Uncapped with Jack AltmanInvesting with Conviction | Sarah Guo, Founder of Conviction | Ep. 5
EVERY SPOKEN WORD
50 min read · 9,661 words- 0:00 – 0:11
Intro
- JAJack Altman
[upbeat music] All right, Sarah, thank you for doing this. I realize that you, uh, you've been spending more time being the interviewer than being interviewed, but I appreciate you doing this, and it's nice to be doing it in your office.
- SGSarah Guo
Yeah, well, any excuse
- 0:11 – 2:27
What a VC firm is at its core
- SGSarah Guo
to hang out with you.
- JAJack Altman
The first thing I wanna ask you about is what a VC firm sort of is, and th- the thing I've been thinking about a bunch is when I was doing Lattice, I kind of knew what a company was. Like, you know, you build a product, you sell the product. Like, there's like a sort of a very tractable thing. And then over the last year doing venture full-time for the first time, it struck me that it's a much more sort of flimsy concept. And, you know, there's obviously like a, a fund that owns shares, but then there's like a brand, and there's people, and there's these other parts. And as I've been thinking about building a VC firm, I've realized that thinking about what it actually is, is sort of like a wispy idea. And so I would love just to hear from you as you've thought about... You know, you've been at one, like a, a very substantial, long-standing one. Now you've built your own. Um, how do you think about what a VC firm is?
- SGSarah Guo
We've taken, like, two steps toward building our own.
- JAJack Altman
You've built something, though.
- SGSarah Guo
But it's, it's an interesting question. Like, the way we think of it internally is, um, and it's not, like, the most flattering view, but venture is a bundle of, like, money. Um, I'm thinking about the value prop to the customer, right? The customer is the founder. Venture is a bundle of money, where, like, everybody's money is approximately green, right? You can have, like, lower and higher quality LPs, but, uh, generally, that's not how founders make their decision. Then you have, um, people and beliefs that you are associated with as a founder, and then you have advantage, right? Like, what can, like, can... And I, I wouldn't do the job if I didn't figure, like, that the last piece could matter at all, but, um, help you can give companies and to, to try to make things happen faster or make ideas, like, more possible to, to actually make real. It is a, it is a weird way to think about venture as a business, because for all tech investors love to talk about, like, you know, like, moats and differentiation and sustainable advantage, I think venture, like, when you think about those components, money is the purest commodity. The rest of it is pretty squishy. It's a lot of, like, brand and individuals that feel quite fragile or, like, point in time. Um, but, uh, you know, some of the great venture brands have been around for, um, a long time, and I think it's still possible to build an enduring institution,
- 2:27 – 6:44
Compounding qualities of enduring firms
- SGSarah Guo
so.
- JAJack Altman
Yeah, it, and, and some of those brands do- so- something is compounding there.
- SGSarah Guo
Mm-hmm.
- JAJack Altman
And I guess maybe that's an interesting sort of way to pull on the thread is, like, what is compounding at Sequoia or Greylock or these firms that have been successful for decades? What's the thing that is, like, hard to knock off balance? Like, what is the thing that's making the... Is it like, is it the brand? Is it the network of founders? Is it something about the way they do business? Like, what is holding on through different years and teams and cycles?
- SGSarah Guo
Yeah. Well, I, I would start by saying, like, I actually, like, really wanna try to live like this, and I, I think your entire, like, personality expresses this, but, like, it... This is- this doesn't feel like a particularly zero-sum environment. Um, I, I think you can try to build a new thing without saying, "We're, like, completely after somebody else." But i- in terms of, uh, durability, I think you have, you have, like, ethos, right? Like, what matters to the people in a firm that goes from generation to generation and different investors. You have, like, some, um, tribal knowledge, and that is, like, what has worked in the last generation of companies, um, good and bad biases, like the history of technology, right? Like, sure it's how Apple or Google or NVIDIA did it, um, or, or Facebook for that matter. And then you have, you have brand, which is just obviously what founders think of the place, how much success you've had, and then you have network. And I think those are, I think those are the things that are harder to replicate very quickly. I think you also, if you are at a platform venture firm, you have, um, a lot of capital available to you, but there's also just a lot of capital in the world.
- JAJack Altman
Yeah, I wanna come back to what you said about sort of the whole, the zero-sum nature of it all and to what degree, you know, more value gets created versus, you know, venture capitalists are sort of, are capturing. I've heard some people say that they think that, um, great founders select-- like, the truly great founders are actually selecting for a different thing than other founders when they're thinking about their VCs.
- SGSarah Guo
Mm.
- JAJack Altman
Um, I can't remember, but you know, who all, but one name that comes to mind, I know Parker at Rippling has said that, like, brand is the most valuable thing that he can get from a VC, because it makes it easier to recruit, easier to get the next customer, et cetera, and, like, he's gonna do the work anyway, and so at least he can get a brand. Do you think, like, as you've experienced sort of working with companies and founders, do you think that there are different attributes in a venture firm that different founders prioritize? And does that impact at all the way that you want to build when you think about, you know, your founder is the customer, but obviously, you're looking for certain founders within, within that customer set?
- SGSarah Guo
Yeah, I definitely think we don't have to appeal to everybody. Uh, I think if you are going to go to, uh, the, uh, sort of highest prestige brand, like, you wanna buy, um... I don't know. I want- I was gonna say, like, IBM, but I, I mean this in a flattering way. Like, you wanna buy, like, the known winner?
- JAJack Altman
Apple, let's say.
