Investing in 10+ Unicorns: Kevin Hartz on Finding Winning Founding Teams

Kevin Hartz is definitely one of the best and most gifted investors in the Silicon Valley. He invested in PayPal, in Uber, in Airbnb, in DoorDash, in SpaceX, and many, many more companies. But he would definitely kill me if I'd say he's an investor. He's on the other hand, a founder. He is the founder of Zoom with an X in the beginning, not a Z, which was sold for around a billion dollars to PayPal. Later in the journey, he co founded Eventbrite together with his wife Julia, and they went public and now he's building Sauron, his new venture. We will talk about this later while he is running his venture fund, Astar. So one of the topics that I wanted to talk about with Kevin was founding teams, because he did it from both sides. He found the best team teams that build ventures. I think a look at his portfolio definitely shows that at the same time, he builds successful companies. Two companies that were unicorns, and he's building the next one. So all the learnings of his life about founding teams combined, I think are super, super interesting. For every founder starting to build a company and focusing on the early hires, the key hires, is so, so important for the trajectory of your venture that I spent a lot of time with Kevin on this topic and then we looked into his thesis on the AI industry. Where's the value creation? Is the value creation in the foundational layer? Is it in the application layer? What is important when you build such companies? How do you identify good ventures from an investor perspective? And then also, what is the opportunity creation currently? And why is he building a new company? How does he do it?

What.

What is the specialty that he's looking forward when we talk about building a new company? Afterward, I asked him sadly, off the record, about his energy management, and he was like, yeah, I'm not a founder in my 20s anymore, so I'm not out hustling everyone anymore. But I think as a CEO, my duty is to inspire others by giving them a vision, giving them the direction that we want to run with, and try to inspire, and then dive deep into the things where I can be the most helpful to unblock the team. So I really like those words, so I wanted to include them even when I don't have them on the record. At the same time, I think we are more than ready to jump into this interview. You're listening to the Unicorn Bakery. My name is Fabian Tausch, and here's Kevin Hartz.

Thank you. It's a pleasure to be here.

So I thought of A long time. What to ask you first, and I have one specific thing in mind. You are investing in companies for more than 20 years now. You're building companies for more than 20 years now. You've seen it all in quotation marks. Like you've seen teams that you believed in that did very well, you had a lot of incredible investments. There were teams that you didn't invest in that did amazingly well. And you are constantly talking to new founders. You're building a new company. How do you take what you learned throughout the last 20, 30 plus years and apply it to what you're currently focused on, but at the same time are staying open for all the changes and new things happening?

Yeah, great question. I think that I was always concerned with this kind of expression. You can't teach an old dog new tricks. And I always wanted to have a flexible mindset, always wanted to be thinking about, always wanted to be open to change and just see a lot of things go wrong when one loses that flexibility. And so I've had the good fortune of investing in starting companies since the mid late 90s. That's a long time. And while things have dramatically changed, they also really haven't dramatically changed at all. In terms of the type of people that I like to be in business with and love to work with, it's the same spirit is essential and present. Whether it's the original PayPal team of Peter in that kind of historic group of people that came together to build PayPal or Airbnb or Pinterest or Enduro or Ramp or others. So I look for those immutable qualities and they really don't change at the same time. Now I'm out in the market looking for that next set of leaders and builders. One of the nice things I'm doing is building a company with a team. The company is called Sauron. It's reimagining home security, and it's an area that's kind of fallen on disrepair and that really helps. Just keep in mind what it means to be building and have that spark.

So when you look at companies either building or investing, it all at first comes to the founders and the founding team as a second layer. You said there are characteristics that are not changing that much. I ask myself, are there things that were relevant 20 years ago that are not as relevant today in a founder team?

Well, there's the why now, and that changes depending on the period. You know, when. When great companies start, there's usually an opportunity in time and place. PayPal started towards the tail End of the dot com boom. And E commerce was certainly a segment to bet on. Now, it wasn't clear at the time because in 2000 you had a dramatic market crash of tech stocks and the baby was thrown out with the bathwater. The Googles, the Amazon, Netflix and PayPal were all kind of considered dot bombs and not viable businesses, but in fact, they were absolutely, you know, the stalwarts that we see today. But you're looking for a reason why a company should exist. And a lot of times there is, you know, a platform that one is building on. You know, my simple thesis is to look and see, you know, is it Airbnb and Uber taking advantage of iOS and the pervasiveness of iOS and growing on mobile? Is it this new slew of companies building on top of OpenAI, a platform? It's often kind of bemoaned as, oh, there's all these companies that are light wrappers on top of OpenAI. But I love people building on the application layer. That's where an immense amount of value is created. And that's where I focus a lot of my time, is a new platform emerges and developers build on top of it and build into something rather substantial. That's how my companies, Zoom, Xoom and Eventbrite really started. On top of building on top of payment platforms, building on top of PayPal and later Stripe, in terms of payments are pervasive. What kind of applications can we build to take advantage of these new payment platforms?

