a16z's David George on the Most Controversial Bet at a16z & Do Margins and Revenue Matter in AI?

Our best performing fund in the history of the firm is actually a one-billion dollar fund.

David George is a general partner at Andreessen Horowitz, where he leads the firm's growth investing. His team has backed some incredible defining companies of this era. He's now investing behind a new generation of AI startups.

If you overweight the fear of future theoretical competition, you can always talk yourself out of making an investment. The number one way to measure a company is ultimately return on invested capital. On the gross margin point today, I'll say this. We give a little bit more of a pass than we used to.

At what point does the entry price you think for OpenAI become not a good use of dollars?

We have to constantly reassess this. So-

What I just don't understand, and I would love to, is flow. Can you help me understand flow? 'Cause I think the world kind of scratched their head. Why did it make sense to you when it didn't make sense to anyone else?

You remember what I said earlier about investing behind strength of strengths?

Yeah. Ready to go? David, dude, I am so excited for this. Um, I've been looking forward to this one for a while and I feel like I'm extra prepped now I've just listened to you on Invest Like The Best. So, I'm ready to, I'm ready to go, dude.

Let's do it.

Okay. So, I actually spoke to most of your partners beforehand, and they said to me that I have to start with a show that we did with Everett Randall. And Everett Randall said on the show that you cannot look LPs in the face (laughs) and tell them you'll do a 5X with the fund sizes you have. How do you think about responding to the notion that one can't say to their LPs you'll do a 5X with large funds?

Uh, well, Harry, it is great to be back with you. I love, I love hanging out with you, so I'm glad, I'm glad we're diving right in. Yeah, as it relates to fund sizes, so our funds consistently beat small, large, diversified, concentrated venture funds. So, our larger funds have outperformed our smaller ones, and our larger ones actually have similar multiples of money to our smaller ones, uh, ac- across, across strategies. So, I would start by just saying this. In venture, we have two customers. We've got the LPs and we have founders. On the LP side, money is gonna flow to where the highest returns and best risk reward are. And, and so I think our fund sizes are a reflection of that. Our best performing fund in the history of the firm is actually a one-billion dollar fund, so it's a large fund, right? In that fund, Databricks has returned 7X the fund so far. Coinbase has returned already DPI 5X of the fund. In that fund, we also had GitHub, DigitalOcean, uh, Lyft, and many other things. So, to me, you can kind of see it in the data and our returns already, it's about the number of winners you capture, uh, and if the big wins are great, that can really work out. Um, so I think the idea that large funds can't have great returns is just not true in our experience. So, private markets have changed, tech waves create bigger opportunities. So let me just talk about each. The private markets have grown 10X over 10 years, right? So it's over $5 trillion of market cap now in our market. We actually just looked at the 50 top IPOs from 2017 to 2025, and if you disaggregate where the dollars of return come from, 47% of the dollars of gain happens between the C and the Series B, and 53% of the dollars of gain happen from Series C+. So there's actually a lot of dollar... I was actually surprised when we looked at this. But there's a tremendous amount of dollars of gain that happen at the later stage. And that's 17 to 25 IPOs, that actually skews a little bit heavily toward when companies were still going public, uh, when they were, when they were smaller. Um, so the size of outcomes, you know, is huge. Again, we've got 5 trillion of private market cap. Uh, if you look at our LSV funds, the aggregate market cap in those funds has ranged between 700 billion to one and a half trillion. So it's just large companies, and if you apply ownership assumptions to that relative to generating, you know, 3X or 5X returns, it's, it's pretty manageable. So, that's the private market and the conditions that have changed, and we can talk a bunch about that. Tech waves tend to create massively different value. I mean, this is very well covered, but the big story of mobile social SaaS cloud e-commerce all at once was 20 tr- 25 trillion of market cap creation. And if that started from scratch today, given the public private market dynamic that I just described, so much of that value creation would take place in the private markets. So we're in winning inning one of this new big tech wave. Um, I never would have expected in the last wave that companies like Salesforce would be worth $230 billion, or ServiceNow would be worth $175 billion, or CrowdStrike $130 billion, or DoorDash $100 billion. But here we are. And if you look at what's happening in the private verse public markets now, the size of the winners from a new tech wave, that's gonna happen in the private markets. Uh, so-