# Inside Coatue's $70BN Machine: Why Price Matters Least

Why Mega Markets are the Most Important · How to Assess Durability of Revenue and Margins in AI with Lucas Swisher

20VC · Feb 23, 2026 · 67 min · 14,237 words
Speakers: Lucas Swisher, Harry Stebbings
Source: https://www.996.fm/episodes/20vc--ep-252c3c04/

## Cold open

**Lucas Swisher** [0:00]:

I think price does matter, but I think it matters least. Margin matters, but early, it can be a misleading indicator. Data is a prerequisite. It is not the answer. One of the places where we don't spend time. These pre revenue companies have really high valuations. I don't think the king the kingmaking concept is a real thing. Who's gonna wanna help you, and who's gonna wanna hurt you?

**Harry Stebbings** [0:19]:

This is 20 VC

## Intro

**Harry Stebbings** [0:20]:

with me, Stebbings. Now I am bored. I am bored of recycled guests, interviews that have been done over and over again. Today's guest is rarely ever on a podcast, Lucas Swisher. He co leads the growth fund at Coatue, and they've backed some of the best companies of the last few years, like OpenAI, Harvey, Deel, Canva, Anthropic, and many more. He also previously worked at Kleiner Perkins with the one and only Mamoon Hamid, and this is one of his few appearances where we really delve deep into the investment process at Coatue and what they look for in great, great companies and founders. But before we dive into the show today,

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**Harry Stebbings** [1:00]:

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## Conversation

**Harry Stebbings** [4:26]:

Lucas, dude, it is so good to have you on the show. We've walked around High Park. I feel like we bonded in my short shorts. I've had so many things now because I stalk the shit out of you from David and specifically Jesse at Deathcon. So thank you for doing this, man. Of course. Thanks for having me. We're gonna dive right in with super easy question, which is public SaaS companies are getting killed. I'm looking at my book, dude, and I'm like, I thought I was so good at this. And now I'm really starting to question it with the amount of red that I'm seeing. So why is the public private boundary breaking down, and what's the better side to be on?

**Lucas Swisher** [4:57]:

For the first time ever with this AI wave, people are questioning the terminal value of SaaS. These were supposed to be like insurance companies, you know, annuity streams that just have revenue streams and profit pools forever and ever and ever. And for the first time with a lot of AI, and I think in particular in the last six months with a lot of the coding models that have come out of Anthropic, OpenAI, and others, you are starting to question that value. When you question that value, a lot of other things happen. The breaks that you got on SBC, stock based comp, and GAAP versus non GAAP earnings, those all start to go away. So that's the first dynamic. And then I think the second dynamic that's happening is people don't know which SaaS is gonna be affected. Right? Like, you can think of a bull case and a bear case for basically every SaaS company in the public markets. And when that happens, people are saying, okay. I'm just gonna take my bags, I'm gonna walk away, and I'm gonna do something else. Because why own anything if I'm really not sure which one of these things is gonna work? I'm just gonna go own consumer Internet or simmies or something else. Right? And so I think, like, that's the real dynamic that's happening as those two things are happening all at once. And all of a sudden, you know, that barrier breaks down. How do

**Harry Stebbings** [6:01]:

we determine the babies that are being thrown out with the bathwater, so to speak? There are many different profiles of companies that have all been hit relatively to the same extent, but they're very different profiles. For sure. How do we determine value in this pool of reductive market caps?

**Lucas Swisher** [6:16]:

I think it's really, really hard right now is the short answer. Right? This is the debate that we have all the time inside of our building. You know, you take a design tool, for example. You can make an argument that that design tool is super well positioned in a world of because they're gonna integrate AI into all the design process and generate so much more value than before. But then you could say, well, I just create all my designs in ChattypuTi now. Right? So why would I even need this design tool? And I think that's the argument that you're gonna have on both sides of this at all times. I think the things that you're gonna wanna look for, the leading indicators that you're gonna wanna look for, is the revenue still continuing to grow sequentially? Is net new ARR still continuing to climb? What's happening with the retention dynamics of these businesses? The more you can see that, the better you're gonna feel. But the reality is for the next three months, six months, nine months, we're not really gonna know what's really happening in the world. Things are happening so fast. All of the earnings that happen are retroactive. Right? So you can only see into the past that way. So I think that's why you're seeing people basically walk away from the sector.

**Harry Stebbings** [7:14]:

If our job is to make money, which is pretty simple, actually. I think we've over romanticized a lot of this job in the last few years. Correct. Our job is to make money for our investors. Correct. And we're both fortunate most of our investors are amazing institutions. My question is, opportunity cost adjusted now, surely it has to be better being in the publics where Monday is trading at one and a half x, Wix is trading at two and a half x. It's 4,500,000,000 market cap at 2,000,000,000. Yeah. Surely that is better risk adjusted than the $10,000,000,000 rounds that we're seeing for private companies.

**Lucas Swisher** [7:45]:

Yeah. I think you could make the argument both ways. On the public side, one, things may look cheap, but things may look cheap for a reason. Right? When things look really cheap, oftentimes they look really cheap for a reason. On the private side, oftentimes the most expensive deals can be the best ones in many ways. And what I would say more on a macro point is if you think about the public markets right now, it's very hard to own the future. You have to, like, look and really pick and be really careful about the future. You get liquidity. You can trade in and out of things. That's the beautiful part about the public markets, but it's hard to own the future. If you wanna own the future, you kinda have to be in the privates. Right? Think about it this way. Say I wanna be ultra levered long to the token factory. I think tokens are the next big thing in AI and I wanna be ultra levered long to AI and whatever the next token factory is. You can own some things in the public markets, but you may say, I wanna own OpenAI and Anthropic and SpaceX, which now owns xAI, and this long list of incredible AI application companies that are coming down stream. And so to get growth, something that's growing more than 30%, to get durability of that growth, to get access to the future, you have to own privates.

**Harry Stebbings** [8:52]:

So funny. I was asked the other day what are the top three stocks that you're most likely to own? And I said that's easy. It's Anthropic. It's Revolut, and it's OpenEvidence. And really interesting that you cannot get any of those in the public markets. Correct. And I thought that was just a really interesting realization of, it's absolutely right. In a decade ago, I probably could have got them all in the public markets at this point, actually.

**Lucas Swisher** [9:10]:

You know, that's absolutely right. Right? We've seen the emergence of I mean, we call them platform companies. Right? At the top, call it 20, rough justice 20 companies in the private markets. 18 of those would probably be public today a decade ago. But we've seen the emergence of these platform companies. They're huge scale, growing way faster than basically anything you can access in the public markets. They have multiple products. They've shown they can be great public companies, but they're choosing to stay private. And those platform companies, you cannot get access to as a public market investor. As a normal person, you can't buy stock in OpenAI or Revolut or OpenEvidence, all Coatue portfolio companies. Right? You can't you can't get access to those. And one, I think that's a shame for the normal person that they can't go and buy that stock. But two, it is it is an enduring trend that we've seen over the last five to ten years.

**Harry Stebbings** [9:57]:

It's a shame, but it's the greatest gift of venture capital that we could have ever wished for because it's allowed for us to transition from fidelities in the large previously public entities, you know, working on BPS to shifting to two and twenty and respectfully your co twos and your GCs and Lightspeeds of the world

**Lucas Swisher** [10:11]:

ballooning fund sizes. Our job to make incredible investments and generate real returns. That's what we are a 100% focused on, generate real returns for our investors. I think it's one of the benefits of having a somewhat flexible mandate. Right? As I'm not tied to having to do a series b this year. If this trend emerges and it continues to persist, some of the best trades for us, some of the best investments for us are in that segment of the market.

