BVP合伙人 Byron Deeter：风险投资的未来——为什么拿Chanel对比Walmart是胡扯

The stakes are way higher than they've ever been. I thought we understood this next phase we were going into and how big this was going to be, and very sincerely, we've probably added a zero to everything. I think there are going to be a lot of trillion-dollar businesses created from this. The game is on.

Byron, you know what, dude? I appreciate people who gave time when they really shouldn't have done to 19-year-olds who knew nothing and were so kind and supportive, and that was you. So thank you for rejoining me when I am slightly older but much less intelligent than I was. It's great to have you back, man.

Harry, you big stud. It is great to be back. It is awesome to see you. It has been too long, but it is amazing to see what this thing has built into. Congrats, and I'm thrilled to be with you today, my man.

1. Why are the stakes in AI higher than ever before?

Do you know what? I'm as surprised as everyone else, to be honest. I do want to start, though. We were chatting before, and you said, “A couple of years, but now it feels different, and it feels great.” This was not in this beautiful agenda here, but I wanted to start there. Why does it feel different and great now, and why are you optimistic bouncing into work today?

This AI stuff is just awesome. I'm a tech geek at heart, and we all look a little taller and sound a little smarter when there's an uptrend in a market, but this one's different. This is going to be the type of thing that we tell our grandkids about and that generations talk about as a transitional moment. It's absolutely awesome to be part of it.

2. Is defensibility in AI gone for good?

I think great businesses will be built and money will be made, but just from the technology side, what we're going through is so damn cool to see, and I'm just loving it. It's neat to see mind-blowing demos again and to be part of discussions of what can be—things that you couldn't have conceived of a few years ago. It was tough. It felt like a steady gut punch coming out of the 2020s, with the market pullback and people questioning tech, so many board meetings doing layoffs, and just having to survive. It's just awesome to be back on offense again.

I agree in many respects. The challenge that I have, though, is the transience of “wow,” so to speak. What I mean by that is: “Wow, that demo is amazing. This company's great.” Three weeks later, there's a new demo from a new company, and, “Oh, wow, it really is quite average.” It seems like the defensibility is completely gone. The commoditization is almost across everything, and so it's very difficult to know where to play. How do you think about just playing the game on the field and being aggressive because you have to, versus pausing to see what shakes out?

I would phrase it a little differently. I would just say that the pace of innovation is incredibly compressed right now, and the best teams are using that to their advantage and iterating at mind-boggling rates. The marginal companies are getting passed faster than ever, and we're going to keep seeing that because the tech and the enabling tech is so damn good.

I don't worry about commoditization in the sense of price erosion, which is often implied. It's often used as a derogatory term, but sure, you can think of perhaps foundation models as commodities in the way that hyperscalers are. By the way, the best business in the history of software is sitting there with AWS, in what people refer to as a commodity. I think the same playbook's going to be run in the foundation models.

I think the layers on top of those models are going to extract phenomenal value because they're going to deliver phenomenal value. I think we're going to see great businesses built at multiple layers in the stack.

To what extent do you care about margin when investing today? A lot of people are denigrating a lot of the specific app-layer companies for having shitty margins. How do you think about the importance of good margins early when investing?

It was interesting how you worded the question: “How do you think about margins when investing today?” I would add some words in there. I care a lot about margins on investments we make today, but the margin profile of the future.

A lot of these businesses that are doing transformative things may have really crappy, certainly net margins, but more importantly, where I think the question was going, gross margins, because of an investment profile that involves massive capex, et cetera. You can look at a business like Snowflake that had negative gross margins very late in its life cycle. That was a precursor to the LLM world, where these businesses have had very tough gross margins in the early days, and you're now starting to see the leverage kick in.

We are investing for the future. None of the investments we make are cash-flow-based in the short term. In fact, very few of them are gross-margin-based in the short term. A lot of them do require you to look over the horizon and see what can happen.

In a business like Stripe, Twilio, or Shopify, they went through those journeys as well. Many businesses have this really intense, capital-intensive investment horizon, even outside of frontier tech.

When we think about the capex required that you mentioned, these are, in large part, very capital-intensive businesses, even on the app layer, to the extent that we haven't really seen before. How do you think about the dilutive nature of these businesses, given how early we both are and how much cash is going to need to go in?

We talk about this a lot. I'd say we're excited, in many cases, to be small investors in very large companies. You look at Anthropic, Perplexity, or Canva. We have 9 figures into each of these companies, and yet we are still well below historical venture standards, where you aspire to own 20% or something in these businesses.

It's a long journey where billions more will probably be raised by at least a couple of those, and so it is a different venture.

Why did you decide to break the rules there, my friend? Because there's always an opportunity cost of cash, and you can put that 9 figures somewhere else, and that multiple is just getting shot. I remember one of my friends in Anthropic, and they did it at, like, 4. When it was done at 60, they had, like, a 3.8x because of the dilution, and that really struck me.

My question then is: Amazing businesses, and yes, generational-defining, but the opportunity cost on that multiple is pretty high. How did you guys?

If you believe that's the end state, sure. But current reports suggest Anthropic may be raising at $170 billion, and people are buyers at that number, believing that it could be one of the next hyperscalers in a trillion-dollar business.

