat of a discount because of that justified fear. Uh, and as you know, SaaS multiples, for example, are-... lower than they've been in the past 10, 12 years. Um, but I think over time, what's gonna happen is that for some companies, uh, this suspicion is gonna materialize, and in fact, uh, even with a discount, they're gonna, in hindsight, look very expensive today. [chuckles] And [clears throat] for others, they're gonna be beneficiaries. Now, specifically with Navan, wha- which, a company I know well, I'm 100% convinced that there is zero chance [chuckles] that we get disrupted by AI, and there is 100% chance that we're huge beneficiaries of AI. I can go into details, but I feel- I just feel very, very, uh, very, very strongly about it.

   7. HSHarry Stebbings6:43

      Can you? I'd, I'd love to hear-

   8. OZOren Zeev6:45

      Yeah, well, I can't get into details in terms of numbers, obviously, but, but just, just, but, but, but from a qualitative perspective, um, [lips smack] I think that, um... I'll give two examples.

4. 6:57 – 11:29

   The Death of Incumbents? Why Most AI Predictions Are Wrong

   1. OZOren Zeev6:57

      Uh, gross margins. Um, you know, three years ago, before AI, our gross margins were ar- around 50%. It was all the cost of support, and now, uh, in the past three years, we've invested a lot, and m- you know, and we're doing more and more with AI. So, uh, and ultimately, I believe that if not all the, the, the, the, almost, almost all the support is gonna be done by AI. Uh, already, I think that... You know, I don't wanna sm- I don't wanna say a number that's not accurate because of the sensitivity, but it's dramatically better already. I mean, this is public information. I just don't have it in front of me, and it continues to improve. So this is the easy part. The second part, which is even more exciting, is think what you can do with AI, uh, in terms of, uh, the customer experience. And again, I don't- I'm not sure what I'm supposed to say and what I'm not supposed to say, so I want to leave it to the, the, the company because I don't wanna trip on some, uh, [chuckles] SEC rule or something. But the even more exciting thing is how the, uh, how it dramatically improves the, um, the, the user, uh, uh, the customer experience on multiple levels. And, and, and, and back to the first thing, why am I not worried about being disrupted? Because this... I, I think that if you have a piece of software that's fairly simple, uh, then yeah, someone can write it quickly and maybe, and, and maybe, uh, uh, price it, uh, lower and maybe even have better functionality and have much faster velocity, and those companies are at risk. But the more operationally complex a business is... Now, I'm not talking about Navan, I'm talking generally, but I think Navan falls in within this, uh, framework. The more operationally complex a business is, the more, um, it's about, uh, distribution, the more it's about, uh, integration with, um, source and with other pieces of software or content, in the case of Navan, or, or, um, part of the e- ecosystem, the more, uh, the more it's in a regulated... This is not about Navan, but the more it's in a regulated, uh, uh, uh, environment where there's a lot of licenses and stuff, the harder it's gonna be. 'Cause, you know, the technology, okay, so someone can develop the technology, but technology is 5% of it. You know, you have the- you have all, uh, you know, you have all, all, so many other things. Data, you know, uh, it's not- i, i- data is so important, especially in the age of AI. And who has the most data? The incumbents. So the bottom line is, I think this notion that all the incumbents are gonna die, you know, this notion that is being promoted by some, uh, people who, who- I think whose main motivation is to, uh, make provocative statements, you know, uh, and get, um, attention, [chuckles] as, as, as, as, as thought leaders, um, I, uh, I don't buy it. I think that, yes, some... Of course, there's the, the change of technology and some companies that are not gonna be able to adapt for both objective reasons, like the one that I mentioned, and also ma- and also execution reasons. I mean, some CEOs are just gonna be faster, uh, and more ada- you know, and, and, and, and more, uh, crisp in their- in adapting the cu- the companies. Of course, if you continue to, to do nothing different, you're gonna die. But that's always been true. [chuckles] So I have, specifically with Navan, I have zero concern, and I think that, in general, companies that on one hand are not- uh, many companies are not easy to disrupt, and as long as they don't fall asleep on the wheel, and as long as they, um, um, navigate, you know, they adapt, uh, they're gonna be huge beneficiaries of AI.

   2. HSHarry Stebbings10:42

      So I have so many things to unpack there. Uh, the first that I just want to unpack is you mentioned, like Navan have invested obviously in support, blah, blah, blah. Support is a space where everyone is like, "Duh, AI is gonna replace a huge amount of labor-

   3. OZOren Zeev10:55

      Yeah.

   4. HSHarry Stebbings10:55

      ... It's the most perfect solution for AI."

   5. OZOren Zeev10:57

      Yeah.

   6. HSHarry Stebbings10:58

      That would be a consensus company/market to invest in with huge amounts of competition.

   7. OZOren Zeev11:06

      Yeah.

   8. HSHarry Stebbings11:06

      Does that mean you don't like it? 'Cause that's the opposite of what you said you like. [chuckles]

   9. OZOren Zeev11:12

      Yeah, a new company that they're solving the support, uh, problem, y- one, you know, one of them is gonna be successful, but there's, there is thou- well, two, but there's a thousands that are not. So I'm not... At the very early stages, I don't trust my intuition [chuckles] enough to know which one of the thousand is gonna be successful.

5. 11:29 – 18:43

   Why Chasing Hyper-Growth is a "Disaster Waiting to Happen"

   1. HSHarry Stebbings11:29

      You know, it's something I'm really struggling with, which is like growth rates. And what I mean by that is, I'm meeting companies today-

   2. OZOren Zeev11:35

      Mm-hmm

   3. HSHarry Stebbings11:35

      ... and I'm looking at them, and they're going from 1 to 5 million in revenue. And before, Oren, when we met, that was great. That was impressive.

   4. OZOren Zeev11:42

      Yeah.

   5. HSHarry Stebbings11:43

      Now, it's just not enough to get the great big funds interested at the B or the C, and I know that actually I'm not gonna get a good next round on the back of that growth. How do you think about the changing expectations on company growth rates, and does that impact your investing?

   6. OZOren Zeev12:00

      Yeah, so to be honest, I don't buy that either. Um-... I, uh, call me old school, but I don't buy that, 'cause the math doesn't change. If you have, uh, if you have a company that, um, can double every year for the next five years, it's gonna be32X what it is today, 'cause two to the power of five was32 before AI and after AI. That has not changed. So the real question is, are they- is it sustainable growth, and is it h- healthy growth? So maybe a company grew from one to five, but, you know, it's not necessarily healthy growth. You know, the economics don't... are not very impressive, and, you know, I think that next year they, they, they're not gonna be growing much. So yeah, so in that case, it's not gonna be enough to grow from one to five. But if the company grew from one to five, and they look like next year is gonna be20 or15, um, and, and, and, uh, and the economics are healthy, absolutely it's a great company that I wanna, uh, uh, be, you know, invested in. So and I think there is danger in dismissing companies. I actually have, right now, a company that's raising... And really, and, a- and the company is, um, uh, is growing at100%. It's a$20 million, $20 million today, growing to ARR, growing to$40 million, with very healthy, uh, this year, uh, with very healthy, uh, uh, economics, and I think they should also double the following year. And one investor said, "Oh, you know, we're gonna be- have a challenge with the growth rate." Over 100%, right? And I, you know, and I, you know, and I have a lot of respect for this investor personally. I'm not gonna mention him. I have a lot of respect for him. I think he's dead wrong on this one. Um, and I think it's-

   7. HSHarry Stebbings13:38

      Why, why, why do you think he's wrong? 'Cause I think he's right.

