# Why the SaaS Apocalypse is BS Why China Will Win the AI War · Why 50% of VCs Should Not Exist and are Tourists · Why Stock-Based Comp is the Hidden Sin of the Valley with Mitchell Green, Lead Edge Capital 20VC · Mar 7, 2026 · 60 min · 13,091 words Speakers: Mitchell Green, Harry Stebbings Source: https://www.996.fm/episodes/20vc--ep-cfb33d38/ ## Cold open **Mitchell Green** [0:00]: What I'm most excited about is there's gonna be a really bad downturn. If you don't have earnings or EBITDA, there is no floor in a lot of these things. AI is not gonna be about the next call center company or the next, like, workday. ByteDance is the most advanced AI company in the world. Don't count China out. I bet they win the AI world. Don't underestimate, like, Chinese creativeness and, like, ingenuity to, like, figure out how to, like, reverse engineer and engineer things in much cheaper ways than Americans can do. Buying is glamorous. Selling is the job. There's 50% too many VCs. 60% people in this industry that actually probably add negative value to companies. **Harry Stebbings** [0:34]: This is 20 VC ## Intro **Harry Stebbings** [0:35]: with me, Harry Stebbings. And for the show today, we have Mitchell Green at Lead Edge joining us. I freaking love Mitchell, and I'll tell you why. In a world of fluff and framework thinking investors, Mitchell Green is a moneymaker. Mitchell has co led or led investments in insane companies like Alibaba, Benchling, ByteDance, Grafana, among many others. Across different cycles, he's shown ability to make money, real DPI unlike anyone else. This was an investor nerd's dream show to do. 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If you're in London together, we should do it, and we should do it actually over, a dinner and mic everyone up. 100%. That'd be amazing. Listen. Wanna I start with something that's actually quite disarming for a lot of investors today, which is bluntly the SaaSpocalypse, the SaaSacre. And we're looking at the markets, and they're just in the shitter. And I think there's a lot of people who are questioning whether they are actually good investors or whether we were just in a bullion cycle. Is this justified in terms of the downturn, or is this an overreaction to AI and Anthropic product releases? We are buyers. **Mitchell Green** [4:07]: We're buying software stocks right now. You know, a portion of our funds can be invested in public equities. So we're buying companies like Procore, Workday, Appian. We love Clearwater Analytics, but it's in the process of being taken private. The stock doesn't move. We're big investors in Toast, which we've been buying back. We were early investors in it and sold and are rebuying. These companies aren't going anywhere. Like, the incumbents have distribution, data, and balance sheets. It's a it's a fool's errand to think all these companies are going away. Not being said, in any period when there is big periods of disruption, there will be new companies that are created. There will be incumbents that thrive and adapt. There'll **Harry Stebbings** [4:45]: be some incumbents that blow up. Help me understand. I love your perspective, but I don't understand it. Workday's at 6.8% growth now. We're seeing the cannibalization of the seat model. We're seeing bluntly no impressive use of any agent products within the existing incumbent set. Well, Workday's **Mitchell Green** [5:04]: AI business is growing super fast inside it. Keep in mind, they are $10,000,000,000 of revenue and like $3,000,000,000 of free cash flow. So there is law of large numbers for a lot these companies. You know, look, it is not normal for companies to grow like Anthropic or OpenAI have. And oh, by the way, Workday does it with serious profits. Or a company like ByteDance grows at, you know, 30% a year with massive profits. Like, let's see what these companies would how they would grow if they had profits. Look, I mean, for seat based pricing for Workday, I mean, Workday is is more tied to, employment growth in The United States. But, you know, the company is like a low teens, high single digits grower. But again, it is a huge business. It is like a $10,000,000,000 revenue company. I actually think what people got wrong and why a lot of these software stocks have actually sold off, looking back in hindsight, is if you looked at the end of last year, street numbers were too high for this year, just in general. Like, they didn't show enough decel. And what I mean by that is you'd have a company that was forecasted to grow like grew 20% last year, where the Street thought they would grow like 19.5% this year. It's a small, large number. As companies get really big, they decel. And street numbers in general all across software were were too high. And so what will happen is, you know, Wall Street analysts, sell side analysts are like pigeons, like, you know, squirrels. And as the stock goes down, they're like, oh, now now we gotta lower my numbers and take the numbers down. And a lot of big public hedge funds or public market investors, you don't wanna own stocks when numbers need to come down. You wanna, like, own them when numbers are about to go up, so estimates are about to go up. So what you're gonna see is they're gonna take numbers down at a bunch of companies, give it a quarter or two. Companies will start to then beat numbers, they'll then they'll raise the numbers, the stocks will start to work. But it's probably dead money for a little while. **Harry Stebbings** [6:47]: I was always a big fan of Howard Marks and his investor letters, and one of his big things is, you know, never try and catch a falling knife. Yeah. And so I see what you see in terms of the opportunity, but I'm like, I have no idea where this is gonna go. And honestly, a month ago, I was looking at Duolingo going, wow. What a buying opportunity. And the lesson I have on Duo is, wow. There really is no floor. If you don't have earnings or **Mitchell Green** [7:09]: EBITDA, there is no floor in a lot of these things. What we tell people is if you want to own them, just buy them over a month long period or buy them on down days. But just like if you're an individual and you think you want to own a million bucks, up $200,000 of some name, buy $50,000 every time it, you know, it it dips and sells off hard. And maybe you'll never get fully filled, but you just you won't catch a bottom. But the funny thing is, if you actually do the, like, long term analysis on buying just indexes, the Nasdaq or the, you know, S and P, it actually turns out just like if you look at like very long term, like longitudinal data, that if you just actually just buy it on a big down day, it's nearly impossible to time it. **Harry Stebbings** [7:45]: We mentioned Workday. We also have seen recently in Workday, annual Bush, the founder coming back, not specifically about Workday, but I'm unwaveringly negative on companies where the founder is not the CEO and we're in this AI transformation. Do you share that non founder led companies are inherently disadvantaged? **Mitchell Green** [8:03]: I would agree with that partially, though I do think there are very good CEOs. You need like a growth mindset. And I believe that there are companies that are run for growth, and there are companies that are run for margins. Anytime you have big technological transformations, you want the management team that is run by the company that is focused on growth, that are like they're growing. And by the way, those are oftentimes entrepreneurs. Another way to think about it is oftentimes when companies are run for margin, earnings or EBITDA margin, they're oftentimes heavily levered. Where I think the biggest opportunity to disrupt incumbents today is software, tech enabled services, any company, it actually can be a manufacturing company, it doesn't matter, any company with a bunch of leverage on it because those companies don't have the cash flow to innovate. And by the way, you can look at '99 in 2000 and look what happened. And so if we had sat here in '99, we would have debated, are all the traditional retailers going to go bust? And are all these e commerce companies going to be gigantic? If you look today at the 10 largest e commerce companies in The United States, six or seven out of 10 of them are traditional retailers. They're people that were long way before '99, Walmart, Target, Home Depot, Lowe's. However, there were a bunch that went bust too. Sears, Kmart, Montgomery Ward, Bed Bath and Beyond. And you you have to ask yourself why. Most of those companies had huge amounts of leverage, so they couldn't innovate. Whereas like Walmart, we didn't have leverage. And they're like, we're we're going all in. We're gonna like bet the company on this stuff. And you're gonna see the same thing, I