Why Now is the Time for the Application Layer

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This is the person, or This is the team I should be talking to. So I think you need a great network. I think you need to ship your ideas. And I think you need to be willing to take bets on people, which, again, I think you’ve done a good job of with your program.

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

what does that look like? You know, one future is that the labs, especially the ones that are starting to approach something that feels like superintelligence, if they reach it, once they reach it, we will have some form of recursive self improvement such that we hit this exponential growth of intelligence. The thinking goes that whoever gets there first will run away with it. Once you reach recursive self improvement, you’re gone. No one can catch up. That’s not necessarily the future that I am hoping for. For everyone who doesn’t know, what is recursive self improvement?

This is self improving AI, right? This is super intelligent AI that can do its own AI research, right? So once you have it, once you deploy it, it can just continually improve itself on the exponential forever until it plateaus, until it self limits in some way. And by the way, we don’t know what that self limiting factor may be. It may be that for some reason, these architectures, you know, the transformer architecture, let’s say, doesn’t scale past a certain point. We don’t know if that’s going to happen.

It could be that the model needs some amount of data that it can no longer access, right? There’s a limit to the amount of data. It may mean that we can’t keep up with the hardware infrastructure build that we need to keep recursively self improving. So in the past, in the history of new technology adoption, I mean, if you study them, they actually all follow S curves, right? They have a slow takeoff, then they have what feels like an exponential ramp up, and then they plateau for some reason, like we just discussed.

That’s potentially the second future for AI, right? We reach some plateau in terms of intelligence. And I think if that happens, then the technology might start to look somewhat more like a commodity. If it plateaus, then we’re at a point where all the other labs can catch up, and they can all have the same technology. And if they all have the same technology, then we’re going have a lot of competition. We’re going to have a lot of competition in terms of price, in terms of product experience, and in terms of the various components that make up the new intelligence stack.

Yeah. Probably done by one of the labs that already has all these advantages, these vast compute advantages. They already have models that are at the frontier. They have the infrastructure. They have the chip. So I think it’s probably done by one of them. That said, there are a bunch of amazing researchers working on incredible new architectures that maybe haven’t broken through yet, but maybe they can. Maybe they’re building something that is better than the transformer, right? There are a number of these labs out there. Thinking machines, safe superintelligence from Ilia and Daniel.

I think if I were to bet, I would say the labs that already have the advantages, but that doesn’t mean there isn’t a new architecture being worked on in a lab somewhere that could leapfrog all of it. Okay. Number

I think in that world, enterprises and individuals are probably optimizing for a couple of things. I think they’re probably optimizing for cost. Right? They’re starting to think about the trade offs between intelligence and spend and how they can optimize their token spend. So what does that mean? It probably means, you know, leveraging things like open weight and open source models. It probably means leaning into things like the routing layer to optimize the token usage towards the model that maybe gives you the most bang for your buck, rather than always just TokenMaxxing and picking the most powerful model.

I think the other thing it looks like is choosing tools and products, and you know, hate to use the new buzzword of the past six weeks, harnesses that are maybe a little more human aligned.

You know, on Axe, I really want to do grok, what is a harness? But I know

will be like, oh, Harry. I think of the harness as the application that tightly, tightly couples with the model. So in the case of Claude, it’s like the Claude desktop app, and I would say specifically Claude Code and Claude CoWork that are sort of having this loop, this flywheel of product and model sort of engagement. You know, some other harnesses that I think people are pretty excited about are things like Hermes. I consider Hermes a harness that takes over your Mac Mini. I don’t know if you’ve set it up yet.

Pie from Irondell is another great harness, European company. Having products, agents, harnesses that are human aligned and aligned with your own goals and incentives, I think is gonna be really, really important. I think people are going to be a little more self conscious about the incentives of the model they’re using. Obviously, the incentives of the models that come out of the big labs are to make the lab’s models smarter, better, faster. And you might think to yourself, hey, if I’m outsourcing all of my agency and all of my personal information and these goals and my credit cards and all these things to an agent, I want that thing to work for me.