   8. OZOren Zeev13:41

      I... Yeah, okay. So we'll see. I think he's wrong because I think that if... 'Cause I think this company can- it's not... Again, it's not as if... Look, if this company had competitors at the same level growing at3X and they're growing2X, yes, then he would be right. But they have the market to themselves. They're leading the market. They're growing2X. They're growing a very... I prefer a company that's growing2X with very healthy economics than a company that's growing3X with unhealthy economics. And I, you know, as long as I believe that the market is large enough to, to continue to sustain this kind of growth for the next few years, I'd, I'd, I'd, I'd back this company all day long. So, um, um, so yeah, I don't think that, uh, AI changes mathematics, you know, and compounding, compounding is the same compounding before AI and after AI.

   9. HSHarry Stebbings14:26

      When you look at the opportunity cost that large, great funds have today when they're investing large amounts of money into the follow-on rounds of our companies, they can be in a Cursor that goes to a billion faster than ever. They can be in a Harvey that hits$200 million within two years. And I, I, I'm in businesses like you are, dude, so-

   10. OZOren Zeev14:45

       Yeah

   11. HSHarry Stebbings14:45

       ... we're on the same side here. But I'm looking at it going, "I get it. Opportunity cost-adjusted, they wanna be in Harvey and Cursor, not us."

   12. OZOren Zeev14:53

       Mm-hmm. No, don't buy it. Sorry. No. But I, I don't think so. I will tell you, even this day, this day and age, there aren't many$20 million companies that are doubling with, you know, with very healthy economics. You know, it's just not so many of them. The other thing, I think this notion that only growth matters is so- a very dangerous one, and I've seen this movie many, many times, you know? Um, because when you only look at growth, it drives companies to do things that are unsustainable and unhealthy. For example, these, um, circular deals. I, I'll buy your product for a million dollars, and you buy my product for a million dollars. It's a win-win, right? Because we both now have another million dollars of revenues, and yes, we also have another million dollars of cost, but that doesn't matter, 'cause nobody looks at it. So, uh, so you'll realize that no value was created in this theoretical transaction, but a perceived value was created. So we're starting seeing this, and this is not even before I get to fraud. This is really still, like, within grey area. Uh, and you see other invest- uh, you know, a- a- other, uh, manifestations of that. You see things that are clearly not, uh, not sustainable. And, um, now, in some cases, in some cases, the companies will be able to somehow, uh, despite that, maybe, uh, succeed, but in others, you know, it's gonna implode at some point. So-

   13. HSHarry Stebbings16:23

       So are you telling companies that you're on the board of, "Don't listen to the hype, don't believe the bullshit on podcasts about growth rates needing to be crazy. Build healthy businesses today"?

   14. OZOren Zeev16:34

       Look, I think growth is super important, and then there are some... But yes, in general, yes, grow healthy. Now, there are also- there are some rare situations where you have no choice, because if you have competitors that are also growing very fast, you don't have the luxury of, "No, no, I'm gonna grow healthy." You know, you just have to play the game and, and, and, and, and hope for the best. Um, and you know, uh, you know, I don't know, Uber versus Lyft would be a good example10 years ago, or15, whatever,15 years ago. You know, you didn't have the choice of, "Oh, let's build it slow and make it, uh, healthy." You have to go as crazy as possible, whatever the margins are, and ultimately, in, in the case of Uber, come out on top. Um, but, uh, but it, n- but again, I, I look for businesses where this is not the dynamic, and when you have the choice between growing fast in a sustainable ma- manner versus, um, just going crazy and just optimize just for top line, ignore everything else, yeah, I think that the, the, the latter is a disaster waiting to happen.

   15. HSHarry Stebbings17:38

       Do you worry ever, that having a focus on margin and good economics too early hinders the upside opportunity for the companies that you're in? If you look at a DoorDash, shit margins for years. [chuckles] If you look at an OpenAI or an Anthropic, actually shit early margins.

   16. OZOren Zeev17:55

       Yeah.

   17. HSHarry Stebbings17:56

       Do you worry that actually you focus too early on margin optimization?

   18. OZOren Zeev18:00

       As I said, in some spaces and area, yes. You know, you, you know, it's more important to win the market share. You know, it's more, more important to win the market, and you don't have the luxury of focusing on margin too early, and you have to make the assumption that you'll take care of margins once you, once you win. But most businesses are not like that, necessarily. Certainly not all businesses are like that, and when, in the business, when you have the option-... uh, then again, don't focus on it too early. I still think that the, that the, uh, growth is more important. So I agree with you that focusing too early, absolutely. But at some point, you do wanna focus on it, again, if you can afford it, and that point really depends on the business and the competitive, and the competitive environment. It's not-- I don't think there's one solution for all or one answer for all.

6. 18:43 – 33:20

   The Biggest Mistakes From 2021 and Investing Lessons From It?

   1. HSHarry Stebbings18:43

      My biggest mistakes have always been when I think that I'm smarter than the market, okay? You know, I turned down a deal at the seed round 'cause I was like, "Payroll? Really? Paychecks, ADP, come on, this is ridiculous," with this kid, Alex-

   2. OZOren Zeev18:56

      Yeah.

   3. HSHarry Stebbings18:56

      ... who's now a friend, he won't mind that.

   4. OZOren Zeev18:58

      Yeah.

   5. HSHarry Stebbings18:58

      Um, really, um, do you give a shit about market, given the stage where we invest? How do you think about that?

   6. OZOren Zeev19:07

      I, I also made mistakes thinking I'm smarter than the market, but, but also my biggest ones were when I thought I was, uh, uh, uh, smarter than the market, and it's much more about the winners than about the losers. So, uh, no, I, I, I actually, this social proof and what other things, I, I, uh, I... What other people think, I try to actually, uh, suppress this, uh, signal, uh, uh, uh, if not ignore it altogether, and, uh, and, and, and really invest based on my own conviction. And, you know, sometimes I'm gonna be right, and sometimes I'm gonna be wrong, and it's more important to be right about these things because, uh, you know, if I'm... If my, if fifty percent of the t- time I'm right and fifty percent I'm wrong, that's actually a great result because it, a winner is so much more important than a loser. Uh, 'cause, you know, as you know, if, if we lose something, we only lose one X our money. If we win, it could be a hundred X our money. So, uh-

   7. HSHarry Stebbings20:03

      I- it's absolutely true. What you don't wanna do is continuously put money into a loser, and you wanna reduce that-

   8. OZOren Zeev20:09

      No

   9. HSHarry Stebbings20:09

      ... reduce that time cost. When you have done, what did you get wrong, or what did you not see?