A 3.8x will keep you in business for a long time, but the reason to do it is because you believe it could be a 30x. That's the basis of our Anthropic investment: We believe that it is a generational company. There aren't going to be many of those, and so you have to be right.

That's the scary thing right now: The stakes are way higher than they've ever been. These businesses, in some cases, could still go to zero. You've got these hyper-power-law outcomes that are scary, and it is changing the nature of the game.

I do think that scale matters for venture firms to be able to play over this arc of private life. On the flip side, the outcomes are going to be bigger than we've ever conceived of. I sold my company years ago for hundreds of millions of dollars, and that felt like all the money in the world. It was the top outcome for our software cohort in that vintage back in 2005. Now that's a seed round for some of these businesses.

3. Investing Outside of Top 10 deals

Well, I think one of OpenAI's rounds is about the size of the entire SaaS funding market for that quarter, so don't feel too bad. I was chatting to Jason Lemkin before this, our mutual friend, and he said, “What I'd love to understand very much on this point is: When we look at the concentration of value and the concentration of funds, is there any point in investing outside of the mega-top-10 deals today, given 40% of venture funding went to 10 deals?”

It's a big landscape, and so there's a skew with the dollars-raised stats because of that concentration.

I think the numbers right now—the top 3 LLMs, if you include Anthropic, OpenAI, and X in there—are going to raise $100 billion in this 6-month period. That's just an inconceivable number by any historical standards, and obviously people are betting that there'll be an eventual return there.

However, there are hundreds of other really compelling venture businesses that will be created in and around those ecosystems. I do believe there will be great venture outcomes from a number of companies in and around those businesses. The power law will play into the premium outcomes of those returns, but I also think there's a lot of 10x and many 100x returns that are going to exist in and around those businesses.

I do think that the economy is still vibrant and healthy. It's just skewed much more than we've ever seen or literally could have believed just a few years back.

4. Is vertical SaaS dead?

Can you help me, my friend? I'm a vertical SaaS nerd—not quite as good as you, sadly. Otherwise, I would own sports teams, too. But my question being—

Give it time, Harry. You're far too kind.

I feel like an old man, if I'm honest.

Like looking for the next ServiceTitan or the next Procore when everyone else is shooting around with these incredibly cool companies. Is vertical SaaS as we know it dead in the way that, honestly, kind of, who gives a shit?

I think it's a legitimate question. Our view is no, but it's an area of debate. Frankly, alpha comes from not only being right but contrarian, ideally, because you're going to get some counter-cycles in there. Our belief is that it's going through another cycle, and AI is a foundational part of where vertical SaaS is headed.

Data models matter much more than they historically did. Connectivity and collaboration up and down the supply chain matter much more. Marketplace capabilities are a defensible moat. There are a lot of attributes that matter a lot.

As I think back on our vertical SaaS investments, like Shopify, ServiceTitan, or Toast, when they added payments, it became that big next-horizon unlock for them and really doubled the TAM and the market caps for these businesses. I think AI is going to do the same thing with what it can do with ServiceTitan, as they talk about automating the technician experience and the ability to go out there and have a copilot alongside of you.

I was at the MaintainX board meeting yesterday. They're doing the same thing on the factory floor. When you look at Luxury Presence in real estate, look at what they can do for real estate professionals to interact with their clients.

And so the competitive landscape is heating up in the sense that more entrants are able to come over from horizontals and come up from infrastructure layers to try to make a run at these spaces. But I do believe great vertical software will still win. These are big markets. These practitioners deserve great tech, and they will get it.

In many ways, I love that it's not as sexy right now and people are distracted, because we're going to stick to our core and work with great founders and great markets. I think those will be rewarded over time.

A couple of questions off the back of that. You mentioned some great businesses, but some businesses that are already at scale. That's different versus a company that's at sub-$1 million in revenue with next to no distribution and next to no customers.

Absolutely. We're doing both, Harry.

If I were to push you into a camp, does it favor ServiceTitan more or your pre-seed company more?

Okay, so that's a great question, and I will confess we're in the challenger business. AI gives the incumbent some advantages that didn't happen in Cloud 1.0. In Cloud 1.0, you had a business-model dislocation going from license to subscription, and you had a delivery-model dislocation going from on-prem to single-instance, multitenant, cloud-delivered software and business models.

In this AI wave, it's really the next horizon of cloud. You're layering intelligence on top of cloud delivery and business models. You're moving, maybe, to a token model or some other monetization of value, but essentially it's an extension of cloud. The incumbents have platform advantage, data advantage, and massive distribution advantages.

The fast-moving incumbents are absolutely going to make a run at being the leaders in the next cycle, which hurts the challengers, and that is a reason to be scared. I still believe that the high-execution challengers will beat them over time. They also have some inherent advantages as innovators, and all of these things still exist.

But when I look at our own portfolio, I look at a company like Canva or I look at a company like Intercom that's at a scale where, in some ways, they're already becoming an incumbent in those markets, and yet they're disrupting themselves at awesome rates and have AI products that are already deep into the hundreds of millions in revenue. It's just fantastic to see what they're doing, which then, I think, will be an indication of what the public incumbents may be able to do if they're nimble and act fast.