I want that thing to be completely aligned with my incentives. You know, I published a thing a few weeks ago on X called Who is your agent working for? And that was the big idea we were trying to get across with that, and that I think in the future, as you become more and more comfortable handing over the keys to an agent, you’re going to want to know that it’s working for you. I think that’s a little bit like what that second future looks like.

There’s a chance you’re right. I

for that. No, no, you’re not. I think there’s a good chance you’re right. If we’re just thinking in terms of bets and probabilities, I think the history of the Internet and personal computing suggests that you are right, Harry. But two things. First is, I think we have never handed over so much of ourselves to a technology before than we’re about to do with agents. Yes, you’re right. We browsed the web, we used Chrome, we used But it didn’t do shit for us. It didn’t do shit for us.

Yeah. Right. We still got to control it, right? Yes, maybe we let these companies learn about our interests and the things we care about, but it wasn’t out buying stuff for us, right? It wasn’t out sending very personal messages to family members and loved ones. It wasn’t a second self, right? It wasn’t us. I think now we’re gonna be doing stuff like that, and it might just make us think a little bit more about the incentives of the model that are doing those things for us.

That’s number one. Number two, I’m not sure that every model and every agent needs to be superhuman aligned. I’m not sure every person needs to care about it. I just think enough people have to care about it such that one player or a few players keep the others in check. Right? I think we need market forces where a couple of good actors keep the rest of the other actors in check. So is it gonna happen? I don’t know. History says it won’t, but I think it’s possible.

What I see in Anthropic is I see an extremely mission driven driven company. And Anthropic, you know, love them or hate them, there’s no doubt they’ve been extremely successful. I think at the time of us recording this, they’re the most valuable privately held company in the world.

it’s a very different game. I think it’s a risk. There are two schools of thought playing out right now with regards token spend. I think one school of thought which we’re seeing, and I think when I really think about it probably applies more to the incumbents and the big companies, the sales forces of the world rather than the startups, is that if every employee is just spending like crazy on tokens, the fundamentals of these businesses are gonna be in trouble. They’re just too big. Right? There are too many employees at a Salesforce or, I don’t know, a Microsoft such that every employee can just have an unlimited token spend budget.

So I think we’re gonna see a lot of those companies start to constrain their spends. And we’ve seen mentions of things like these on X We’ve Meta, Uber, Microsoft, Wall Totally. Yeah. I think if you’re a startup, the calculation probably looks a little bit different. Your organization is smaller, right? So you’re not going to have a situation where you have 5,010, 50,000 employees just spending out of control. You can more tightly control the spend. But also, I think as a startup, you need every advantage you can get right now.

And so if I, you know, if I were the CEO of a startup right now, I would actually still be pounding the table to maximize token spend on the on the right things, right? Definitely with coding, maybe not with other things, just for simple tasks like summarization or, operations type work, I’d probably be leveraging Sonnet or something. But if I’m at a startup and I’m coding, I wanna be using the Frontier. I want every advantage I can get against Salesforce. So

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

I do think engineering organizations are going to evolve. You will increasingly have probably somewhat smaller teams of higher caliber and higher quality engineers, because I think a lot of the lower level tasks increasingly can be delegated away to agents.

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

I don’t know that you need to be at the frontier if you’re not coding.

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

I do think routing is interesting and important right now. Again, as enterprises are trying to optimize their token spend, they wanna make sure that the model they’re using is the right model for the job, not only in terms of its capability and what it can get done, but its cost. And so you’re gonna have companies that are singularly focused on this, companies like OpenRouter out of New York, which is doing some really interesting work. And then you’re also gonna have companies that are leveraging other parts of the stack for their products that build build their own routing layer as an opportunity to monetize.