One thought I had, when we think about the best founding teams, would you say the best teams will also pick the best opportunity? Like, for example, now building on top of the platform of OpenAI or something as relevant, because it's definitely not the only thing that you could currently build. Or would you say sometimes the best teams are also working on stuff that is not as visible, the next big thing. How do you think about a great team and then also the market opportunity that they're going after?

Well, great teams will find their way to the biggest market opportunity harkening again back to PayPal. It didn't start as PayPal, it started as Fieldlink, which was security for mobile devices. I think they were palm pilots at the time and it went through a number of quick iterations before finding the right market, which was online payments and merchant processing, and it took off from there. Similarly, the best teams. It makes me think of what Jeff Bezos would say. He wants to hire people that are mostly right, meaning that when they make decisions, they get them right more times than not. You can't always get things right and you've got to take some risk and so on. But the best performers are mostly right and move into that right direction to find those right markets. Now, the contradiction here is that it's a red ocean of competition around OpenAI building on top of these platforms. There's so many different generative AI tools and platforms and so on out there that, you know, how do you. Why would you run into this very competitive space? And so there's somewhat of a conundrum there, but there's still many opportunities. You know, when we devised Soron Home Security, we were looking more ahead at computer vision, which, you know, is not even intensively focused around LLMs. And, you know, that was really our thesis is that computer vision side will see this revolution at a staggered pace, but it's absolutely coming.

One of the key elements of building companies, but also investing is uncovering potential where others might not see it. Like assessing people in a way that you're like, okay, I know this person can fulfill the job and grow within the opportunity that we have at our company, or the team of founders, or just one founder that I love and the team that he puts together have the ability to build something great. Do you have a framework in mind on how to assess potential?

I do look a lot at kind of the slope of growth. So, you know, I'm willing to give a lot of opportunity to finding, you know, raw talent. And there's a number of reasons to do this. And, you know, it's maybe if you're like in baseball, it's how do you build a magnificent team? You can't go out and recruit all the, or pay the price of a Yankees pitcher and so on. So it's finding, you know, very new, very raw talent that's going to build and you see, you know, in all the great companies, you know, whether it's all the way back to Microsoft in the 90s or Facebook in the 2000, 2010s and beyond, you know, Google, it's finding extraordinary talent to build this. And it tends to be, you know, very, very young talent. I just saw Fiji speak. She's the CEO of Instacart, French leader who is, who kind of came out of ebay in her 20s to join Mark Zuckerberg. And he just continued to give her more and more responsibility as she, as she grew with it. And there's no better feeling of seeing that type of talent succeed. And now she's running Instacart as a public entity. So back at Zoom for example, I made these wagers and hired Shyam Sankar, who headed a business development country expansion for our money remittance business. And he went on to Palantir and CTO COO role and has been very instrumental there. And you want to find such good talent that, you know, you see them grow, you know, that you. You see them progress on into the future.

How do you find them as raw diamonds?

Grad school, I think, is part of it. Yeah, we were recruiting folks out of grad school. You know, there is this kind of birds of a feather, you know, that you see these clusters of talent kind of come together. And, you know, certainly Peter was remarkably astute at it. In his case, he recruited a lot from the original Stanford Review crew, like David Sacks or Keith Rabois or others. And then Max Lepchen, his co founder, brought talent from that UIUC group that a lot of the crew originally involved in working on the original Mosaic browser. And that was just a kind of magical combination of the two.

It's so interesting because I, like, on the one hand, I totally get it, like, how much do you. Because you said you took some wagers as well. And I think grad school in itself is a wager because it's people without much experience. Probably they had some projects with other students. So how do you. What are you looking for when you're interviewing for a role, no matter how much ownership you want them to have immediately from day one. But what are the questions you ask to understand if they have the grit that it needs to then also excel through the opportunities that you give?

Yeah, it's interesting because California labor laws are bleak and prevent a lot of the examining questions that I think are most helpful. But when you're speaking with founders that are building a company, you know, you can ask any array. And I think it's very important to understand the founder's background, their, you know, where they came from, did they. You see a lot of overcoming obstacles. You see competitiveness, you see academic and intellectual achievement. Were the parents doctors or professors, or what kind of climate did they grow up in? And you just see these same kind of stories repeated over and over with founders that become a very clear path that's a little harder to do when you're hiring on the employee side.

In what way are you comparing founders, for example, to the Airbnb founders? When you're like, okay, I invested very early. Now they're at this point, do I believe the founders that I'm talking to right now could achieve the same growth and Development. To what extent is this helpful or harmful?

Yeah, I mean you always need to benchmark and there's always gives and takes and those are the big questions. But it's like you look for kind of n of 1, an extraordinary founder or founders that just kind of break the mold, that see the world in a different way, that have, are kind of apt to move fast. They want to build, they want to you know, a sense of urgency that, that is unbridled in a passion towards what they're building. And you know, sometimes we always miss the mark on these. But you know, I would say, I would say like it's, it's become a lot, it's clearer over time and seen such a wide pool of founders.

When I look at companies, especially building out of Europe, then often their investors say hey, hire as senior as possible. Which would be the complete opposite of like giving grad students the chance to, to move forward. In what moments would you say it's experience over like potential? Like when do I hire experience and when do I hire for potential? And grit? Probably that's a better framing.