- SGSarah Guo
Apple, you buy Sequoia, right? Um, and like, you know, a number of challengers in the established tier. But I think a lot of people make decision-- like, founders are not a homogenous set, and, like, let's just use examples here. Um, I, I think a lot of people make decisions very individually, right? Um, if they know... And, and, you know, we also wanna back first-time founders who've never met anybody in venture capital, and we talk about how you build that trust and those relationships. But Brett Taylor, when he builds his third company, he's just calling people he wants to work with. He does not care where they work, right? I don't think he, like, particularly cares about the brand of the firms. He is working with firms with nice brands, but he is picking individuals, um, probably because he doesn't feel like he particularly needs the halo. I think if you asked Parker, because I have, like, I'm pretty sure he called Mike, actually. Um, because there's, uh... And maybe that's also a thing, uh, a symptom of him-... also being a third time founder. I think his specific words here were like: "If I were ever to build another company, please, God, no. [chuckles] Um, but I'd call Mike." And so I think that, uh, at some point, like, the things that you feel like you want help with or support on, or how much brand matters to you, change as a founder.
- JAJack Altman
For sure.
- SGSarah Guo
Um, and so we, we want to attract a particular set. Um, and I think our brand does stand for something. We're trying to make it stand for something now, but it doesn't have to be, like, the most established prestige. We actually can't go back in time and do that.
- JAJack Altman
Totally.
- 6:44 – 13:01
Intentionality behind building Conviction’s brand
- JAJack Altman
Yeah, okay. I want, um, I wanna shift to brand now, 'cause this is, uh, it's something that you've done notably. I promised you I wouldn't, like, ask, like, a question that was, like, rooted in flattery, but, like, you've done a good job branding the firm since you started, and actually, in some ways, I would say, you know, the, the, the last sort of really great firm to be built that, uh, that I can think of, you know, that also launched with what I think was a very strong market presence, was Andreessen. This is like 2009.
- SGSarah Guo
Mm-hmm.
- JAJack Altman
And like, all of a sudden, they were like everywhere. They did many things. They, like, dominated PR. They were like, you know, investing in great companies at what seemed like then high prices. Many of them, you know, were actually still really good investments from there. But, like, there were a bunch of things that let them get this brand very quickly, and then they scaled rapidly and all of that. And in some ways, there was not, you know, another firm that did that. And, um, you know, at risk of flattery, you've been- you've built a very good brand very quickly, and you've kind of been everywhere. And, you know, people see you in a lot of different places, in high-value places. They see you on good cap tables, they see you at good events, they see you, you know, they, they see you just, like, frequently. To what degree is that just, um, what's been happening by a product of you sort of working hard, having a clear view, and whatever? Or to what extent is this all, like, wrapped around, like, an intentional goal, building the firm in a particular direction, and this is part of the story?
- SGSarah Guo
There's a founder that we both know, who has, like, a medium-scale SaaS business now. And, um, at one point, I lost, uh, an investment at my prior firm to Andreessen. It was a Series A for this company. This, uh, lovely founder was like: "Hey, love you guys, but, um, they're paying more, and, like, let me..." Like, I was... And, and I was like: "Oh, well, like, it doesn't matter. Like, all of these other things matter." And we sat down in a bar for, like, three hours, and he explained to me, like, how he saw the firms. And he basically was like: "Ah, these things, like, they look pretty similar, except they look bigger, and, like, they're better at PR, and they're willing to pay more." And I was like: "Oh, that's a bummer." [chuckles] Um, I took this, like, list that this founder gave me and, like, stuck it on my office door at my old firm for a number of years. I was salty about it or, uh, wanted to, like, try to solve the problem. And, and so one of the things that, um, I think you just like, think about when you start a company and you've worked on early-stage companies for a while, is, like, the... Who said this originally? Uh, like, it's, it's such an important thing. Like, nobody cares. Nobody cares about Jack or Sarah or their firms or your new startup, and so, like, you have to make them care. The other thing that, like, we thought about was just if we think we are good partners to entrepreneurs, um, like, why should they know? We have to, like, solve an information asymmetry for them. And one of the things that, um, this founder said to me is, like: "You say you have a good network. They say they have a good network. It all kind of looks the same." And so one of the things that we wanted to do- and, like, all this stuff is like, I don't know, you can just, like, try stuff and then see what sticks. But one of the things that we thought would be important would just be, like, demonstrate who the network is to founders in ways that are, like, accessible to them without us, like, man-to-man combat, woman-to-woman combat, proving it. And so we did a bunch of what you would consider to be, if you were in a company, it was like a, you know, SaaS founder of Fly, it'd just be like partner marketing.
- JAJack Altman
Yep.
- SGSarah Guo
Right?
- JAJack Altman
That's true. It looked like.
- SGSarah Guo
Um, and, uh, well, well, we just were like, if it was a business-
- JAJack Altman
Yep
- SGSarah Guo
... it would be a funnel. As part of marketing, like, what can we do that is efficient with people who have the distribution that we want, that like us? Like, okay, let's go show up with NVIDIA and Snowflake and OpenAI and whoever it is that, um, like, is part of the community we wanna be part of.
- JAJack Altman
I mean, there's also the reality that you doing... You know, to, to the Parker point, there's reality that you doing the brand work actually also helps the companies in some ways, 'cause, you know, you doing branding can help your-- at least at the early-stage companies, there, there's value to it. So you talked about, so there's, like, partner marketing, which is sort of like express the network.
- SGSarah Guo
Yep.