**Harry Stebbings** [10:34]:

I I'm gonna move to flexible mandate, basically, because I just wanna touch on the durability of revenue. Described it brilliant. It's like the insurance annuity that kind of previous software revenues were. And now we have, you know, this transience of technology superiority, which sounds really kind of wanky, but, like, technology cycles have changed so far. So Gemini is better, then Claude's better, and then OpenAI is better, that your durability of revenue seems to be more questionable and transient than ever. Should we ascribe value to revenue in the same way

**Lucas Swisher** [11:00]:

that we used to? I think you're absolutely right. I think it's changing, and I think it changes during every architecture shift. Right? This is the really critical part of technology. Right? As you move from on premise technology to SaaS technology, as you move from the Internet to mobile Internet, You had a potential for all of the companies in the prior generation to completely evaporate. And the big question is, can you find the companies that have the talent density, that are the most forward thinking, that are willing to reinvent themselves over and over and over again, which is so hard? And those are the companies that you wanna find out. I think of a great example every time I I think at this point, which is Databricks. If you talk to Ali from Databricks, we've been an investor since 2019. I think one of the things that we've seen from there and even before I mean, I looked at the company when I was at Kleiner Perkins, I've seen this company for a very long time, is his ability to reinvent that company over and over and over again and ride multiple S curves from being basically an ELT data transformation layer to running and training models to being the center of all data in the enterprise. Those are like multiple s curves that he's hopped and multiple times he's reinvented the company. It's not revenue growth that you wanna chase. It's that.

**Harry Stebbings** [12:12]:

It is the most incredible adoption of new trends and moving with the next chapter that I think we've ever seen, actually. Because you could look at, like, a replete and go similar, actually, how they've coattached to a new cycle. I mean, this is another league. You mentioned the growth of revenue there. Mhmm. This is the other hard thing, which is that when we did lovables a, it was, at 3,000,000 in revenue. By the time the legals were done, it was at 20.

**Unknown** [12:34]:

Mhmm.

**Harry Stebbings** [12:35]:

And so the multiple had gone from 70 x to 10 x. Correct. I mean, Anton should have been asking for a trade. I I wanna renegotiate this. How do we value assets that are growing in such disproportionate or previously unseen ways?

**Lucas Swisher** [12:49]:

Yeah. This is one of the hardest things. It's why we actually think the framework that we use internally is we think about valuation. Everybody has to think about valuation. But when a company is growing exponentially, 10 x year on year, 50 x year on year, right, the things that we're seeing now, we think about valuation last. It's the last question we try to answer. Is the valuation great? Because you mentioned you may invest in a series c at 20,000,000 of ARR at 3,000,000,000 post, And that seems insane. But if the 20 goes to a 200 in one year and then 600 the next and 3,000,000,000 the next, all of a sudden, that looks extremely cheap. And so our job is how do you find the things that are on that curve?

**Harry Stebbings** [13:25]:

Okay. Let's take that, actually. That's an interesting one. Let's say you are investing in a company that is doing, I don't know, 50,000,000 in revenue, and you're paying 4,500,000,000. Yep. Specific numbers. And they say, we're gonna be at 250,000,000. Mhmm. And then you go at the end of the year, you're like, wow. Gosh. You're gonna five x in a year. And then we're gonna three x the next year to 750,000,000. Wow. Well, you paid 4.5. Mhmm. So even if it triples and then doubles again, you're still not at the six or seven x it will be valued at in a public market. How do you just get your head around the hard dynamics of what it will be in a public market?

**Lucas Swisher** [14:03]:

Yeah. It filters down into every decision that we think about all the time. And I think the key is, first, you wanna be in gigantic TAMs. Big ideas only. Because if you ever compromise on that very first principle and you're paying high valuations, you're in trouble. Medium TAM, small TAM, you better believe that this thing can absolutely gigantic. We have this test internally, right, where it used to be five years ago, we called it the $10,000,000,000 public company test. Right? Can this be a $10,000,000,000 plus public company? That bar has changed in this new world because we are tackling much larger markets than we used to. And so now that test is, can you be just an enduring public company? And that may mean 50,000,000,000 of market cap. It may mean a 100,000,000,000 of market cap. It really depends based on the stage. But really, it's big idea first, and then is the market absolutely yanking you into that giant market? Do you feel that market pull such that that revenue curve and subsequently down the line that earnings path is really achievable? And so what you need to really believe is, like, take this 50,000,000 ARR, 5,000,000,000 post type company. You need to believe that someday, you can get to 5,000,000,000 of revenue with 30% margin minimum growing really fast. So what does that mean? I better believe there's 50,000,000,000 of revenue to go get.

**Harry Stebbings** [15:17]:

And you also then are saying that risk adjusted, that is the best place you believe to put your capital, which is where I get stuck. I'm like, in an ecosystem where there's so much opportunity. I understand that you can get there, but is that really the best place to put my money over the 10 other homes where I don't have to double, triple, and then do a somersault into Kenya? No. That's really no.

**Lucas Swisher** [15:38]:

It's really fair. And, again, it's it's something we think about a lot. The two things you wanna consider when it comes to that. Right? And it's one of the reasons why, again, we love having a flexible mandate. We are not tied to just being able to do a series b at 300 post and, like, that's all we can do is because we can have almost this, like, rowboat that rows up and down the river. Anytime we see something opportunistically that we think is the best risk adjusted opportunity at that moment, we can invest. And then the second thing we're really looking for, right, take that round as an example. And one of the reasons why we go back to this big idea test is I wanna believe that if that company works, that its best days are ahead of it, and I can continue to invest. One thing that Jeff Horring from from Insight always says is the best round is the double down round. And so by getting access to that company at a certain stage, if I think it has a shot at being a $100,000,000,000 company, that round may not actually be the best round, but it gives me the opportunity to double down and make an even larger investment where more of my capital is gonna be deployed over long periods of time. And, again, it's important why this market structure is changing. Right? I now because companies are staying private longer, these platform companies are staying private longer, you have the opportunity to make those bets. Previously, you might not have, but now we have the opportunity to make those kinds of bets.

**Harry Stebbings** [16:52]:

It's so interesting you said there about the lesson from Jeff Horring about the the value of the double down round being such a good place for, like, value accretion or, like, resource deployment in some ways. I always remember Brian Seeman say we drastically underestimate the ease of the next double. And it's like it's much easier for Harvey to go from 6 to 12,000,000,000 Yes. Than it is a company to go from 0 to 6,000,000,000. Yes. That's really freaking hard. I really always remember that, actually, and it impacts a lot of how I think about selling.

**Lucas Swisher** [17:17]:

There's actually a stat around this that I love. We have this chart internally, which just shows at each market cap band, the percentage of companies that 10 x. And the counterintuitive thing is as you go up those bands, the percentage increases. So from a 10 to a $100,000,000,000 valuation, I have a better shot at picking a 10 x, not like a better return, a 10 x, than I did in the prior band.

**Harry Stebbings** [17:42]:

I just again, I wanna get back to the fascinating statement that you said there. Like, number one is market size. We need gigantic markets. Do we need gigantic markets over the best immediately incredible founders? Know I that's a really shitty question to ask, and forgive me for it, but I've actually learned that a good founder in a fucking great market almost trumps a great founder in an average market.