Yeah, I mean the vast majority I would go with kind of speed and grit. And you know, in training somebody up, you know, there are certain areas like, you know, we're, we're bringing on a perception engineer and that's a very specific area that, you know, we just need somebody of that caliber. But for the most part I would always choose, you know, that, that slope or that, you know, that high growth candidate over somebody that's been in the market. It's you know, somebody that's been, you know, so called experienced, is not going to necessarily move at the same pace, has a certain way of things, is not as malleable, is not as forward thinking. And it sounds like ageism to a certain extent in maybe the valley. And when I say the valley, that includes all in tech, the metaphorical valley. But I think that's where you find just the greatest variability in growth.

Is there a point in time of the life cycle of a company, like when you come above the typical startup phase and you're scaling up and it becomes, you're still pushing, but it's also managing what's there. Does it change then? Do you then look for different candidates and different kind of talent? Or would you still like, where's the, is there a flipping point of talent?

Yeah, I mean there's, you know, a company is like a, you know, a book. It has many different chapters and each chapter is kind of different and the story progresses over time. And you do need to hire differently at different times. Like, the challenge is that, you know, as a company matures, like, there's just a. The momentum is. It's harder to keep things like in forward momentum and to keep things from becoming too sedentary. And so you want to keep that sense of urgency driving people forward at a time where companies just naturally want to slow down. And so it's incredibly admirable of companies that have kind of just continued to grow through, you know, these sort of periods. But. But yeah, I. I think that hiring methodology, you know, lasts for most of the lifetime of a company. And yeah, I would also kind of posit that there's, you know, other little traps and things. You know, we've seen, you know, maybe on the AI side, if you're. There's been a lot of PhDs and so on entering the market there, you have to kind of gauge like, is this. Does this person has, like, a lot of specific knowledge of, you know, some area of AI, but is there a kind of commercial sense to it? So always kind of gauging in that core team, is there a commercial sense?

I think the one. One side we talked about is finding talent. I think the other side is retaining talent. When we're talking about company building, and you mentioned that you're happy to trust talent with opportunities and give them more and more ownership and what projects they can go forward with. What would you say is the most important part about helping talent to succeed inside an organization?

Yeah, there's this kind of proverbial lifeboat exercise where you find that maybe it's a relatively small amount of engineers are having an enormous impact on the organization. And you want to recognize that and work to retain and challenge those engineers. They're usually the ones that you can steer on, you know, kind of blue sky, totally new projects, and they'll go after those with vigor, you know, so that kind of recognition is important. What would I say outside of that? Yeah, and I've always found that you can never give too much stock to the most talented. You know, just loading them up with options or stock is, you know, worth its weight of gold for your, you know, kind of top tops. But I think that in. In general, when you're at a startup, you all the way through maturity and beyond, it's, you know, it's. You go there because of the people you're working with and the things that you're learning and then, you know, compensation and these sort of ideas as well. And so just from a leadership, a founder mentality, Is like, are you providing that to the team or do you have people just slaving away in obscurity in some de minimis part of the project? You know. And so I think kind of keeping that kind of empathy in mind of understanding the battle that the team is going through is critically important. I also just love to give, you know, those that are performing really well just you know, like put them in front of investors or put them in front of, directly in front of customers or other areas of exposure and just see how they do because often those like stars just will shine on all dimensions.

How would you describe your own leadership style?

I would describe it as like giving it a tremendous amount of, kind of yielding to, kind of my direct reports yielding to them to make magic happen. And you know, that's especially important now because you know, I'm building Sauron, but I've also got, we just launched our second $300 million a star fund and so I've got a fair amount on my plate and so it's a forcing function to actually delegate. And I'm probably an overly big fanboy of Peter Thiel, but Peter did this incredibly well where he didn't seem to ever want to manage people, but did a great job at hiring and letting the talent operate on our own. And then you see in his first go around at it, you saw Max Levchin the CTO and Roelof Botha the CFO now running Sequoia and Keith now at Khosla and Reid Hoffman created LinkedIn. I mean just incredible, incredible, incredible dense talent and so aspire to be even in the zip code of that type of talent.

So talking about Sauron and building it, how would you describe your own role? I think you did it in a form function right now in the last answer. But what are the parts that you with all the things on your plate can do and what are the parts that you can't do with building a new company?

Yeah, I hope, I hope it's more inspiring. You know, I'm as much as, I don't know, I was up late last night, we were searching for 3D designers for like game designers for the way that we're building our interface depends on that. But yeah, I'm you know, part steward of capital, part setting this initial vision for what the product is and then you know, pulling as much of the, the team along as, you know, but, but to be honest, like the, the team's remarkable self starters, you know, they're just going 24 7, they're building their so In a lot of ways I just have to be patient. We're going to give some demos on July 9th and that's all that needs to be said is a lot has to happen between now and July 9th.

To be able to.

Be at the point where we present.

What were the exact positions that you were or founding team members that you were looking for for Sauron, just to get an understanding for the specific case. What were the first people you brought on board?