think, today. **Harry Stebbings** [9:35]: There's many things I wanna do somehow. You said you run a company for growth, you run a company for margins. Yeah. If we take, like, a matter in a Zuck, he's running it for growth, which is why free cash flow is in the drains. And now I think it's valued at, 1000x free cash flow. Well, the CapEx burn for all these things is totally pummeled for it. Yep. Is it right to pummel him forward or is he in the right mindset for growth? This is the million dollar **Mitchell Green** [9:59]: question. Is Apple right or is Google, Microsoft, and Meta right? Apple is spending very little, and those other three or four companies are spending insane amounts of money. Time will tell. I would argue though, Mark Zuckerberg deserves to go for it. Like, he's it's his business. He built the damn business. Like, I don't think you really have much to say to be like, oh, don't bet on the guy. And by the he kind of has to because his competitors are doing the same thing as well. Look, I mean, our view is that ByteDance is the most advanced AI company in the world. You know, it's very underappreciated by the western world, like, you know, how much AI they use and how much they're investing in it. Our view, AI is going to change the world. It's an incredible thing. Now again, though, we sat here in '99, the word social media doesn't show up. Who would never have talked about Facebook or anything. Right? It's $3,000,000,000,000 value now. AI is not gonna be about the next call center company or the next, like, workday. I I truly believe what we're seeing right now, and, like, people invest in a lot of these AI companies across the board. Look, some of them are going to be gigantic, a whole bunch of them are going to bust. I actually think it's the stuff that's going start over the next like two to five years. Those are going be like the giant businesses, and I don't even know what it is. Mean **Harry Stebbings** [11:07]: We're going to get bounched by ByteDance, but then do you agree with the play the game on the field analogy, or do you actually think there is such moving sands that actually an optimal strategy is to be conservative, not invest a ton right now given the transience of markets, and sit and wait for some form of new equilibrium to emerge? That's a great question. I **Mitchell Green** [11:29]: think it depends on what business you're in. If you are an early stage venture fund where returns are made 100 x's or zeros, you should be investing in stuff. We like to always ask, if I make an investment and it grows for like eighteen months and it hits my numbers, am I like now in the money? The problem is we invest at a 100 times revenues or something. You can go at some crazy rate for eighteen months, and you're like, well, I'm still nowhere near in the money. So we always like to ask ourselves for that. But if you're trying like we're in the business of trying to make two to five times our money in three to seven years for like a 25 IRR, we don't drive zeros. We also don't have 20 Xs. I think we've had like two ten Xs ever or something like that. But we've only had like, you know, one or two zeros ever. This environment for us is just kind of weird. It's just, it's different. Like Are you finding it hard? It is definitely harder to invest today than it was in 2017, for sure. Although there's like different pockets of opportunity. Like the secondary market for us right now is like exploding. Like our special sits business, we just did a deal in a company that, you know, in a special sit and put $200,000,000 to work. And the company is now raising around at like two x the price we invested at, and literally it happened a month ago. **Harry Stebbings** [12:38]: When you look at a lot of the growth equity investments that you and a lot of people have made in the last years, are they not made a lot more vulnerable in the new environment that we sit in? The well priced company up north in The UK that's doing accounting Look, one of our **Mitchell Green** [12:54]: companies is Grafana Labs. It's a giant business growing crazy fast. It's benefiting from a lot of this AI spend. Their customers are a bunch of or some of these big AI companies. And I would say **Harry Stebbings** [13:06]: that's a straight down the fairway, so they can Male deal. It's with Sequoia, and it's Yeah, but like **Mitchell Green** [13:10]: when we invested, nobody knew what the company was. Like, was a bootstrapped $12,000,000,000 software company. Like us and Lightspeed were the first two investors, and it was bootstrapped. The guy actually built like a $12,000,000,000 company. How did you find We cold calling him. Cold calling the CEO. So cold calling. Cold calling. So we have a team of 18, 22 to 24 year olds, like pounding the phones, calling companies all day long. Learn from insight. Learn from insight, yeah. So by the way, and they just replicate with Summit and TA did. Yeah. So by way You just had Jerry Murdock on the show. Yeah. He's fantastic. So if the company calls you back, it's like, hang up the phone. It's a CA you call every two days for a month. That's who you wanna get on the phone. And look at people are building amazing companies. We have a business down in Florida called Pacemate. It makes cardiac monitoring software. So if you put like a pacemaker in your body or a defibrillator, it takes the data off the device. That data then is sent to the manufacturers like website. There's lots of different manufacturers, lots of different models. This is like single pane of glass software for cardiac clinics. By the way, it is like a 99% gross dollar retention business. These guys, when we first invested, it was like $20,000,000 of revenue. It raised 8 to get there, but only burned three. It was growing like 50% a year, probably did like 45,000,000 revenue last year, few years after we invested. By the way, we're using AI to benefit. Like, we have a huge amount of people in the call center, or like in the customer service, like analyzing the data, make sure all this stuff is like is working. The company can now continue to grow and not act. I mean, they don't have to fight they're not gonna fight all these people, but they can keep the same number of people and make people much more productive. And I think that's what people are missing that, like I think there's two things. One, this is gonna lead to a giant productivity boom. Two, software companies have never been about like r and d. This is not semiconductor investing. Like, it's very different. So if you were to look at your average software company that goes public, you know, if you look at cumulative spend since inception, it's usually around like 30 is R and D. So a huge amount of these businesses are about like sales and marketing, distribution, customer support, things like that. But AI will **Harry Stebbings** [15:09]: help a lot of those things. Are you worried that we might see I'm sure you read the Sattrini research piece or saw it come out and, you know, wipe billions off the stock market, essentially saying that That's a more incredible thing. What? **Mitchell Green** [15:22]: That some random person can write a research report. Imagine if we had Twitter in 2008. It's amazing that people are listening to some random research firm versus listening to people like Stan Druckenmiller, Howard Marks, Ken Griffin, Steve Cohen, Marc Benioff, people like Mark Zuckerberg, know, Jensen Huang, who's like software is not dead at all. Yet a random research report can, you know, get 25,000,000 views **Harry Stebbings** [15:44]: and takes itself in the stock market. It's crazy. Is this not the ultimate sign there that we're seeing the casino of public markets? Just. Yeah. Which actually makes it by **Mitchell Green** [15:53]: the way, that's the opportunity for long term investors. You buy, you know, as Warren Buff said, you buy when people are scared, you'll be able to make lots of money. **Harry Stebbings** [15:59]: Or the flip side, you don't wanna take part in entirely irrational markets, which are no longer tied to value. **Mitchell Green** [16:06]: Look, I was working at a hedge fund seated by Julian Robertson in 2008 and 2009. This is nothing like this. This is like amateur hour. This is like nothing. This isn't even volatile compared to like what was going on back then. Market was whipping, the indexes were whipping up and down like 8% in intraday moves. Like you'd have 15% swings, but that presents the opportunity. By the way, had you in early in like 'nine or late 'eight, you know, and bought great companies, you could make a ton of money. And so you're like, this is the opportunity to buy stuff on sale. **Harry Stebbings** [16:35]: Okay. I'm gonna push back on you there and say there was no fundamental technology inflection point