   10. OZOren Zeev20:16

       So first of all, I don't often get... The, these double downs that I do, I don't often get them wrong because I really, I believe, have enough intellectual honesty, uh, to, um, look at things, uh, not, not to, not be biased because I'm already in and not, you know, not, uh... And I, I, I true, maybe because I'm originally an engineer or whatever, even when I was, um, in my previous life as a VC with the... I saw compared to the other partners, you know, I had a partner [chuckles] who never saw a follow-on he nev- he didn't like. You know, he always found a reason to justify his, his, his previous decisions. And I think one of the strengths of being a good decision-maker is actually change your mind when the, you know, when, um, when, uh, uh, there's new information and not get, uh... You know, there's a, a quote I like from, um, Annie Duke's book. Uh, it goes something like, I'm gonna butcher it, m- but it says, "You know, we humans are not truth seekers. We are, um, self-validation machines." Meaning that, you know, people- most people, when they have an opinion, whatever information [chuckles] now, uh, arrives, uh, uh, in their mind, it's a proof that they were right, right? And, and I don't, I don't think this is a good mindset, you know, for a good venture investor. So I think that you wanna have enough intellectually hon- enough intellectual honesty to, um, uh, to change your mind based on the, based on the new information. But I will give you an example of, uh, because I, you know, I'm not foolproof, and of course, I make mi... Just like I make mistakes in, in, in new investments, I also make mistakes in, uh, uh, in follow-on. So I'll give you an example. A company that I, um, that was in the proptech, uh, space and, uh, w- seemed to be on fire. You know, it went from two million run rate to thirty million the next, uh, the, the, a year after I invested, and the, and the projection was to go from thirty to a hundred. Everything looked great. Uh, so, you know, I doubled down, and I thought, uh, I probably got a discount to what you, the founder would've got from the market. And, um, but the timing was just before the, uh, big rise in, um, uh, in interest rates in, um, late 2021 or '22. I forget exactly what it was. So what did I get wrong? So first of all, I understood that the business is dependent on interest rates to some degree. Um, and I even stress-tested it, and I... So I, uh, I actually did assume that interest rates will go up fast, and I had the worst-case scenario, and I concluded, and I ran the model, and I concluded that, uh, the business is gonna be resilient enough and was gonna survive it. In hindsight, I overestimated the resilience of the business, and I underestimated the speed, uh, what I called the worst-case scenario. What I modeled as the worst-case scenario was actually, um, not as bad as the real, uh, the real scenario that happened. You know, the, the, the rise in interest rate was, was too fast, and the company just could not and did not survive it, and, and I lost. And by the way, this is, uh... Yeah, so there's an example. So it happens. You know, the, you know, you know, you- we're still in the risk business.

   11. HSHarry Stebbings23:31

       What do you take away from that as a lesson?

   12. OZOren Zeev23:35

       [sighs] You know, I actually don't... Not much. I'll tell you why, because I think that- I, I think some of the bets are not gonna work, you know. I think it's a mistake to judge a decision by the outcome, um, because i- i- you know, it's like, like, if you, when you play poker, and again, I'm, I'm, I'm, I'm, I'm quoting from, uh, uh, from, uh, from that book. Uh, for example, I'm not a big poker player, but when you play poker, um, you can make the right decision, and the odds are in favor, and but, you know, the cards that came out, you know, you lost the pot. Doesn't mean that your decisions were wrong. And over time, y- you know, over time, uh, if you make the right decisions, then over time you're gonna win. And but in any individual case, luck has a huge role to play. So if you... You know, you can also learn the wrong lesson. So yeah, I took a bet. I, uh, in this case, it was wrong. I- in hindsight, I wasn't aggressive enough in my, as you know, in my stress testing.... uh, but does that mean that I should be overly, uh, conservative next time? Not necessarily, because I could have been right. In other cases, I was right. So yeah, so I just have to be comfortable with losing money, including big pots, um, every now and then.

   13. HSHarry Stebbings24:49

       Can I be blunt, Oren? You have massive balls. [laughing]

   14. OZOren Zeev24:53

       I don't know about that. [laughing]

   15. HSHarry Stebbings24:54

       When you, when you, when you look at your concentration into Navan-

   16. OZOren Zeev24:58

       Yeah. [laughing]

   17. HSHarry Stebbings24:58

       -okay, which is now a public company-

   18. OZOren Zeev24:59

       Yeah

   19. HSHarry Stebbings25:00

       ... and it, it's been incredible to see all that they've built.

   20. OZOren Zeev25:02

       Yeah.

   21. HSHarry Stebbings25:02

       But at times, it looked hairy. Yeah?

   22. OZOren Zeev25:05

       Yeah.

   23. HSHarry Stebbings25:05

       COVID, for example-

   24. OZOren Zeev25:07

       Yeah

   25. HSHarry Stebbings25:07

       ... when travel stopped as a travel company and stuff.

   26. OZOren Zeev25:09

       Yeah.

   27. HSHarry Stebbings25:09

       Do you feel the pressure in those moments?

   28. OZOren Zeev25:13

       Actually, [exhaling] in the case of Navan, I never felt pressure. I, you know, I, uh, I, I, uh, COVID was a big one. By the way, even before COVID, we had a, we had a, in nine- in 2018 or '19, we had, uh, an exist- an existential crisis when, uh, Delta Airlines decided that they hated us. And you cannot really succeed as a, as a travel company when one of the three major airlines in the US is not willing to work with you, and is suing, and, and all that. And luckily... And it wasn't- it was not obvious that we'd be able to solve it. Uh, and luckily, we did. Um, and then COVID happened. But, you know, with COVID, I had complete trust in the leadership of Ariel. Uh, I had no doubt that people... 'Cause some people were saying, "Oh, after COVID, people are gonna just stop traveling for business and just do everything over Zoom." Never believed it, so I had no doubt that at some point, COVID will be behind us. So and, and I- and, and, you know, I, I would say that i- in a- and, and Ariel was such a CEO that, as an investor, I could sleep well at night knowing that, uh, he's doing and the leadership is doing everything. Uh, and they did a lot, actually. Not just on the cost cu- you know, everything. They reacted so fast, and, and, you know, and they, they, um, uh, adjusted the, the cost. They were the first company to let people go, and they got so much shit on, uh, for it because they fired people over Zoom, as if there was any other way they could have, and they still got a lot of shit from the press, but who cares, you know? And, uh, and, you know, changing product priorities, for example, changing, uh, pricing models, pricing messaging, price, uh, uh, uh, uh, uh, um, again, prioritizing features that are more relevant, uh, in an environment like COVID. So they did so many things, um, when very, in very quick, bold actions. But in- at the end of the day, [lip smack] I think relative to other people, it's easy for me to also let go, I find. So if I have a company where maybe the founders are not doing the right things, and I'm, you know, and, uh, they're not reacting to a crisis in the way that I think they should, I don't get too worked up about it. And I, you know, at the end of the day, I just, uh, am letting go emotionally. I mean, I'm, I'm still gonna show up to board meetings and be- you know, try to be helpful and, and, and, and positive, but emotionally, I'm letting go. I'm not... You know, I'm, I'm gonna at least try not to sh- not to, uh, manifest frustration and, uh, angst.

   29. HSHarry Stebbings27:43

       LPs often like capital concentration limits. For those, obviously, who don't know-

   30. OZOren Zeev27:47

       Yeah
7. 33:20 – 35:54

   Is the Future of Venture Boutique or Mega Fund: Does the Middle Die?

   1. OZOren Zeev33:20

      fifty.

   2. HSHarry Stebbings33:20

      Well, so when we look at that decision, I think managers are faced with the decision to say, "You either need to be really fricking big, à la Andreessen, General Catalyst, LightSpeed, a wall of money, or you need to be a real craftsman and boutique." Do you agree that you have to be one or the other, and that is the future of venture, and the messy middle will be painfully suffering?

   3. OZOren Zeev33:43

      I, I, you know, I, I, I, [clears throat] I do agree with it. Ninety, ninety percent agree with it. I, you know, I think you have to have something special. You know, I, I, I think that being middle of the road, you know, you wanna be differentiated. So I think that naturally there is a bifurcation. So either you are this, you know, one of these platforms that, um, uh, like Andreessen, like, uh, Sequoia, like maybe LightSpeed, um, who are bringing a lot to the table and can do things that smaller VCs cannot, um, including myself. Or you're going in the opposite direction, uh, of solo, solo GPs, for example, um, that you have other advantages, [tsking] um, or I have other advantages. I'm not trying to be better than Andreessen in Andreessen's game. If it's gonna be Andreessen's game, they're gonna win, you know, beat me every time. Uh, no, I've... I, I, I, I, I, I, I offer something different, you know, uh, I, I'm faster than anyone else, for example. You know, there are other things. There's the personal connection, there's, and there's a lot of other things that founders find extremely compelling with, uh, uh, solo GP, and I, and, and I, and, and I go for companies or founders that this is what they want, okay? So, um, and that's differentiation, or you have something else that, uh, differentiates you. But generally speaking, if you are a traditional five, six-person partnership, uh, without anything very, very, very unique and special and differentiated that you bring to the table, then yes, I think you are, uh, in trouble because, um, it's almost like, you know, worse off. On one hand, you're not as agile, you're not... It's not the personal connection. Uh, it, it, it still feels as, as, as, as a, as a corporate to the, to the founder, and on the other hand, um, you're not Sequoia, you know? And so you're not gonna get the very best deals. So yes, I think, yeah, you don't wanna be caught in the middle, and I think- and, and again, unless you position yourself like an amazing brand or, or you're just, like, an amazing expert in some area, uh, so yeah.