Well, Vasu is our co founder, so it's myself, Jack Abraham, who I've known for years. He's the creator and founder of Atomic, which is a startup studio and a star did this in conjunction with Jack. So it's the two of us and our initial search was all around finding Vasu and she's extraordinary. So she's a roboticist, she is Caltech post grad, she was at Neuro, she was at Zoox and then most recently four and a half years at Zipline. So she's right out of central casting for what we were looking for in the robotics side and perception side for this. And you know, and so she checks all the boxes for like the skills but it's also kind of the attitude and it's the kind of growth mindset, the mentality of wanting to learn, you know, wanting to build something really caring and you can kind of see, you know, you just want that in a founder. So we're pretty delighted we have FASU on board.

I listened to a talk that you gave at some point and you were quite strongly opinionated on incubations and you said 99.9% of incubation sucked besides Snowflake. And it sounds a bit like an incubation what you're doing.

Yes.

So why.

Yes, well, hopefully I can prove myself wrong here but incubations in general just tend to be very kind of stiff. They lack a soul, they're kind of assembled together, you know, where instead of pulling together founders, you're pulling together, you know, hired guns. And at the end of the day do people care enough in the mission? Do they care enough? And so yeah, we have a lot to prove here but I'm seeing some very non incubation like patterns for our incubation which is good because it's somewhat terrifying if you look at the just absolute track record of things of incubations out in the market. But yeah, I wonder at the end of the day if it is much different. Maybe we don't have as much of large sample size but you know, most companies, most startups fail. And, you know, maybe incubations aren't, Aren't, you know, much different.

What do you say are the things other incubations do that you tried not to fall into?

Well, I think. I think there's like this, you know, the. It's developing an ownership mentality. And there's an expression, nobody ever washed a rental car. And Americans know that, you know, like, get that immediately because there's this, like when you, when you rent a car, you know, you'll run it into a post or you'll back over a fire hydrant or something and you'll say, oh, no worries, it's a rental. You know, it's because you don't care. And, you know, there's like an Airbnb example where somebody during the holidays, like, nailed a Christmas tree into a hardwood floor, you know, of somebody else's house. And again, it's like, when it's a rental, people don't care. And so how do you create that ownership mentality that when push comes to shove, like the. That somebody really cares, that this is their work, that this is meaningful and impactful and they're going to go to any lengths to make this succeed. And that's the. Usually what misses out in incubations is that you get kind of bored of the idea or your mind drifts or you go chase the next big AI or crypto thing and it's done.

I think all the Germans listening right now are like, yeah, but we had rocket Internet and they incubated or copied and incubated a lot of things. And. And then like Zalando, HelloFresh and others were still. Still, like, did well. And also the founders are dummy. Please don't be Sad. Like the CEO and co founder of HelloFresh. But, like, not having that much equity and still being the public company CEO, I have no clue if there were new incentive packages and how they reiterated on that. But at the beginning, there was not much of equity packages. And still somehow they made it work. Not for every company, a few of them, but it is an interesting example.

Well, I think the somewheres kidnapped and threatened their children. Now, I'm just kidding. I know Ali and the team, they actually invested way back when, when we were starting Eventbrite, they invested in Eventbrite and that was like a good way to ensure that they didn't copy Eventbrite. But that is a model. I was always impressed with how fast and with such urgency how quickly the sunwares could move and could drive and they knew how to find A certain archetype of, you know, ambition, you know, up and coming, ambitious, you know, founder, maybe out of consulting, maybe out of McKinsey, maybe out of banking, high IQ and run with it. And so you can say a lot of things about the somewheres. Like I remember when they were trying to compete with Airbnb and it was a lot of bitterness, but they, they, they had a style of building companies that worked enough as Zalando and HelloFresh exhibit.

On the other hand, those were I think a bit more execution heavy companies than for example, what you're building with Sauron. So there is a difference in the kind of incubation because they saw a proven business model and rebuilt it from the German market or then in different markets as well. Like when they copied it and built something in the South American market or Asian market or. So those were execution heavy businesses, I think not much R and D. So we can also, with everything, it's not black and white. So we can layer here and say, okay, for those kind of businesses it might work, for those it might whatever. So it's super hard to say it's either or. But it's an interesting example from, from that point. And when we look at Sauron, I mean knowing that you invested in a few good companies so therefore also you have the opportunity to finance and fund your own startups if you want to. How do you think about capital when you're building a new company?

Yeah, I think that having a fund raising formal rounds is important and you know, having tried it both ways where I've just kind of slapped my own capital into things, it's, it's helpful to have like the checks and balances of doing a seed, a Series A and so on. It's helpful in investing to have, I find, to have LPs, you know, and it's, it's a way of keeping score and keeping honest your real returns. Because you know, what investors tend to do when they're not like, you know, like obsessively calculating, you know, actual results is that you tend to fool yourself into, you know, everything is an Airbnb and a Pinterest and you forget all like the ones that went sideways or didn't make it or, or so on. So like capital and you know, our LPs are, yeah. A great way for us to ensure we methodically drive returns. Now we don't want to overthink about that. Everything shouldn't be turned into like an irr moic or so on because. But at the end of the day like you know, the end result is those numbers will look very good.