**Lucas Swisher** [18:03]:

Yeah. No. I think the founder is incredibly important. Right? You go back to the example of Databricks. Most founders in that situation, they would have been handed well, not handed. They would have built an incredible company in that first wave, but maybe they wouldn't have found their way to wave two and three and four. And it's, again, it's why we like this type of company that we call a platform company, right, which is the has shown the ability to skip TAMs, to have multiple TAMs over time. And I think that founder is tied to the market, you know, is tied to that market dynamic, and they're they're equally important, but market size is always first. A great founder in a small market with a wedge that is not easily able to expand, I think will build an incredible business. But without having that core market and that core trend, it's hard to get to a 100,000,000,000. Right? Like, you could be in this niche area that's very hard to expand. It's really easy to get an act one, but hard to get the act two and the act three and the act four. And to build that enduring company, right, you see it with SaaS today. You have to have the act two and the act three and the act four. And those things, that's why they go really in tandem.

**Harry Stebbings** [19:01]:

Because of the expansion of TAMs and outcome sizes, can you be thoroughly elastic on entry price even at the real growth stage, or does price elasticity constrain significantly with increasing enterprise value?

**Lucas Swisher** [19:14]:

Ultimately, price always does matter. Yeah. Right? I think some folks will say, oh, price doesn't matter. I think price does matter, but I think it matters least. You, of course, could make the argument of, oh, Lucas, well, you do it five. Why not 6 or 7 or 8 or 9 or 10,000,000,000? What if it was 20,000,000,000? What if it was 30,000,000,000? There does come a delineation point where you feel like the returns are gonna erode such that you would pass on an opportunity. But I'd say by and large, if you're the one instigating these rounds and you're the one that's preempting these rounds, you can kinda help figure out what the right price is for a company at any at any given moment. And I do think you wanna think about it last because, again, these generational companies, it's almost never too late for them.

**Harry Stebbings** [19:53]:

I agree with that. We have a very clear litmus test, which will make us make many mistakes and which is why we should change it immediately. But it's like when we think about our entry price it's true. When we about our entry price, do we think that we are able to three x that entry price within the next fundraising round? And so if the company says, hey, are we gonna go from 1 to 10,000,000 by the end of this year? And because of that, we're gonna be able to raise at $3.50. Great. Well, we're paying 70 for the a. I can totally see my three x there. Yep. Or it's like, well, actually, we're only going from 1 to 4 because we're a slow enterprise sales cycle, but we're paying $1.50 for this incredibly hot a. One to 4, I'm not raising it 300 if that's the case. Right. Shit. I'm probably raising a flat round. Correct. Maybe. No. That's how we think about it. Do you have any internal monikers or frameworks for like

**Lucas Swisher** [20:40]:

I think the more simplistic way that we think about it, and again, this is not a hard and fast rule, and it's more qualitative than anything, is if I invest in this round at this price and the company executes, do I wanna put more at a higher price? That's the litmus test. It's to say, alright. Say I invest in a company at 5,000,000,000, and it does super well this year. Is this a big enough idea? Is this generational enough? Is this transformational enough? Is the founder amazing enough that if in six months they wake up and say they wanna raise at 10, that I'm gonna wanna do that?

**Harry Stebbings** [21:08]:

I think it was Henry Allen Bogan that said once that he wants to invest as much money as possible as the company becomes more expensive, which is one of those kind of counterintuitive statements. Do you want to kind of spray early? And spray is a derogatory term, and I didn't mean that rudely. But, like, constrain capital effectively and then double down very aggressively, or do you want to aggressively get ownership and then focus on constraining as time goes on?

**Lucas Swisher** [21:33]:

Yeah. We're we're much more the latter. And I think there are two dynamics around this. One is our view is there are very few companies that generate the disproportionate value in technology. If you look at the private markets today, take the whole private market ecosystem. 20 companies have generated 80% of the enterprise value. 20 companies, 80% of the enterprise value. Of all the private companies that exist in the world. And four companies have generated 65% of the enterprise value. Four companies. And so what really matters is being in those companies. Those 20 platform companies that are generating the disproportionate amount of value. And then your next question is, alright. Well, how? Like, this wonderful framework. Like, we all would love to be in all of these platform companies, but, how? And the answer is, from our view, you can't do this brand prey at the early stage or the early growth stage. The reason why is you may be in the wrong horse or you may be in the wrong market, and you may be investing your time wrong. Because there are very few companies, we need to make very few investments, even at the early growth stage or the growth stage. We can't afford to be in the wrong horse.

**Harry Stebbings** [22:30]:

I get you, but actually we I'm not asking you about yours, but we see a world of competitive investing. And the reason is in competitors consistently. There are many people who are in many companies where they directly compete. You can actually afford to be in the wrong horse today and still do the next horse.

**Lucas Swisher** [22:47]:

I think you can, but it definitely makes your job harder. It does. Right? You wanna make your job as easy as possible and not put up the barriers in ways to being able to win to win a new investment. But I agree with you. At at scale, when companies become these platform companies, right, which is our style of investing, oftentimes, it's almost like buying a pseudo public stock. Sure. In many ways, as a public market investor, I could own Google and Meta. As a private market investor, at the very earliest stages or the early growth stage, should I be investing in, like, two series b's that are exactly directly competitive? That feels really counterintuitive. You probably don't wanna do that. One, just because you're making a bet that's directly competing. But at the growth stage when you get these platform companies, maybe they didn't even start by being competitive, but they grew into it over time. When founders come to you and

**Harry Stebbings** [23:32]:

they're like, I mean, how dare you? Like, it started off as a pillow company, and now it's doing enterprise payments. I I I how how? I don't know.

**Lucas Swisher** [23:41]:

And listen, that's part of the game. And as a founder, I completely empathize and understand that. Right? I can understand how that would be, you know, a really tricky situation. From our perspective, it's when you're investing in large markets, oftentimes, you are going to end up in assets that compete because they naturally expand TAMs. A great example of this is I think we were the only private investor that was invested in Snowflake and Databricks when they were both private. They started off in completely different areas. Databricks didn't have a data warehousing product, and Snowflake didn't really do a lot of ELT. Was mostly built around the ecosystem. They grew together, and they we weren't invested when they were starting to compete because Snowflake went public a lot earlier. But at the same time, that happens in big markets.

**Harry Stebbings** [24:21]:

It's so funny you said that you the enterprise value, I think 65% is done by four companies or created by four companies. I tweeted not too long ago that, basically, unless you're an Anthropic OpenAI, Cursor, Lovable, OpenEvidence, Harvey, you name your life, you're irrelevant if you're not in them in venture. And naturally, every irrelevant venture investor came out of the woodwork and said, how dare you, Harry? I'm very relevant. I promise. And it just made me laugh. But I did understand the nuance of you don't actually have to be in them if your fund size is constrained. If you got a $100,000,000 seed fund and you have a $3,000,000,000 outcome It's a business. And so I wanted to ask you, when you think about mega funds, which we see more and more of Yeah. Do you think they will be able to produce the venture like returns that we see with early stage funds given the outcome sizes, or actually we just have a different LP profile?