Actually, we’ve talked to a number of companies building at various different levels of the stack that when you talk to them about their business model, they talk about building a routing layer and monetizing the routing layer. So I think it’s a really interesting area that has a lot of opportunity, and a lot of different companies are gonna go after it because they see the potential.

just a commodity pipe? It’s a good question. I think a lot of companies right now are thinking about charging a small margin on top of it. And I think to your point, that might not be a great business model. I put out a piece on X about this a few weeks ago, and a number of people chimed in with some of their interesting idea I heard was this notion of almost a bounty model at the routing layer, where the routing layer gets rewarded for choosing the right model, right?

So if you choose the most efficient model or the best model for a certain task, that’s when they collect a fee. And I thought that was kind of an interesting idea. Haven’t necessarily seen it built out yet, but I thought it was a pretty interesting idea.

that $50,000,000,000 company built in routing alone, I have to say. Maybe. But on the other hand, we’ve seen time and time again in the enterprise, in infrastructure specifically, that these infrastructure companies, they become deeply embedded in the developer workflows and in the developer ecosystems, and you just can’t rip them out because it just becomes the gold standard. So maybe somebody will build that routing layer that every developer adopts and never wants to remove. Would you say it’s unfair of me to say that USV missed the model game?

I think USV was playing a different game, and that’s actually been the history of Is the game not unbelievable returns in generational defining companies? So USV, again, I think has never been afraid to take a position, and I think USV did not invest in any of the big model layer companies. But what USV now has been doing for a number of years, and I’m a big believer that we haven’t seen the full circle of this narrative play out, is they’ve been betting on energy. They’ve been betting on energy since 2001.

And the idea has been for a long time now that no matter what model wins, if you believe in AI and if you believe in intelligence, there’s going to be an energy layer underneath that is going to be needed to power these things. And over the time since 2001, we’ve learned that we only need even more energy than we thought, and we need more portability of energy than we thought. And so energy is a big theme at USV. It was starting in 2001, and it still is to this day in 2000 or 2026.

Did I say 2001? I meant 2021.

the

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

What a wonderful world. We we have a bet in a company called Roon. Amazing company. Have heard of Roon? No. They’re building micro data centers that sit directly next to generators, wind farms and things like that, to solve the portability issue. How do you get the energy as close as possible, as quickly as possible to the compute, to the data centers? And so we’re on the lookout for things like this that are sort of innovating the model of energy and portability of energy.

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

building SMB

I think that there’s an opportunity for automation in the enterprise. Personally, I would much rather build products and companies that obliterate. That’s actually something we talk about at USB all the time. Don’t automate, obliterate. But hey, some people want to automate. What does that mean, don’t automate? Well, you just talked about automation, and you talked to I think you were talking about SaaS in a I think there have been amazing companies built that automate existing workflows, existing processes. But at USV, we like to bet on businesses that obliterate, that literally obliterate markets and existing business models.

We actually don’t do a lot of enterprise investing for this exact reason. Enterprise investing often requires selling to middleman, you know, selling to selling to customers, or building things that just make existing businesses faster. We want to invest in businesses that literally reinvent the way something is done. Take Doctronic as an example. You familiar with Doctronic?

USV led the seed in Doctronic a couple of years ago. At the time, it seemed like a crazy idea. AI putting a doctor in literally everyone’s pocket. Now, we could have invested in AI that make medical practices faster or more efficient or help you with, you know, insurance claims, or we can put doctors in everyone’s pocket and totally reinvent the model with AI. So I think that’s what we’re talking about when we talk about obliterate, don’t automate. Dotronic,

Maybe. We just talked about a bridge. I think you had Shiv on here recently. A bridge has been working on this problem for close to ten years now, and it’s given them a massive advantage. It turns out in highly regulated industries like healthcare, you can’t just walk in the door and say, Hey, we’re gonna do healthcare now. You have to actually build relationships, build partnerships, clear through regulatory hurdles. And that ends up being a form of a moat. USV invested in a bridge, I think, in twenty eighteen, eight years ago now.