I think Intercom will actually be a case study for the most aggressive reacceleration and rejuvenation in a world of very changing technologies. What Owen and the team have done with this Fin product is a great use case for AI, to be clear, where you have the customer data and that interaction.

I was at one of our portfolio company board meetings the other day, and they mentioned that they had switched from human-based interventions to the Fin product from Intercom. They showed the stats: deflections went up—I forget—to 90% automated, and their NPS went up.

I said, “Okay, I get that the deflections and costs are going down, but it makes no sense to me. Why is a robot better than a human in interactions?”

They said, “Look, they're giving faster and more comprehensive answers.” The recipient—the customer who has the question—is getting links, references, and more information back than our humans were providing. So it's a better experience.

5. Will AI Reallocate Human Labor Costs?

That was an unlock for me, where I realized that this can actually be a win-win-win on so many levels, and it's starting to happen. Customer support and service, messaging, help desks, ticketing, and these things are one of these killer use cases that's just starting, but it's going to roll through so many other areas.

I think the fundamental question that Rory O'Driscoll addressed, actually, at Scale—I don't like to tell them, but they actually make me quite a lot smarter by hanging out with them—is that the real question we have to grapple with in this next wave is: Will AI fundamentally transition the technology that we sell and create into the labor budget, not just the technology budget, or will it remain in the technology budget?

If it does move, amazing, we open up a multitrillion-dollar market. If it doesn't, much less exciting. How do you think about that fundamental question of the ability to move to the human labor budget?

That question is already being answered. It's not even a debate anymore, Harry. It's over. These tech solutions are absolutely addressing software, hardware, and services budgets comprehensively, and they're doing it in a very successful way.

If you look at early adoption in categories that skew this way—and so you asked, are we still doing early-stage vertical SaaS?—we're going down accounting, legal, and medical. We're going through these sectors where there's a lot of frontline humans doing busy work and paperwork, and we're supercharging them.

We're taking away a lot of the manual transcription and summarization, as well as error-prone, laborious processes, and we're freeing them up. [likely Abridge] is freeing doctors up in their patient interactions to actually interact and talk with a patient, rather than having to turn around and type things into the computer for most of the meeting.

Okay, that's a really interesting topic, because what struck me there was Epic coming out and saying, “Hey, we're going to offer transcription.” I think you're seeing this more and more, where the incumbent is fighting back. How do you think about that fight back from the 30-year-old incumbent?

The game is on. Epic has had this wonderful state-endorsed monopoly for a long time. I hope that they're going to continue to be forced to be open as a system, and I think you're going to see a thousand flowers bloom in the medical ecosystem, because that is one of the most important areas for AI to address.

If you read Dario's essay from Anthropic, “Machines of Loving Grace,” I highly recommend everyone reads it. It's a tech-optimistic outlook of what AI can do. One of the great statements he has is that 100 years of medical research is about to be pulled forward in the next decade.

This certainly goes into diagnostics and treatments, but it also goes into patient-care interactions. AI can be so damn powerful when you use it to help patients at the point of treatment, at the point of care, for follow-ups, for preventative medicine, and those sorts of things.

Epic holds the key in terms of patient data that we need unlocked, and we need that treasure trove to be accessible for these apps and for innovation to happen. I think it's going to happen, and I'm very bullish on the potential for AI in medical use cases and healthcare more broadly to be utterly transformative for quality of life and the treatment processes for patients.

We mentioned moving into the human labor budget. We've seen—I mean, one of your companies, Shopify—unbelievable, like 91% revenue growth in the last few years with a 30% reduction in workforce. You're seeing Alex Karp say the same thing at Palantir: reduction in workforce, massive growth in revenues.

Are we seeing the era completely where it's dramatic reduction in workforce and optimization of revenue? More with less, ruthless leadership on this behalf?

We are. I just would push back on the ruthless leadership point, in the sense that I love the statements these executives are making, which is: We're going to give you all the tools in the world to supercharge your daily job so that you're doing the cool stuff again. You're doing the strategic work, the architecture, and the direction.

Tech is going to work for you. You're not going to be a slave to tech. It's going to enable you to have much more leverage. We're going to grow the business, but we don't need to grow the workforce to do it. We're going to supercharge what everyone's doing.

And so I think we're going to see the era of the microbusiness.

I think that we're going to have 10-person companies that are crossing billion-dollar valuations. Kids in schools are going to be able to launch businesses in real time in ways that haven't been possible before. And so, I think that is great for the economy. I've got 3 kids who are at various stages of entering the workforce.

So, there's going to be disruption, and that's scary. I absolutely admit that we're going to go through this cycle that we all need to understand in terms of what entry-level jobs mean, the training, the enablement, and those sorts of things. But society's been through this many, many times before, and I believe that we will work through this cycle quickly and positively.

You said that at the beginning when we chatted, and I hope you've still got that kind of youthful naïveté.

Sadly, no. In Europe, we say à la poubelle—to the trash. I'm really concerned that there's this generation of 23- to 30-year-olds who don't have a passion for the craft, who aren't experts in the craft, and who are about to get hit by what I think is this completely naïve, utopian view of, “Oh, we're just going to give you tools. You're going to do more with them, and how beautiful.”

It's a reduction in force, Byron. It's not like, “Hey, just do more.” Tobi's cut thousands of people, which has been a good decision for the business, but these 23- to 30-year-olds are about to get hit with a train. Do you disagree?

