Inside the Agentic Hunger Games: Startups vs. Enterprise AI Chaos

Any topic or issue you present to the board, you should have a point of view on it. Why are we pretending that you're just some neutral arbor? Please tell me what your point of view is so we can talk about that instead of talking in the abstract about whether this is an interesting issue.

It's the week of April 21st. Welcome to the Learning Corner, a Precursor Ventures podcast.

Welcome to the Learning Corner by Precursor. I'm Mia Farnam and I'm joined by our GP and Managing partner Charles Hudson, where we will be talking through the article and Goodreads that caught our team's attention over the past week. Our first topic came from Ed Sim In a recent LinkedIn post titled Enterprise Agent Hunger Games, which explores the battle to bring AI agents into the enterprise setting. He cautions founders against raising VC unless they're building for massive scale, and highlights the difficulty of deploying AI in complex enterprise environments, for factors like security compliance and integration are really non negotiable. Ed sees opportunity in companies that build agentic workflows building cross platform intelligence, but warns that the landscape will consolidate quickly with very few winners and many downfalls. So Ed's article paints a really tough picture for agentic companies going after enterprise customers. And one thing that came to mind when I was reading the article is just how competitive the market is. So you're not only competing against other agentic startups, which there are hundreds of them, you're competing against larger incumbents that enterprises have already paid tens of millions of dollars over many years to deploy and use. So do you think, Charles, that founders understand how steep that distribution and integration hill actually is when they first go out and raise funding for agent tools?

You know, every time Ed writes something about enterprise I always read it because that's his world. I think. On the enterprise side I don't see quite as many first time founders heading in that direction. I think there's sort of a recognition that competitive dynamics are different and that, you know, the minimum viable security level, authentication level, just the MVPs for those products are oftentimes much big and the capital required to raise them to build those products is usually much greater. So I think what Ed said is totally true. It's like all enterprise software, but with the added twist of this new thing called agents that are not fully well understood. But I also feel like venture capital dollars tend to follow themes and if you just say, well, enterprise and cybersecurity have been a good theme and AI is a new theme. What if we take was traditionally a good theme and Marry it with this new theme, there ought to be space for new companies. And sometimes the answer is it's a good market, but just not a good market for startups. But I'm very curious. I am quite confident in the next five years many organizations will use agents to do many things. Maybe today it's simple tasks over time will become more complex tasks. The advent of a new technology, a new paradigm, does not mean that startup companies will be the winners. So I'm very curious to see whether there's, you know, two competing forces here. One is the novelty of the approaches that companies can build when they're not tied to legacy infrastructure. And then there's this sort of account control positional advantage that the incumbents have by already being in the building and maybe not being on the cutting edge of technology, but already having the relationship trust and integrations. It reminded me also of Tomas and Goods Had a good post. I think it was this week or last week about basically integrations as a competitive lever and being able to integrate with and talk to lots of other systems that your customers use is once again going to become a competitive, competitive differentiator.

It seems like the folks who are going to be the most competitive in this space will have to have extreme knowledge that's really deep on what the existing legacy tools that their customers currently already use and not fall into the demise of being like a point solution and be able to kind of create that data. I'm putting quotation marks around my fingers for moat because it's pretty easy to just try and compete against the tens of fifteens of different companies that are hitting up each one of these folks internally at Enterprise.

I would suspect that also most of the venture dollars for enterprise agents will flow to people who already understand selling to the enterprise. Because if you think adding in the burden of selling a new technology is hard, but selling a new technology with a selling motion you don't understand. But where the buyer has a preferred way of buying, that's pretty tough.

Yeah, and Ed said it really well. He said that oftentimes right now you're going to be betting on the jockey. And so the jockey in this scenario would be the founder who knows exactly who to talk to in specific enterprise scenarios. Ed also said pretty explicitly, don't raise VC unless you're building for scale. Do you think we as investors are doing enough to communicate what that actually means, especially to founders who are entering the AI market for the first time?