It took that company five, six, seven years to hit this inflection point now where this product is being used by so many doctors in so many different health care systems because they were able to clear those hurdles. And so we can say that we live in a world where the labs and the hyperscalers can take over any product in any market. But the reality is that’s been the story of technology and innovation since the beginning of time. There are always going to be startups and founders and entrepreneurs that specialize and do the really hard things before anyone else has thought of them that end up prevailing.

I mean, just take Spotify, which we talked about at the beginning, right? Spotify went up against a behemoth. It’s a classic David and Goliath story, and they could have been killed 50 different ways along the way, but they specialized, and they did the hard thing early and often, and now they’re obviously the winner. So I hear you that the labs can kind of go into any application layer, but not only do I think that that’s not true, I also just think it’s not really fun. And what fun can we have as venture capitalists if we don’t believe that startups can take down the Goliath?

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

You know, going back to what we talked about earlier with Seed, I think if you put yourself out there in the world, you’re gonna see deals that match those themes and ideas. And not to say I didn’t do that at Lightspeed. We did that at Lightspeed as well. But to the point earlier about being very focused on energy, right, or now being very focused on this Rebel Alliance, we’re gonna see a lot of those companies come to us. And I think when you’re small, you kind of have to pick your spots.

You have to have constraints and focus on a small number of things. And so I think to the extent that we see things different, it’s because we focus really, really deeply, and for a period of time, we may only look at a couple of different areas that we have theses What are you

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

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

Maybe. But I think you want to get your foot in the door. And I think when you want to get your foot in the door, you want to sell one thing. And once you’re in, then you can you can expand horizontally to different categories. But I think if you come in, expand it really, really wide, now you have to convince the enterprise to give up all these different things. Right? You gotta give up your Gmail and your Google Docs and your Google Sheets and your calendar.

Right? And this and that. Whereas if you’re just doing meeting notes, it’s like, hey, we’re just gonna be your second brain for your company, right? We’re not gonna do anything else. We’re just gonna be your second brain. Oh, and by the way, we’re the best at it.

I do worry about that. Of course. Absolutely. We saw this play out with Slack. By the way, Slack is still around. It’s still a massively valuable product. But, yes. I do. 27,000,000,000. I love the way we say this. It’s like 27,000,000,000. I’ll I’ll take it. Yeah. Yeah. I do worry about it. What I have also learned about AI products and granola is that context is extremely valuable, right? If granola gets inside of your organization and everyone in the organization starts using it and producing and accumulating all of this amazingly rich and valuable context, that’s not something you as an enterprise want to give up.

You’ve built out this incredibly rich history of information that actually helps you work better. I think this era of building AI products is in many ways about being first and about moving really, really fast.

what worries me is just

I think it all goes back to what are you optimizing for? What’s your mission? What are your constraints? We talked about VC early on before we stepped into the studio here. USB has always had small funds. It’s the game we like to play. You can be very successful in terms of what you’re trying to accomplish as a venture firm with a small fund. Now, maybe that same model can’t work if you have a $10,000,000,000 fund, but we’re playing a different game. And I think you’re playing a different game too.

I

Series As are expensive now. They’re 100,000,000 posts. They’re 80,000,000 posts. They’re occasionally 150,000,000 posts. And so, if you wanna write a check into around that size and get decent ownership for your fund, you have to have a slightly bigger fund than you had three years ago. Are you being more elastic around how you think about ownership? I think it depends on stage. The way we think about it at USV is that the the seed and Series A stage ownership is important, And the reason is the outcomes are bigger right now.

You talked about it. And the companies that end up doing really, really well raise a lot of capital very, very quickly, and the valuations get very high. And in those later rounds, it’s actually very, very hard to buy ownership, especially if you’re a small fund. And so you have to get that ownership early on. And Seed and Series A are kind of the rounds where you can do that. Now once a company sort of crosses that chasm, maybe into the Series B or to the Series C, you can identify them as being market leaders and potential generational companies, then I think it matters less.