There's an awesome history going back to Bessemer Venture Partners' namesake, the Bessemer steel process, which many people don't know. You look at newspaper clippings from 100 years ago, and there are these great headlines and articles about the coming workforce dislocation and factory workers being displaced because the Bessemer steel process is so much more efficient, and the struggles the economy and society are going to face. And yet, literally fast-forward a few years later, and buildings are built into the sky because skyscrapers are now possible with stronger steel, railroads are built across the US, and transportation, connectivity, and e-commerce are unlocked.

You read the articles about the phone operators, and I think 4% of the female workforce was doing manual switchboard work. There was this idea of a huge dislocation of the workforce when that was automated. There are hundreds of these micro-cycles that have gone through with different tech disruptions and things.

It's coming, definitely, and at the same time, more opportunity is going to be created as a result, along with the potential for these new workers to leverage technology to do amazing, creative things. The micro-film producer can now release a movie that they can create on a laptop; there's the ability to do apps and the ability to do fundamental research with agentic, PhD-level support in new areas of biology, physics, and chemistry. We're looking at fusion investments now that I think will be supported and accelerated by AI.

There's just this whole different wave of innovative unlock that will be possible, which will favor the nimble, the reactive, and the dynamic. But society at large will benefit.

You make me feel like I'm being too negative.

It's an active point of public discourse. I get it. I also, by the way, don't agree with the fully utopian era of abundance where we're all going to sit back and consume the arts and the robots are going to work for us. It would be good for sports-team investments, with a lot of leisure time for arts, entertainment, and sports.

I don't go that far, but I do think we're going to get some hours back in the day. I think we're going to have a little more balance, and I think that we're going to benefit in areas like medicine that we talked about, and in education, where everyone can have a personal tutor and everyone will be able to have tailored learning pathways for their benefit. Again, in fundamental areas of scientific research, you're going to be able to merge fields where agentic, PhD-level chemists, biologists, and physicists will be working together at your side to unlock things in ways that weren't conceivable.

We mentioned the naïveté that I've lost, or the cynicism that I've gained, whichever way you want to put it.

Come on.

6. Is treble-treble-double-double now too slow for AI companies?

No, yeah. Sorry, dude. Dario's writing is brilliant but optimistic, to say the least. I think he just raised a new round when he wrote it.

My question to you is, I've been raised in this business, and as part of that, there are rules that are ingrained in you. One of those rules is triple-triple-double-double—the SaaS compounding growth journey. I look at that, and I worry that what we've told founders with triple-triple-double-double is no longer enough. Do you think that is correct, and that we have now misled founders, and that it isn't enough?

Now, don't get me wrong: it's still a pretty damn good business if you ride that arc and scale it. But unfortunately, yes. We just released a State of AI report that broke this down and quantified it. We were, again, geeks at heart, so forgive the analogy, but we referred to these AI ecosystems as galaxies and talked about some of these supernovas and shooting stars that are emerging, where we're seeing businesses go from $0 to $100 million in 1.5 years. That's the supernova profile.

Dario at Anthropic has now been open with it. They're well past it, so I think he's more comfortable sharing the numbers: $0, $10 million, over $100 million, and over $1 billion the next year. He's openly said there's a chance to cross $10 billion in the next year. And so, it's a curve that goes like this.

We used to have this chart in our State of the Cloud report that had a 7-year journey, and those were centaurs to $100 million. Going from $0 to $10 million in 18 months was like, “Holy shit, go deliver the term sheet with a dog and a golden retriever.”

Yeah, that's cute now, but it's off by an order of magnitude.

To be fair, this is a rare class of company and rare breed—a small subset of even the companies we back. Nonetheless, not all the companies that are started meet that profile. We thought it was important to document and share it and say, “This is actually possible now.”

Consumer-like growth for enterprise businesses is happening, where adoption curves can pull through great products at inconceivable rates of adoption and speed. The supernovas then yield to the shooting stars, which is kind of a 4-year profile. I would say that's the fatter part of the curve for businesses we're fortunate to work with, where you see a pretty good number of companies going from $0 to $100 million in a 4-year arc.

Again, that gets to this kind of quadruple-quadruple cycle, where the businesses are just scaling really steep curves. You had asked earlier about margin profiles. Some of these, early on, need to invest at heavy rates, but far from all of them.

You see a large number of these businesses doing it in pretty capital-efficient ways, and that gets incredibly exciting. You know that you're a data nerd like me. We talk about the Rule of X and these trade-offs between growth and efficiency and all that. Ultimately, we do still believe that all businesses should be valued as a sum of their future free cash flows, and that ultimately is the mark of a good business.

The incredible thing is that these businesses still have those fundamental economic profiles in most cases, where they can throw off real cash flow at scale.

But if I'm a founder now listening to you, what you're telling me is, “Hey, take as much money as possible, invest in fucking growth as fast as possible, and don't worry about margin.”

So, actually, no. That's why I wanted to make that second point: efficiency still matters. We do think that trade-off comes into play, and we quantify it. The Rule of X mathematically shows it's about a 2- to 2.5x multiplier value of growth over efficiency at mid-stage scale. Call it $50 million ARR or so.