**Lucas Swisher** [25:11]:

Yeah. I would separate the two asset classes almost in some way, right, venture and growth in many ways. Right? They've we've almost developed completely independently and separately. Obviously, are firms that do both. There are firms that do both very well. If I was a venture fund staring down the barrel of a $3,000,000,000 venture fund, I think that's a tough putt. That's a tough battle to be a part of. What do you what do you mean by that? If you're in one? I mean, if you are a venture fund that is staring down the barrel of having to deploy $3,000,000,000, I think that is hard. Because, again, at the early stage, it is hard to capture disproportionate ownership in the few companies that actually generate all of that liquidity. If you're a small venture fund, I think it's super possible in today's world. You don't actually to be in you don't have to catch the seed of SpaceX. You'd really like to because those are the only the platform companies generate liquidity. But at the end of the day, like, you can get by with not capturing all of the great outcomes. If you have a $3,000,000,000 venture fund, the math is really hard. You have to capture a lot of those. The growth funds are a little bit different math. But I think just go back to your question about can a $5,000,000,000 growth fund scale and work? The answer is yes. The reason why is the markets change in two different ways. Change number one, these companies are staying private longer. They're getting bigger while they're private. There are more opportunities to invest over time. So now where ten years ago, you couldn't put a billion dollars in a company. Now you can invest a billion dollars in any given round. If I invest a billion dollars and I 10 x that billion dollars, that's a two x on a $5,000,000,000 fund. Now I need to be concentrated to make that happen. Right? And I think, again, that's why we go back to our strategy. Few investments, big checks. You have to have that type of discipline to make those fund sizes work. The spray and pray does not work, but you can absolutely make it work. And then I think the second dynamic that's different, the outcomes are bigger now than they used to be. In the SaaS wave, I think it would have been really hard to make that fund size work. Because SaaS, you're constrained. The largest SaaS company in the world that's independent outside of Microsoft and the hyperscalers, Salesforce, Salesforce Workday, ServiceNow. Those are like a couple $100,000,000,000 of market cap. So it's gonna be hard in that world. But in an AI world, if we actually think that we're augmenting labor, if we think that we can address a lot of these really big markets, if you move from human inputs to tokens, then you're gonna have much bigger outcomes and the math works.

**Harry Stebbings** [27:22]:

Do you think in a world of mega funds with $5,000,000,000 plus funds, which are several now, vertical SaaS is no longer an investable category just because the outcome sizes will not be enough to generate the mega outcomes needed.

**Lucas Swisher** [27:35]:

Listen. Vertical SaaS, I think you could talk about it a lot of different ways, constrained TAM, AI risk, all kinds of stuff. They're still great businesses today. People have made a lot of money in vertical software over time. Think about Insight. Right? They've had incredible exits in vertical software over time, multibillion dollar exits. In today's world, if you have a big fund, I don't think that's where you should be focused. I think you should be focused on the absolute mega outcomes, the platform companies that are gonna generate that disproportionate return, and you're actually gonna get liquidity out of.

**Harry Stebbings** [28:03]:

Don't laugh. What is an attractive enough upside scenario to get you excited? You know, we always hear an early stage in my business. Oh, it needs to be a fund returner. Sure. What is attractive enough for you? Like, Revolut, I think, is a phenomenal company. I'd love to be ambassador at 75,000,000,000. I'd love to be Mhmm. I think there's a clear pathway to 250,000,000,000. For sure. Is that three x enough to be exciting?

**Lucas Swisher** [28:24]:

No. A three x is not enough to be exciting. And the math is really simple. Right? Say I'm a fund, and I'm Coatue. I wanna make a three x net return for my investors. Sort of the baseline for what people would say is, like, a top quartile return, and people get really excited about three x net return for a fund, you know, 25% net IRR, something around those bands. I'm gonna have some things where I swing and I miss. Say I have a one x. I need a five x on the other side of that. Heaven forbid, I have a loss, and I have a zero. I need a six. We obviously really try to avoid those. Right? If I have a two, I need a four. So for me, I need to see a a steady case where you can get that three x. But I really need to believe that if the company three x's, I wanna put more money in because it can three x again. And I think this is a really critical thing that a lot of folks end up missing over time is, ultimately, I need to imagine a case where after I've made my three x, somebody else thinks they can make their three x. Because otherwise, one, I'm not gonna get those six x pluses that I'm going to need in my fund. But two, the company's not gonna exit. I have to imagine this is why the big idea being in big ideas really matters. Somebody's gotta sit on the other side of that stock. I have to be able to walk down the hallway to the folks that operate on our public side and say, do you wanna buy this stock? Do you wanna buy this stock more than all the other opportunities that you have? And so every investment I make, that is the rigor and the framework that I use is, someday, is my public counterpart gonna wanna own this stock over everything else in their book? Is there or at least is there a chance?

**Harry Stebbings** [29:49]:

With the extension of those private markets and the outcome sizes, and your entry point, as we said, can be flexible. But, you know, the 300 to 5,000,000,000 is very standard. I know it can get much higher. Given that delay in public market entry that we're we've seen from private companies, you have the chance to sell a lot more than you used to. How do you think about taking advantage of secondary markets pre going public and doing great returns for your investors?

**Lucas Swisher** [30:12]:

It's certainly an option for liquidity now. Right? A lot of folks, especially the early stage funds that have been in companies for a really long time, are taking advantage of this, and I think rightfully so. And, again, I think it's why, even if you're an early stage fund, this is a great style of investing, and it's the type of company that you wanna be in because it's the only type of company that can get access to liquidity, whether it's private or public.

**Harry Stebbings** [30:34]:

When you have doubled down and it has been a mistake, what did you not see that you wish you'd seen? And you don't need to name a company, but

**Lucas Swisher** [30:40]:

Yeah. Of course. I think, again, it goes back to that very simple principle. Multiple products. And it's why we're really focused on that and why I harp on it literally nonstop is we've just overestimated TAM, and we've overestimated the ability for companies to launch multiple products and expand into new TAMs. We're usually not getting things wrong on the basis of metrics or the team being good or it wasn't growing fast enough. It's really that question. And it's why we have applied and really raised the bar on the type of investing that we do is because of that. Right? It's like we're we're we've gone wrong, and the nice thing is we have a you know, we tend to have a very low loss ratio because of the style of investing that we do. But where we've gone

**Harry Stebbings** [31:19]:

wrong, it's

**Lucas Swisher** [31:20]:

that.

**Harry Stebbings** [31:20]:

When we say raise the bar, the challenge that I have with a lot of companies today is they're like good enterprise companies. Okay? But they're doubling and tripling Yep. At $1,020,000,000 in revenue. What happens to that generation of SaaS companies from 2020, 2021? They're they're good companies. Great companies. But, well, respectfully, they're not great companies. They're good companies. And in the prior cycle, they would have been funded, and they've been funded well. But now, are you really gonna jump out of bed for 10,000,000 growing to 25,000,000?

**Lucas Swisher** [31:51]:

The short answer is I don't know. I don't know what's going to happen to those companies. I don't know what the terminal value is. I don't know what the exit pathways are, right, with private equity and the place that it's in with the public markets where it is. All I know is I have a lot of conviction, and I see a path in the style of investing that we do. I don't know how to comment on the other part of the markets. Right? There's this notion that, like, the the triple triple double double double is dead, and these companies suck and all this stuff. I don't think that's true. There are great companies. You can drive real margin from them. They make incredible businesses. It's just not our strategy. Right? And I think in today's today's world, the reality is in a SaaS world, the triple triple double double double was a thing. It was an incredible metric. These businesses were incredibly repeatable, very comparable. Now we exist in a world where if you have a product that the market likes, it is going to absolutely yank you into that market. It's not gonna triple at the earliest stages. It is going to scream. And I think you really see that. Right? And so those are the companies and again, it's not like we think these companies are all bad at this and that. It's just our strategy is to find those and to work with those companies because that's where we think the disproportionate returns come from, and it's the companies that we have an advantage working with.

**Harry Stebbings** [33:03]:

You mentioned the word margin there. And I think why I think so many people feel really insecure as investors today is because there's so many prizes that are being fundamentally questioned about growth rates or rule of forties or I was always taught that margin mattered. I walked with my mother around London. I'm like, Jules, margin matters. And now I'm looking at going how you wake up every morning? Pretty much. Margin matters. I put my feet on the ground, I say margin matters. But I start to question whether margin actually does matter in the early days. If your company is rocking, you're spending on inference, and that is a sign of good usage and love, does margin matter anymore?