Then it’s just about getting capital into those companies and underwriting it as a cash on cash type outcome. Forgetting about percentages, just imagining, okay, if we put 25,000,000 into this, what can the multiple be on that? Is it a 10x? Is it 100x? Is it 1000x? If it is, you know, if it’s something really big like that, then you don’t really need to think about ownership. We

Oh, nice.

Later for us.

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

Should you do it if you don’t think there’s, like, a mega outcome? I know that sounds strange. I’m not sure. For for us, for USV at the later stages, if we don’t think that there’s a gigantic outcome, it probably doesn’t make sense for us to bet.

Look, I think in general, you always want to believe that the things you’re betting on are playing in large markets with very, very large surface areas, and we’re gonna look at every company that way. But I do think that because our funds are smaller, similar to yours, there’s probably more downside protection for us in that model than, say, at a larger fund where you have to multiply billions of dollars. For us, the fund that we’re investing out of now, the core fund, it’s a $275,000,000 core fund.

And so you can multiply that a lot easier than multiplying, say, several billion dollars, especially if you get the same type of ownership that a that a larger fund is getting.

We think that we are coming out of a period where there has been a massive infrastructure build out and very, very capital intense companies. Firms, large firms that were able to invest in those very capital intensive companies have done phenomenally well. But again, I think we’re also now playing in a world where there will be a proliferation of startups and apps at the application layer that are less capital intensive. And for those, again, I think you’re gonna need to know what you’re looking for, and I think you can you can get in those companies at more modest check sizes.

Now I don’t think you can have a fund that’s in the middle to do that. Think you need to either be on the the large end and play the consensus game or be really small and really opinionated and multiply a much smaller fund.

I talked to my partner, Fred Wilson. Gotta shout out Fred, one of the one of the GOATs. And I asked him a question. I said, what is what is the biggest lesson you’ve learned in VC? Actually, I asked him what are a couple of the biggest lessons. And one of them was never pass on price. So Fred says never pass on price. I think in reality, there’s probably some nuance. Just to bring it back to the USV strategy, I think for us, again, if we’re investing a little bit later stage, we need to really believe that it’s a market winner.

The multiple can be very, very, very high. And in that case, we can be a little bit more elastic on price. But I think at the earliest stages, especially when we’re investing out of our small funds, I do think there will always be a limit for us on price, just because otherwise we can’t make the fund math work. You know why my job is

I told a story on that podcast where when Anchor first launched, I had never met Fred, and the Anchor app accidentally auto tweeted for Fred. And he has a big follower count on Twitter at the time. Now it’s x, obviously. And he was not happy about that. He started lighting me up on Twitter. This is one of the day like, the day after we launched Anchor. Obviously, that was uncomfortable for me as a first time founder. But to your point, I cold emailed him right after the fact.

And I apologized, and I offered to troubleshoot it with him. And he responded immediately, and he was super gracious and forgiving and understanding. And so I had a similar experience.

Yes. True.

like, I’d still pay it. Yeah, yeah, absolutely. I can think of some of the best deals I’ve done. And even though I’m happy with where the price landed, in hindsight, I’d probably pay double the price if I could go back and do it again. If I were to ask you, what are your biggest lessons now, having been in venture, in the same way that you asked Fred,

would you say they are? You can’t project your own ideas on the founder. Sure, you can offer ideas, of course, if the founder wants. But especially as a former operator, you often think, oh, I know how this business should be built, or I know how this product should work. And I think that can really, really get you into trouble. One of my former partners, Jeremy Liu at Lightspeed, I made this mistake a few times, and he called me up one day, and he said, Hey, I think you’re projecting as a former founder.

And he’s like, In my experience, that’s very, very dangerous and very risky. I think it was a great lesson. The reality is even if you have great ideas and you think you know the answer, even if you’re right, by the way, reality is it’s the founder’s company, and they may completely different way. And not only that, if you project your ideas on a team that you’re evaluating, you might get it completely wrong. Right? You might look at a business and say, I know what this company needs to do.