- JAJack Altman
You also touched on something before, which was like, stand for something and then like, you know, share that. Is that, like, an essential part of it? Is that, like, the center of it, is like, believing something in the world, and, like, that's what the marketing is about? Like, you know, I know, like, this is like a Steve Jobs thing, was like, you know, we stand for something at Apple, and, like, that's what Apple's brand is, is we believe in, like, you know, we, we believe in, you know, XYZ things, and I think, like, that, that could be the analogy here. But do you think of it, you know, is, is it network? Is it stand for something? Is there a third pillar? Like, what are those components in your mind?
- SGSarah Guo
Be willing to take risk on having an opinion is an important one for us. I think a number of founders choose to work with us because they, um, believe that, like, the firm is AI native in terms of, uh, understanding of these sets of things that the companies are trying to do, and then some is access to network, some is understanding of the research itself, some is just, like, company-specific challenges. I also think that maybe entrepreneurs, like, i- if you, if you, like, wanna go one level deeper, like, I don't know what the world looks like.... 20 years from now. I really hope that, like, Conviction as an institution exists, but if you think about the, like, name we chose as well, it is like, have an opinion. Maybe we're in the, like, post-AI abundance age, and, like, venture is irrelevant, or, like, we're on to the next big technology thing, and I hope the people at the firm, and maybe it's me, like, are on to the next big thing, too. But part of the core ethos for me about venture is, like, I wanna understand the new thing, and then, like, we take risk on it. Um, like, we published our LP letters recently. Some of those, uh, beliefs and predictions are gonna be wrong and look very stupid. But for a generation of entrepreneurs right now, where everybody is in, like, a very dynamic environment, and, um, I think people are unwilling to, like, make any claim about understanding or about prediction, I think that can be, like, very grounding of like, well, at least these people have an opinion, and I can decide if I have that worldview or not.
- JAJack Altman
It's actually funny that you said that because a- about Conviction, before you said that, I had been thinking of the brand as AI native, and now that you say it, I actually can immediately re-understand it as have strong conviction, and what we believe right now is that AI is the most important thing. But if in 10 years that's solved, and now it's about space travel, like, Conviction could be about space travel, and that actually, that resonates. That makes sense to me.
- 13:01 – 16:33
Correlation or causation between brands and returns
- JAJack Altman
Do you think that in venture, do you think, like, brands typically, like, need to follow returns? Or do you think, like, do returns follow brand to some extent? Is there a strong correlation or causation between these two things?
- SGSarah Guo
I think the most important part of brand should be success, and success for a venture firm is, like, the quality of the companies. I actually don't even think that, um, most founders have that much visibility into, like, how early you are or, like, how much of the companies you own. And like, you know, sometimes I think, like, that would be-
- JAJack Altman
Totally
- SGSarah Guo
... useful to founders to have more transparency around, where like, hey, that person that like says they're part of this journey, bought secondary at the Series F, right? And that's, like, probably different than working on the company for eight or ten years. But I think, like, year zero, you gotta do something.
- JAJack Altman
It, it also brings up a funny point, though, of like from a founder's perspective, what is a VC being successful? What does that mean in the way they care about? Like, should they care more that you partnered with important companies or that you deployed a lot of capital, or should they care more that you got crazy returns in companies they never heard of and didn't play a role? You know, so it's, it's not so obvious, and I do think that there are firms that, um, that can kind of impact the direction of capital flows, and firms that are working with the most important companies that maybe don't have as good of returns as firms that are, you know, not doing those things. And so I do also, you know, as we're talking about it, wonder from a founder's perspective, which type of success is actually important. You know, like I joked recently that somebody was talking about like: Oh, why should a founder wanna work with that company? You know, they're, they're, they're huge, and they don't have big returns. And I was like, if I'm, you know, thinking from a founder lens, I'm like, low returns for them means that-
- SGSarah Guo
[chuckles]
- JAJack Altman
... that was less dilution for me, so that sounds great. You know, it's, but it's, it's not so one-to-one.
- SGSarah Guo
Yeah, I, I think it's a really good point of, like, I actually don't know that founders should care about the quality of our multiple. I think that is a proxy for, like, something founders should care about, which is taste. I, I do think some of the very best people, if you ask them, uh, like, when they say they're choosing brand, um, they care about association with quality and with success.
- JAJack Altman
Yeah.
- SGSarah Guo
And so if you do a small number of companies and the hit rate is high quality, and the people is like a set of people that you would be excited to learn from, I think that is attractive, right? And, um, uh, there, there is often a debate about whether or not you learn more from success or failure. I believe you learn more from success.
- JAJack Altman
Me too.
- SGSarah Guo
Um, and so I think people want the tribal knowledge going back to, like, what is a venture firm really? Of like, what is working at, like, the handful of companies that are really working in this era. Um, and, and so I think we want that to be, uh, you know, part of the value prop and then part of the brand. But to your point of, like, should founders choose the same thing, um, a- and are the incentives fully aligned? I, like, I think not. Like, there's a whole range, right? And I think it is... I actually joke with, um, my, my partner, Mike, of like, I think it is very reasonable if you think about if a bunch of VCs can argue about whether or not they're good operators, but once they've been investors, like, how might they raise money? They might raise money from their friends. They might raise money from the, like, highest taste people and people who are most helpful. They might also raise the most money they can at the least dilution possible with the least control.
- JAJack Altman
Yeah.
- SGSarah Guo
It really depends on what you are looking for and, like, what your view is of what you're looking for from your investors. And so I, um, I also think it's, like, very stage specific. I, I don't think that founders should be optimizing for our returns. I think that's just a, a proxy for other things they
- 16:33 – 27:15
Shape of the current VC market
- SGSarah Guo
might care about.