Early on, the math doesn't matter much. It's hopes and dreams. You're just trying to get in market, so it's an infinite multiple of anything. But when you actually get the engine going, there should be math underlying the fundamental assumptions.

I assure you, one of the coolest things about the profile of Anthropic, Perplexity, and Canva—these businesses—is that the math actually pencils out. You'll hear these founders talk about how, in the foundation-model phase, it's a bit misleading because the P&L doesn't match beautifully. But you should think of these model releases as a product in and of themselves, and there's a healthy life cycle to that product.

You're monetizing last year's training in this year's revenue line while you're investing in next year's model, which is going to be monetized in next year's release. And so, there may be these order-of-magnitude step functions where each atomic unit of product is highly successful and profitable, and yet the P&L looks upside down because of this hyperscale—no pun intended—growth rate that they're enjoying in that forward-investment cycle.

7. From Incremental to Exponential: AI’s Scaling Curve

Even though it seems crazy, I believe it would be economically imprudent not to forward-invest when you have that market demand there and when you can show the unit economics working at each fundamental level.

Totally agree, and I totally get you there. A lot of people think that the excitement, although very real, will plateau in some respects, and that maybe GPT-5 is the first instantiation of that kind of incrementalism in terms of development. Do you agree that this incrementalism is coming, or do you actually think, given what you see today, that we're still so early on the curve that more compute—in the way that we're seeing Elon and Dario require it—will lead to continuous exponential gains over the next 18 to 24 months?

It's going to be fits and spurts, and I think that was part of why people were underwhelmed with the GPT5 release and the discussions around it. We've had these cycles before, and there will be breakthroughs, but fundamentally, I do believe—

The thing I love about you is your wisdom. Honestly, you've seen so much. Does it remind you of other cycles?

It does, and there have been some hard miles here. We've been through a lot, Harry. But the curve is still up and to the right, without a doubt, and I do believe that we will cross over this threshold. People use various different terms about levels of reasoning and awareness, AGI, and the like. I have no doubt that, if we're not there, we're going to blow past it very soon, and that we will get to this notion of higher-level reasoning that does mirror the world's smartest scientists.

I think that's coming in the next 18 months, and that these curves are going to continue. How we harness that and how it instantiates itself will be the opportunity for us all to figure out and monetize. But I don't think it's slowing down.

I do think that we're also getting many more hardware approaches and solutions out there. As wonderful as NVIDIA is, it's not just an NVIDIA world anymore. The chipsets from Amazon, Google, AMD, and others are becoming quite capable. You're also going to see different approaches, different optimization paths, and innovations in technology that unlock leap-aheads in terms of training capabilities and the cost to deliver inference. I do think that we're going to continue to see innovation there, and these scaling laws will continue to hold.

You know what I find really interesting, and what's changed a lot in my 10 years of investing, is the level of competition. I'm sure you remember when, 10 years ago, there'd always be 1 other competitor, and you'd hate them silently because it's rude to hate them publicly. There'd be 1 or 2. Now there's 15 in every single thing. How do you think about that, and how does it factor into your thinking when making an investment?

Yeah. The social graces are gone, aren't they? It's kind of a bummer.

Yeah. The way to win in AI—as Rory O'Driscoll says really well—is to enter a space and scream the freaking loudest, then deliver on customer promises afterward. Scream so loudly and raise as much freaking money as possible that you suck all the air out of the VC room, and then deliver from there. Harvey is a good example of that, as mentioned.

I think that works in some spaces. I think that's counter to my earlier point, though, which was that the great products are being pulled through. People are finding them. ChatGPT didn't scream from the mountaintops; they delivered a world-changing user experience, and people showed their friends. Perplexity is doing that in the search-and-answer-engine world, and these models at the API layer are doing this for business users who are looking to connect them.

I think the capital's important in terms of building and forward investing, as we talked about for the business model, but I actually think marketing and sales have less of a role in this new economy than they did before. These products, in many ways, are selling themselves, and product-led growth and innovation are the unlock for this supernova and shooting-star aspirational growth profile, because you can't put human sales reps against these things.

The sales learning curve that Mark Leslie talks about—we backed him decades ago in Veritas—is no longer applicable, because you just can't possibly throw the bodies at a 0-to-100 growth curve inside of 2 years. The sales models don't support that.

I totally agree with you there. One of the things I love about Bessemer is your discipline, actually, and I think you've seen it play out across multiple cycles. People consistently think you're a very disciplined player, be it in terms of temporal diversification and price. You've had to break that discipline in a new cycle. I'd just love to understand how you think about breaking pricing discipline today, where, respectfully, you have broken it in the names that you mentioned, and how you think about when you're willing to versus when you're not. Is it clearly just an outcome scenario-planning game?

Thank you for what I think was meant as a compliment, but I'll also say that we spend a lot of time—

It turned into a bit of a negative. I'm so sorry.

Well, it's fair. What I would say is that we're certainly not value investors. We pay market-clearing prices. We lean in where we believe it's there, and we're buyers again in some of these top-priced rounds, deep into the hundreds of millions. I think it's very clear that we played to win.