**Lucas Swisher** [33:38]:

I think the same business principles that have applied to businesses for the last three decades in technology are the same business principles that matter today. Margin matters, but it's nuanced. I would add an addendum to that. Margin matters at scale. The best businesses, in particular infrastructure, whenever there's a technology wave happening and an architecture shift, some of the best businesses, not all of them, but some of the best businesses have had horrific margins early. The hyperscalers. The hyperscalers were low margin early. Those are the best software platform businesses in the world. Snowflake and Databricks, very low margin early. A lot of people passed on those early rounds because they're, oh, in SaaS, you have to have 80% gross margin. Look at Snowflake. It's got 20. You know? Margin matters, but early, it can be a misleading indicator, especially when an architecture shift is happening. The reason why in AI, and I'll give you the the bull case on this, right, is the reason why margin might not matter early on in a company's life in AI is the cost curve is coming down so fast. Say my inference margin is 10% today. It may have been negative a quarter ago and super negative two quarters ago, but the token costs are coming down so fast. Maybe I'll be if I'm an application AI company, I'll probably be able to develop my own model for some of the workloads. I'll probably wanna use frontier models for some of the workloads. I'll probably wanna use really small cheap models for some of the workloads. And over time, I'll be able to optimize my margin. That's what we really believe is going to happen over time. But listen, these companies are structurally lower margin than the last generation because you pay the cloud and you pay the LM.

**Harry Stebbings** [35:08]:

And so we just get used to actually larger outcome sizes with larger, probably, revenue pools associated, but a slightly lower margin profile.

**Lucas Swisher** [35:16]:

Well, from, I think, gross margin, yes. But what you might say is, hey. I'm actually substituting a lower gross margin for lower OpEx because my engineering team, maybe it's more efficient. My sales team is using AI tools now. Maybe it's more efficient. My legal team, maybe it's smaller. Yeah. Maybe I'm more efficient. So your terminal operating margin may actually be higher in this world than the last world. Your gross margin might be lower, but your operating margin, which is ultimately at the end of the day is really what matters, may end up being higher.

**Harry Stebbings** [35:45]:

What else do you think a lot of investors oscillate or focus on, which is total shares?

**Lucas Swisher** [35:50]:

One of the places where we don't spend time, these prerevenue companies have really high valuations. I think this is a lesson that at least we've taken about ourselves from 2021 is that is not our business. The prerevenue company at a really high valuation with no product is not our business. And I think a lot of investors are focused there right now because what ends up happening is if you can't invest in OpenAI and Anthropic and Revolut and SpaceX and Canva and, you know, all of the companies that are these great platform companies, and you're locked in to a certain part of the ecosystem, you make decisions that you can make. And so I think a lot of people are focused on that part of the ecosystem right now. And for us, that doesn't make sense from a risk reward perspective. Our focus is real businesses that are growing really fast, that we think are gonna be really durable outcomes and actually generate liquidity for our investors. And, again, it goes back to this principle around, if I have a zero, I need a six. And a six is really, really hard.

**Harry Stebbings** [36:42]:

You mentioned earlier that you wouldn't want to be a seed fund deploying 3,000,000,000 or staring down the gun at 3,000,000,000 or whatever it is. In a way, I would because I can absolutely destroy the economics of all the seed fund players, and it's something that we see. We lost a deal recently to a large mega fund, and we did three on 15, and they did 10 on a 100 with no lick pref pre anything. Destroyed all the economics. And I told the founders, you should absolutely take that deal, like and sell tomorrow for, like, $5,000,000, and you've made money. Yeah. But they can destroy the economics. Is seed still a business when you have mega fund entry with different economics

**Lucas Swisher** [37:15]:

in the way that we do? I mean, I think it's gotten harder for two reasons. One is you do have this mega fund dynamic, but the other thing is we're in a different world than we were five years ago. Right? Which is, in general, people are coming out of the gate with bigger check sizes and bigger valuations. And that just raises the risk dramatically over time. Right? So I think those are the two dynamics that are that are really at play. It's harder for a seed fund to buy 20% today or 10% today or 5% today than it was a few years ago because of this dynamic. And that has to do with a lot of different things. One of them is in a SaaS world, you didn't need that much capital. You started up, you kinda get going, whatever. In this world, businesses tend to be more capital intensive. They may be actually more durable at scale because of this, makes it harder for the next entrant to come in. But the reality is they're harder to start, they take more capital, and that has led to some of these, like, very big ballooning seed rounds. I think that makes it harder to be a seed investor in today's world. And, again, why having a flexible mandate where you can row up and down that river and not have to be there is really a nice place to be. Do you

**Harry Stebbings** [38:19]:

think a good investor at a can be a good investor at d? A lot of LP minds are like, no, early stage is different to growth, and poof, that's very different. I think Josh, who's a different at Thrive, has proved that actually that's not the case. But other people

**Lucas Swisher** [38:33]:

still very much hold that true. I don't think it's impossible, but I do think it is very hard. I think that's because the type of frameworks that you use, the types of things that you see are very different at different scales. Being able to read a balance sheet actually does matter for a pre IPO company. Right? Like, that really matters. But seeing thousands of founders, thousands and thousands and thousands, really matters for seed because what else do you have, you know, to go off of? And so I do think it really matters. I don't think it's impossible. I think there are some funds that have done it exceptionally well. But I think it's why you see for us. Right? We as a fund, we I actually think the public market skill set and the private market skill set is also different. And so having different folks that are focused on different things is really important because there are different parameters, different things that you see all day, and there are other people that you're competing with in all of those different segments that make it really tough to be the best at everything.

**Harry Stebbings** [39:25]:

There seems to be a consensus of excitement around certain companies, and we see the concentration of cash to to few players in select industries, which has led to this idea of kingmaking. When we think about kingmaking, do you think that is a rational or real thing, or do you not? I don't think it's a real thing.

**Lucas Swisher** [39:44]:

You don't? I don't think the king the kingmaking concept is a real thing. I think some companies attract more capital early. Some companies slingshot from behind. Do you know what they do?

**Harry Stebbings** [39:54]:

Raise a lot of money from large tier ones who then are very vocal and loud. It dissuades other people from investing in anyone else. It

**Lucas Swisher** [40:01]:

certainly does, and it's an advantage, but it doesn't mean that you can't build a great business if just because a bunch of tier ones are crowding into a name. I think there is the concept of it gives you an advantage. Yeah. More capital does give you an advantage. There are some cases where historically it's given you disadvantage. If you have so much capital and not a lot of product market fit, I'd say you probably had disadvantage. If you have a lot of capital and insane product market fit that allows you to go hire a huge sales force, that's a huge advantage. Right? Like, if you're actively taking a market and you have way more capital, a better right? Like, it's this is, like, almost tautological. That is a huge advantage. But do I think that there's this concept of, well, if Coatue and Sequoia and Kleiner all pile into a company that it's over?

**Harry Stebbings** [40:43]:

No. Totally get that. I think it is an advantage, but I don't think it makes it, which is probably why kingmaking goes too far. Do you think we are foie gras in companies today in the same way we have done before? What do you mean by that? You know foie gras. Yeah. Yeah. You know they shove a tube down it and then force feed it, and then it explodes. Yeah. So we are putting too much money into companies, and then in there are artificially inflating and then exploding.

**Lucas Swisher** [41:05]:

I think there are segments of the market where it feels like that is that feels like a little bit of a problem. I think for these companies, and I'll and I'll just focus on what we do. Right? For the companies that are explosively growing at the growth stage and have real product market fit, real product, real traction, I don't think so. Right? You look at these companies that raise really rapid rounds in succession at the growth stage that actually have something underneath. No. Because there's real ROIC on the capital that's being invested. Right? There's real ROI for the dollars that are going into these businesses. Sometimes I think when growth funds in particular chase venture companies, right? We've talked about that delineation point. That's where I think it can get quite dangerous. It can make companies complacent. It can make companies spend too much on things that maybe it's not great. Like, at that early stage, that kind of capital scarcity, I think, can breed actually great things. And so I think there are parts of the market where that's certainly true. These growth stage companies with this insane momentum, I don't think so.