- JAJack Altman
As you think about the current market landscape, um, and you'd been investing, you know, professionally through the teens, and then you got to, you know, live through sort of the, the ZRRP escalation and s- like, sort of late-stage SaaS before AI and all this other stuff. You know, for me, on the founder side, what I remember in 2020 and 2021 was all these crossover firms that I just thought were hedge funds, like, came and were, you know, doing all these crazy market distortions, and as founders, everyone was like, "Cool."
- SGSarah Guo
[chuckles]
- JAJack Altman
Um, but, like, that was what was going on. Then everybody kind of went away in 2023, and now back in 2025, we have what looks to me like a similar but different dynamic, where the crossovers don't seem to be back in a, you know, particularly important way, at least. But you have the sort of bulge bracket, institutional VCs that have gotten as big as those firms were-
- SGSarah Guo
Mm
- JAJack Altman
... and they're now, you know, three or five or nine billion or whatever. So you've got that going on. Um, the other thing that I think is interesting that you sort of were the, maybe the first of the most recent set, but there's, like, a number of now successful GPs that have left multi-stages, started their own firms. So now there's gonna be... You know, there's always new firms being started, but there's now a set that is sort of, like, ostensibly going to be slightly more institutional over time, probably smaller, but so you have these two sort of ends of the market going on at once. And you have, you know, AI mania, which, you know, as we know from, you know, internet in 1999, could be, could be undervalued still.... could be overvalued. Who knows? What do you make of the shape of this market right now? What does it mean for where you think people can successfully play? What do you think it means for you and where you want to be playing? But, like, what's your read on that sort of market map?
- SGSarah Guo
Starting a venture firm has, like, made me slightly more cynical about the ind- I'm, I'm like a, uh, I'm the opposite of a cynic in many ways. Like, I'm a deep optimist about technology. I like working with really earnest people. I try to be an earnest person, but it is clear to me that raising money... Like, the capital markets are really deep, and raising money is an awful lot easier than making money in venture, from a returns perspective. I think, like, if you actually think about the economics of a venture firm to the investors, there's a crossover point of, like, you could be a, like a best-in-class in any vintage investor delivering, let's say, like, respectable eight to ten times multiple returns on a small fund, and make not that much more money than somebody who's charging traditional venture fees on a fund ten plus times your size, right? And so I think there's a very rational thing, um, happening in the maturation of certain asset platforms, where it is very easy to unconsciously be attracted by growth because, like, you know, you've built a company, growth feels good. Growth is not a natural state for venture. It changes your ability to invest, right? But people are growing their firms. It's also, like, a natural organizational thing, right? If you hire young people, and then you hire ten, then you hire fifty, like, they got- they gotta go somewhere.
- JAJack Altman
Gotta grow. Yep.
- SGSarah Guo
Um, and that also means, like, that means opportunity, that means comp, that means agency. So I think that, like, a very natural thing has been happening where these things that were little boutiques are acting like businesses. The businesses naturally grow. There's capital available to them. The feedback loop for, uh, whether or not the returns are supported are also distorted by the fact that lots of people see the backwards-looking multiple of the best, um, funds of the vintage right before ZRP, and were under-invested in venture and are still trying to invest in venture. And I- like, the outcome of all that to me is, there's obviously secular increasing opportunity in technology over time, and that's the thing we index as venture investors. And so I think there should be some growth in the venture industry. Uh, I think this is, like, a skew from that, and it will not end well in terms of returns for folks, but, um, it is also just maturation of the asset class, and so I don't know that it goes away. If you, like, take private equity as an asset class prior or those platform businesses, it is very hard to make money in private equity at a top tier, and people are not moving money out of the asset class.
- JAJack Altman
Does it skew the ability for small firms to make money because these big firms, though, are going to play at every stage? And in the same way that, you know, the crossovers got into late-stage growth and sort of were sort of starting to do non-economic things, do the venture firms that are huge- or is it rational for them to do non-economic things at seed because, you know-
- SGSarah Guo
Yeah
- JAJack Altman
... it fills the pipeline, and they know that they're just gonna play, you know, a different game on the winners and take sort of, like, a different IRR on that? And does that impact the whole ecosystem in a big way?
- SGSarah Guo
I think it does. Um, and so I think the... Like, if you asked me, what is a- what could I be wrong about in the whole, like, strategy or the ecosystem? I think there is a point of view of, like, you can't make money in venture anymore in terms of, like, an outsized multiple in early, because it's just a sourcing funnel for the late-stage firms, and the expectation on multiple, uh, like, the cost of that capital is lower.
- JAJack Altman
Mm-hmm.
- SGSarah Guo
Right. Um, and so, like... And you can just spend resource on it, subsidized by the growth firm to, you know, be more competitive that early.
- JAJack Altman
Yeah.
- SGSarah Guo
Right? In terms of, like, marketing or people or whatever. We have eight people today. We had six people until last week. Uh, I, I guess, like, I would pause it until proven wrong. Like, I, I think in the very early end of the ecosystem, like, we're not trying to win everyone. We only have two hundred million dollars of capital. We need to have a couple really important companies to have a hugely winning fund in every cycle. You don't need that many people and that much money to compete because people are looking for different things, and the experience of working with you or working with a, like, a very specific set of people that have an opinion and have some certain understanding is quite different than working with a very large business. And, like, people choose different things. It's not a homogenous market.