The distinction, though, is that we fundamentally want to understand how the businesses become self-sustaining and scaled, and we will walk from a lot of things where we don't see the unit economics penciling out. One of the most famous and most painful for me was Tesla early on. It's on my anti-portfolio. If you go to the Bessemer website, we have a page dedicated to our screw-ups, and that's one of mine, because I couldn't fundamentally see how the unit economics of the Roadster were going to work.

To be clear, they didn't. Without the DOE bailout loan and things, Tesla wouldn't have existed. But what I missed was that Elon is a force of nature, a generational entrepreneur. He put that company on his back and powered through so many subsequent layers that the next arcs of the model worked and pulled everything else through it.

That's one of my big regrets. Our job is to see that potential in entrepreneurs, to create those unlocks. That's the challenge that I put back on myself: how to break this notion of short-term discipline for the long-term horizon of what's possible.

What prices do you do at, then?

We've done the last several rounds, so I forget the valuation of the first round. I give [likely Pete Sonsini], by the way, a lot of credit. He's a good friend and a great investor. He also did Databricks, but he was very early with Ramp as that business was being formed.

We did what was technically the second round, I believe. I think that was branded a B; it may have technically been an A, and then subsequent rounds. Again, I wish we were earlier and larger shareholders, and I still regret that we didn't see what Pete saw early in that business.

Do you think about taking chips off the table at any point? We're seeing the extension of private markets in a way that we've never seen before. I'm not talking about Perplexity here, but just generally, we're seeing the extension of private markets in a way that we've never seen before. Horsley Bridge taught me that, fundamentally, venture is a very challenging category or asset class unless you know the small windows of hyper-liquidity and can recognize and act on them. Do you think we're in 1 of those small windows of hyper-liquidity in these assets today, and do you act on them?

I love that question, and I hope you continue to ask it of LPs and later-stage investors as well, because it's looked down upon right now. It's sort of a dirty word. If we went and sold part of our position in some of these companies, people might think there's signaling risk there or that there are issues.

To be fair, Bessemer has this awesome history, and we've generated billions for our LPs, so we don't have DPI pressure that some emerging funds might have. But I think that stigma is wrong. If these businesses went public as they used to—I mean, my very first IPO, Cornerstone OnDemand, went public with $50 million of ARR and, I think, a $700 million market cap, and they traded up to billions over time—that used to be a really successful IPO many years ago.

Now you look at Canva at $40 billion-plus, Anthropic at $70 billion-plus, and Perplexity deep into decacorn status and the like. These businesses aren't going public anytime soon. Yet, from an investor standpoint, there's an argument that they should be handed off to later-stage investors, hedge funds, and others.

I do hope and believe, for the industry, that liquidity in the secondary markets is viewed more favorably and is more active. This is a change in my view; I'll confess that I was pretty hard-line against this. Not for founders and teams—I always feel that taking some pressure off for them is good—but I didn't love it when our co-investors were looking for liquidity early in businesses.

I do think that in these mid-stages, when people are staying private for so long, an outlet is healthy, and I do think that LPs deserve that.

8. From Private Valuations to Public Markets

I think for emerging funds, it's important that you have these options and that the world doesn't judge you negatively for it, but actually understands that there's some economic necessity in a healthy ecosystem and that capital flows both ways.

For years, you've had a pricing premium in private markets, which has led in large part to the expansion of these private markets. Now you're seeing that move to the public markets, and you're seeing your Figmas pop in the way that they do, your CoreWeaves, your Circles, your Bullish pop yesterday. My question to you is, will we see this mass movement toward public markets, given the reception that this first wave has had?

Oh, I hope so, Harry. God, I hope so. Definitely, the discussions are heating up again. I do think we're going to have a healthier IPO market at the end of this year and, in particular, going into next year, but in many ways, we have to. It has been at record lows and record bad over the last several years, and that's not sustainable for the capital-flow reasons we just talked about.

This liquidity discount hasn't made sense. If you go back a decade-plus in the markets, private markets traded at a discount because they were illiquid, there was uncertainty, there were fewer disclosures, and those things. Logically, they should. Now it's a growth-adjusted discount, of course. When private companies are growing faster, you have to normalize the multiples accordingly, but rationally, there should be a discount for the lockup characteristics, the information flows, and those things, and we haven't seen that in many years.

I hope and would love it if the public markets returned to premium multiples and the private markets priced off of those. I'm not convinced we will, but I am optimistic that we are finally going to see more IPO activity. When you look at our Cloud 100 list, which will be released here shortly, I'll give you a little bit of a spoiler piece of news there: we're over $1 trillion in private-market cap now among just the top 100 cloud and AI companies.

That's just an astronomical number to consider. And so there's $1 trillion.

How much of that is legitimate, do you think?

What's that?

A trillion. How much of that is legitimate versus synthetic hype?

I think this is entirely legitimate, Harry, and that's the crazy thing. Now, of course, it's skewed toward the top. I think OpenAI, xAI, Anthropic, Canva, Databricks, Stripe—go down the list—I think those are incredibly high-quality companies that essentially are tradable public entities in a private wrapper today.

I think those are entirely accurate marks and very real. The quality level of this list has never been higher. I think there are buyers and sellers at the marks all the way down the top 100. Now, you can make a case that 101 to 300 may have some walking wounded, some last-round prices that are artificial, and the like, but I think we've cleared most of that out of the system.