in 2008, which could render an incumbent set relatively redundant, which there is today. The mainframe business is **Mitchell Green** [16:47]: still a $5,500,000,000 market. Mainframes. They came out in 1950. Most banks are run off of mainframes. Oracle is a legacy software company. Microsoft is a legacy software company. SAP is a legacy software company. They are some of the biggest software companies in the world. These companies are not going away. I will bet any amount of money on it. Now there will be some that will focus focus on the companies that have ninety, ninety five, 98% gross dollar retention. Now there will be new giant companies created, 100%. But most of these incumbents will not disappear. Some of them will innovate and become exponentially bigger. Some of them will grow 10% a year. I mean, there are a ton of software companies that have been around twenty, thirty years that are still growing. And I actually think the biggest disruption you're going to see isn't like manufacturing, isn't like health care. You think about like the companies that can figure out how to get drugs to market much faster than anybody else. I think AI could potentially like huge parts of cancer could be solved. Dementia could be solved because you can run drug trials faster. Think about manufacturing. If AI and robotics can come about, if you have two competing companies that make cars, one's levered, one's not levered. The one that's not levered is probably gonna be able to invest a lot of resources into it's gonna be hugely beneficial for them. **Harry Stebbings** [17:57]: Going back to what we were just talking about, know, we're saying about the casinoization and crazy it is. You mentioned productivity increases. Yeah. Are you worried that we will see productivity increases, but with that, less and less consumers having jobs and a weakening of consumer wallets? **Mitchell Green** [18:14]: Not really. There were a couple million switchboard operators in 1980. There's been lots of jobs that have been lost over the years. Think about all the number of you know, there's been retailers over the years that have gone bust. People innovate. And it's funny. I was just talking to somebody at one of the world's largest banks, a very senior person at one of the world's largest banks this week in London. And his point was, look, we have hundreds of thousands of people in like back and middle office. Those people that we've trained them for five to twenty five, thirty years. Right? These people are not all gonna we're not getting rid of them all. We're gonna retrain them. By the the people that don't wanna be retrained will be okay. Fine. Go work for the government then because, you know, you can do, like, old school jobs there. But, like, companies will retrain people. They'll do different things. It's remarkable throughout history. There's been, like, lots of technological disruption over the last hundred years. People find new things. If everybody's worried about everybody's gonna lose their job, you got then don't invest in any of these companies because it's gonna be a would be a complete disaster. It's like I would I guess I'd tell people, like, if you're worried about China invading Taiwan, you really shouldn't worry about your ByteDance position because you're gonna have a lot bigger things to worry about. At some point, by the way, the government would get very involved. If all of a sudden all these jobs start to disappear and you have ten, twenty, 30% unemployment, it's not. It's not happening. First of all, people always think this change comes faster than it does. Most big companies that are, like, financially regulated, you can't even go on to Claude or ChatGPT. Like, you can't even, like, get on the system to do work. And by the way, we're still five years in. It's literally like people woke up a month and a half ago, and we're like, oh my gosh. All these companies are going go away, and like unemployment's going to 30%. It's nonsense. It's silly. We're going to sit here in ten years, and we're going to have like, it's going be an amazing time to invest. You're going have a bunch of amazing new companies come and create Oh, you're gonna have a bunch of them. You'll have some legacy and companies that went to zero. Not all of them or anywhere near all of them. You're still gonna go to retailers. You're still gonna get your haircut. But I just think it's gonna be like an amazing time to invest. And by the way, during periods of volatility and the, you know, the casinoization of the stock market, you want to buy fundamentally good businesses on multiples of earnings. **Harry Stebbings** [20:16]: Do you worry that the world is just being memed, that the world is being calcified? The world is just a fucking calcium poly markets replica. It's insane. Is that a momentary thing, or is this a new world of social media, dopamine junkies, real time? It's a **Mitchell Green** [20:32]: great question. Look, I mean, I've joked for years that social media is like the demise of society. This stuff needs to be regulated. It will be regulated. It is incredible how fast information moves. Know, right? Just imagine if like Twitter had been, you know, big in like 2008 and 2009. It's absolutely incredible. And I will say that the makeup of the stock market is different today than it was twenty years ago. Passive ETFs are much bigger. The retail stuff comes and goes like retail trading, but you just have to buy good businesses when they're on sale. Like, buy good businesses at multiples of fundamental if you don't have earnings, there is no floor. But if you have earnings, like in free cash flow, reason a lot of these stock or stocks and Internet stocks are actually still not cheap is because the stock based comp. Like, the stock based comp in a lot of these companies is totally nuts. Like, the amount of equity compensation and dilution of shareholders is is very high. And I'm actually surprised more people don't talk about it. **Harry Stebbings** [21:28]: Why are we not talking about it? What do we not know that we should know? Are we in a new norm for the Snapchats and OpenAI's of the world to have unreasonably high SBC and no one question it? **Mitchell Green** [21:40]: Some of the big public market investors have been questioning it for a while. It's surprising that more people don't talk about it and just look how much like stock option dilution there is at a bunch of these big Silicon Valley companies. It's not as bad outside Silicon Valley, but like the dilution is real. I'm surprised more people don't talk about it. What should happen? **Harry Stebbings** [21:57]: Like if you're a snap holder, and Avon is running a gifting program right now. Yeah. Like, I don't know. **Mitchell Green** [22:02]: We're not activist shareholders at all. I have a lot of respect for entrepreneurs like Larry Ellison, who effectively did a levered recap of Oracle. He basically was like, I have all this free cash flow. I'm gonna borrow debt and buy back an enormous amount of stock. And what did he do in the process? He didn't sell it to was own, so he just kept making it. He'd make sure it can't go down, not up. People forget that in companies, there's it's market cap equals number of shares times price of shares. And so companies that respect that have discipline on that, I think, are **Harry Stebbings** [22:36]: powerful. We've seen so many names that are so well known be in the dumps. And a lot of people are questioning, oh, well, are the CEOs and the management team buying when they're in the dumps? The ServiceNow CEO who bought $3,000,000 worth. I think Salesforce **Mitchell Green** [22:51]: just came out and said they're going to buy $50,000,000,000 of stock, or some crazy number from their earnings report last night. No, I agree with you. By way, companies should be buying back stock. Those that aren't buying back stock, you should question **Harry Stebbings** [23:01]: and ask **Mitchell Green** [23:01]: why. Okay, **Harry Stebbings** [23:01]: but ServiceNow's bought $3,000,000 worth, which is less than his car collection. **Mitchell Green** [23:07]: Yeah, but I don't know, is the company buying a lot stock back? I don't know. But you have to ask also ask, like, how much stock does the CEO of ServiceNow already own? Does he own $300,000,000 of stock? They're like, that should tell you something. The companies where the, like, founders are buying or the companies are buying huge amounts of stock back, that to us would make one more bullish on that company versus, like, another company, a 100%. I would suspect as earnings come through, you know, you will see more things like like Salesforce, people put in place big buyback programs to start buying back stock here. I think you'll see it. We spoke **Harry Stebbings** [23:40]: about ByteDance a little bit. Mhmm. Everyone for years has been like, oh, the ByteDance discount is so cheap. ByteDance is insane because there's the China discount, and ByteDance is the China discount on the China discount. That sounds great, but it's only good for you as an investor if that discount chasm shrinks. What's it gonna take for the discount chasm to shrink? I think it already **Mitchell Green** [24:02]: it to some degree, it already is. So private market implied valuation multiple should be determined by public market investments. You should argue a software company today, like, should be getting done in the private markets cheaper than public markets. It definitely doesn't always occur like that. So Alibaba and Tencent should be two giant, you know, Chinese companies, should represent roughly how ByteDance should trade. I haven't looked at them in the last, like, couple weeks or month. They were trading like mid teens earnings multiples, not EBITDA, not revenue, earnings multiples, multiples, and they don't really grow. Now this is a business that, you know, grows 25, 30% plus a year, generates a tremendous amount of earnings. And you can stick like an earnings multiple on this company and get to a very, very big number, like fundamental earnings. And I think Facebook's trading like 25, 30 times earnings right now, like stick that multiple. But then maybe that's too high because it's a Western company. So then put the China company multiples on it. I think it is possible to see in a few years that this company is doing, you know, $70.80, 100,000,000,000 of earnings in the next five years. **Harry Stebbings** [25:03]: Yeah. But in a deglobalized Trump world, I'm I'm just doing the the kind of alternate argument here just to understand. In a deglobalized Trump world, it's gonna not list in The US, is it? 0% chance it'll list in The US. No. Mean, **Mitchell Green** [25:14]: that's right. So I have no clue, Sure. No. It'll list in Hong Kong. But, you know, people have been talking for years that they're gonna, like, delist all these US these Chinese companies, Baidu, Ctrip, BABA. They never did. And to mine, like Alibaba and Tencent, our Alibaba stock has like doubled off the lows over the last year. So like sentiment today on China is a lot better than it was eighteen months ago. When we were buying know, when we were buying ByteDance stock, like, you know, we're buying at a prices around $200,000,000,000. Like, we we thought the risk adjusted reward given the earnings power was just, like, incredible. Don't count China out. I bet they win the AI world. I bet they win it. Look. The great thing in China is you can build a nuclear power plant in a couple of years. You can build power plants, like no problem. In The US, we are going to run into major issues around power. Why do you think they win the AI world? Just because of Because of the power, resources, consumption, like number of PhDs, how much they value science and technology. And look, there's things that could totally change it. Like, nobody's really talking about quantum. We are not quantum experts at all. But is that something that could make these things exponentially more efficient? **Harry Stebbings** [26:17]: How does that realization change how you invest? I completely hear you and I agree. I think we still dramatically underestimate the capability of China or just choose not to think about it or push it to one side. But if that is the realization, how does that impact your go forward mindset on investing? That's we don't know a of ByteDance. **Mitchell Green** [26:35]: But it's not like winner take all. It's not that ByteDance wins and, like, Google and Facebook loses. A year ago, when I was probably on the show, I don't I don't know if we talked about Google. Everybody thought Google was gonna lose. They're like, ah, Google's dead. It's done. Like, nobody's gonna search it. Seen the stock in the last year? Stock's, like, doubled. Now it's gonna win everything. Now it's gonna beat OpenAI and all these other things. No. Like, they're both they're both gonna be fine. The the biggest question for us on these LLM model companies is can they ever turn, like, a real profit? Like, I just don't know the answer, and I don't think anybody really does right now. I think another thing you're going to see in The United States as it relates back to power, and you really haven't seen much of it yet, local communities getting like really upset. You have the small local town in Iowa or the small town in, you know, Kansas or Ohio or wherever, Virginia. And they built this giant data center. They employed all your people. They employed a ton of people locally to build it. They then built it. Now it sits there and has 50 local people that work there, your local power prices have tripled. And like, is it polluting the environment and things like that? It's just a big ugly building. I think you're going to see real local pushback. And I don't think it's one of The United States. I think it's probably Europe as well. And it's like, hey, you know, these people that are not better off today than twenty years ago, and these things are in their backyard, and people in Silicon Valley and the coast are making tens of billions of hundreds of billions of dollars off. I'm like, I think there's gonna be real pushback, there needs to be regulation on it. **Harry Stebbings** [27:56]: Do you not think climate is a luxury problem? We were also worried about it in the last three to five years, and now no one gives a shit about it. We should be worried about it. Climate investing is in the drains. Yeah. **Mitchell Green** [28:06]: We should be worried about it. It's probably important. Look, it's we've always struggled with how to invest there because of how capital inefficient a lot of those businesses are. And I think like just China has some advantages in that respect, whether it's like giant solar farms they can build or whether they can just do things that we can't do. But I would expect, look. If you look at the Internet, the biggest innovation in Internet is over the last decade or fifteen years is caught up China. Like, if you actually wanna look where, like, e commerce is going and, like, social media is going, is go look at China. You know, it was not a surprise to me when Deep Sea came out. But don't underestimate Chinese creativeness and ingenuity to figure out how to reverse engineer and engineer things in much cheaper ways than Americans can do. **Harry Stebbings** [28:50]: Can I ask you, going back to the not specifically on the ByteDance, I actually really want your advice on the sell side, which is like when you look at a ByteDance, there's many opportunities to sell in in a lot of these names? So not taking ByteDance specifically. How do you think about, you know what? With three x up on where we are, we've been in it for four years. Let's take chips off the table. How do you think about sizing positions over time? And have you got any big lessons or advice from me on that? Buying is glamorous. **Mitchell Green** [29:19]: Selling is the job. Constantly re underwrite. That is actually what it really is. And we're trying to make two to 5x in three to seven years. If you put that into a on a curve at the '25 IRR curve, put it into a fund to make it two to 2.5x net fund. That's what we're trying to do. That's what we tell our investors. So we're constantly just re underwriting to saying like, okay, if we were gonna a bunch of ByteDance today at $5.50, which is where it's been reported that like General Atlantic is selling a bunch and there's other people, and we've been offered higher than that. I think it's always like, what is the probability it can double? And then we to ByteDance, we look at like what fundamental earnings are and be like, okay, this is doubling, no problem. Now if somebody came to us today and said, hey, I'll offer you $1,300,000,000,000 we'd tell a bunch. Because it's not that I don't think the company will do $100,000,000,000 of earnings in the next five years, that's 20 times, that's worth $2,000,000,000,000 But there's a risk, what does it trade out on a multiple basis? What would we be on our total investment at that price? **Harry Stebbings** [30:14]: Sean, how far ahead are you paying for growth? And at a point, there's a really valuable moment to go, yes, you're paying four years Yes, **Mitchell Green** [30:22]: correct. What we like to say is this, I think this has actually kept us out of a lot of trouble too, which is like, are we in the money eighteen months out? Like, that's what we think. With a reasonable multiple, are we in the money eighteen months out? Can you unpack that? What you really talking So like, if we invest today and revenues are $20,000,000 with a reasonable model at