- JAJack Altman
We talked about, um, how, like, there's a certain type of round that is obvious. Sometimes obvious is Brett Taylor at the seed, but, you know, maybe more often it is Cursor or something like that, like a company that is really working, you know, and there's things in the middle, there's things past that. But as you think about, you know, these types of companies ranging from completely not obvious to extremely obvious, and you think about where money is most likely to be made, and sort of line that up against sort of the dynamic we've talked about with, you know, Sequoia is able to sort of play a dominant strategy of, like, they can go win the obvious things at a very high rate. You know, small firms can do different things. Where do you think that that leaves... If you had to, you know, take your best guess of where in today's market, like, the most alpha exists? Like, is the winning strategy right now to become able to win things? Because to this recent point, there's the non-obvious feeders, but there's more money to be made at doing the first obvious round. Is it sort of the much later stage stuff, where actually the ten billion dollar companies look much better than the one billion dollar companies because, you know, we now live in this world where things are going to get way be- way bigger than we thought? Like, what is your current read on where the pockets of value are at the moment?
- SGSarah Guo
I think it's a super interesting question, but I don't spend that much energy on this question in particular, because my orientation is actually just, like, my taste is my taste, and I'm an early-stage person. I actually think my taste is, like-... pretty mainstream in many ways, right? Um, it, let me contrast this. I, I think we will have opinions on companies that other people will not have, and, like, we might choose to be earlier or, or, um, make like- it's very hard for me actually to tell what the mainstream opinion is, right? Because if you remember, like, the GPT wrapper era-
- JAJack Altman
Mm-hmm, mm-hmm
- SGSarah Guo
... where like, "Nobody's gonna make any money in the application layer." And now it's like, "You're only gonna make money in the application layer."
- JAJack Altman
It was crazy how that flipped very quickly.
- SGSarah Guo
Yes, exactly. And so one thing is like, I don't think a lot about... I think great investors do this, but not me. I don't think a lot about, like, where is the risk reward and like, you know, a lot does- like, where's the risk reward in like the mid stage, the late stage, the early stage? Because I'm like, well, I, I'm only good at the-
- JAJack Altman
Doesn't matter. I've got my game, it doesn't matter what-
- SGSarah Guo
I am pretty sure being great at early is gonna be valuable no matter what, and I'm not like globally optimizing, right? And then, um, I think your, your point of view on product and people just is what it is. I do think that, um, if you think that, uh, like, you- let's say you just want to be able to, uh, win whatever opportunities you wanna work on, then you have to, like, build your ability to win, right? So brand does matter to us. I think there are like, uh, seemingly very effective alternative strategies, right? You can own a particular community. He'll hate that I even mention his name out loud, but I think Zach Frankel is very good at this, right? He works with a really small number of people. He has good taste. He does well. If you look at, um, uh, what Matrix has done, the quality of some of Ilya's companies, I think what he would say is like, "Hey, we're not here to compete in the, like, general brand game and put a lot of energy toward that."
- JAJack Altman
Yeah.
- SGSarah Guo
"It's not really me, but, um-
- JAJack Altman
But he's in incredible companies.
- SGSarah Guo
But he's in incredible companies, and like-
- JAJack Altman
And he did them when times when they weren't obvious.
- 27:15 – 32:06
Learnings from experience at Greylock
- SGSarah Guo
landscape as it is.
- JAJack Altman
On, on this point about, you know, y- you're now running your own thing, you can sort of... You, you have the luxury of now investing the way you want to invest.
- SGSarah Guo
Figuring it out.
- JAJack Altman
Figuring it out-
- SGSarah Guo
Yeah
- JAJack Altman
... as you go. But you have, you know, you get to adapt as you see what you like and what you think. I wanna sort of reflect on your learnings, 'cause you... were investing very differently at Greylock, but they're objectively very successful.
- SGSarah Guo
Mm-hmm.
- JAJack Altman
And you worked closely with Asheem-
- SGSarah Guo
Yeah
- JAJack Altman
... who, you know, as you know, you know, is like, really different style of investing, where, you know, I saw that, you know, people talking about this recently, that he's, like, never lost money. And this is, like, also not, you know, somebody who's just making safe investments. He obviously- he did great stuff with that, but it's a certain type of investing. To me, in some ways, what you're doing now is, you know, maybe opposite is too dramatic, but it's, like, quite different. Where, you know, if that was very linear, very clear, you know, he could probably name, you know, several companies that ought to exist that don't yet, and how they might be built. You know, you're operating in sort of like the most shifting of, you know, sort of sands underneath, you know, the space. And so I'm curious what you, you know, what your reflections are, going from that experience to now investing this way. And maybe more interestingly, is there anything that, despite how different they are, is there anything from that, that you take to this, that somebody who hadn't had that Greylock experience wouldn't have?
- SGSarah Guo
So much. I mean, like, I learned to be an investor at Greylock. Uh, it is one of the great firms. I think, um, Asheem is one of the greats, and I think having his hit rate on both, uh, capital, both... A- all three, of capital preservation, doubles, and home runs, is like, you know, [clapping] that's, that's fucking amazing, right? What to learn? So I, I think that there are patterns of investing that are... Like, w- we were talking before, and you're like, "Oh, it's non-linear." I appreciate, like, um, linear thinking is clear thinking, right? You can follow somebody's pattern of logic. And one thing that is, um, like, characteristic of traditional firms, that I think is a very valuable thing, is your understanding of how an existing market works. I think a pattern that's worked really well for, um, some investors that spend more time on traditional markets is, they know the talent base in that market. You could take security or storage as an example. Mike Speiser is also amazing at this, right? And then you... Or Anil Busari, when he was a full-time investor, right? And it, it would be, like, objectively true that for any point in time, like, the dominant markets are incumbent existing markets, right? Um, and you just look at what the transitions are that are macro technology-... and then you make the bets on the right types of people, given that transition in an existing market. Three check boxes, right? I don't know, like, you, um, have amazing intuition for investing, but, like, maybe you didn't practice this specific thing, seeing the pattern of it. And like, let's take an example. If you, uh, look at the biggest categories of security spend, you might say, you know, category one of security spend, given the shift to the cloud, how does that change? Um, category one of storage, given the shift to Flash and the quality of consumer Flash, and the ability to manage that with software, how does that change? And then who are the right people? Um, a lot of those people work at the incumbents. I'm not saying that's, like, all of traditional venture investing, but I think there are patterns that are really powerful, where the existing network and the understanding of how those businesses work, like, I'm really glad I got to learn a little bit of it, um, and, and try to replicate some of it. I do not think that what I'm doing, uh, now is the opposite of that. But again, like, uh, venture is, like, such a- you know, companies are an expression of the, like, personalities and taste of founders to a great deal, right? And I think venture investing is also a very personal thing. Even when you're responding to customer needs, it's still, like, it, you know, Lattice, a- it was a lot about you. I'm curious about, like, the things that change most.