8. 35:54 – 44:02

   The Great VC Shakeout: Why 50% of Funds Will Slowly Die

   1. HSHarry Stebbings35:54

      Do you think a lot of funds will go out of business in the next few years-

   2. OZOren Zeev35:58

      Yeah

   3. HSHarry Stebbings35:58

      ... be unable to raise-

   4. OZOren Zeev35:59

      Yeah

   5. HSHarry Stebbings35:59

      ... and slowly die?

   6. OZOren Zeev36:00

      Yeah, yeah. I, I think we're seeing it already. I think it's much harder to raise in the last couple of years. I think, first of all, there's less money going to venture, but not only that, a, a larger percentage of it is going to the platform, so to the platforms. So, uh, if you're not a platform, um, then it's much harder for you to raise. Um, again, and um, uh, and I would say that at least 50% of the funds, uh, today, and maybe more, either cannot raise, or at least are not sure that they can raise, so they're trying to stall and, you know, not test the market, and I think many of them are not gonna be able to raise.

   7. HSHarry Stebbings36:40

      Do you think LPs have an uncomfortable awakening coming with 90% of unicorns that they have marked as unicorns in their book not being unicorns? That is quite a difference.

   8. OZOren Zeev36:51

      First of all, it depends on how the GP reports things because there's huge latitude in how we can report things.

   9. HSHarry Stebbings36:58

      How do you report things?

   10. OZOren Zeev37:00

       ... you know, I try, I try to report things in, uh, in, in the conservative and what they're actually worth, and not, uh, uh... And, and it's less, to me, uh, uh... What I always tell LPs, whether or not you can believe numbers from a VC le- is less dependent on the methodology that they use, because with any methodology, you can inflate or whatever. It's more a function of the personality or, you know, the character, but even more so, the motivation. By that, what I mean, if you're a fund that's... Let's, let's take Sequoia, for example. They know that they can raise any time, right? So they have zero motivation to inflate numbers. They have all the motivation in the world to, uh, show things as conservatively as possible, right? Uh, 'cause they get no benefit from inflating numbers. Uh, however, if you, uh, if you are a fund that is more middle of the road, and you're not sure how easy it's gonna be raised or not, you're gonna find any excuse to keep the prices up, right? To look good on paper. So I think just ask yourself, as an LP, uh, the more secure the, the, the, the, the GP that you speak with is, uh, the less likely they are to inflate, to inflate numbers. And, uh, and it's easy to inflate numbers. And, uh, the, the, the, the, um, uh, accountants are not good, um, um, are not good, um, rail guards from that perspective. Because even if they challenge, uh, valuations, they always challenge the wrong things, and they always... And it, it's complete lack of understanding what... You know, 'cause how- why would they know what, you know, what companies will be i- ca- It's not, it's not in the numbers necessarily, what companies are worth. So, so I think there's a huge latitude, which means that there's a huge challenge for LPs, uh, to tell whether the paper values are real or not, and there are only two ways. One is impractical, which is to really study every single underlying, um, position. When... It, it's, it's impractical. Uh, and the other one is just rely on who do they believe, [chuckles] and who they don't. And here, it's based on their experience, it's based on the, uh, personality, and it's also based on the motivation of the... Uh, how, how motivated... They should ask themselves, "How motivated is the GP to, uh, to inflate numbers versus be conservative?"

   11. HSHarry Stebbings39:16

       You mentioned the first close in fundraising. Is the attitude mindset what LPs want different today than what it was in prior years?

   12. OZOren Zeev39:26

       First of all, in general, they've had, uh, little liquidity. By the way, that might change in 2026, in big way, in a big way, because there are a host of, uh, a host of huge, unprecedented-size IPOs in the works now. You know, companies like SpaceX and, and, and, and, and, and, and, uh, and Stripe, and, uh, Databricks, and, you know, uh, you know, ma- ma- and, and others. Uh, so there could be, there could be a tsunami of, uh, liquidity in 2026, 2027, and that would, would reshuffle the cards again, and who knows how it will affect? But right now, there's been a, a drought of liquidity for most LPs for a long time, fi- four, five years. Um, add to that, the fact that I... What I just said, that it's difficult, um, you can- the TVPI is... You cannot accept it at face value. You have to ask yourself because... So it's, it's, it's, it's challenging to ba- to judge based on that. And because of that, I think there is, uh, I would say, uh, too much focus even, but understandably, uh, on DPI. A- and, um, uh, where, you know, people hardly talked about it three years ago, and now some LPs, "Oh, it's, it's just DPI. It's just DPI. We don't believe anything." So that's, again, that's also an approach. When you see something that's difficult to understand, one approach can be, "Okay, I just discount it. I don't know, and I treat everyone the same. I just don't believe anyone. [chuckles] And I only..." That's an approach. I don't think it's, it's, it's the right approach, but it could be an approach. So yes, so from that perspective, I do see a change. So we have, number one, they have less liquidity, and they're very focused on DPI, more than, more than two, three years ago. By the way, Harry, I do think it's a cycle, so I do think it will change again. I, I don't think I, I, I... But right now, there is, there is, there's this focus, yeah.

   13. HSHarry Stebbings41:16

       The lack of liquidity in large part is down to the extension of private markets-

   14. OZOren Zeev41:20

       Yeah

   15. HSHarry Stebbings41:20

       ... the platforms that are able to have the supply side of cash to-

   16. OZOren Zeev41:22

       Yeah

   17. HSHarry Stebbings41:22

       ... to fund them for longer. Um, that means that we either have to hold them for longer, or we can sell secondaries.

   18. OZOren Zeev41:29

       Yeah.

   19. HSHarry Stebbings41:29

       How do you think about proactively selling secondaries and managing the book pre-going public?

   20. OZOren Zeev41:35

       I understand why others do it. Uh, I don't. Uh, and again, the reason is motivation. So first of all, in any given moment, anything that I wanna sell, I won't be able to, and everything that I can sell, I don't wanna sell, okay? [chuckles] Uh, because, you know, the, the, the, the, the things that I can sell are the best positions, and, and I wanna keep... If it wa- if, if it makes sense, you know, the assumption that I'm gonna sell something, you cannot assume that the buyers are stupid. So they're only gonna buy things that they can think they, they can, they think they can double or triple within the next two or three years. Now, you know, I'd rather... I- if it can double or triple in the next two or three years, I'd rather keep it, right? Um, so, so almost by definition, to sell anything, it's possible to sell, but you have to give a significant discount to the buyer, otherwise they're not gonna do it. They're not stupid either. Um, so why do people do it? I think people do it, again, if they need it for the fundraising.

   21. HSHarry Stebbings42:36

       We sold something earlier this year, and so we knew it would be double or triple in a couple of years-

   22. OZOren Zeev42:40

       Yeah

   23. HSHarry Stebbings42:40

       ... for sure.

   24. OZOren Zeev42:41

       Yeah.