eighteen months out, are we in the money? Like, with a reasonable multiple, not 50 times revenues. You had a price where if it's growing 60% a year, eight times revenue, six times revenue, it's like, okay, I'm in the money. No. I haven't tripled my money, but like, I'm start I'm in the money versus like, oh, Jesus, to be in the money, I'd still have to sell it for 30 times, 40 times revenue. **Harry Stebbings** [30:59]: Do you why with your companies like the pacemaker company? I didn't wanna pick on them so much. That's fine. 20 to 45,000,000, which is great, phenomenal, fantastic. But who's gonna buy that company? I mean, there's a line of strategics that would buy it. **Mitchell Green** [31:11]: There's private equity firms that would buy it. At a good multiple? Yeah. We'd make great money. By the way, you forgot what I what what did I pay for it? Good investment and good company are two very fundamentally different things too, and you're trying to, like, get the union of both of them. Like, there's a lot of A plus companies at D minus prices. Nor do I also want to buy **Harry Stebbings** [31:29]: a D minus company at an A plus price. But do not want to make that investment? I'm always taught by most people on the show that I've never made money with a good deal. See, like, I would strongly disagree **Mitchell Green** [31:39]: with that statement. Like there are a lot of people that invested in good companies, great companies in 2020 and 2021 at really stupid prices and didn't make money. So it's like it's the intersection of both. It's not like you're not trying to buy a D asset at an A plus price, that's like zero. But like if you can buy a B plus company at an A plus price, you can make like amazing risk adjusted returns. But we also buy A plus companies too. And you can buy like the great thing is, is can you do like structured structured secondaries? Secondaries? Or can you do like really unique things like some of the stuff Larry will do and will do? And can you buy an A plus company or an A company at like a B minus C plus price? Those are like incredible deals. Can you get in like cheap to buying out old LPs out of an old fund that need liquidity. By the way, joke that we're an Nvidia earnings miss away from like a recession. By the way, if you get that, a bunch of old funds are going be like, they have horrible DPIs. You're going to have all these LPs that are like, you know what, I'll sell an interest in this 2013 fund or this 2015 fund and be able to buy stuff super cheap. But look, there are also different beliefs. People are just like, oh, look, there are a lot of people in the venture business that are just like, I will pay anything because I'm trying to get like the power law and I'm trying to find the next Google. **Harry Stebbings** [32:54]: Would you not advise me though that actually when you have a world where upside is relatively uncapped and you have trillion dollar companies, or at least many more $100,000,000,000 companies, I should be so much more elastic on my pre billion dollar entry price than paying 300 or 600, **Mitchell Green** [33:09]: I guess. No, because most companies don't become that, the vast majority. It just depends what you tell your LPs, by the way. We tell our LPs make two to five x in three to seven years, rinse and repeat, generate two to two and a quarter x, two to two and a half x net funds with twenty nine hours, and it turns out if you can do that over, like, a twenty year period of time, you are, the best of the best. **Harry Stebbings** [33:26]: Dude, I I'm very good friends with Jason Nimkin from SaaStr. Yeah. You on a on a show with me very recently said, oh, fuck this picking winners, early stage stuff. I just wanna do an Anthropic SPV. It's much easier. **Mitchell Green** [33:40]: It's not easy to do this stuff. I think there I think 50% of people in the venture business should not actually be in this. There's 50% too many VCs. Maybe more. There might be 70. Actually, it's not only VCs. It's private equity, alternative access. What makes you say that? There's too much money, and there's, like, too many tourists. And there's people that don't show, like, investing, you need to show discipline on price. Like, go talk to the greatest venture investors in the planet, and they'll be like, price matters at the end of the day. Again, let's see what all these companies get out at at the end of the day that are valued in the trillions of dollars. There aren't that many of them, to be clear. Right? And look how much earnings a company like Facebook and Google and Microsoft and Amazon and Nvidia generate like profits. I think there's a lot of companies that are way ahead of themselves in terms of like valuations and what their profit numbers will be at the end **Harry Stebbings** [34:27]: of day. Do you think we will have more or less money in venture in three years' time, though? Probably less. **Mitchell Green** [34:33]: I don't know. And at some point, I don't know if it's three years or five years or seven years, for sure. People are going to wake up in 2030 and 2032 and realize it's, oh my God, they're still all in this stuff from 2012 and 2015. If you weren't selling, when are you gonna sell? That's actually the best advice I would give to young fund managers and, like, people starting funds, is liquidity windows open and close. And when they are open, take advantage of them. You should be selling. Even if you're winners, sell 20%, sell 30%, sell 5%. Your job is to return money. Companies are bought, not sold. Yeah. Like, I guess, marks are opinions. DPI is math. And so, like, no, companies are bought not sold. That's not true. But you don't have to sell the whole company. If there's a round being done in a company that you're investors in, especially if you're a small new fund, you can go to the founder and be like, oh, founder, you've taken some money off the table. Like, I won't be in business in five years if I can't get some liquidity back to your companies. And by way, you can do the math. If you build the next giant company and you sell some at 500,000,000 or a billion, like who cares? Like you still own 90% of your whole thing. But like LPs want money back. And the people that stay in that are going be in business ten, fifteen, twenty years from now are people that will continue to give money back to their investors. **Harry Stebbings** [35:45]: Are you seeing LP sentiment change today around what they care about, do you think? **Mitchell Green** [35:50]: Absolutely. I think you've started already seeing it. So we've always cared about DPI, but I think that we've always been really disciplined. Two to five x, three to seven years, like, did it, move on. You know, probably a third of our deals have been secondary sales. So people have accused us of being traders. That's fine. But I guess I'm a trader. But you know what? I gave money back to my investors. And guess what? The investor is my client. Like, they know, I have two clients, entrepreneurs and investors. Without investors, I don't have any money. Don't have a business. And so, like, I think people need to remember, like, who pays the bills. Investors are very, very, very focused on DPI now. And it is possible with a small early stage fund as a new relative upcomer in the first couple of funds, you can actually generate amazing DPI's. It's a game you can play. I don't know if you've ever had like Fabrice Grindel on here or Jose Marin from after labs. Those guys are like ten, fifteen year LPs of ours, friends. Those guys have played the game extremely well. They understand that not every company goes to the moon, takes some chips off the table, give it back to your investors, rinse and repeat. **Harry Stebbings** [36:49]: I think the advantage that a lot of these small funds have that most people don't consider is they're able to sell so much easier without really disturbing company progress at all. If you're if you're if you're gonna risk to respect him, he can sell very easily, and it's not a big problem. If you are Sequoia Correct. Hard. It's like negative **Mitchell Green** [37:05]: signaling, a 100%. Versus that's why I'm telling younger funds, whether you're in venture, growth, buyouts, younger funds, it's you can be like to the entrepreneur, hey, you're selling some stock. I really need to sell some stock here. Why? Because if I don't return money back to my investors, like, won't be talking in three years because I'll need to find a new job because I won't **Harry Stebbings** [37:25]: have my second fund. Do you worry about being a trader and not being an attractive investor to founders? Nope. Because I believe if you **Mitchell Green** [37:33]: help founders and do what you say you're gonna do now a lot of investors don't do that either. I I there's think 