When you look at Mr. Irrelevant, if you use the NFL draft analogy—number 100—it's an awesome company on the list. It's a great business that certainly people would be buyers at or above the last-round marks. I think you're going to see that across the list. Again, there's $1 trillion of enterprise value sitting there that's not yet in the public markets and should be soon.

You said we're not going to see your Canva go out soon.

Why? I said this to Cliff. I messaged him after the Figma IPO. They should go public.

I told him he could have just done the Giving Pledge to my fund.

They should, and I think they will. I'm not scooping news, and I put them in a general basket of very short term—meaning, in the Q3 window or the like. Clearly, they could have been public long ago, and they're in no rush. Of all the founders out there, they're thinking incredibly long term.

The ultimate Giving Pledge that they did, giving away 30% of their economics for the public good, including a lot of initiatives in Africa, I think that shows—

You would have absorbed the $30 billion happily. See, Harry, the power.

I would help a friend, Byron. Okay, I'm here. Well, I could. Sam, do you want it? Yes, please. It's amazing how many SPVs have popped up with that exact value proposition. Oh my God. It's like there's a wrapper on a wrapper on a wrapper, and my dentist is doing it now.

I have no doubt, and that is probably another sign that things may be a little heated. But I do think that great companies like Canva ultimately deserve to be public and will be public. They've hired a great CFO in Kelly. They're certainly giving indications that they're headed in that direction, but they continue to think long term, and they've made it clear to investors that they do not want a short-term mindset.

We bought in. It's one of our largest investments in our firm's history. We're hundreds of millions in, and we're thrilled to be part of it. They keep building value, and we believe that it will be a great public company when they choose to go public. But the urgency level there is moderate.

What is your largest investment? When I had Founders Fund on, they said it was Anduril. It was their first and their second-largest check. I was like, whoa. It's one thing to be your first, but your first and your second. What's yours?

That's awesome. It used to be Twilio. Then, yeah, probably StubHub, Canva, and Anthropic—probably that bucket.

We now very comfortably go deep into the hundreds of millions. We understand that these rounds have grown to a point where scale does matter, and we need to be able to support our companies all the way up. We've added growth capabilities to be able to do that.

Did you have to learn to get comfortable doing that, Byron? You're my friend. If I were to describe the transition from a $20 million check—which is an awful lot of money, and we're both very grateful to have the luxury to write them—to a $200 million check, it is a very different muscle.

I'll tell you, as you're alluding to, it goes against your instincts when you have a business that's cranking, you own a lot, it's marked up 10x, and another round comes up that's also at a big forward multiple. There's this mental disconnect of, “Hey, let's let someone else now come and mark it up and price it, and let them run. I'm already sitting at a 10x. That's great,” versus, “I want to be a buyer again and reset everything, put in $200 million, and now I need to go back to work and prove that I can dig out and get a return on it again,” et cetera. It's intimidating.

We've actually added people and processes to make sure that we don't get subject to this kind of mental inertia. We invite in another partner to look at it, and our best deals—we're constantly saying, “Okay, we have the Century Team,” which we call it, and which we believe will be the iconic companies of the next century. It's also a bit of a riff on our Cloud 100.

It's a team that'll come and help and basically partner with you on a deal and say, “Okay, let's take a fresh look at this, let's re-underwrite it, and let's make sure that we believe there's a 10x ahead of us.” In which case, let's double down. We don't do it in a way where we're muscling out everyone else in these rounds. Oftentimes, we'll be part of a syndicate, and we still believe that other partners around the table can be helpful.

We're trying to break that mental trap of being comfortable with success and being afraid to really back up the truck. You'll see us doing that more and more.

Where I've fucked up is when you do a deal at $20 million at seed, and then 4 months later it's crushing it and it's at $100 million. I've been like, “Why would I pay 5x what I've just paid?” Actually, you have to be willing to pay up fast in your best companies and not think about it as, “Why would I pay more than what I've already paid?” It's a very dangerous mindset.

It's incredibly hard, especially when we're all investing at big numbers to begin with, and we have a lot of times where literally the day the round is announced, someone will offer them a 2x step-up. That could still be a great investment. The mindset around these things is difficult.

Is that bad? I remember Pat Grady saying to me, “Dude, the biggest challenge that I have is that I do a deal and the next day someone offers them 3 times the money at 3 times the price.” What we forget is that capital fucks companies and can distort the journey in a negative way.

I think there's a real risk of overfunding businesses. There's a good in there, which is that I do think there's a positive when you get great firms and partners in there. There's a signaling benefit and there's an impact. I do think that we can actually help move the slope of the line a little bit for these companies and add value.

One of the ways that we add value is that it makes it easier to raise downstream capital.

And I think that's totally true and a good thing. But there is an excess: the people showing up the next day with huge markups, pushing more capital, can be seductive to founders. Part of the discussion is, look, if you had that additional capital, the critical thing is not to spend it in a disruptive way. That's the foie gras analogy, where you choke on the capital, and you don't want that.

If you execute on the plan every day, you're going to be adding value. So let's make sure we're fully capitalized to play out this next horizon of risks, goals, and investments we want. And if we could take a little extra capital to that, maybe we do. But what's more likely is, let's actually go out and execute, put this first wave of capital to use, and build more value. Those investors are going to be there at even higher prices downstream.