   25. HSHarry Stebbings42:41

       But dude, there was inherent risk baked into that. There was a lot of execution risk that was dependent on that. Then there'd be a lock-up on the IPO. If I'm thinking about IRR for our investor, fuck it! They'd rather have a 3X back now than a four-and-a-half X back in two to three years' time.

   26. HSHarry Stebbings43:01

       ... dependent on a successful IPO and then a good healthcare?

   27. OZOren Zeev43:04

       But that's okay. But let, let me go with the numbers, because I do still remember my, uh, second grade math. Uh, you said three X versus four and a half X. That means that you only believed one and a half X over the next three years with a lot of risk. Yeah, so on the, you know, if this is what you believe, you should have sold. Absolutely. But in general, of course, there are some positions that I can justify- yeah, that I can justify a sale. But in general, uh, um, uh, in, in, in, in, in general, I think that if I know that I need to raise, and if I know that in order to raise, I need to show more DPI, then I can understand why a manager would be willing to give up upside in order to show, uh, uh, uh, DPI today and help them raise the money. You know, I never felt that I needed to do it, and I, you know, I always think of... First of all, I'm the, the biggest LP in every, uh, in every one of my funds, I'm the biggest LP, every single one.

9. 44:02 – 57:50

   Why Oren Zeev Takes $0 in Management Fees

   1. HSHarry Stebbings44:03

      Can I be blunt? How much of a fund generally are you? Like ten percent, twenty-

   2. OZOren Zeev44:06

      About thirteen, about thirteen, thirteen, fourteen percent. Um, so, so, uh, and I don't have any LP who's more than ten percent in, in any given fund. So I'm always... every single fund, I'm the biggest, uh, LP. Uh, and on top of it, I have thirty percent carry, so, so really, I'm forty something percent of the economics. So of course, I think as LP, and, and I'm trying to maximize the, the, the long-term value, and I don't want to short-change myself as an LP. So I, I believe, by the way, in radical alignment with LPs, and this is why I set up... By the way, I pay myself zero. I, I don't see anything, uh, which is very unusual. I don't know any inv- any VC in the world, as far as I know, that has, uh, zero income from the management fees. Zero, you know, um-

   3. HSHarry Stebbings44:50

      So you don't take a management fee at all?

   4. OZOren Zeev44:52

      First of all, I take s- uh, low management fees, um, but I don't... But I reinvest hundred percent of it in the fund. So I don't, I don't have any expenses because, you know, I don't have an office, I don't have people, I don't have any expenses, and I don't pay myself anything. So, um, um, so I have- I see zero. Before the investors see their money back, I don't see anything from LPs, before they got hundred percent of their money back. Even the... By the way, even the way the management fee way- uh, reinvestment works is that the way it works technically is that I don't actually, despite being an LP, I don't actually get paid until the LP's got hundred percent of the money back. That's how the, it's set up. So this is radical alignment. I don't see it, a shekel, a dollar before they, uh, before they, uh, see their money back. And, uh, because of that, I'm really, really cl- very clearly incentivized to optimize for the, for the LPs. Uh, but, and, but, and not, you know, remember what I said at the beginning of the call, substance versus appearance? So I'm hundred percent substance, zero percent appearance, you know, uh, so we... Yeah.

   5. HSHarry Stebbings45:57

      What do you think are the biggest misalignments between GP and LP today in venture?

   6. OZOren Zeev46:03

      Look, es- especially in the larger funds, um, the compensation that the V- that the GP gets from the management fee, especially if you, um, account for time value of money, is typically greater than, uh, than the, uh, than the upside. So let's say you have ten billion and you charge two percent, uh, the minute you close the fund, you already made two billion dollars because it's, you know, two percent over ten years, that's twenty percent. You already made... Already, you only made two billion dollars that are, by the way, are... You're gonna see them over the next ten years, but starting today. And, um, now, the carry, you'll start seeing maybe in seven, eight years, maybe, you know, because it takes time to w- return these funds. So even if it- even if you double the fund, uh, if you double the fund, you, you get another, let's say it's twenty percent, you get another two billion, okay? Um, but, but you're only seeing this two billion in eight years. So if you d- you know, you take into account with, you know, you apply discount rate, you're seeing more from the management fees than, than the, uh, than the, uh, uh... So, so I think that for many, uh, funds, uh, they really wanna do well enough to be able to raise the next fund, and their whole thinking is: "What do we n- need to do to, uh, raise the next fund?" And if it means selling something early to show DPI, then yeah, of course, they'll do it, you know? And, and, and, and, and, and again, in some cases, it can lead to other things. So this is one set of, um, maybe misalignment. The other set of misalignment is actually not between the LP as an entity- sorry, the GP as an entity and the, uh, LPs, but within the individual GPs. Because, uh, the larger the partnership is, the investors, not even the GPs, by the way, also the, the, the lower, um, you know, also the, the younger partners, they're first and foremost managing their career. You know, if there's a conflict between what is good for the individual manager and the long-term, maybe value of the fund, guess what? I'll give you an example. Y- you know, if, if, if, if the typical... If a partner in a, in a, in a, uh, in a partnership, especially large partnership with some... with politics and all that, uh, they're much more interested in their investment succeeding than anything else because that's their career. If their fund is great, but they didn't get, you know, uh, the credit... You know, remember the partner that I mentioned that never saw a follow-on deal he didn't like? That's part of it, because there's- they have- there's no incentive to admit failure. You know, they have all the incentive in the world to, you know, convince their partners to put more money into this company, roll the dice again, and who knows? Maybe, maybe it's gonna succeed. If, and even if not, they bought some time personally, you know? So, so I think the larger the partnership is, the more there is not hundred percent alignment with- between the individual partners. And just like in a company, you know, just like in a company, sales-... the guy in sales can have, uh, a different motivation than the guy in product or the guy in marketing and, you know, and, uh, now the small, like in my case, it's just me, so there's a hundred percent there's no difference. And then I'm the biggest LP, so the LPs and, you know, uh, just there's zero conflict, you know, uh, in my mind.

   7. HSHarry Stebbings49:30

      Can I ask you, I, I think one area that's very challenging as we look at the market today is also about pricing. I, I, I look at Series A today, dude, and I think it's the worst place to be investing.

   8. OZOren Zeev49:41

      Yeah.

   9. HSHarry Stebbings49:41

      And so I'd love your thoughts on this. Yeah, we have 200 X ARRs, 150 X ARRs. There's very little company progression from the seed round, but there's a very steep price increase.

   10. OZOren Zeev49:53

       Yeah.

   11. HSHarry Stebbings49:53

       It's a very competitive stage.

   12. OZOren Zeev49:55

       Yeah.

   13. HSHarry Stebbings49:55

       How do you advise me, others, to navigate this seemingly very bad insertion point today?