60% of people in this industry that actually probably add negative value to companies. The simplest lesson I think entrepreneurs, anybody can learn, and I learned it early in life, is just if you say you're gonna do something, actually do it. The number of people that promise, like over promise and under deliver, like be the reverse. Under promise, over deliver. And so like if you've been really helpful to an entrepreneur, help them recruit, help them like with customers, You sell 20% of your old ins, like who cares? Keep helping them. We have companies we've sold 100% of that we still help drive customers to. Like, it's like, By the way, great. You helped me make like five times that money. Nobody else in the cap table is liquid. We sold all of our stock. **Harry Stebbings** [38:15]: Keep helping you, please. What are the most common ways you see investors provide negative value to companies for founders listening that they should watch out for? Burn **Mitchell Green** [38:25]: money at all costs, recruiting. They actually just act like they know how to run the business. But I never run company in my life. Though I know where I have, like, 98% of venture investors or private equity investors. Get people around the table that have done what the entrepreneur is trying to do. So if, like, you're a $20,000,000 AI company or a $20,000,000 software company, find entrepreneurs around the table, help the founder recruit people that have built businesses from 20,000,000 to 200,000,000 and get them around the table and get out of the way. It is truly the advice that I think. And like, I just think there's too many knuckleheads. You know, the worst is somebody, you know, who went to Stanford Business School, worked for eighteen months at a startup, and now comes in, you know, is a venture investor, now they're experts. Be humble. Don't act like you know, because most of these, by myself included, have never actually run a bit. Mean, look, if you want to sort of venture fund or growth equity fund, I've done that. I can give people advice on that. But, like, if you're trying to figure out how to build out a great sales team, go talk to great sales leaders and get advice from that. So I actually think that's the best way that VCs and private equity people can help founders and entrepreneurs is connect them with people who have done it before and help them recruit. I truly think that's why Sequoia and Benchmark are great and Index are great, because they help founders and entrepreneurs recruit amazing talent, and people want to work for those funds portfolio companies. **Harry Stebbings** [39:43]: Dude, just say I'm gonna switchboard. I honestly just feel like the women in the 1960s, you know, connecting people all day, because I'm like, no idea how to do that. Speak to my friend now. Just my friend. See see **Mitchell Green** [39:53]: you. 100. Great. **Harry Stebbings** [39:54]: Yes. And I think that's what the best entrepreneurs actually want. A 100%. Yeah. Here's my mid view from seeing a load of companies. No, don't want that. You said that, like, oh, a negative value is, like, hey. Burn money. Burn money. They say burn money. Burn money because they need to see growth. Mhmm. And they are looking at markets today going, for me to get my next round of funding, the game's changed. It's no longer triple triple double double. It's I need you to go from zero to honestly thirty forty for this to be interesting. **Mitchell Green** [40:23]: Well, that's about wait. Because that's because that's the price that they paid in the deal. Like, if you if you paid these asinine prices on the way in by the way, what's what's really interesting to me in the market right now is this, like, people that spin out of, or, like, leave Anthropic or OpenAI and raise money at, like, $2,000,000,000 or a billion dollars for a freaking idea. Like, there's nothing more than an idea and a napkin. To us, that seems complete lunacy. What I actually want to know, have any of those ever actually worked ever? Like, has anybody ever raised at some crazy price initially, just like an idea on a napkin, like billions of dollars or $500,000,000, and have any of those things actually ever worked? I don't know. Anthropic? What was their first I don't know what the did, like, Dustin invest? I think it was pretty small. It was like billions. No, no, I think the original seed deal was much lower than that. But I thought when Dustin and some of these guys invested the seed, it was much lower, but I don't know. **Harry Stebbings** [41:13]: The astonishing is Dustin will make more money from his Anthropic investment than he will from definitely from Asana. Definitely from Asana. I don't wanna be Not Facebook, though. **Mitchell Green** [41:22]: I'm not sure. Yeah. I'm not sure about **Harry Stebbings** [41:24]: that. We we said about kind of burn money, and they want the growth. Is the triple, triple, double, double debt. There's so many SaaS founders who ping me every day, and they're like, I've been told for ten years, you know, triple, triple, double, double, and then we'll be in a good place to raise our next round. I I'm in that third year where I've doubled, and I'm now gone from 10 to 20, and no investor wants me. I think it's by the call us. **Mitchell Green** [41:48]: We think those things are interesting because we can get them at potentially good prices. That's where it matters. Like, what is your gross dollar retention? So we like, here's the deal. It's the most important number in in tech companies, gross dollar retention. What I mean by gross dollar retention too, because everybody wants to quote nets, is gross dollar. You ended 2024 with 20,000,000 revenue. What did you end at 2025 with just those same customers? No upsells, just downsells. 18% is good, like you want like 90%. Anything less than 18%, we won't touch. Great is 19%, incredible is 19.5%. Like you're looking for 90% gross is good, 95% is great, 98% is amazing. And by way, the reason why there's so much dead wood in venture and like all these living dead, there are so many companies with like sixty, seventy, 80% gross dollar retention. Yeah, good luck. I don't and the problem it's not your 10,000,000 revenue, that's the problem. It's when you get to like $150,000,000 of revenue, and you're like at 70% gross dollar retention, you're just like churning through. And so that's why the company that's got 95 gross dollar retention can grow really fast and not burn much money, because they're not spending money on sales marketing to fill up the bucket. **Harry Stebbings** [42:55]: If you're a TOMA Bravo Mhmm. And you've got your Coopers and your Anaplans, where the companies are kind of growing at best mid teens, what happens to this generation of growth equity, PE investors in tech? **Mitchell Green** [43:10]: So think growth equity and like buyouts are very different. I think even buyouts are very like, I think like people like Hellman and Fried like, if you want to go with the large cap, people like Hellman and Friedman and people like Primera are slightly more growth oriented. And there are other firms that are probably more like margin focused. I think it's probably a function of how much debt they have on their companies. To be honest, I have not looked and spent tons of time like studying the the financials of Coupa Software or Anaplan and things like that. If I was them, it's like, I know that all these companies, they drive EBITDA margins from 5% to 40%. The question is, how are they doing it? I would hope that they've done it mainly through, like, cutting really inefficient go to market and sales marketing and G and A. I would hope they haven't taken the engineering sales headcount from 200 to 20. I suspect they have not, but, like, that would worry me if they had done that. But I suspect they have not. Like, by the way, these people are really smart people. Like and the the question is, if those companies have been bought with no debt, then they would be investing hugely, I'm sure, in AI, something like that. They probably already are. But like for me, that's why what I said at the beginning, we worry about any company and any big technological disruption that is levered with a lot of debt on it. Regardless if it's a software company or a manufacturing company or an accounting services firm or an industrial services firm, whatever, with debt, you're just like hamstrung with how much you can do because you have massive interest payments to buy. **Harry Stebbings** [44:35]: Do you not worry that given the casino of public markets and the volatility that ensues from a Figma where it rides up to where it is to them being in in the gutter and Atlassian, which is posting accelerating numbers and it's down 76%? You buy you buy a company like Atlassian. That would be