- JAJack Altman
Mm-hmm.
- SGSarah Guo
Right? And one of the things that made me believe that there was actually an opportunity for a new firm, was that the, like, AI technology shift would actually m- mean that the, uh, the most interesting markets were not necessarily the markets that already existed, right? Like, let's say, enterprise infrastructure, and, like, s- systems of record in the high end. Uh, and, uh, I love businesses that look like that, by the way, but some of the categories of company that we are lucky to be a part of, like, they attack markets that are not traditionally software markets. Harvey in law, um, Sierra in, like, actual support work. Um, HeyGen is doing the work that, you know, S&B video agencies did before, or just creating new capability. And so I think if you were very traditionally market-focused, you might not, um, you know, might not have the time to
- 32:06 – 33:55
Market vs founder driven
- SGSarah Guo
see them in the same way.
- JAJack Altman
Are you trying to bring some of the, like, equivalent market linearity to being like, you know, you're spending all this time understanding AI right now, and you obviously, you know, have spent a lot of time just knowing regular business markets. Are you trying to intersect those and think, like, "You know, I'm still gonna be founder driven, but this year I wanna find a company doing, you know, something in XYZ vertical, because, like, my triangulation is that this should be happening soon." Do you do it that way, or are you, like, following founders and networks?
- SGSarah Guo
We do both. There are a lot of people out there with really good ideas. Um, and I think it's, like, better use of your energy as a venture capitalist in general, to listen to founders' ideas, right? And just, like, be educated by them, and be able to make the right decision when you see it. That being said, like, you spend a lot of time talking to customers out in the world. Like, let's say you've ever been an idea person. We made one investment in the portfolio we haven't announced yet, where I, like, carry around my little, like, set of PowerPoint slides, trying to convince founders to start this company for five years.
- JAJack Altman
No luck?
- SGSarah Guo
Um, well, we finally found the company.
- JAJack Altman
Oh, you got it?
- SGSarah Guo
Yeah. Well, I mean, we didn't convince them to start the company. They'd already started the company. It was, um... But I, I was just, like, so thrilled to meet them because I was like: "No, no, no, stop your presentation! Let me show you, like, uh, like, we, we believe," right? Um, and so I think there are, uh, like, uh, one of my partners now, um, Pranav and Mike are, are working on, like, a space where they want something to exist, and so I think we'll actively go hunt for people that we think would be great to start the company, and just be like, "You should start this company."
- JAJack Altman
The couple times that I've done that and put, like, a little beacon out in the world, I have found that, like, it does help attract the people who are some- it somehow makes the people who are working on that more likely to come find you, and you're a much more prepared mind when you do it. So I do always think I should be spending more time doing this-
- SGSarah Guo
Yeah
- JAJack Altman
... than I have been.
- SGSarah Guo
Yeah.
- 33:55 – 36:28
AI conversation shifting from inputs to outputs
- JAJack Altman
I kinda wanna shift into, like, AI and not necessarily, like, prognosticating about the future, but, like, you do-
- SGSarah Guo
Oof
- JAJack Altman
... spend your time here.
- SGSarah Guo
Yeah.
- JAJack Altman
And so, like, I wanna try a little bit, or at least to sort of, like, hear your thoughts on some recent commentary. Um, there was, like, a good quip recently that I was like, "That's a good reframe," from Satya talking about, like, you know, this AGI stuff is great, and we should think of it that way, but, like, I'm looking for, like, seven to ten percent growth. And I think it was, like, a soundbite that sort of... W- it, it did something, where I think it sort of changed the conversation from, like, inputs to outputs, basically. I think it, in many ways, gets at the overall question of just, like, is this market big enough for, you know, the tens of billions or hundreds of billions that's going in from the hyperscalers, and the hundred billion that's gonna go in from VC and all this other stuff? When you think about where we are and how you'll see the signs that, like, the outputs are following the inputs, are you thinking of this in a, "I just wanna see, you know, more companies that are at, uh, you know, fifty or a hundred million that are durable?" Are you thinking about something on the intelligence layer? Like, what is your frame of mind when you see, like, that kind of thing from Satya?
- SGSarah Guo
I think it's a super, like, rationalist decision from Satya. I think it is a statement that he does not believe that owning a particular lab or research effort that gets to a reinforcing fast takeoff is going to lead to a lot of economic value capture, or that the probability of that is not worth spending many billions of dollars, right? Um, uh, but I think the view of, like, "Hey, we're just not seeing enough revenue adoption to make fifty billion dollars of capital outlay into model training every year worth it for us," is completely reasonable, right? He's responsible to public shareholders. I have, like, a much easier problem, which is, I am quite sure that there's gonna be enough economic value created to, uh, return a best-in-class venture multiple on two hundred million dollars. The way, like, we try to stay rational about it, but, like, I think if you wanted to back up the truck and, uh, and just, like, only do CapEx-heavy foundation model companies, you'd just raise a lot more money than we had.