   14. OZOren Zeev50:02

       So first of all, I agree, but with a few, uh, comments. First of all, scratch the word today. It's always been the case. It's always been the case, even 30 years ago, that someone invests, uh, uh, uh, you know, you have a seed round, uh, basically founder's in an idea, uh, it's priced low, uh, and then a year and a half later, basically, they have now 20 people, they have an office, maybe they have a few tiny, you know, small customers. They really haven't proven anything, but it- the perception is, "Oh, now it's a company, and we made so much progress. Now we have a product, now we have this." You really didn't prove anything, and all of a sudden they jump in valuation. This is... There's nothing new under the sun. This has been the case always, okay? So this is something to be wary, uh, uh, uh, worried about always as an investor. That's the first comment, observation. The second comment is, I agree with you. Just don't get-- Just watch it not to be t, um, confused by the name of the round, 'cause it... Uh, 'cause the, the, calling it A, that's just a name. You can call it anything. You can call it Seed one, you can call it A, you know, it's just a name. So, uh, there's... A- and I think people, when they talk, it, it's kind of a shortcut, you say A, and it's, "Oh, I know what you mean." You know, actually, no. You know, because we can, we can both call something Round A, and it would be very, very, very different things. So I wouldn't be caught up. I don't care if it's called A or B or Seed or whatever. Generally speaking, uh, when I look at the second round, after the first round, I want to make sure that the progress that I'm seeing is really substantial in terms of, uh, reducing the r- i- in terms of risk reduction, as opposed to the looks of it, the optics of it. So if the progress is, "Oh, yeah, now we have a product," and as I said before, "and we have a few, few logos," but really they didn't really ma- make a commitment, really they haven't renewed yet, there really is not... You really... So the, so the, the tough question is, for an investor investing at this stage, whether it's me or you, is, are the indications that I'm seeing, is it a real signal of product-market fit, or is it just noise? Because if it's not real signals of product-market fit yet, then nothing has, uh, uh, nothing, uh, has really changed since the seed. If anything, maybe the opposite. The very fact that after a year or two, they don't have s- signs of product-market fit, maybe it means that, you know, it should be worth less than what it was worth at the seed. Because at the seed, you had the option value of maybe within a year or two, you will have it. So, so I think that's the thing. It's not about whether you call it A or not, uh, and it's, it's, it's about really exercising judgment, uh, if this really represent product-market fit or not.

   15. HSHarry Stebbings52:51

       What do you think of the rise of very proactive, preemptive rounds, where you have a company raise, and then a month later, Iconic or any of the big platforms come in and shove another fifty million bucks in, and very little has changed again, it's still on three million of ARR?

   16. OZOren Zeev53:09

       Yeah.

   17. HSHarry Stebbings53:09

       Do preemptive rounds work more often or less often in your experience?

   18. OZOren Zeev53:15

       I, you know, I think my advice to founders, and it's advice that's harder, hard to follow, actually, 'cause I cannot fault a founder for, for taking fifty million at a high valuation if he's, if they're being offered that. Uh, but I often tell them, and they, you know, it's, it's hard, but some of them, uh, the more mature ones, are able, I believe. [clears throat] My advice is, take the money, but continue to behave as if you didn't. Um, don't spend money just because you have it. You know, companies can be overfunded, and, uh, it can lead to loss of focus. So if, if the founder is mature enough and strong enough, uh, to take the money, put it in the bank, but spend it based on the signals that they get from the market, as opposed to, uh, the, the, the, the pressure that they're getting in the boardroom, I think they should take the money [chuckles] 'cause it would be stupid not to. But again, it's, it's, it's easier said than done often.

   19. HSHarry Stebbings54:17

       But Jason Lamkin is a dear friend of mine, very famous SaaS investor on Twitter a lot, and he says, "Founders today, they don't want to hear your thoughts. They don't want to hear your opinions. They, they at best will say thank you and ignore you, and at worst will say, 'God, what a dick,' and say bad things about you for giving the advice."

   20. OZOren Zeev54:34

       Yeah.

   21. HSHarry Stebbings54:35

       Do you agree with that perspective, that founder sentiment has changed towards investor advice?

   22. OZOren Zeev54:40

       I'm not feeling it personally. I feel that, uh, uh, founders that I back, the only reason they speak to me and ask my advice is because they want to hear my advice, because... And I'll tell you why. Because I never force my advice. So they, so they, so for them, I'm a safe environment. You know, it's like going to a psych- you know, to a psychotherapist because they don't... And, and the other thing is, they don't need to convince me, uh, because I'm going to support them even if I think they're wrong. So when-... when you n- feel that as a founder, that you need to convince someone that, then you're not so much in a receptive mode. You're, you know, trying to think, "Okay, what-- Okay, how do I overcome this objection and that objection?" When I have a conversation with a founder about something, and the founders know before we even start the conversations, that no matter what, I think I'm gonna support what they wanna do, it disarms them, and then they're much more in receptive mode. Then, 'cause otherwise, why even talk to me unless they really wanna hear what I say? Now, uh, so I'm not personally feeling it. I think it also depends on the way you deliver the advice, and, you know, there's a [clears throat] there's a famous book about raising children, and I think the title is: How to Talk to Children So That They Listen, and How to Listen So That They Talk. And I think it's very, [chuckles] it's very... I love the na- the, the, the, the, the, the, the name of the title, because if when you listen, uh, you keep, uh, telling whether it's chil- whether it's your children or founders, [clears throat] uh, you're being judgmental, you're being, um... You're, you're, you're accusing, you are, uh, um, uh, you're not patient, you know, you think you know better, then of course they're gonna be less receptive to listening to your advice. So I think it also- And by the way, I don't know, um, Lemkin at all, so it's not, uh... You know, I don't wanna sound like I'm, um, bad-mouthing him, and I've only heard good things, so it, uh, it's not, it's not personal, right? Uh, but in general, I do think that you want to, be as an investor, you want to be mindful of how you give the advice. And if you come from a point of know-it-all, then I think that most founders would not react well to it. Uh, I wouldn't react well to an LP who would, [clears throat] um, you know, start telling me, even if they're right, by the way. [chuckles] I, you know, I remember, I remember, by the way, an LP of mine, uh, who, uh, two years ago was very critical of the size of my fund and really pushed me to, um, to take, uh, a smaller, to, to do a much smaller fund, and I didn't like the way they delivered it, and basically, uh, and I wasn't, you know, willing to listen to them, even though in hindsight, I think they were right. Uh, but at the time, I wasn't will- willing to listen to it. In fact, I told them, "Listen, there's a very easy way you can help me making it a smaller fund, by just not being in the next fund." And, uh, to, to my surprise, to my surprise, I was sure that I lost that LP. To my surprise, they stayed with me. Today, we have a g- great relationship. But, um, you know, even I was not listening to advice, which in hindsight, was the correct advice. Um, so I think it's also, the delivery is also important.

10. 57:50 – 1:02:41

    Why VCs Should Never Tell Their LPs What They Are Doing?

    1. HSHarry Stebbings57:50

       How have your thoughts on ownership changed over time? The reason I ask this is because, like, we could have invested in Eleven Labs at the seed round. We would've got 1%.

    2. OZOren Zeev58:00

       Yeah.

    3. HSHarry Stebbings58:00

       We could invest in Granola at the seed round, we'd have got 1%. But we do what we tell LPs, Oren-

    4. OZOren Zeev58:06

       Yeah

    5. HSHarry Stebbings58:06

       ... which is we lead rounds-

    6. OZOren Zeev58:07

       Yeah

    7. HSHarry Stebbings58:07

       ... and we take double digits ownership, and we are your concentrated investor.

    8. OZOren Zeev58:12

       Yeah.

    9. HSHarry Stebbings58:12

       Well, how have your thoughts around ownership changed, and where do they sit today?

    10. OZOren Zeev58:15

        So first off, they haven't changed, and that's exactly why I don't tell, I don't tell LPs anything in terms of what I'm gonna do, because I feel that if I tell a LP something, I would feel too committed to that specific strategy, which I may have thought it was the right strategy, but then there's a situation that requires being flexible. So I tell LPs I only have one rule, and that rule is that I have no rules. Um, and, uh, that's it, you know? Um, and, uh, so I think it all depends on the circumstance, and in some circumstances, I would... In some cases, I would do things that maybe an hour before the meeting, I didn't think I would do. [chuckles] I'll give an example. Uh, and, uh, by the way, which is still an ongoing company, I don't know how, where it's gonna end, but, you know, there's this co- AI company called Descartes. Have you heard of it?

    11. HSHarry Stebbings59:02

        Yeah.