It's interesting because in the German market for example, and I'm comparing here because it's interesting to discuss a bit of the differences. A lot of the founders that then have money try to build on their own to own more equity, to don't have to grow as fast to have a bit more time. And then there are examples, for example, like Scott Chacon, a good friend of mine who is one of the co founders of GitHub who then some point self financed his, his venture Chatterback and then realized at some point okay, I self finance it but now that I would need to take a leap, I'm not at the point where others want to finance it and fund it. So I self finance it to a point where I cannot continue it. So he discontinued or like let all the people go. Now it's like running with one person and then it's profitable. But having the issue of not running for the metrics for a few months or years could push you off track. That if you want to go back, it's hard to. So it's interesting to see that like and in the German market there is a trend towards hey, let's build bootstrap businesses. Our cash incentives are better than, because If I do 10 million in AR and it's profitable it's, it's sometimes a better exit than like a mediocre venture that I built. It's interesting how the incentives of building companies are shifting around.

Yeah, it tends to fluctuate with a feel in the market but on the one hand you have David at midjourney who had a challenging time. He created a great product in Leap Motion. Early haptics, you know, he's a hardware engineer and didn't have a great experience with investors and venture capitalists. And so in his next go around with mid journey he's bootstrapped that he owns 100% of that business. And you know the like, you know, it's likely doing a few million a day in net revenue. Like it's extraordinary. But he, but the downside of that is that he's got to drive himself. He doesn't, you know, as the sole shareholder I'm not sure whether or not he grants stock to employees. I'm not sure if he does. But as the sole shareholder, you know, he doesn't have as much accountability which is great on the one hand but you know, like can you build a world class organization kind of on your own? Like therein lies kind of the trade off. But I guess I'm not going to feel sorry for him to be in the position he is. It's incredible what he's built. Then you have founders that have built their companies and been diluted down to almost nothing when they could have built a business and did 2 million in ARR and just dividended it out to themselves in a much more effective manner. So there's always that trade off and you just have to ensure that you're not kind of, you know, that you don't constrain things too much if you take a more bootstrappy mode. Like bootstrapping is always the best way to build a company. You're building in a very capital efficient manner. And if you can do that, you absolutely should do that. And you should have a thought and a path and a direction to do that. In some cases you don't have that option. Certain businesses, you know, hardware, software, so on would, would be harder to bootstrap. But you know, like in, in today's world, like the infra cost, you know, I think it was Max Levkin a number of years back published a blog on when will we have our first one person billion dollar valued company. And it must have happened somewhere. Maybe that's mid journey but I guess that's not one employee. But just the fact that you can outsource so much infrastructure software services and build such a kind of like I kind of think of it as a perpetual motion machine that can just run on its own and rack up higher and higher revenues and returns is kind of a great thing. But in a great aspiration you just have to ensure it doesn't come at too much cost. Or that then competitors just run you over when they see the opportunity and know you're under gun in many ways.

You mentioned the opportunity to outsource many things and you're building a new company and the question is for everybody, like how much do I like? What are the things that I want to built internally and have to have as a moat and what are the things that I can work on with freelancers or software that solves issues or infrastructure layers that solve issues. How do you decide what's crucial for building internally versus okay, it's faster and better to probably it's more expensive at first or over the long term. But it's not as crucial to build our moat and we therefore go for freelancers or even software and infrastructure layers.

Yeah, I don't know. It makes me think another Peter Thielism in the late 90s he had just sold or early 2000s he had sold PayPal to eBay and he bought a place in the Four Seasons residence in San Francisco. Never did his laundry. And he would say, Kevin, you outsource your non core competencies. And so in Peter's case, he wanted to think and build, he wanted to play chess and spend time with friends and family and so on. And so he outsourced everything else, laundry, dishes, the whole thing. And you can kind of look at that that same way with a company is like, what can anyone do? What's kind of a commodity? In the case of Sauron, like we want to kind of outsource. We want to, you know, not reinvent the wheel unless we absolutely have to. And where we absolutely have to reinvent the wheel, that would be a proprietary advantage. And so we would spend time on that. But you know, we're building hardware, software, you know, we have installation, we'll have installation teams and so on. But in our first incarnations, like it's to get out in the market and so we're going to use off the shelf hardware, we're going to use off the shelf sensors and lidar and radar and all these different systems. But over time we'll learn from that and boil them down and in time with success, we'll build our own hardware, contract manufacture towards building our own hardware. But if you go out the gates and try to do everything and boil the ocean, you just won't be successful. There's too many points of uncertainty, too many variables loose. So thinking about the problem in that sort of where can you apply the most unique advantage and your expertise is in, you know, that inevitably falls around that software AI side.