It needs to do A, B, C, D, and then it’s going to win. But if you make your bet based on that evaluation and that judgment, and that team doesn’t do those four things, you made a bad bet. So don’t project. Don’t project. You have to really believe in the team and the team’s judgment and the team’s ability to execute on their own plan. That was a big lesson for me as a former CEO. Founder, market, product. Rate them one through three. When I first started this job, I would have said product, market, founder.

I’ve completely flipped that. Now founder, market, product. I think that the founder is the most important thing. At the end of the day, most startups, especially early stage startups, they’re gonna pivot in some form or another. What’s most important is, are they resilient? Can they execute? Can they adapt to change? When you get founder reads wrong, what do

I often see communication as a big hurdle for founders. I think one of the hardest things you can do as a leader is communicate effectively, because I think communication touches every part of company building. It’s part of recruiting, which, as we know, is one of the most important things you could do. You have to be able to communicate your mission, your values, why you exist, what you’re trying to accomplish. You have to communicate to investors, right? If you’re not a great communicator, you’re not going to be able to raise capital.

You’re not going to be able to put venture dollars into the business. You need to be able to communicate your product vision to your team, right? How can you align the team around building the perfect product if you can’t communicate it? You have to be able to tell your story to the market. When I think about some of the mistakes I’ve made in evaluation, it’s maybe been on communication. That’s probably been one of the biggest.

different

way. Granola for me was a pure founder bet. Pure founder bet. I knew Chris. I’ve known Chris now for fifteen plus years. He’s also not an amazing seller. Just gonna give it if I hadn’t been blunt. But I knew Chris up close. So when I was building Anchor, the Socratic office, Socratic was his previous startup, was right behind ours. And we did a few meetups together. Our we got our teams together for a few happy hours. And I and I you know, I would talk to him as another founder, and we would share our struggles and, you know, get advice from each other.

I was like, this guy, I know he can do it. I’ve seen him. I’ve seen him do it. Pure founder bet. Suno was something very different. Suno was a pure thesis driven bet. For me, the thesis came from actually the days of Anchor and seeing what it meant for a product to democratize a creative medium. And music had never really been fully democratized before AI. So I went out and I met with every team building AI for music. I went out and I hunted down every team.

And then and then, of course, I met Mikey and the team, and I was like, wow, is an incredible team. And and then the founder then the founder lens came on, and I was like, this is an incredible team. How obvious is it when you meet a founder that you wanna invest? With Mikey and the Suno founders, it was immediate. I I met Mikey normally immediate? Not always. Not always. With Suno, was. Mikey and I sat down at a restaurant near my home in Hoboken, New Jersey.

His family’s in Jersey, so we met up in Hoboken. We just immediately hit it off. Just instant connection. And, you know, I immediately recognized how not only how smart he and the team were about the models they were building, about their vision for the world, but also how passionate they were about the problem. Mikey is a former musician. I felt like he could deeply, deeply connect to this idea of how do you make music creation, expressing yourself, creativity, how do you make it easier? When you were doing Suno at $5,000,000,000 what are you underwriting that to?

So we believe that Suno has unlimited upside potential. If you look back at the history of media on the internet and you think about the generational platforms that truly democratized a medium, right? YouTube, TikTok, Twitter, Facebook to some extent with writing and publishing. I mean, these are insanely valuable platforms, and you don’t really think about the upside of

So I probably would have said yes when I invested. First of all, I do think it is a platform, but I think you’re asking about something different. Consumption platform. Yeah, you’re talking about, do you need a creator side and a consumer side? Similar to what we saw play out on Spotify as an example. I think when I originally invested, we thought that it did. Now, I’m not so sure that we understood what Suno could be back then. What is happening now in Suno is what Mikey and the team have been saying for a while and what I now believe, it’s that it’s literally a new behavior.