I think there's a difference between what is said and what is heard. Sometimes I think most VCs are like, I tell people I want to invest in big companies and founders are like, yes, I hear you. But often, sometimes founder version of what a big company looks like and VC version of what a big company looks like are one and sometimes two orders of magnitude different. So I just find it's more helpful to tell people, listen, we're trying to find companies that can get to $100 million in revenue minimum with good margins. And getting to a hundred isn't the end game. But that's sort of the first waypoint if you're interested in building one of those. But if you're pitching a really big fund, the answer might be like, hey, we're looking for a company that can comfortably get to 250 million in ARR, but with a path towards 500 to a billion so that it can go public. I think there aren't that many founders I meet where when I tell them that's what big looks like, don't go, oh, that's like bigger than I was expecting.

It'll be really interesting to see who continues to emerge as the ones who are able to sustain the next couple of years with their same contracts. We talk about this all the time on the podcast, but so much money is being put into the exploration of tools because the hierarchy of corporate enterprises, as someone says, put money into AI. I think the first thing they probably look at is who of my current existing solutions offer something that I can just take off the shelf and what they're building, I'd rather experiment with that. And then the next hope that you should have as an agentic company is that you are the best next possible solution. And then after you even solidify a quote unquote pilot, you then have to deliver ROI moat to continue to be able to sustain that relationship year over year. And that, I don't know how that's going to look in the next couple of years.

I mean, I had a fascinating conversation with a friend of mine who it really put a fine point in what you just said, Mia. He sells sales enablement technology that's enabled by AI. And he's like, we just won this deal from our biggest competitor. We undercut them on price and we stole the deal from them. And I was like, but your plan is to then raise price on the customer next year, right? He's like, yeah, that's the only way the deal makes sense. I was like, but what if somebody comes and does the same thing to you and cuts the price by a third and they're going to have the same logic that you will. He's like, oh, that's already happening. And so I just think the other dynamic is there's so much venture money chasing these ideas. In some cases there are more startups with money than there are customers with problems. And so, as you know, the old economics phrase of ruinous price competition, I'm already seeing that in some categories where newly funded companies who are desperate to win business are going out and undercutting people. And for the first time, one of our portfolio companies this week told me they walked away from a deal because their competitor priced it in such a way that they're like, there's no way anybody could make money on that deal. And we'd rather go find things where our technology works and where we can make money than sign up for that.

Well, our next topic is another LinkedIn post, but this time from Jeffrey Silverman, partner at Laconia, titled Reframing the Board Meeting. It's Not a Performance Review. Silverman offers a really useful mental shift for founders. He suggests reframing board meetings as a strategic work session where you can lean on investors for help. When board meetings are structured and around shared problem solving instead of polished updates, founders can get more value and transparency and boards become true partners in navigating inflection points. In an ideal world, yes, I'd love for all board meetings to follow that structure. But I also know that there are factors outside of a founder's control. So is the board paying attention on the call? Did they read the materials in advance that you were work so hard to prepare? Are they engaged at all? That said, focusing on what is within the founder's control? What are some examples you've seen of founders running truly productive and effective board meetings?

Yeah, I mean, I think I read the article and I was like, there are parts about this that really resonated with me. I think the, the hard piece is you are as a board member, always evaluating the founder and CEO during a board meeting, but maybe not in the way that founders think. The number one thing for me is I was like, does the agenda and the time allocation reflect what I think are the most issues facing the company today? And so the best board meetings I've gone to, if you think about two circles, one circle is what are all of the issues that the investors see as the biggest issues facing the company? If you think of another circle, what are the issues the CEO wants to talk about and wants to spend time on in the board meeting? When you have perfect overlap of those two Circles. I think everybody walks away feeling good about the board meeting. The investors are like, we spent all of our time on the most important thing and the CEO put together an agenda that gave us enough time to talk about those things. This was a productive, effective board meeting. The worst ones are where the company needs to talk about a new round of financing and the CEO wants to give you a product demo and talk about customer service ticket response time. And you're like, there's a big issue here we need to talk about. And so usually what I'm judging CEOs on, other than their command of the business, which I think it's frankly fair, and your job as a board member to evaluate the CEO based on his or her command of the business. The other one is, are they focusing our collective time on the most important big ticket issues? And oftentimes I find with first time founders, sometimes there's an avoidance, avoidance of a difficult issue because there's a fear of not wanting to open that can of worms or not wanting to frankly talk about shortcomings. And you know, the number of times people have been like, well, we had a great quarter, we missed plan, these two people quit, but we got Best place to Work in San Francisco award. I'm like, okay, the things you just highlighted to me are not consistent with a great quarter. A great quarter doesn't look like that. And so sometimes it is painful. Me, I've been in board meetings, I'm like, this CEO is delusional. Like he or she doesn't understand the gravity of the situation that they're in. And like, we might need to make a change in most cases. Changing CEOs is so painful. Having done it the few times I've been involved with it has made me want to do it less and less each successive time. But the times I've done it, I was like, wow, this person has gotten themselves into a problem that they don't know how to get out of. And that's the time usually as a board member be like, this person doesn't have the answers.