I think one of the questions that arises more often also on the AI side, but it fits perfectly towards your case as well, is the question of is the go to market capacity and then the customer base that I'm building and everything from that point onward, enough defensibility for the start to build on top of. Because I think in your case with, okay, we're not also building our own hardware, we're going with off the shelf. At first it's a bit like okay, NI wrapper on application layer where you're like, okay, this might be something that some other LLM or AI company, infrastructure company might solve in the next months, but we have our customer base until then built to a certain point and we can now also iterate towards the needs faster with the new technology capacities. So the question stays, is the go to market motion and capacity defensibility in Itself.

Well, in the case of Sauron, it's a very complex business. We see a lot of players in the market that have stumbled just in terms of poor execution of installations. If you have to send an installer out more than once, like already you're losing money. And so like there are, there's a multi points, you know, that we can differentiate, but those are also multi points which make us vulnerable to lose. And we have to really show that where we see Sauron really shining and we, you know, our strong belief is that this, we're going to have this kind of. Post World War II, the film the wizard of Oz was released and it was, it was in black and white towards the beginning. And then Dorothy lands on Oz and the door opens and the world is in color. And so the first time, you know, the world saw a film that was in color and it was like, you know, this incredible moment. And we see that with Soron of how we're representing data, we're doing it in a way that hasn't been represented before. And you know, I'll leave it a little bit at that. But we're very excited to unveil that to the world. And that's what our target is on on July 9th.

Getting back to the AI topics and like moving a bit forward in our conversation before I come back to how you think about AI, I think we talked about staying open to new founders and understanding why they might be the ones that change the world and investing in them. The same happens with topics like industries that are created and staying open minded about. Okay, that's happening right now. Building your own opinions and making your own opinions and figuring out, okay, what to go with and what to bet on. How do you try or how are you assessing on the one hand trends, but also technologies and potential industries to understand if you think they're worth a bet, they're not worth a bet and staying open minded to that and discovering those new platforms that you talked about earlier.

Yeah, great question. Like, you know, it's, it's so fun in, you know, in tech to really see a new phenomenon, you know, start to arise. Like, and it can manifest itself in so many different ways. Like the sharing economy in the case of Airbnb. You know, we looked at it like when we had invested, we had put a term sheet into Airbnb after demo day and so did Sequoia, they went with Sequoia, but they liked us enough and Roelof and the team cut us in. But our thesis around that was very much a Business that we saw as like a. It's like a distributed storage system. Like, so you can have these big emc storage systems of the past which were on prem, and you'd have to cool them and maintain them and have people out to fix them and update parts and so on. Or you can have distributed storage throughout the Internet, in which case you have this perfect system of not having to maintain all that. And Airbnb was like that conception of it. And, you know, as we thought about it, we were very excited about that possibility. And it has absolutely become that, you know, and in spades. And so, yeah, I think, if I think about it, it's a lot like I have a great mentor, Michael Ovitz, who was the founder of CAA in the mid-70s and you know, kind of during that golden era of Hollywood, he was the sort of kingmaker. He would put together these films, Jurassic park and others, and actors, Tom Cruise and so on. And, you know, and I see the tech businesses like that. You're trying to find, you know, the great stars, the great talent of tomorrow. You're trying to find the Beatles in a sense, and, you know, help this all come into fruition. And, and you do that around these different trends that are forming, these platforms are forming. And that's why you hear this, why now expression of like, okay, it's 2007 or 8 and Steve Jobs releases an iPhone. You know, that's an opportunity. Rush to it and build. But sometimes that always doesn't happen. I remember the. It was so exciting at the Facebook F8 conference the first time they opened their API. And then they said, well, let's not be too generous with developers, and they effectively shut it down. Maybe Zynga and a couple companies snuck through there, but, you know, finding like, what is going to be that next Airbnb or that next great company is what we're always on the lookout for.

Without throwing in any notions from my side. And it's June 4, 2024. So the question that I'll ask might your answer might not be the same in six to 12 or 18 months, but what would you say? Where does the value creation in the whole topic and industry of AI happen throughout the next months and years?

Well, I mean, it is at the application layers. And, you know, I'll call that like, being a thin wrapper is like a great thing to be on, on top of OpenAI because you start out there, but you build something of substance over time. And, you know, most of these things start out incredibly simplistic. If you look at, you know, the first incarnation of PageRank in Google search or the first incarnation of Zuckerberg's Facebook directory of people. Its sophistication in defensibility grows tremendously over time. And we backed a company just less than a year and a half ago in Madrid. It's called osea and it's a Latam focused chatbot. And we put a quarter million dollars in at like a 2 million pre as they were just getting, Alvaro and the team were just getting started. And you know, today it's doing a few million in DAUs and dominant in Latam. And you know, we, we see that as just the beginning for a lot of these opportunities, whether it's building specific vertical chatbot like Lucia or whether it's, you know, kind of enterprise sales aids or whether it's customer service in terms of a company we're working with called decagon, which has automated tens of thousands of customer service inquiries a month to eventbrite and seeing that work extraordinarily well and them doing it for Substack and many other great services.

Why are there so many people thinking that the application layer or building on top and building in an irapper or application layer is not enough?