- JAJack Altman
Yeah.
- SGSarah Guo
Right.
- JAJack Altman
Yeah.
- SGSarah Guo
Um, the signals we look for are, like, actually going back to, like, what do you take from traditional venture? I'm like, [lips smack] I really like to see revenue. One of my companies talks about EBITDA. Do you remember EBITDA? It's a [chuckles] very, very exciting concept. There are companies that are creating user value very rapidly-... and they're not spending a lot of money to do it. I think you can be more or less expensive as a business to grow, like we'll do both, but it's really nice to see that some companies are being capital
- 36:28 – 42:44
More billion dollar companies than ever before
- SGSarah Guo
efficient about it.
- JAJack Altman
One of the things I'm, that I think is interesting is that we're back in sort of like twenty twenty-one in a way, where like a hundred times ARR rounds are like, not particularly uncommon on things that, you know, are growing fast and, you know, have a reasonable base and whatever. I remember in twenty twenty-one, sort of the kind of the, the general wisdom was, "Hey, we all thought there were gonna be X number of ten billion dollar companies, but there's actually gonna be like ten X, and there's gonna be a lot more fifty billion dollar companies than we thought," and so on. And, you know, we all just had like the wrong idea of the size, and it now looks like that was, like, mostly wrong. And I think in some ways now we're back to thinking that-
- SGSarah Guo
Mm-hmm
- JAJack Altman
... in a way that, you know, at the moment at least, you know, feels, feels more right. You know, that could change in the future, but, like, are we still investing, even at the early stages, in ways that require there to be a lot more ten billion dollar companies than there, like, ever have been? And like, are we collectively betting on that? That will be-
- SGSarah Guo
Uh, absolutely, and I think it will be true. Like, let's talk about the mechanism of action when, like, people thought this in the SaaS world, right? Um, I think some of it ended up being- and, like, speak up 'cause you actually did this, but, you know, as a, as an analyst, right? Um, some of it ended up being true. More people than ever before, like, in businesses, got to consume software for their business because it became cheaper to use, because you didn't have to, like, buy packaged software and operate it, because it filled many more functional gaps, right? Um, and because you had internet distribution, right? You got cheaper to actually sell to people. Um, that's how I like think about like: Oh, why should we have more SaaS? Um, the thing that I think the market got wrong, or one of the things that the market got wrong, was there was not infinite ability to, like, cross-sell more software into the organization in-
- JAJack Altman
Yeah
- SGSarah Guo
... any segment of business, right? SMBs, mid-market, enterprise businesses.
- JAJack Altman
Enough became enough at some point.
- SGSarah Guo
Enough became enough, and, like, they didn't wanna buy any more darn SaaS, and, um, there was just a limit to budget and a limit to consumption. Uh, and, like, that seems rational, right? Um, uh, like, in contrast-- well, that seems rational in retrospect.
- JAJack Altman
Yeah.
- SGSarah Guo
Uh, I'm sure we're wrong about something else with AI now. In contrast, um, I, uh, like, I have pooh-poohed on, uh, generally working in healthcare tech for a long time, not because of lack of interest, but I'm just like: Okay, I was one of, like, three people at Greylock that ten years ago got staffed to, like, go look at digital health, and we looked, and it was, like, not, um, it was not a good look, right? You wanna sell to providers. It was slow. There wasn't much budget. It just didn't change the business that much. Uh, I now sit on the board of a healthcare provider tech company, um, and it's growing really fast, and there are other companies that are growing really fast. I think that people just didn't build stuff that was worth buying enough for a long time. And, um, like, it, you know, it's sort of memetic now to say, like, AI eats services.
- JAJack Altman
Mm.
- SGSarah Guo
But I think if you just, like, think about the value provided, it is not necessarily like service industries, it's just technology does way more.
- JAJack Altman
Yeah.
- SGSarah Guo
And your willingness to pay as a consumer or as a business for these things that you like, um, a- again, like, could have been part of your job being done for you, could, could be a legal service, could be, like, the skill to be creative, could be education, like, those were different budgets.
- JAJack Altman
Yep. What's interesting on that point that makes sense to me now why it's happening, but I'm not sure how it plays out over time, is at the moment, agents, for lack of a, you know, different term, are replacing labor instead of software, and so the price that they're comping to is labor.
- SGSarah Guo
Mm-hmm.
- JAJack Altman
And so instead of SaaS being, you know, a hundred bucks a year, two hundred bucks a year for a person seat, an agent can be like: Oh, it's 40K a year, which is way cheaper than your software engineers or way cheaper than your accountants. You know, you're gonna save 70K a year by just giving us 40 per agency. And so there's this very strong pricing potential that you can have.
- SGSarah Guo
Yeah.
- JAJack Altman
And that seems, at least at the moment, like it could be rooted in sort of the existing paradigm, but in the future, does that pricing stay, you know, as com- as competition goes? And so that's one thing that I, you know, and I say this to somebody who's, like, investing in companies building agents, but I'm, like, wondering how that ought to play out, because it's like, will this eventually price relative to, like, cost and, like, an appropriate margin, or like, it happened to used to be done by people, so we're just gonna kinda peg to that forever?