The team calls it creative entertainment. People are coming into Suno. They’re making music for the pure joy and entertainment value of making music. You know, previously, like, let’s say on Anchor, you would make a podcast for the purpose of getting distribution and eventually monetizing it, right? Now AI has made music creation so much fun that you’re making music to make music. And I think it’s actually not too dissimilar to what we see with Claude Code or Midjourney, right, or some platforms that are making it easy to make games with AI.

You have no greater aspiration for this content, right? You’re not trying to become a hit game developer. You’re just having a lot of fun making games on your computer. And we see that a lot in Suno. What miss?

So one company that I would’ve loved to invest in a long time ago, which we didn’t at Lightspeed, we met them a few times, and I think we can never really wrap our head around kinda price, also at the time where they fit in the market. Now, I think with the benefit of hindsight, I really regret not ever having having had the opportunity to invest in Substack. I really believe in Substack.

I realize it’s not your traditional sort of AI company, but I think over the past eight years, and I think the trend is continuing, I think we’re moving more and more and more towards a world of self publishing and people controlling their own destiny in terms of media and what they create and what they publish and how they monetize it. And I think no company, maybe other than X, has done a better job of that than Substack. And so that’s a company where, you know, I love the founders.

I love the purpose behind the company. I love the product and the platform. Unfortunately, never got a chance to invest. Is traditional media dead? I think traditional media, in many respects, is dead.

I probably underestimated just how big independent media could become. When we built Anchor, you know, we had this vision of democratizing audio and giving everyone a voice. And I would say by the time I left Spotify in 2022, I’ll admit I kinda thought the opportunity was baked. I was like, okay, it’s done. It’s done. You know, we’ve got YouTube, we’ve got Spotify, we’ve got, you know, whatever, we’ve got X. It’s gotten so much bigger since then. And that was only four years ago. So much bigger.

I mean, traditional TV show or, you know, media personality, everything has made the leap over to self publishing or independent media. I mean, I think you’re a model example. You’ve been doing this forever. But also just like huge names that were on some of these large media organizations that just made the leap, and now they just have a YouTube show or they just have a show on Spotify. And so, like, I don’t even think we’ve reached the peak yet. I think I think television is still in the process of being massively unbundled.

When TechCrunch

editorial freedom is everything. Which is why I love Substack and why I like X and why I like YouTube and Spotify. I think these platforms are amazing. Are you ready for a quick fire round? Sure. Single best first Founder meeting you’ve ever had and why? Brynn Putnam, CEO of Board. Have you seen Board? Tabletop gaming console. Just announced Series A a few weeks ago from from USB. When I met Board, when I met Brynn, I was blown away. Force of nature founder, such clear vision, such deep domain expertise.

So prior to Board, which is a beautiful tabletop display, Brynn was the founder and CEO of Mirror, the Mirror workout device, which she sold to Lululemon. She took that domain expertise and said, I know how to build a tabletop gaming console now with the same hardware and the same supply chains and just crushed it. When I met her, I walked out of that meeting, and I thought to myself, I have to

invest

one seed

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

John, and I

You mentioned chief weather officer earlier. I’m like, oh. Poncho’s the original chief weather officer.

Matt’s brilliant. So Matt has innovated on a completely new model of Venture where he arms angel investors. These are not scouts. These are angel investors. He arms them with additional funds on top of their own capital, which then factorial, obviously, then, you know, monetizes through carry and whatnot. But the brilliant thing about that model is now he’s got all these great angel investors part of the factorial network. You know, these are people like Clem from Hugging Face, like real angel investors. So I think that’s brilliant.