**Harry Stebbings** [42:03]:

Do you worry that there are a generation of companies, a la Canva, a la Stripe, which do not need to get public. Great businesses. Great businesses in private markets, ample liquidity for those that want it, very active secondary markets if they need to. Why would we go public as John said alone when some fucking 30 year old analyst at some big bank telling me

**Lucas Swisher** [42:22]:

that I should increase sales? Yeah. I mean, I think this is one of the reasons why companies have stayed private longer. I don't think most of those platform companies will stay private forever. I think there are a couple reasons that that are good to go public today. One is real capital at scale. Real capital at scale, still, say you're a trillion dollar plus company, it's available, but true liquidity that's not layers and layers and layers of SPVs and all this tricky shit and, like, managing your cap table. Like, true liquidity about your layered SPVs. Mean, you've seen some of the things around some of these companies where it's, like, unbelievable, like, the opacity of this. And the companies don't want that either. Mhmm. They wanna know who their investors are, and you get the investors that you deserve as, you know, you scale and you go public. So liquidity at scale is is certainly one reason. The second reason is, and this can cut this second reason I think really does cut both ways, but the public markets are an incredible feedback mechanism for businesses. If you think about Netflix during their transition, the public markets were some of the first folks, like the analysts on the public teams, to really speak about that transition from the disc to streaming, from the CD to streaming. And I think, especially in an AI world, the public markets folks in the public markets are really, really smart. The 25 year old analyst, this and that. Right? Like, everybody's gonna have varying degrees of intelligence or opinion. But the public markets are this, like, incredible weighing machine that can give founders and teams amazing feedback on their businesses. And then the third thing is when you go public, it's sort of harder to touch you. In some ways, it's easier to touch you from a buying and selling stock, but you're now a public company. You're now levered to four zero one k's, to indices. When you're a private company, people can mess with you a little bit more. It just is what it is. They can mess with you. When you're a public company and you are a big important public company, it's harder to mess with businesses. And so you kind of have this rigor around you.

**Harry Stebbings** [44:12]:

I adore Cliff and and Mel, and I think they're amazing. But you said about, like, the platform companies and you included Canva. If you were to be a harsh critic and you'd say, well, Figma's worth $11,000,000,000 today. Image generation, graphic generation is right in the pathway of a lot of large AI companies. Is Canva really a platform company?

**Lucas Swisher** [44:31]:

What I love about Canva is they've shown that same ability that Databricks has, where they're able to hop multiple s curves and develop multiple products. They started as I'm sure you know the story, but it's incredible. Mel and Cliff started this business as a yearbook business, making yearbooks. They successfully transitioned that online. They successfully transitioned that to SaaS. And now they've transitioned to many, many, many products. Right? Canva is a suite of, like, a dozen products that are all growing extraordinarily quickly. So you have that dynamic. And then the other thing that I love is they were one of the first companies that really leaned into AI. I remember Cliff called me about this very early on because we were early investors in stable diffusion. If you remember the image the image generation company in OpenAI and a few of these other businesses. He called us really early in this wave, like pre ChatGPT in this wave and was like, hey. We're gonna start integrating AI into our business now. And so that type of mentality, both the ability to develop multiple products and hop TAMs and to stay ahead of the curve in AI, think is gonna serve them very well.

**Harry Stebbings** [45:31]:

I again, I love Cliff and I love Mel, and I totally agree with you in terms of that expansion. Know what I also love about that story? Married couple. Amazing. Australia. Amazing. Non technical. Yearbooks. Like, to be fair, the seed investors of that and I'm I'm not taking anything away from Mall and Cliff again. Think they're exceptional. But you've gotta be quite mentally plastic away from the traditional investing rules

**Lucas Swisher** [45:51]:

to be like, yep. All in. Credit to those folks. Yeah. And, I mean, credit to the growth investors who took a leap on that one a little early too. Right? It was very non obvious. It's I mean, I I worked for Mary Meeker when I was at Kleiner Perkins, and she was one of the folks that took a leap on Canva.

**Harry Stebbings** [46:05]:

What's your biggest lesson from working

**Lucas Swisher** [46:07]:

with Mary? I think the biggest lesson is she has this and it it comes from her background of being at Morgan Stanley for a really long time. She has this incredible analytical bent of being able to see things and see stories and numbers that other folks don't and being willing to lean against the grain whenever she feels things. And she's able to tell these incredible stories with data and understand what's happening in the world based on data. I'll give you one example is I remember my second week at Kleiner. I didn't know how to model. I came from Insight. I could barely I could barely model. I was great at talking to founders, but could barely model. And I found myself, you know, in the middle of modeling exercise with Mary and just getting absolutely destroyed. And one of the things she taught me is, like, that is actually really important. Being able to express a company in a few a complex company in a few lines in Excel and tell stories with data is like an incredible skill, and she has this knack of being able to look at, like, sell in '95 and know there's an error. And so that's what I learned is to be, like, highly analytical, very detail oriented, and to tell the story with the data.

**Harry Stebbings** [47:09]:

To what extent does that truly matter versus phenomenal founder, big market, growing fast?

**Lucas Swisher** [47:16]:

I the way that I phrase data, and I phrase this to our team a lot, and this is what I really believe is, data is a prerequisite. It is not the answer. The data must be very good. It's not the whole picture. And I remember I was sitting in a very old IC and we were when we were looking at Databricks at Coatue way back when, and Thomas was like, Lucas, you're missing the force through the trees here. Just because net new ARR didn't accelerate dramatically in any given quarter does not mean this trend is not happening. And so net new ARR or whatever metric you wanna use, they're incredible guideposts, but you can't miss the forest through the trees. Yeah. And it's like the bigger picture, it really matters. But it is it is helpful. Right? I'd say, like, the thing that I'm looking at the most with a lot of these kinda AI native businesses is if you're low margin, I need you to have high retention. You have to have it. Because if you you leave no margin for error if that's not true. If you're be a low margin business to start, the customer behavior must be so sticky. It's gotta be so sticky. Because otherwise, you're really, really fragile. One move the wrong way, and you have no margin for error. Right? So, like, those are the types of places where data can help you. It can hurt you if you live in Excel all day, and you are, like, just missing the forest through the trees.

**Harry Stebbings** [48:25]:

Totally agree with that. You worked with Mamoon too. Yes. I really love Mamoon. Me too. What was your biggest lesson from working with Mamoon?

**Lucas Swisher** [48:34]:

The gift that Mamoon has in I think from the SaaS era, Mamoon, my view is he was the best series a investor in the SaaS era, period. Right? I mean, if you look at his track record, it's incredible. Figma, Glean, Rippling, Slack. I mean, it's just this unbelievable, like, hit after hit after hit. What Mamoon is special at and what he pays attention to and what I learned from him is there are distinct inflection points in companies. There are moments where they really kink. They kink up. And he is the master at seeing that around the Series A. With very little data, being able to see it. I remember going back to, I worked on Figma with him when I was an associate at Kleiner. And I cut all the data for Mamoon. This is a it was it was a very fun time. And I remember he took one look at it, and within thirty seconds, was like, we're doing it. And there was this big company in vision at the time, and it was a great company, and everybody thought it was the winner. And he looked at that data, he was like, this is this is gonna happen. And what he saw is the net retention curves, the customer behavior of really big companies. I think I can't remember exactly, but I think the companies were Google and Square and Amazon. Right? Like, really insane customers, and this is when Figma had 500 k of ARR. And he saw the usage curves inside those three companies. He's like, we're at an inflection point. We're doing this. And that's what he's amazing at.