I think it's a bit of engineering arrogance like that everyone wants to build a foundational model and that you have to build a foundational model to, to kind of build something successfully. And you don't. They're out there like you can build on top of them. And so building on top of them seems like too light and cheap and airy. But that's again what we did when PayPal we convinced David Sachs to open. He was the head of product at the time of PayPal and Alan Braverman and I convinced him to open up an API. And so we were the very first developers on PayPal. And if you looked at our initial apps that we built, they were incredibly crude, but they gained in complexity and elegance and defensibility over time. And so I think when people see this initial starting point, they just think it's something flimsy that OpenAI or Microsoft or anyone else will just run over.

As we talked about Peter Thiel before, and Peter, I recently saw a snippet where he talked about how he thinks AI might decrease the importance of math skills and increase the importance of word skills, like being able to be great with words. So he compared it to, I think in the 90s, he said he wanted everybody to or he thought it would be enough instead of testing for math skills to test for chess skills. And then at some point, because he was in his chess era and at some point he realized, yeah, maybe that's not a good idea later on. But his statement was very clearly on. He thinks word skills will become more important than math skills. Have you seen the snippet? Not that I'm, I haven't.

I'm trying to understand why word skills would be more important.

I can quickly switch it up.

Maybe it's. It still seems like you, like, eloquence can be parroted from an LLM very quickly, though. I've interviewed people before where I know they were reading off of LLMs for answers and technical answers.

Yeah, let me find it and we can talk about it. When Once I, Once you saw it, I think that's easier. Where do I have it?

Intuition would be. It's going to be quite the opposite. Where it seems much worse for the math people than the word people. And what people have told me is that they think within three to five years the AI models will be able to solve all the US Math Olympiad problems. And that would shift things quite a bit. Silicon Valley in the early 21st century. It's way too biased towards the math people. I don't know if it's a French Revolution thing or a Russian sort of Straussian secret cabal control thing where you have some prioritize. But, but that's, that's the thing that seems deeply unstable and that's what I would bet on, on getting reversed. Where, you know, it's like, isn't it like the place where math ability, like, you know, you know, it's, it's sort of, it's the thing that's the test for everything. Right? It's like if you want to go to medical school, okay, we weed people out through physics and calculus and like, I'm not sure that's really correlated with your, I don't know, your dexterity as a neurosurgeon, I don't really want someone operating on my brain to be, you know, doing prime number factorizations in their head while they're operating on my brain or something like that. And so, you know, I, I, when, you know, in the late 80s, early 90s, I had a sort of a chess bias because I was a pretty good chess player. And so my chess bias was you should just test everyone on chess ability and that should be the gating factor. Why even do math? Why not just chess? And that got undermined by, by the computers in 1997. And isn't that what's going to happen to math. And isn't that a long overdue rebalancing of our society?

I mean, is it investor in. Is it standard cognition in Devon? We're implementing Devon right now, which is the code writer at Eventbrite, by the way. It's an irony that founders fund back that because they were so anti the conventional AI path of there's so much noise in the market and then to go into one of the most crowded markets. But they did so I would imagine based on the team that's been put together there, which are all IOI Math Olympiads. And so at least Peter. Yeah, at least Peter and Napoleon still very much value like the mass skill in. In building. But I guess, you know, maybe I. I would suppose that, you know, at some point Devin will surpass the whole team itself in terms of writing code and all of a sudden the cult of the killer IOI engineer kind of goes away.

And I have one last topic that I thought about and also I think it changes probably potentially also a bit. With all the potential around AI. How do you think about the life cycle of companies?

Life cycle in terms of speed or.

Durability, how long does it take to get to a certain point, like let's say getting IPO ready, of course, knowing that it depends on Windows, like when is the IPO window, like what kind of company am I building? And whatever at the same time also the life cycle and the chances to build a generational company versus a company that might be a great exit at some point, but might be not a generational company.

Well, Amazon started in maybe 93 and went public 95 or 96. And John Doer used to say that if a company, you know, this is 80s and 90s rubric, if a company had six quarter, either three or six quarters of increasing revenues, then it should go public. And so there just used to be one. You didn't have all the regulations, Arbanes, Oxley and all the challenges of getting public, but it was considered the natural progression to get there. And now you just have a lot of founders that don't want to go public. Like they could very easily, but they just don't want to. And you know, there's an argument that going public really elevates the game. It puts you in front of the public markets to be on display and a chance for you to really compete and have a liquid stock currency to recruit and hire. But there's very little interest by very few founders. Steve took Reddit public recently. Good for him. It's holding up it's doing well. But he seems to be more of an anomaly in that we're in this world where we just continue to create more private companies that swell up. And that's where you see all these crossover funds and different public funds that are now spending much more time on the private side. This is, I would say, my miscalculation of SPACs was like I had thought SPACs would be the way to kind of fix this illiquidity problem is to make a simple way to do that. What happened is that it became an attraction of a negative attraction. You got the wrong companies, public or public too early, and that's a whole different ball game. Although we just sold, we sold our second SPAC a while back rather than going through the pain and anguish of, of de spacking. And that company is now trading at over $300 a share, which is bizarre. This is crazy.