Second answer, would say, tied for, you know, my favorite seed fund has gotta be Haystack. I’m just a huge fan of Samil and Divya and the work they do. It’s an incredible fund. Obviously, they’ve produced some generational outcomes. Who, when they send you a deal, is the high signal of quality? I was really fortunate at Lightspeed to collaborate closely with Nat Friedman and Daniel Gross before they went over to Meta. And, yeah, when Nat would send me a deal, which he did on multiple occasions, and by the way, that’s actually how I met Mikey from Suno, I always knew to pay attention.

If Nat’s sending me a deal, I gotta pay attention to that. That’s the greatest shame in Venture about them not

What is your favorite growth fund if you were to invest in one? I think the Lightspeed Growth Fund is phenomenal. Again, they’ve done Anthropic, they’ve done xAI, they’ve done SpaceX, they’ve done amazing, amazing investments over the past I mean, over the history of the firm, but really over the past four years of AI, they’ve been phenomenal.

from working with the legend that is Fred Wilson, now you have done? One of the biggest lessons I’ve learned from Fred is that there is really nothing more important than your relationship with the founders. A, because that’s probably the the the best thing you can do to help a founder is just to be there for them. Right? Like, that’s what founders need. Founders are lonely. I I, you know, I could tell you as a former CEO, it’s a lonely, punishing job. And so just having somebody you can actually trust and actually feel you’re aligned with is very, very important.

But secondly, selfishly, I think reputation is everything in this business. You need a great reputation. And the only way you’re gonna have a good reputation is if you have great relationships with founders.

I feel I was extremely fortunate growing up in that I had parents that were extremely supportive of me and my interests, but who also did not pressure me in any one direction. I’ll give you an example. I grew up in a home where baseball, an American sport, and I don’t think it’s very popular here, was a very big deal. Baseball’s a very big deal. And I played some baseball growing up, but I didn’t continue with it.

And I think there are a lot of homes like that in The United States where if you’re not playing the sport or going to the university or pursuing the career in the thing that the family really cares about, you’re a failure or you get pressured into sticking with it. And, you know, my parents, my dad, who, you know, a former coach and baseball player, great, what do you want to do next? And I think that that is so important, and it’s definitely something that I really try to remember and try to instill in the values of my family with my kids.

You know, I really want my kids to do what interests them, but I never want to pressure them to do it. I wanna support them. You know? I wanna be there for them. I wanna drive them to practice. I wanna do everything I can to empower them, but I never wanna pressure them too much.

Yeah. She might pressure test you. Right? Hey. You sure? Like, talk me through it. Talk me through it. But once you I’m sure once you or no. Not even. Okay. I said, listen.

I do think that there was a moment not that long ago where I and I know I said the opposite a few minutes ago but where I thought the model providers could do everything. I did. You know, I thought that we were headed towards this world where there would be one company or five companies that would just do everything. And I think, fortunately, what I’ve been reminded of over the past year or so or two years is that companies can’t do everything. They can’t do everything.

Even the biggest companies can’t do everything. And I’m and I remember, oh, man, ten years ago, fifteen years ago, we thought the same thing about Google. We thought the same thing about Apple. We thought these companies are gonna just take everything, and the reality is they can’t, and they don’t. And so I’ve been reminded of that recently, and been a surprise, and I’m glad for it. You worked with Fred,

It works sometimes, right?

What are you like? It’s gonna be amazing. So my partners the other day, Rebecca and Nick, we asked each other, actually, like, What do you want? What do you want to do at USV? And I said three things. First thing is I wanna show up to work each day and collaborate with people who I love being around, people who I enjoy collaborating with, people who I just have fun with. That’s actually number one for me. Number two is I want to partner with some incredible founders.

And again, like similarly, I want it to be about that relationship and that dynamic, you know, and I want these founders, obviously, who are gonna change the world. And number three is I wanna produce generational returns in terms of funds, in that order. Number one for me is show up to work, have fun with the people I work with. Number two is partner with founders who I love and who I believe can produce generational companies. And then number three is produce generational returns as a fund, in that order.

And I think that’s a good recipe. I think if you optimize for fun and, like, enjoying your day to day, good things will happen.