I feel like a precursor because we come in so early and our checks become smaller and smaller over the growth stage of a startup, we spend a lot of our time actually more so being the true sounding boards to our founders and more so prepping them for those board conversations and also probably being included in conversations with the board, with the founder not there. What learnings have you taken away from that specific role and how hard that can be or impactful?

Also, you know, we're betting on people's upside. So we're investing in them oftentimes before they've even had their first board meeting. And I always go into these things with, like, maximum optimism, with the expectation that this person is going to be the person who rings the virtual bell on the stock exchange and pushes the button and the confetti comes down. And then sometimes you realize, wow, this person got us all the way to Series D or got us all the way to Series A. And this might be as far as they're going to get us, because the skills required to get to the next level are beyond this person. And that's always hard to accept. But the longer I do this, the more I've just started to accept. Two things can be true. One is you can go into these conversations and relationships believing that the person can go all the way. And two, you can also learn things along the way that will reveal to you that that person has the ceiling. I think I've gotten better at talking to people about, hey, we might be approaching. The good news is you can extend your tenure as CEO oftentimes by hiring really great people to work for. And the better you do at recruiting and building an exec team, the longer you will remain as CEO as a founder.

Additionally, within our own team this week, we also talked about Rob Go's recent Trough of Disillusionment piece where he highlights the importance of not projecting your own stress onto founders through tough moments. And for anyone who's listening, definitely read that piece. It was a great read. I know you emphasize being gracious as an investor when things are getting hard. I guess, how have you seen that done well, and then where have you seen it maybe go wrong?

Also, I think most founders are operating under stress at all times. I think in general, when things aren't going well, they know it, and when they've made a mistake, they know it. So I always try to think, you know, if somebody's really down or comes to you with bad news, they probably know it's bad news. There's sort of no need to yell at them, berate them, or belittle them. They. They know they've made a mistake. I haven't found that, like, yelling at people who are already on the back foot makes them particularly receptive to whatever message you're trying to communicate. And sometimes if people are flying really high, it' okay to let them fly high, but it's good to remind them that, like, hey, you should enjoy this. You don't want to suck the joy. Like, you should enjoy this moment. The company is doing well. Now the conversation is, how do we maintain this momentum? So I'm like, I want to be a dampener when the founder's too high. I want to push them down when they're too low. And I'm like, well, sometimes it's okay to be enthusiastic and happy that the business is doing well. And I think you have to always approach these conversations with, like, if I want to be well understood and I want to be an effective communicator, what does this person need from me? And sometimes they just need acknowledgement. Wow, that was a rough quarter. Your CTO quit and, like, one of your big customers went out of business. All things considered, I think you did a decent job of navigating through what was otherwise super challenging, which is different than saying, great job.

I found a lot of my conversations with founders when it's in prep for a board meeting is really educating them on, like, how to communicate this out to board members, that maybe I know exactly what they're thinking on the other side, and maybe not as transparently as the founder even knows. Again, I try to balance being gracious of. These are all the awesome things you've done. These are the things that are coming that I know that are on their brain. Let's walk through that transparently and what you could possibly say, here's the worst case scenario. Here's the best case scenario. Very rarely do I think the best case scenario is going to unfold on the board meeting. But prepping, I think for questions that could surprise founders in the moment and maybe put them on the spot in a light that I don't think is the best for them. It's just that they're caught on heels a little bit. I think that's. That's more of what I try to prepare for.