**Harry Stebbings** [49:43]:

I'm not surprised, and time and time again, I'm amazed by the insight. Again, I meet so many investors, I actually find not that many have the insight that Mamoon has, that Neil Mehta has, that Pat Grady have. Super unfair question. You super unfair question. You can invest in Mary Meeker's fund and these solo GPs. Mary Meeker's fund, Mamoon's fund, or Jeff Warren's fund. Woah. I want dollars, absolute dollar return.

**Lucas Swisher** [50:12]:

Absolute dollar return? I think you gotta split it in some way. I think what you're looking for, if you're an LP pay you anymore. Yeah. I know. I know. I I if you're looking if you're if you're an LP, what you're looking for is the best return across different strategies, I think it's gonna depend on what on what you're looking for, what your time residence. Let me give you the benefits. Right? Mamoon, I think is gonna have an incredibly high slugging average, really amazing returns, but it's gonna be more risk. Mary, I think you're going to get, like, this incredible growth portfolio of blue chip names. And then Horing is gonna provide you very strong, stable core returns. And I think, like, it really depends on what you're what you're looking for. Right? And LPs want different things, and they probably want exposure to all three in different ways. I'm gonna ask you another one because you

**Harry Stebbings** [50:58]:

failed at one. Okay. You've got Pat Grady at Sequoia. You've got David George, and then you've got the folks at Founders Fund, the Napoleons and the behind the scenes people at Founders Fund. You can only invest in one fund. Oh, you can't do this to You can't do this to me. I'm gonna let you out of the room.

**Lucas Swisher** [51:16]:

No, it's incredible. I think Founders Fund's strategy of being ultra concentrated in a few companies has just been this incredible strategy over time. And I think Pat Grady's ability to pick series Bs is, like, pretty unmatched. Pick and win series b's. He's very, very good, and I think Sequoia is very good at that. So I think, again, they're they're they're good for different reasons, but it, again, it really depends on what you like.

**Harry Stebbings** [51:41]:

Final one before we do a quick fire. You have one final dollar, and you can put it in OpenAI or Anthropic. Which one would you put it in?

**Lucas Swisher** [51:49]:

Right. I'll talk about the merits of both. OpenAI, incredible consumer franchise. The retention curves, the growth, all of this stuff, what they've done, it's just it it's insane. Innovation that's coming out of that business. On the consumer side, their strength that's emerging in enterprise with codex and and other coding use cases and these big transformational enterprise deals, and like a third unknown unknown vector, they have this like almost unknown unknown about it because they acquired Johnny I's company. Right? Who knows what that could look like in five to ten years? They have this, like, SpaceX. You know? It's like, how do you value space? Well, how do you value AI? It's like this unknown unknown element of just how big could it get. I think that's the that's the bull case.

**Harry Stebbings** [52:28]:

Did you see the design work that Johnny Ives' team did for Ferrari? Yeah. Oh my god. I can't drive. I don't have a license. I want a fucking car like this because of Johnny's design. Was You're gonna have to learn. You're gonna have to go get it? No. I got I've got a license. It'll be a present. Like, but I was like ride shotgun. Exactly. I'm very happy to hold the phone with the maps. There you go. But I was like, wow. I've never wanted a car as much as Johnny I was designing.

**Lucas Swisher** [52:53]:

Yeah. It's amazing. Yeah. It's incredible. And I think, like, that's the bull case. The bull case on Anthropic is really simple and really straightforward. Their focus on coding has been an unbelievable advantage for them because coding is the first use case in AI that's really taken off. That coding focus has led them to have a beachhead in all the other analytical tasks in the enterprise. Right? Everything is code. Right? Like everything in the digital world is code. And by having a great coding model, they've been able to do that. And the last strategic decision that they made that I think is really sort of unappreciated by the market is they built for every cloud and they built for every chip platform. And that gives them incredible optionality, and a lot of people want them to win. And so that is like a real advantage. So they all

**Harry Stebbings** [53:33]:

Is that I'm sorry. I'm really naive here, and I'm not asking for, like, who's better or who's worse. Yeah. Is is

**Lucas Swisher** [53:37]:

that different to the other providers? It is. Because some of the other providers have been sort of at least until this point, right, like, this is always changing. But they, kind of from day one, had architected themselves to be able to be partners with every cloud and to be with Trainium and TPUs and GPUs. And that takes a lot of infrastructure investment. Yeah. But it means in a capacity constrained world where the demand for compute outstrips supply, their ability to do that makes them more cost effective. It gives them an advantage on where they can deploy. They can take capacity that other people can't. And that means, like, hey, in this world, that's an advantage.

**Harry Stebbings** [54:13]:

I totally get you. And actually having more people support you is a very, very advantageous position to Yeah.

**Lucas Swisher** [54:18]:

It's one of the things that we actually we always try to think about is like and it's a a question that Philippe asks all the time is like, who's gonna wanna help you and who's gonna wanna hurt you? Because that ultimately matters. Right? Like, having a lot of people wanna help you and benefit from your growth is a very nice position to be in.

**Harry Stebbings** [54:34]:

Clearly, Philippe agrees with kingmaking then. Well, it certainly helps. It totally helps. Listen. I I wanna do a quick fire. So I say a short statement. You give me your immediate thoughts. Does that sound okay? Done. What have you changed your mind on in the last twelve months?

**Lucas Swisher** [54:48]:

The size of outcomes. This is really simple. Like, twelve months ago, I wasn't as convinced that we were really going to be able to address labor. This, like, token machine concept that, you know, human inputs were gonna become machine inputs. I wasn't all the way there. We were still kind of in an assistant world versus an agent world. I've become fully convinced on this. A lot of it is due to using a lot of the tools like Cloud Code myself, and just really feeling this. But that, my opinion, has really changed on that in the last year. I think the outcomes this generation in technology are going to be so much bigger than the outcomes from the last generation.

**Harry Stebbings** [55:22]:

When you think about that labor displacement, do you think we are overestimating the adoption of enterprise and labor displacement, or actually underestimating underestimating it's coming sooner than we think?

**Lucas Swisher** [55:32]:

This is the hardest question. Right? And it's like, if you go back to the last era, people always underestimate how long it takes to do things. And I think it's because they look at the consumer and they see how fast the consumer changes and adopts things and apply the same thing to enterprise. I don't think it's unlikely that we're gonna wake up tomorrow and all these SaaS companies have, you know, evaporated. Change takes time. Right? These things are gonna take time. That said, these things are happening much faster than they were before. If you look at Anthropic, right, publicly available numbers, 9,000,000,000 of ARR growing 800%. At the same scale, the three hyperscalers on average, when they were 9,000,000,000 of ARR, we're growing 60%. So it's happening faster than SaaS did. We know that. It just is. Like, it's in the data. Right? That's that's the story. But how long is it gonna take for all of this to happen? I think it's gonna take a long time because people are slow. They're sticky. Change is hard. Right? It's not like I can just throw Claude into an enterprise and all of a sudden it works. There's integration work that has to be done. There's deployment that has to be done. Like, this stuff is complex.

**Harry Stebbings** [56:28]:

One of the most bullshit ones is people talk about in the agricultural revolution and industrial revolution. And I'm like, yeah, you had to buy a fucking tractor as a farm in France and then train your 75 people on a tractor that comes in a year's time, and then you have to assemble it and then train them on safety and doctrine. Here, Gemini puts in Nano Banana Pro, and you're good to go tomorrow. Yeah. It is faster. It's certainly faster. So much faster. What's the single most memorable first founder meeting you've had? I'm not asking for the best founder, but it's like the most memorable first founder.