my argument. Okay. Fantastic. I agree. I think Mike's amazing also found a like company. Correct. A 100%. If I'm Canva, I'm looking at this going, there's no fucking way I'm going out. If I'm Stripe, I'm going, thank you. I feel very vindicated in my decision to stay private. Does this meme ified stock market not just make It's **Mitchell Green** [45:13]: not good for LPs, put it that way. **Harry Stebbings** [45:15]: Liquidity **Mitchell Green** [45:16]: problem worse. Correct. So what will change it? When LPs go to the biggest venture funds in the world and private equity funds and say, we're not investing in your next fund until you get liquidity in these names. I mean, that's the reality of it. But I I don't I agree with founders, by the way, too. I do think there are look. There are companies that there is something to be said for a company going public. I have friends with a bunch of guys that run big public spec You just had equipment checked. Yeah. They went public. Well, the stock's actually done quite well. And, actually, it's like a derivative play. So it was our derivative play on AI build data centers, right? You got to like get a shovel and you got to get like a dump truck. But again, that was a company in 2020 and 2021 that everybody thought was like a tech company. It's not a tech company. It's like an equipment rentals business run by a couple of awesome founders studs and killers. We were able to partner with them to buy a bunch of secondary from people that were desperate to sell, and it's been an awesome Is that how you got into that business? Yes, bought a ton of secondary. You bought a ton of secondary from people who wanted to sell. Yeah, they were like, oh, this is a tech company. No. No. This isn't a rentals business that uses some technology. It will drive higher EBITDA margins and better utilization rates. By the way, they went public because they want to get their brand well known. There are a bunch of companies out there, know, like the Veeva's of the world and Datadogs, why those companies go public? CrowdStrike. Because big enterprise companies are like, hey. Like, alright. You know, big are you? Like, are you are you, like, survivable? Because you have the big public companies like being like, oh, Mike Microsoft telling people, like, oh, this company's gonna go out of business. You know, like, not going business. It's like a $30,000,000,000 company. And so, like, being public helps, I think, with credibility. On the flip side, to the entrepreneur, I get why they don't go public. They got a billion dollars of cash or $2,000,000,000 of cash. But so I think it is so for us, it's really about finding entrepreneurs that like we are very confident will be public company. We talked to them upfront, like, if your plan is to try to stay private forever, you're just not for us. We just don't want to invest in you. By way, not because we disrespect you, but it's just like we need to get out of stuff **Harry Stebbings** [47:04]: at some Why, given the fluidity of secondary markets, if you spoke to a callous and he was like, yeah, we absolutely want to stay private forever. And you're like, great, but I can add, there's very liquid secondary markets for me. Yeah, **Mitchell Green** [47:14]: that's true. There is now. I just our view is we want to back entrepreneurs that if we think the thing has a very good shot at going public, we want to hear from the entrepreneur. It's like, look, I want to go public. By the way, you know how many more public companies there would be right now if these companies didn't have $600,000,000 of cash on the balance sheet or a billion dollars of cash? If they only had 30,000,000, they'd all be public companies. Just it's the amount of money that's available for these companies is incredible. Now again, who knows if I have legitly no clue if like Stripe is trying to buy PayPal, but if they're trying to buy PayPal, they would probably rather be a public company right now to do it, unless they've got some sovereign wealth fund that's gonna write them a $40,000,000,000 check. So **Harry Stebbings** [47:52]: just help me understand, why would Stripe being public help them buy PayPal? How **Mitchell Green** [47:56]: are they gonna pay for it now? Mean, because if Stripe was 100 and I don't know what what the market cap of $150,000,000 for Stripe. For Stripe. If Stripe was worth a 150 and PayPal's worth 50, well, they'd have a liquid publicly traded stock that they could then merge to get they would be a cash offer, and then they'd get the the shareholders of PayPal get liquid stock, and they would sell the stock. Like, that that's a cash that's an all stock merger that happens all the time as public companies. PayPal shareholders are not taking private stock in Stripe. Like, that's not gonna happen. The the public companies don't do all cash offers. Now could they go public in a reverse merger? Maybe that's the way. Maybe you reverse merger into PayPal again. There is no freaking way I can't imagine that happens. To move ever either. The reality is is I think the only way it's a deal like that would happen then is like some sovereign wealth fund. Probably equity funds don't have enough money to write like $40,000,000,000 checks in the in the companies. And so if Stripe was really trying to buy PayPal, again, who knows if it's even true? If they were, if they were a public company right now and they were had a 150,000,000,000 market cap, but it'd probably be less now because the stock market had gone down or whatever. If was a 100,000,000,000, they would be able to do a public merger like you could do one. It gives them less flexibility to do big M and like really big M and A. Obviously, have access to a lot of cash, they can go buy some, like, billion dollar company, no problem. **Harry Stebbings** [49:11]: Do you think there is a massive disconnect between publics and privates when you look at a $150,000,000,000 Stripe and a $45,000,000,000 Adyen and the same similar ish transaction volume? Yes. We see rounds get done. You know, Wix is at 4,500,000,000 and Rapplet's at 9,000,000,000. Yes. Correct. Exactly what you think. I mean, it's kinda silly. It's like, do these private market investors look at the public markets? So should venture investors have more flexible mandates that allow them to adjust to asset classes where there is most opportunity at a given time? I think, **Mitchell Green** [49:40]: it surprises me that more growth in private equity investors can't do publics inside their funds. Think he's opportunistic. But like TCV can, I think Iconic can, I think GA probably can? So I guess probably these people can. It surprises me that more people don't. But I think like early stage venture is extremely different than going to buy Atlassian right now or going to buy Workday or going to buy Salesforce or going to buy Toast or something like that. But what surprises me is that more funds, like if you were an early investor in Toast and you're fully out of it and you love the company and the stock's down like 60%, why not go buy it again? Like, it surprises me more people don't do that. **Harry Stebbings** [50:17]: Totally get that. Can I ask going back to the equipment share style, you said about that size of IPO? Yeah. A lot of people say the 3 to $10,000,000,000 IPO range is just too small for anyone to care. It's not meaningful in terms of size to actual markets. Is that fair? **Mitchell Green** [50:33]: In the world where ETFs and passives have become huge and the number of fundamental investors is shrinking, I don't think you want to be a two to Ideally, you don't want to be like a 2 to $3,000,000,000 company, I but don't think there's any reason you can be can't be a 7 to $10,000,000,000 company or a 5 to $10,000,000,000 company. I think those are like legit. I think when you get like sub 1,000,000,000 or 2,000,000,000, it's like it's kinda just like a pain in the ass to be a public company investor. But you can do it. Like, who says you can't do it? I actually we wish probably more would. Why? Because they'd great small cap stocks, and they could actually you can hold them for ten years and make a ton of money. Like, look at AppFolio. The thing was like a billion, 2,000,000,000. I think it was last thing. It was like 700,000,000 of our capital in public. And I don't know what it's done the last month or two, but, like, it was like a 10 x. Shopify. Correct. It's a $2,000,000,000 public company. And Exactly. That by the way, that's that's what we would hope for. **Harry Stebbings** [51:16]: Like, you wanna find those next companies. Saying you have to be a certain size in terms of public. So if you apply that to funds, we see $15,000,000,000 Andreessen, $10,000,000,000 Thrive. I think it's insane. I think these funds are way too