    12. OZOren Zeev59:02

        Um, so it, I, I, I met them a little bit over two years ago. Um, uh, I met them over Zoom, and when we met, they said they're gonna start... It was just the two founders. They didn't really have an idea, uh, but they were exceptional. And they told me, "Yeah, well, we have $3 million, uh, committed. We're gonna close on it, uh, tom- uh, in the, you know, the next 24 hours, uh, uh, from a bunch of really good angels." And I asked them: "Okay, if you, uh, if I wanted to, uh, invest, what can you do?" And they said, "What we can do is we can cut them back 50% and give you one and a half million of the three million." And, uh, by the way, it was gonna be an uncapped SAFE. I, I normally don't do SAFEs at all, but in this case, I said, "You know what? I'll do it, but I need it to be capped," and, and, and we capped it, um, which luck- luckily, because o- other- otherwise, uh, for, at least for the investors, it was lucky because, uh, uh, the next round was at much, at a very high valuation already. And, uh, so I ended up with, uh, you know, 5%, which is way less than my normal, uh, ownership of, of one a- one and a half million. I assumed that I'd be able to increase it later. It never happened. The reason it never happened is because they became profitable very, very, very quickly, so they didn't need more money. Uh, they only took Sequoia money because they wanted Sequoia. Uh, and they later took Benchmark money, again because they wanted Benchmark. And, uh, but, uh, so they were- so I, you know, was able to maintain my ownership, but I, I was never able to, uh, increase it, so I deviated from my rules. Again, I don't have rules, you know. I don't have minimum ownership. I don't have rules. At that point, it made sense to want to do it, and I'm glad I did, you know? So, uh... And it helps not telling LPs, "I'm gonna do this, I'm gonna tell that, uh, I'm gonna do this, I'm gonna do that," because then you don't have to later explain why you didn't do what you told them.

    13. HSHarry Stebbings1:00:54

        Does having Sequoia on your cap table move the needle for a company, do you find?

    14. OZOren Zeev1:00:58

        I think it depends on the situation, the, the partner, but they're a great firm, and they have a great, you know, the, you know... And, uh, I'm, you know, I've, so I've, I've partnered with Alfred in one deal, and I'm, uh, in, in the case of Descartes, it's, uh, Sean, uh, Maguire, and, you know, I, I think they're great. And, uh, and, and I, I, I, yeah, I, I think there is a chance that it will make a difference, but, you know, it depends on the situation. It doesn't have to make the difference.

    15. HSHarry Stebbings1:01:21

        Can I ask a weird one? Like, Hunter and Satcher at Homebrew-... um, you know, have been incredibly successful, as have you, and decided not to raise more money from LPs-

    16. OZOren Zeev1:01:30

        Yeah

    17. HSHarry Stebbings1:01:31

        ... manage their own money, and they can be way more collaborative because they don't manage other people's money, and they just invest their own.

    18. OZOren Zeev1:01:37

        Yeah.

    19. HSHarry Stebbings1:01:38

        You, you could do the same.

    20. OZOren Zeev1:01:39

        I have done the same before. I, I, you know, between Apex and doing, uh, what I do now, I've done what they d- are doing now for eight years with my own money, and led deals-

    21. HSHarry Stebbings1:01:48

        Well-

    22. OZOren Zeev1:01:49

        Yeah, yeah, I have done the same.

    23. HSHarry Stebbings1:01:51

        Why, why do you not go back to it? You could be more collaborative. You don't have to have LP management. You don't have to fundraise. Why do what you do now?

    24. OZOren Zeev1:01:59

        Why would I wanna be more collaborative?

    25. HSHarry Stebbings1:02:01

        'Cause you can get into more deals.

    26. OZOren Zeev1:02:03

        I don't wanna get... I, you know, I wanna be the main player. I don't wanna get into more deals necessarily. I wanna... The ones that I do, I wanna make it [chuckles] I want them to matter, and I want, you know, I want, you know, to be as meaningful as possible and to be, uh, you know, the player, the main backer, one of at least, uh, so-

    27. HSHarry Stebbings1:02:18

        How many companies do you want in a fund?

    28. OZOren Zeev1:02:20

        In the, uh, early funds it was less, but now it's more like 15, but there is a lot of, um, a lot of crossover between the funds. So I'm now in fund 11, and I only have 40 companies. So, um, uh, so if it was exclusive, it would be four companies per fund, but it's not, because, you know, the same... You see the same names in, in, in different

11. 1:02:41 – 1:07:21

    Quick-Fire Round

    1. OZOren Zeev1:02:41

       funds.

    2. HSHarry Stebbings1:02:41

       Can we do a quick fire round? I'm gonna give you a series of short statements.

    3. OZOren Zeev1:02:44

       Oh, that's scary. That's scary, okay.

    4. HSHarry Stebbings1:02:46

       No, no, it's not scary at all.

    5. OZOren Zeev1:02:47

       You didn't give me any, uh... Okay.

    6. HSHarry Stebbings1:02:49

       What do people not know or see about having money that they should know and see?

    7. OZOren Zeev1:02:56

       Okay, I think most, not, and this goes out- outside the world of venture, right? But-

    8. HSHarry Stebbings1:03:01

       Yeah

    9. OZOren Zeev1:03:01

       ... I find that there is an increasing level of hating the successful, hating the rich. I see it on Twitter. I think in Europe it's even worse, but it's come to America, unfortunately. And I think many, uh, people, uh, unfortunately, generally believe that rich people are evil or that you cannot become rich without taking advantage of other people, et cetera. And the reality is that rich people are as evil and as good as [chuckles] anyone else, and most, uh, you know, most rich people that I know actually are looking for ways how they can, um, um, how they can use... leverage, um, their success to make the world a better place. But you have politicians who are trying to, uh, you know, come up with all sorts of, uh, suggestion how to, um, um, you know, basically hurt successful people for being successful. Of course, they're not gonna get cooperation from, uh... And, and, and, and, and, and be- because they feel that they, they... it will make them more popular among people who, you know, assume that if someone is, uh, is, is, is rich, it's because they, uh, did something bad. So I think this is... I don't know. This is... I'm, I'm... This is more about politics than about business, but I, I, I, I think one of the strengths of the, uh, of America, they always, always believed in merit and, and, and, and success. And let's say that I'm not a fan of the movement or the woke movement that is, you know, dragging or trying to drag America in the, in the, uh, in the other direction. I didn't mean to be political, actually. I, uh, I-

    10. HSHarry Stebbings1:04:46

        Are you, are you concerned by the labor displacement theories of AI? I'm excited 'cause I'm gonna make a lot of money.

    11. OZOren Zeev1:04:53

        Yeah, yeah.

    12. HSHarry Stebbings1:04:54

        But I'm also nervous because I don't know what's gonna happen. Are you?

    13. OZOren Zeev1:04:57

        Exactly, the ex... I feel exactly the same as you. Look, I think it's the most powerful transition or, or force maybe in history, and just like any powerful force, there are very good reasons to be excited, and there are [chuckles] very good reasons to be worried, and I'm pretty sure that we're gonna be proven right on both sides. We're gonna... Our worries are gonna be proven right, and our excitement is gonna be proven right [chuckles] also.

    14. HSHarry Stebbings1:05:21

        Do you think... A lot of people, respectfully, and I mean this so respectfully-

    15. OZOren Zeev1:05:25

        Yeah

    16. HSHarry Stebbings1:05:25

        ... with your wisdom and years of experience, say, "Oh, Harry, it always looks like this. It always takes longer than you think. It always takes a..."

    17. OZOren Zeev1:05:33

        Yeah.