**Lucas Swisher** [56:57]:

Winston from Harvey.

**Harry Stebbings** [56:58]:

Why?

**Lucas Swisher** [56:59]:

It's not even close. I think it was because, one, I already believed when I when I came into the meeting. And then, two, the founder market fit in the story was so clear so early. What are language models good at? Language. Text in, text out. What is one of the most text heavy professions? Law. What have I seen early on? Document generation. Document analysis. And his articulation of that thesis and that story, it was just like so spot on. I met him before the series a that Pat did. I remember being like, this is it. Like, this is

**Harry Stebbings** [57:28]:

the one. Did you lose the a?

**Lucas Swisher** [57:30]:

We had an early stage practice at the time that we were really involved with, and we did lose the a. You know, it goes back again to our to our and I don't try to do very many a's. It goes back to our strategy, which is even sometimes if you miss an early round, for the great companies in the world, there's always another round.

**Harry Stebbings** [57:47]:

Dude, we are doing a time sheet now for a company, and we turned down the seed and we're doing the a. And I said to the team, like, I will not lose out on a great company because we are too egocentric and arrogant to accept our mistake. Absolutely. That we're not gonna do it. Ridiculous. No. I'm kidding. Got it. Understood. Fired the seed team. Yeah. Yeah. Yeah. You can invest in one seed firm and one series a firm. I mean, you guys obviously for the seed. Come on. I love it. I'll take that actually. Yeah. How about that? Which series a firm?

**Lucas Swisher** [58:17]:

I would say Sequoia and Benchmark. I wanna split my dollar. I'll take You're gonna allow me to split my dollar. Yeah. Yeah.

**Harry Stebbings** [58:22]:

I'll take that. Rory O'Driscoll, who we do a show very Thursday, he's brilliant. He always says with Benchmark, you know, reports of my death have been greatly exaggerated. I just find it so entertaining.

**Lucas Swisher** [58:30]:

And I think it's this firm that again Portfolio

**Harry Stebbings** [58:33]:

is so good on

**Lucas Swisher** [58:34]:

good, and they have the ability to reinvent themselves. Right? I mean, they hired Ev, who's my old analyst. So good for them.

**Harry Stebbings** [58:40]:

Listen. This is always a rough with the smooth. Yeah. Poor Peter. He's gotta deal with that every day. No. I love that. He's being fantastic. But seriously, you look at, like, your fireworks, your legora, your madness. I mean, the list goes on. Sierra. I mean, unbelievable portfolio from this era. But, again, everyone's like, benchmark her over. You're like, I don't know. Take any of those companies in my portfolio. What's been the hardest

**Lucas Swisher** [59:01]:

decision you've made in your career? Leaving Insight for Kleiner. I know a lot of people. So I I was Harvard undergrad then went to Insight, and I left Insight pretty early. I was the first one to leave. We we hired classes of 10 back then. So it was, like, 10 analysts, all really young kids coming out of school. The junior summer internship at Insight was literally dialing for dollars. I mean, it's it's incredible training ground. I called 50 CEOs a week. Like, literally cold call. I mean, was ten years ago, you know, almost fifteen years ago.

**Harry Stebbings** [59:28]:

Laff, what do you say? Hi. It's Lucas from Insight.

**Lucas Swisher** [59:30]:

I'm 19 years old. I mean, but it's amazing, right, because you have this platform where young people are empowered and they're able to grow within the organization and bring other people in as they need. And you learn how to, like, navigate a process at nine you know, 19, 20, 21 years old. It's this incredible training ground. But I was the fir I was the first one at Insight to leave my class. And it was hard because it was, like, it was basically like stepping off the linear path. Like, most of my life had been, like, very linear decisions. Not very hard to, like, take the SAT, do well, not very hard to accept Harvard, and then not very hard to go to Insight, even though was a little abnormal at the time, like it was a billion dollar fund when I went. Going from Insight and leaving your comfortable class in basically, you know, private equity SaaS and going to be the only associate on the West Coast in a place you didn't know, that was a a little bit of a leap. I mean, that's my advice to all the all the young folks in their careers, like, you gotta get off the linear path. You have to. Like, it's the only way. Get off the linear path.

**Harry Stebbings** [60:26]:

It's so funny. I always say the safe path is so much less safe than you think. Totally. The risky path is actually less risky than you think. Do you have to be in San Francisco if you wanna build an amazing AI company? No. But

**Lucas Swisher** [60:37]:

it helps. It's like the kingmaking. It certainly helps. I think if you look at some of the advantages you have being in San Francisco, right, just the incredible amount of talent density, there are not very many people in the world that know how to work with these systems right now. That's just the reality. And many of them are stuck inside of two, three, four companies. But the rest, most of them, are in a very small radius in the Bay Area. It's not impossible, but it's kinda like, why would you make your life harder? So with

**Harry Stebbings** [61:02]:

that, do you think the 100,000,000 to 500,000,000 pay packets are actually justified? Yes. I think they should give some to podcasters too. Just putting it out there. You got this. I believe in you. You so much. There's very few people who know how to do this. It's a very difficult job. Penultimate one, what's the biggest miss that you reflect on most across your career? Like, mine is deal.

**Lucas Swisher** [61:22]:

It's not easy because, you know, you've you've done this long enough, you have a lot of misses. A lot. I do remember very distinctly going and visiting Anduril for the billion dollar round down in LA. I was a SaaS investor at the time. So why I was the one who went to visit Anduril, I won't know. But it was one of the it was a classic case of back then, I think my perspective was slightly more myopic. Right? I was mostly focused on SaaS, very focused on metrics. And if you looked at that p and l, there's no way you know, you're a p and l investor, there's no way you invest. Just is what it is. It was an ugly p and l. It was an example of me missing the forest through the trees, not seeing just how special the foundering the founding team was there, just how important that trend was, where the world was going. Right? And that's an example of where, you know, founder-fund got that right. A lot of people got that right. We got that wrong.

**Harry Stebbings** [62:07]:

Final one. What most excites you for the next ten years?

**Lucas Swisher** [62:11]:

I'm excited about the products. This is one of the things that it it it's ingrained in everyone that joins Coatue. At the end of the day is we do love technology. Right? Like, we're technology only firm. We love technology. We love these products. And the ability to just, like, change our lives over the next decade and use so many new things, I think, is what has me the most excited. Like, I cannot wait for OpenAI's new device. Like, we've it's gonna be one of the first exciting new devices in some time. Like, those types of things, I think is what I'm the most excited about is the products. Like, using Cloud Code this year, oh my god. It's incredible.

**Harry Stebbings** [62:44]:

I have to say, you're especially right on the OpenAI devices. Like, what latest consumer device have you been like, I would actually go and wait outside the store. When I was a kid, like

**Lucas Swisher** [62:53]:

camping out for this thing.

**Harry Stebbings** [62:53]:

For the iPod Nanos and the iPod I was like, wow. Thousand like, now with the new iPhones, let's be honest, like, one's like, yeah. I'm gonna, like, run to the store. It's like, oh, whatever.

**Lucas Swisher** [63:03]:

This I've forgotten to trade mine in for four years. Like, he's, like, four generations old.

**Harry Stebbings** [63:07]:

You know? A 100%. I completely agree. So I'm so with you. Lucas, thank you so much for doing this, dude. Thank I loved having you on. This has been fantastic.

**Lucas Swisher** [63:14]:

Awesome. Thank you.

**Harry Stebbings** [63:17]:

But before we leave you today,

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**Harry Stebbings** [63:19]:

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