and they just do the **Mitchell Green** [51:30]: math, the fun math on, like, how they're clearly you you have to have the next open you have to have the next Google effectively, or the math doesn't work, I don't think. And by the way, you can I've even heard people say, like, you don't even have to have one of them. You have to have to like, two or three of them. The amount of money being thrown at some of these funds and, like, the size of the funds is astonishing to me. I hope they prove me wrong because it's like good for me too. If these funds get so big, these companies get so big, then they can buy a bunch of our companies like that. But, you know, I respect people like Benchmark or Index. Like, Index is wrong, but it's still I mean, Index can raise as much money as it wants. Yeah. And it's actually a bit billion 5 or whatever. I mean, index is tiny compared to these other funds. Like, and by the way, those are the best in the world. And so, you know, it's just **Harry Stebbings** [52:13]: I think it just gets really hard. Like, it's crazy. Like, I Well, why? Let me push back on you there. There's 9,000,000,000 in Thrive's growth fund. If they are able to put $23,000,000,000 into Cursor or into Databricks, you can break it down. But **Mitchell Green** [52:26]: you're **Harry Stebbings** [52:26]: just you have to underwrite, like, **Mitchell Green** [52:27]: a $150,000,000,000 companies. Like, that's really freaking big. But at steady state, companies trade at 10 times earnings. Like, I mean, that's just what historically can argue, is it 12? Is it eight? Like, at steady state, when they don't really grow, they trade at 10 times earnings. And you invest in something that's worth like a it's worth a $100,000,000,000, You're effectively saying to make a double with dilution, it's probably $250,000,000,000. Like, that's making the bet it's gonna do $25,000,000,000 of earnings. There aren't that many companies that do $25,000,000,000 of earnings. Like, it's freaking hard. So I I now again, that doesn't mean you can't make a lot of money between then and the steady state. You know, if they go out, it's grown 50% a year. But, again, I would say there's too much money chasing too few things. But, again, AI is gonna create a bunch of great new companies. And so, like, again, if anybody's gonna be on the bandwagon to find the next giant company, the social media equivalent in the next five years, it will probably be one of these funds. And so, like, I see I can see the argument as well. **Harry Stebbings** [53:21]: Everyone says that you need big or boutique. So does that do you agree that you die in the middle? No. I don't think so. **Mitchell Green** [53:27]: Wouldn't I bet against people like Benchmark or Index at all. I think you can state you could stay nimble. Those funds will invest earlier, and they probably won't. Obviously, their percentage ownership along the way will just get diluted over time. But like, I would give Index or Benchmark just as much probability to find the next OpenAI or Anthropic as Thrive or anybody else. **Harry Stebbings** [53:50]: You seem very focused on praising Index, which I love. No, I have no idea. No, no, no. I love Danny and Danny What specifically about Index **Mitchell Green** [53:58]: impresses you in? I just think, like, just looking at the returns. Like, it's just the returns and the funds. Like, it's math. Like, look at their DPIs. They are amazing investors. There's a lot of people that get lucky, like one or two funds. But if you can do this over, like, a twenty, thirty year period and consistently put up, like, world class returns, you're **Harry Stebbings** [54:14]: doing something, like, very unique. Does king making exist? King making is when you get Sequoia and Andreessen and then Benchmark and then debt debt debt debt. Yeah. And the names are so good and the money is so much that you make the winner in the market. No one else wants to go in because that's the Sequoia funded company, which then has got iconic and then got And get everything else. But then, yeah, what **Mitchell Green** [54:36]: what you're seeing now is there's, like, so much money. There'll be, like, multiple players in that space. But, look, Anthropic, I I give the guys at Menlo a huge I give, like, Matt Murphy's, a buddy of mine, a huge amount of credit. Like, when they did Anthropic, it was not obvious. Like, it was highly it was like, are you nuts? Like, he's right. So **Harry Stebbings** [54:52]: Let's do a quick firearm, What have you changed your mind on in the last twelve months? That I think AI **Mitchell Green** [54:57]: is even gonna be bigger than we thought it would be. Like, it's gonna change the world in like so many more areas that we're not even like thinking about. What's the single most memorable first founder meeting you've had? Nat Friedman, founder of Xamarin. We whiteboarded how to save money with Starwood airline points. Sorry, Starwood hotel points and Delta airline points. He's just like a great humble guy, like normal guy, and now he runs obviously AI at Facebook. **Harry Stebbings** [55:21]: You can invest in one seed firm, one series a firm, and one growth firm. Which do you choose? A series a **Mitchell Green** [55:28]: fund would probably be benchmark. Growth fund, it would be myself, because that I mean, that's what I invest in. I have a huge amount of respect for the guys at Iconic, though. We don't really compete against them because they're more Silicon Valley than we're outside Silicon Valley. Seed fund. We don't have much experience with them, but I think the found I mean, those founder fund guys have, like, the returns are totally nuts. What's been **Harry Stebbings** [55:47]: the hardest decision you've made in your career? Doesn't have to be deal focused. It could be the scaling of the firm, the not The hardest decision **Mitchell Green** [55:54]: has been to hire people that have the kind of same view on how to generate returns. And so it's like you're a cohesive group. Because yours isn't the sexy way. It's not the sexy way, correct. So like you, the hardest decision is, actually, the hardest decision was should we have in like 2017 and '18 and '16, when everybody, when we were paying five to seven times revenues for software companies, and Iconic came in and started paying 10 times and just like winning the best deals and prices, we're like, we know these are the best companies. Should we do these deals? We did not. We were wrong. **Harry Stebbings** [56:28]: What was the biggest miss and how **Mitchell Green** [56:29]: did that change your mindset? Oh, I mean, like, I mean, Procore, we were in it tiny amount. We did the deal with Bessemer, put a tiny amount of money in, and, like, we were in a position to lead the next round that Iconic did, and then two rounds later, sold to them. Now, again, this decision to sell actually wasn't that big a deal because it wasn't that big a position. No. I mean, the stake was not actually investing. Oh, I don't know. We also got $2,000,000 in the Shopify IPO because we knew the founders. That would have returned our second fund to x had we just not sold stock. **Harry Stebbings** [56:54]: Like, didn't have to do anything. What investor do you most respect who does not get spotlight? Probably my **Mitchell Green** [57:01]: partner, Nimay, actually. I just think he's, like, insanely disciplined. The, like, loss ratios, I mean, I think maybe he's lost money in one deal ever. No. Again, he's never had 10 x's or 20 x's either. Probably my partner, Nimay. Final one. What are you most excited for when you think about the next ten years? What I'm most excited about is there's gonna be a really bad downturn. You know, it's different than '99 and 2000, but there's gonna be a really big big downturn. Market system go up forever. Economy system go up forever. I think there's a lot of policies in the government in the world, like, right now that might end really bad. And I think it's going to happen in the next ten years. That will be the best time ever to invest. And with combined the productivity booms like that you're going to have with AI. It's like you avoid the Gen one AI companies, just like if you had avoided the Internet 1.0 companies, and then think about all the Internet companies that were started in like 'three to like 'six. And I think the same thing could happen with AI. Could benefit like a Thrive or a Andreessen who are raising these new giant funds, and they could potentially invest it during those periods as well. Always have money to play the **Harry Stebbings** [57:58]: game. Correct. If, yeah, if you don't have money, you're out of the game. So Dude, this has been such a pleasure. Thank you so much. Thanks for having me in. 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