    18. HSHarry Stebbings1:05:33

        And part of me goes, "I get that-

    19. OZOren Zeev1:05:35

        Yeah

    20. HSHarry Stebbings1:05:35

        ... and I respect your experience and wisdom"-

    21. OZOren Zeev1:05:37

        Yeah

    22. HSHarry Stebbings1:05:37

        ... and part of me goes, "This feels a bit different."

    23. OZOren Zeev1:05:40

        Yeah.

    24. HSHarry Stebbings1:05:41

        Which side are you on?

    25. OZOren Zeev1:05:43

        Yours.

    26. HSHarry Stebbings1:05:44

        Oh.

    27. OZOren Zeev1:05:45

        Yeah.

    28. HSHarry Stebbings1:05:47

        Good.

    29. OZOren Zeev1:05:47

        But, but by the way-

    30. HSHarry Stebbings1:05:48

        What-
12. 1:07:21 – 1:14:58

    How I Missed Investing in Facebook and Lessons Learned

    1. HSHarry Stebbings1:07:21

       What's your biggest miss, and how do you reflect on that? I mentioned deal for me.

    2. OZOren Zeev1:07:25

       Yeah, you know, [sighs] -... I don't have too many, which means that I'm not seeing a lot of the great, uh, to be honest, it's not a good thing. I'm not proud of it, uh, 'cause I didn't see the- by the way, I love Alex, from this, this time, Alex Homdeal. Uh, I really didn't see it. Uh, so I, you know, I, I don't know that I saw anything that was... Turned out to be super great that I didn't do, but again, this is not a positive, this is a negative, because it means that I didn't see things that, [chuckles] uh, I should've done, I should've seen. I- now, now that I, I do have misses from the Apex days, where I saw something that I wanted to do, but I knew that there was no way I could get it approved, including Facebook, by the way. In the very early days, you know, I saw it, I could have done it. I brought it to the partnership, and it was dead on arrival. Or, or, uh, the one that I know I could have done, is I tried to convince the partnership to buy... I, I, I made the investment, uh, in Audible, was my first big home run, and then it went public, and it was a good, a great- we sold, uh, not all the shares, but enough to make it a home run. Uh, and then the stock price, um, dipped, and it was obvious to me that it's temporary, and I wanted to basically take it private, and I couldn't, you know, and, and I, and I could have, because the founder was totally on board, because he didn't like being public, and I couldn't get it approved. But this is less of a miss of mine, because I, I tried, and, uh, and, uh, and, and then because the, the founder already decided they don't want to be public anymore, we, we, we ended up selling it to Amazon. Um, and, uh, and now it's a huge, humongous company, and, uh, it would've been an amazing deal if we took it private, but, but that's less of a... In terms of- I'm, I'm sure, by the way, I'm sure I did. I do have things that I, uh, uh, missed, but not one of, not one of the really great names, not an OpenAI or Anthropic or any, anyone's. Which is an interesting story, because when I heard that, um, uh, I didn't know Asaf, but when I heard that he was, uh, leaving Microsoft, I didn't even know he was starting a company. I, uh, asked someone to make an introduction. I guess he checked with them, um, and, uh, conne- and, and he, um, uh, connected us, but he used the wrong, um... But he used the Microsoft email address, which Asaf was not checking. So I tried two, three times, didn't get an answer, and I moved on. [chuckles] Now, two years later, when I met him for the first time, I asked him, "Why didn't you respond to me?" And then we worked it out back, back, you know, we worked it back, and it turned out that he was, on one hand, he still had this email, otherwise it would've bounced, and on the other hand, he wasn't checking it. But to be honest with myself, I don't think I would've got the deal anyway, because, you know, I think, uh, uh, he was, uh, you know, he had an amazing cyber investor from his previous company, who also led, uh, uh, you know, I think you know him, Gilly, and, you know, it was his deal. I wouldn't, I wouldn't, I... You know, and he's not much of a- just like me, he's not much of a collaborator either, so I don't think he would've done me any, you know... I, I, I don't think I would've got into the deal anyways, just because... And, and by the way, this is one thing that is consistent fallacy within VCs, that they think that just because they saw a deal, they necessarily would've been able to do it. Um, no. You know, uh, with all due respect to anti-portfolio, it doesn't make sense that the same deal appears in 20 different anti-portfolio, because it's not as if the 20 could have done it, you know? So, um, uh, but anyways, this- yeah.

    3. HSHarry Stebbings1:10:54

       No, mine I could have done, actually.

    4. OZOren Zeev1:10:56

       What's that?

    5. HSHarry Stebbings1:10:56

       There's three $10 billion co- I've got three $10 billion companies now-

    6. OZOren Zeev1:11:00

       Yeah

    7. HSHarry Stebbings1:11:01

       ... where I legitimately could've, I could've-

    8. OZOren Zeev1:11:02

       No, I, by the way, by the way, it's easier when you, when [lips smack] i- easier when you write a small check, because, and you have the value that you have, then why would people not let you in, right? It's harder when you have to be the winner and exclude everyone else. Uh, so yes, I agree, you could have done.

    9. HSHarry Stebbings1:11:18

       Yeah, but I-

    10. OZOren Zeev1:11:18

        By the way, Riverside too, Riverside too, which is the, uh, the, the, the, the... It's not 10 billion yet, but it will be, I believe, and, uh-

    11. HSHarry Stebbings1:11:25

        But d- uh, dude, you sent it to me.

    12. OZOren Zeev1:11:27

        I know, that's what I'm saying.

    13. HSHarry Stebbings1:11:28

        Do you remember this? You sent it to me.

    14. OZOren Zeev1:11:28

        Yeah, that, that-

    15. HSHarry Stebbings1:11:28

        And I was like, "You, dude, you're an idiot-"

    16. OZOren Zeev1:11:30

        I know.

    17. HSHarry Stebbings1:11:30

        "... Zoom is gonna continue."

    18. OZOren Zeev1:11:32

        Yeah.

    19. HSHarry Stebbings1:11:32

        I, I- [lips smack]

    20. OZOren Zeev1:11:33

        Yeah

    21. HSHarry Stebbings1:11:33

        ... really. Well, what are we on now? Oh, Riverside. [chuckles]

    22. OZOren Zeev1:11:36

        [chuckles]

    23. HSHarry Stebbings1:11:36

        Yeah.

    24. OZOren Zeev1:11:37

        Exactly.

    25. HSHarry Stebbings1:11:37

        That's pa- uh, uh, just keep sending things, Oren. Next time, I won't ask, okay? [laughing]

    26. OZOren Zeev1:11:44

        [chuckles]

    27. HSHarry Stebbings1:11:44

        Um, you mentioned Mickey earlier, and we mentioned Mickey earlier. Which investor do you most respect and admire, and why them?

    28. OZOren Zeev1:11:51

        Mickey is definitely very, you know... I, I don't want to say the only one, but he's one that I super respect, not just as an investor, but also as a human, as a, as a person.

    29. HSHarry Stebbings1:12:01

        What do you take from your relationship with him? Like, for me, he taught me, "You've never won or lost, you're only ever ahead or behind." I always remember that.

    30. OZOren Zeev1:12:10

        Okay, I have to think about it. [chuckles] Now, look, I, I've been in this business longer than he has, and actually, when he started, he came, you know, also consult with me, and so it's not, it's less of some mentorship, but what I so respect about him is that he just, you know, he's so authentic, you know? And he speaks his mind, is, is, is... I, you know, I think he's, uh... And, and he has his, you know, his own way of doing things. I have mine, different, but actually, I think it's harder the way he does it, because, you know, it's one thing to do things your, your own way when you're one person, it's another to be a leader of, of, of, of, of, uh, of a group, which he is. So he's a much better leader than I ever will be or aspire even to be, and, uh, nothing, he's just a great, just a great person, uh, and, um, yeah.

Episode duration: 1:15:08