I also just tell people, any topic or issue you present to the board, you should have a point of view on it. There's a difference between a discussion and an exploration. To me, a discussion is, hey, I'm thinking about hiring a VP of sales, and I'm leaning towards doing it. I can have that conversation, which is different from. From, do you think I should hire a VP of sales? Do not want to have that conversation at the board. And I do think in many cases, framing is the difference between a successful conversation and an unsuccessful conversation at a board meeting. And oftentimes I'll tell people, like, well, you brought this issue up. Presumably you have a point of view. Why are we pretending that you're just some neutral arbiter like you're running the company. We're talking about this issue because you have a point of view. Please tell me what your point of view is so we can talk about that. Instead of talking in the abstract about whether this is an interesting issue.

Would you say a productive practice? Because I know a lot of founders like to do this is individually with board members, bring them up to speed on what they're going to talk about ahead of time and then at the board meeting almost represent it, knowing what everyone's thinking. I've seen it go well and then I've seen it go not so well.

I think sometimes it feels a little silly because you're just like, well I've talked to all of you about this. I know that you all. So I think if it's a big thing, it's really good to read the room before you present it and just know, am I going to get resistance on this issue? Or where are people's heads on this issue? Because sometimes you can get clues you like, oh well, here are the three things I'd really want to know if we're going to make a decision about this candidate. Here are my three questions and I'd love if you could bring more information about this issue to the meeting. Sometimes you do get things that are additive and sometimes just dry running it. You realize like, oh, I don't need to spend 45 minutes on this. Everybody kind of thinks this is a good idea. So I Now have like 30 minutes back in this meeting to do something else with. But I do think it's an investment on the part of the CEO. I know a lot of board members like to know what's coming. Some people are like, I want the deck a week in advance. I'm like, well that's really hard for most startups to do and if they're going to give it to you a week in advance, you really better read it. You were your AI assistant really better read it.

For our last topic, in a really candid and introspective post, Holly Teo shares why she chose to step away from angel investing after backing more than 54 companies across 15 years despite really strong deal flow and a deep network. She reflects on how the economics rarely work for angels, how follow on funding was increasingly inaccessible, and how the constant pace of investing began to feel like chasing status rather than generating returns. And her reflection challenges the incentives around angel investing and suggest that there are alternative ways to build deeper founder relationships and stay on the forefront of innovation and trends. I'll speak from My personal experience, I'm a huge fan of Pali Techo just being so close to the healthcare market. So hearing this perspective in Oliver Kander was really interesting. And actually a few weeks ago for all of our listeners, we talked about Bradley Tusk and the realizations of economics perhaps not being as advantageous to be in traditional venture from the institutional level. Now we get to hear it from an angels pov. So some of Precursor's largest co investors have been strategic angels. What makes them great co investors and what could happen into early stage land if we see more great folks hit the pause button on investing in that ecosystem?

I think it was the Wall Street Journal about a year ago wrote an article which is like angel investing is dead. I've thought a lot about this because we spend so much time talking about what's happening in capital v Capital C venture capital. I think the loss of angels is.

Probably actually more so being the true sounding boards to our founders and more so prepping them for those board conversations and also probably being included in conversations with the board with the founder not there. What learnings have you taken away from that specific role and how hard that can be or impactful?

Also, you know, we're betting on people's upside, so we're investing in them oftentimes before they've even had their first board meeting. And I always go into these things with like maximum optimism, with the expectation that this person is going to be the person who rings the virtual bell on the stock exchange and pushes the button and the confetti comes down. And then sometimes you realize, wow, this person got us all the way to Series D or got us all the way to Series A. And this might be as far as they're going to get us because the skills required to get to the next level are beyond this person. And that's always hard to accept. But the longer I do this, the more I've just started to accept. Two things can be true. One is you can go into these conversations and relationships believing that the person can go all the way. And two, you can also learn things along the way that will reveal to you that that person has a ceiling. I think I've gotten better at talking to people about, hey, we might be approaching. The good news is you can extend your tenure as CEO oftentimes by hiring really great people to work for you. And the better you do at recruiting and building an exec team, the longer you will remain as CEO as a founder addition.