Do you think SPAC will come back as a vehicle, like just an other option of getting and going public?

No, it will not. I soundly believe it won't. Is this for a lot of different reasons? I think most succinctly a good friend, Kevin Warsh, who was on the Fed Reserve board before I was going to, before launching nyspac, I wanted to talk to him and see if it was the right thing to do. And he said, Kevin, the best way to separate investors from their hard earned money is to launch a spac. And he turned out to be exactly right on that. He's mostly right. I should have listened to him because.

You were very convinced, right? I didn't want to bring this topic up, but now we're here and you brought it up. But I listened to a few of the interviews you gave in that time and your plans and I think as you mentioned, you did two like a one and a two I think were the names and those were the SPAC vehicles. And it's interesting to see how the spec vehicle, like not yours specifically, but in general, like the opportunity or the option to bring up a SPAC got shattered in short amount of time. Short amounts of time.

Yeah, it was a SPAC bubble and it popped. And you know, I think we have this like interesting situation where we have like tech and information just move so quickly, even more quickly these days and there's so many more platforms being built that, you know, just so we had a spec bubble and now we're entering an AI bubble and hopefully reentering a crypto bubble or I mean, I shouldn't hope for a bubble, but we can never Just we capitalism never gets it just quite right. It's either boom or bust. It's. De Kremlin described it once as a pendulum, you know, that never stays right in the middle. It's. It swings really hard one way or the other. And you know, and for that reason for all these other platforms, it's going to be an exciting five years ahead. I mean a tremendously prosperous five years. But it's also going to be wrought with, you know, there'll be a reckoning at some point as we set up and, and people say it's different this time.

Coming back to the company building part, I think you mentioned Max Levchin's article on the one person billion dollar company. At the same time we have all the upcoming solutions and things that are already there with all the AI stuff, Devin and other companies and do you think like, do you think it's either the companies like will people and founders build more complex companies and tackle more complex problems and take the same amount of time or longer to build them because there are new opportunities or will they build in quotation marks easier to build companies that are like problems that are already a bit more familiar and known but in less amount of time because of the capabilities of AI?

Yeah, I mean theoretically what should happen is that we should be able to build much faster maybe to Peter's outsourcing non core competencies. I remember in the early 2000s building Zoom and we had to build every aspect of, you know, fraud detection, deterrence, we had to build, build in KYC, we had to build in filing suspicious activity reports, SARs and now all that is obfuscated. You know, there's like, you know, there's like a library or there's like a, you know, a component or a platform to do any and all these sort of things. And so like being able to assemble together a lot of the components of a company, you still have like that key differentiation piece that you have to build but yet theoretically we should, we should be able to move faster and build more. But that's theoretically and often. With Devin or other code creators you should just start building up bigger and bigger platforms. So eventbrite, I hope it's not under NDA, but we're implementing Devin. So we have one instance or I'm not exactly sure how it's implemented but you know, when we're at 100 or 1,000 Devins, like what happens then? Like how fast, you know, wouldn't we be moving at like nearly the speed of light and doing so much and so that's a very exciting future and yeah, but these things always like take much longer than we suppose. Kind of like AGI is always five years away.

One last question or topic? I think there are not many people that are more deeply rooted in the Silicon Valley than you are. What's your take on other ecosystems? Could be the US ecosystems like New York, but could also be Europe or even South America, Asia, whatever.

Yeah, ecosystems are really important. I was talking to a friend, had dinner friend Karthik, who started Polychain, the crypto fund. And he was commenting on how like these sort of crypto havens had diminished after Covid. And we were kind of just noticing that there was like a resettling in the Bay Area and even New York or Puerto Rico. You know, some people stayed in Puerto Rico for different reasons, for tax reasons. But yeah, I mean I'm really interested in kind of communities that come together around things. I mean, but I still am not finding, I mean outside of maybe Hollywood and that ecosystem which now the streaming leaders have all infiltrated like Netflix. But you can see I'm very biased towards tech. But yeah, I mean I think the most interesting communities are the ones like what happened in Hayes Valley over the last couple years where it all really started in one shared hacker house. And that hacker house kind of coming together around a community coffee shop and other community area and more people moving in. And as AI grew out, Cerebral Valley was really born and now you have HF0 and you have like all these startups sort of streaming in from. In populating Hayes Valley in a way that like this whole new kind of community has, has begun. And, and so in terms of movements, I don't know, it's like the Left bank in Paris or something akin to that is. Is what I want to say. And I'm. And, and I. Outside of maybe Burning Man, I can't think of any other like mass phenomenon.

Like it for everyone not so familiar. Hayes Valley is a spot and location in San Francisco where a lot of AI people met and gathered as you described. And then everything else became work, came a bit out of it. And the last question for this podcast promised is if somebody's listening and says, okay, what Kevin talks about seems to be very profound. I would love to work with you and Astar and who should reach out? Who are you looking for at the moment? What are you investing in?

Always looking for great talent, always looking for founders that are out raising seed. We primarily focus on seed rounds. We love to be first money in. Kevin.

Thank you so much. It's been such a pleasure.

Thank you. A lot of fun.