- SGSarah Guo
I think generally there will be, like, absolutely very strong pricing pressure. Um, and I, I really think about, like, what is the basis of competition some number of years from now? Um, if you have a unique offering where the customer really wants what you are offering, and I think, like, people don't really know what, like, the most with agents will be, but, like, let's assume, you know, there is uniqueness in some set of offerings. Like, if you're Figma, pricing pressure is different than if you are one of many different companies. Like, people just want specifically Figma. There's nothing quite like it, right? And your team is in it, and you're gonna use it. So I think there's some set of companies that will end up with that dynamic, and they will be able to retain some sort of value-based pricing. And then I think, like, the majority of companies will probably gravitate toward, like, you know, cost of compute or energy or intelligence plus.
- JAJack Altman
Yep.
- SGSarah Guo
... yeah, but like I d- I have no idea how long that takes. Right now, like I basically think a lot of it, it ends up getting pushed to consumer and business surplus, as it should. Right now, it's just like, wow, the surplus is so good, even and if it's, you know, a third the cost of an engineer.
- JAJack Altman
It's sort of interesting 'cause it felt to me like for a while, you know, before AI, it felt like in order to come up with a good idea, you had to be like kind of non-consensus. At the moment, it feels like there's actually a lot of ideas that are both like consensus and right, and then the rea- the reality is then you get like, you know, a lot of competition, and it floods, and they kind of all do really well. So I'm curious to see how it like plays out. But there's a few of these spaces like support and codegen and these things where it's like everybody knows it's working. They are, are indeed all working, and, you know-
- SGSarah Guo
[chuckles]
- JAJack Altman
... there's just not even close to the market demand yet.
- 42:44 – 44:40
Agency being the last human resource
- JAJack Altman
The last topic I was curious to get your thoughts on are, um, that there was a, a good post about like agency being more important than intelligence now, and-
- SGSarah Guo
Hmm
- JAJack Altman
... you know, intelligence is like abundant, and so like the thing that's left is agency, which I wanna believe this. You know, that like that's the model of the world, and that, like, you know, they'll never come for our like, you know, agency. Um, and we'll, we'll see if that's true or not. But I'm curious, as you've talked, you spent a lot more time, you know, than you probably ever have with AI researchers, and you think about this. So I guess, do you see it that way? Do you agree that like agency is going to be the sort of like last human resource? And then, like, do you think, if so, does that like impact the way that you think at all about like the types of founders you're investing in?
- SGSarah Guo
I'd focus on being hot and funny. [chuckles]
- JAJack Altman
[chuckles] That's good.
- SGSarah Guo
[chuckles]
- JAJack Altman
That's high agency.
- SGSarah Guo
No. Um, I, um, I don't know if I have like a, a, a, a good answer to this question. Um, I guess I never particularly thought like intelligence was enough anyway, right? And so like when-- like, it sure helps, right? Um, when you think about the founders that we select, like without being over a particular, uh, uh, bar, like all other things considered, like, of course, we're gonna back people who are really, really smart. I was on this campaign at my, um, prior firm to try to be more specific about how we talked about people. Uh, because it's, like, very easy to say, like: "Oh, the person is special." And what does that mean? The thing that we most look for is, besides intelligence, is, is kind of like force of will and, um, the ability to, like, take a point of view and be right. Right? And so I don't know what that is. Like, maybe, like, maybe AI is gonna have better predictive power than, um, founders about the future of different markets at some point. Like, the ability to generally navigate the world and shape it to what you want. Like, I don't know if that's how you think of agency, but, like, that doesn't feel in grasp of pure intelligence
- 44:40 – 46:29
Important skills for kids to learn
- SGSarah Guo
anytime soon.
- JAJack Altman
You have three kids like me. Are you thinking about their education at all, or what you think they need to learn, or what you're teaching them, you know, in this-- as you're thinking about what's obviously happening now?
- SGSarah Guo
Of course I am. Uh, I don't know if I'm more, like, doing anything about it. [chuckles]
- JAJack Altman
Yeah.
- SGSarah Guo
Our kids are young enough that, like, I, I think about, um, like behaviors as much as like knowledge for now, right? Like frustration management, the ability to concentrate, right, the ability to upskill yourself in something. I think those are gonna be important no matter what. For now, like, maybe if you just assume that, like, information retrieval will get better... Andrej Karpathy, like, is very convinced that, uh, you still want to build, like, a certain types of reasoning pathways in kids' brains before they get too much older, and the, like, purest forms of reasoning are essentially like stem-
- JAJack Altman
Mm
- SGSarah Guo
... reasoning.
- JAJack Altman
Mm-hmm.
- SGSarah Guo
Which is funny because we seem to make, be making, like, very good progress on coding and stem reasoning in these models today. But I, um, I still think, like, the ability to, like, structure a logical problem, decompose it and debug it, like that, uh, that seems useful, and your ability to use even all of these tools will be better off for your ability to do structured reasoning. And that seems like, you know, there's a reason, you know, mathematicians don't tend to prove a lot, like after the age of twenty-five or some really sad number. Like, those pathways get built. I guess I like subscribe to that pretty mainstream view. Um, but I- I also think, like, I am willing to be, like, very flexible about what education looks like for them ten years from now. Um, like, if it's not Stanford, it might not be, you know, traditional education.
- JAJack Altman
Yeah.
- SGSarah Guo
Right?
- JAJack Altman
All right, well, Sarah, thanks for doing this. I really appreciate it.
- SGSarah Guo
It was so fun to hang out. [upbeat music]
Episode duration: 46:29
Install uListen for AI-powered chat & search across the full episode — Get Full Transcript
Transcript of episode gUrgLyEioZ4
Get more out of YouTube videos.
High quality summaries for YouTube videos. Accurate transcripts to search & find moments. Powered by ChatGPT & Claude AI.
Add to Chrome