Additionally, within our own team this week we also talked about Rob Go's recent Trough of Disillusionment piece where he highlights the importance of not projecting your own stress onto founders through tough moments. And for anyone who's listening, definitely read that piece. It was a great read. I know you emphasize being gracious as an investor when things are getting hard. I guess, how have you seen that done well? And then where have you seen it maybe go wrong?

Also, I think most founders are operating under stress at all times. I think in general, when things aren't going well, they know it, and when they've made a mistake, they know it. So I always try to think, you know, if somebody's really down or comes to you with bad news, they probably know it's bad news. There's sort of no need to yell at them, berate them, or belittle them. They. They know they've made a mistake. I haven't found that, like, yelling at people who are already on the back foot makes them particularly receptive to whatever message you're trying to communicate. And sometimes if people are flying really high, it's okay to let them fly high, but it's good to remind them that, like, hey, you should enjoy this. You don't want to suck the joy. Like, you should enjoy this moment. The company is doing well now. Conversations. How do we maintain this momentum? So I'm like, I want to be a dampener when the founder's too high. I want to push them down when they're too low. And I'm like, well, sometimes it's okay to be enthusiastic and happy that the business is doing well. And I think you have to always approach these conversations with, like, if I want to be well understood and I want to be an effective communicator, what does this person need from me? And sometimes they just need acknowledgment. Wow, that was a rough quarter. Your CTO quit, and, like, one of your big customers went out of business. All things considered, I think you did a decent job of navigating through what was otherwise super challenging, which is different than saying, great job.

I found a lot of my conversations, conversations with founders when it's in prep for a board meeting is really educating them on, like, how to communicate this out to board members, that maybe I know exactly what they're thinking on the other side, and maybe not as transparently as the founder even knows. Again, I try to balance being gracious of. These are all the awesome things you've done. These are the things that are coming that I know that are on their brain. Let's walk through that transparently. And what you could possibly say, here's the worst case scenario, here's the best case scenario. Very rarely do I think the best case scenario is going to unfold on the board meeting. But prepping, I think for questions that could surprise founders, founders in the moment and maybe put them on the spot in a light that I don't think is the best for them. It's just that they're caught on heels a little bit. I think that's. That's more of what I try to prepare for.

I also just tell people, any topic or issue you present to the board, you should have a point of view on it. There's a difference between a discussion and an exploration. To me, a discussion is, hey, I'm thinking about hiring a VP of sales, and I'm leaning towards doing it. I can have that conversation, which is different from, do you think I should hire a VP of sales? Do not want to have that conversation at the board. And I do think in many cases, framing is the difference between a successful conversation and an unsuccessful conversation at a board meeting. And oftentimes I'll tell people like, well, you brought this issue up. Presumably you have a point of view. Why are we pretending that you're just some neutral arbiter, like you're running the company? We're talking about this issue because you have a point of view. Please tell me what your point of view is so we can talk about that. Instead of talking in the abstract about whether this is an interesting issue, would.

You say a productive practice? Because I know a lot of founders like to do this is individually with board members, bring them up to speed on what they're going to talk about ahead of time, and then at the board meeting, almost represent it, knowing what everyone's thinking. I've seen it go well, and then I've seen it go not so well.

I think sometimes it feels a little silly because you're just like, well, I've talked to all of you about this. I know that you all. So I think if it's a big thing, it's really good to read the room before you present it and just know, am I going to get resistance on this issue? Or where are people's heads on this issue? Because sometimes you can get clues you like, oh, well, here are the three things I'd really want to know if we're going to make a decision about this candidate. Here are my three questions, and I'd love if you could bring more information about this issue to the meeting. Sometimes you do get things that are additive and sometimes just drive running it. You realize like, oh, I don't need to spend 45 minutes on this. Everybody kind of thinks this is a good idea. So I Now have like 30 minutes back in this meeting to do something else with. But I do think it's an investment on the part of the CEO. I know a lot of board members like to know what's coming. Some people like, I want the deck a week in advance. I'm like, well that's really hard for most startups to do. And if they're going to give it to you a week in advance, you really better read it. You or your AI assistant really better read it.

For our last topic In a really candid and introspective post, Holly Teco shares why she chose to step away from angel investing after backing more than 54 companies across 15 years despite really strong deal flow and a deep network. She reflects on how the economics rarely work for angels, how follow on funding was increasingly inaccessible, and how the constant pace of investing began to feel like chasing status rather than generating returns. And our reflection challenges the incentives around angel investing and suggests that there are alternative ways to build deeper founder relationships and stay on the forefront of innovation and trends. I'll speak from my personal experience. I'm a huge fan of Pali Techo just being so close to the healthcare market. So hearing this perspective in Oliver Kander was really interesting. And actually a few weeks ago for all of our listeners we talked about Bradley Tusk and the realizations of economics perhaps not being as advantageous to be in traditional venture from the institutional level. Now we get to hear it from an angels pov. So some of Precursor's largest co investors have been strategic angels. What makes them great co investors and what could happen to early stage land if we see more? If great folks hit the pause button on investing in that ecosystem?

I think it was the Wall Street Journal about a year ago wrote an article which is like angel investing is dead. I've thought a lot about this because we spend so much time talking about what's happening in capital v Capital C venture capital. I think the loss of angels is probably a much bigger net negative for found. And I read Halle's post and I really like her writing and her podcasting and her investing acumen and I think digital health will be worse off without her. But I think for a long time if you think of what made angel investing work, you got in at relatively low prices, actually substantially lower price prices than the VCs. It was less institutional, so it was More betting on people. And really there weren't institutional pools of capital doing pre seed or angel style investing. So angels were this really critical way for somebody to go from 0 to 1 and build a product. And part of the reason the math worked is A like you were getting in at these impossibly low valuations, B companies actually went public and got acquired and then founders wanted those angels on the cap table. And if I look at the economics, entry prices have gone way up. There's more institutional capital like ours that will do some of that 0 to 1 investing. The hold times for angels have gotten much longer and as Hallie pointed out, one of the challenges is as startup financings and fundraises have gotten more complex. As an angel, oftentimes you don't have pro rata rights. So either you get massively diluted by future financings or the company does some kind of restructuring recap or pay to play and you get washed out. Or in general, and I don't mean this as a generalization, but I will say it as a generalization, I think previously there was much more attention and care paid to the needs of angel investors by founders. They treated those people like early employees and they looked out for them when they were acquires or acquisitions or things that were happening. And I think we live in a world where I think capital feels more transactional in general to founders, including angels. I've seen angels, you know, they were in the deal the longest and got treated the worst because maybe they bought common and they were lumped in with the common shareholders and like they got the short end of the stick. And I can understand why angel investing today as a financial activity is probably less attractive. And also just given the volume of startups out there, it used to also be even in 2020 we had all these operator angels who were just like, I'm just slinging checks on the side of my day job. And at some point I always tell them, be careful, once you make enough investments, people are going to know that you're an angel investor and your deal flow is going to go up 10x. Yeah, so I don't know, I read that post and I was like this is a good reason to get out of the angel investment business. If this has been your experience. I just hope we don't lose all of our great operator angels.

And to your last point about your deal flow increasing by 10x, that then means you don't get this really curated set of small deals you can spend more time to look at and you know, somebo who works there and they come recommended by someone you trust. You run completely by yourself and a hundred percent of the risk is done by you. And it's difficult to give it the time and effort that you've done for your best checks that you probably wrote earlier on.

It's like running a venture fund with no management fees. It's a pretty tough. But I will say the irony is the thing that has endured that I wasn't sure would endure is I meet so many of these funless SPV people who are able to cobble together 5 to 10 million dollars through hustle and through relationships to put into series B and C stage companies and like that proven to be a much more enduring part of the capital stack. So that's I think the interesting thing about our business is the capital stack shifts every 10 years. We got seed and that kind of unsettled things. Then we got precede and unsettled things. And I think we're going through another unsettling right now as these big venture funds get get larger. And I really hope we can find a way to make angel investing lucrative and interesting to good people.

Well, we are all out of time today. Thank you Charles for stopping by and thank you for our listeners for popping in as well. Please like and subscribe and we will talk with you all next week. Thank you.

Bye.