9. Reflection on Byron’s Mistakes

The important thing—and we try to get alignment with our team members and things—is that we want to build a ton of value. If the round gets so frothy and runs away that it's even too highly priced for us to double down, that's okay. That's a good thing for the company. And if your cost of capital goes down a ton, then we're your partner. We'll go out and raise at a very high number and take very little dilution, and everyone wins because we're shareholders and we're aligned.

Peter Thiel always says his biggest investing mistake is not doing the next round of Facebook. If I were to ask you, what's the biggest mistake you made when you didn't double down again? What would it be, and how do you reflect on that personally?

Not only do I have the anti-portfolio of the misses that we didn't do—the Tesla and Atlassian and companies like that—front and center, but doubling down on every one of our winners. I'm fortunate. I think ServiceTitan was my 13th IPO, and I have a couple dozen unicorn investments. Mathematically, every one of those I should have done every subsequent round, and I wish I did.

Is there one that comes to mind more?

I would say, on the positive, Twilio—we did exactly this. With a company like Procore or ServiceTitan, we still were very large shareholders, but we had a lot of people come in and follow. I think this was one of the things—you talked about vertical SaaS, so there is a good lesson in this. We underestimated TAM and weren't sure these could be $50 billion businesses because we hadn't yet unlocked the payments expander. So we misassessed the total TAM and therefore got weak-kneed investing into the billions. But we left a lot of money on the table. We owned 28% of Shopify and Twilio at IPO, and we owned well less than that of Procore and ServiceTitan, just because we included a lot of other investors downstream.

Market-size misunderstanding and misestimation is the single greatest reason why great investments are not made. Do you bother doing outcome scenario plans, given that, for your best investments, you wildly misread them?

Not only do we do it, we require it. Every one of our IRs—investment recommendations, in our memo terminology—has a scenario analysis at the end. We have also published many of these on our website, where we'll go back and publish the memos. It's kind of embarrassing when we do, because you look at the just-goes-nuts upside scenario and they're embarrassingly small. It's not because, as investors at the time, we don't believe that they could be much more. We're trying to be rational and bracket it in a medium-term horizon that our partners will understand.

Yet the tiebreaker in these deals is always the one where you, in your gut, believe it can just go nuts and where the 100× scenario is there. It's always this amusing back-and-forth where the vast majority of our deals that we put forward solve to a 3×. You look at these scenario analyses and it's like, why is it that every memo I'm reading solves to a 3×? It's because people are trying to balance and be rational and talk about capital loss and all these things. But at the end of the day, the deals that get done are the ones where the partner is sitting there saying, “I'm pounding the table that the high end and more is possible.” That really is the qualitative overlay that has massive quantitative implications.

But if you think about the mistakes that have been made in terms of the misreading of markets and TAMs, is it not actually detrimental to the quality of your investment decision-making if we consistently misunderestimate or underestimate them?

It's incredibly detrimental. You go back and look at Facebook. If you did a TAM analysis on Harvard, Hot or Not, it would have been pretty small.

But then I go to what Jason Lemkin taught me, which is: don't do it. Don't do it. He's like, “Hey, you know what you do? You go: Is the founder world-class, one, and then, two, can I see a 3× by the time of the next round? If I can do the deal with a world-class founder and I can see it, don't try to think, ‘Is Twilio going to be a $10 billion business?’” No one thought Twilio would be a $10 billion business. Now it's much bigger. Just do the 3×.

Yeah. I don't fully concede that. Maybe the tiebreaker here in my mind is that I look for at least exciting adjacencies. You've got to have some killer unfair advantage to get started. You've got to have this mindset of, okay, they know what they're going to go attack first. They're going to build a killer product. They can get into some vortex of growth and launch. I may have a lot of questions about the TAM, but there's enough adjacencies, enough things that could go right, that they could layer things on.

I want to see that 3-dimensional cube of segments, products, and users that can flex over time. We don't have to have it figured out. We don't have to know exactly what it's going to be, but I have to believe that they're playing in a big enough pond where good things can happen. I think that's the difference. I will totally concede that there are times where we're not imaginative enough to go after it, and great founders will break through at times. But I think that combination is still powerful, and the investments that we're making today—and certainly that I'm making personally—tend to still massively overweight those 2 things: team and TAM, and at least our vision of the TAM horizons.

The analogy we were talking about with vertical SaaS before is that you go through workflow automation, then you go into payments, now you go into AI, and you go into services. Even what seem like small markets can unlock massive dollars when you're creative about the horizons. That's what great entrepreneurs will do. They'll go attack those markets, suck up the value, really deliver an awesome product, and can build great businesses. As long as you price things rationally at each step and walk it up, it probably back-solves into Jason's math also, but from a top-down rather than bottom-up point of view.

I think the unwavering lesson is that truly great founders always find the second act—the payments for Toast—which completely unlocks a business that was never there before. You said about 28% of Shopify at IPO. My question to you is: famously, you guys distributed pretty early, and the outcome since has been so astronomically larger than anyone anticipated there. Do you sit and reflect on that as a partnership and change your go-forward stance on liquidating positions once public as a result?

Importantly, we distributed early. We didn't necessarily sell. What we did is give people the choice. A lot of LPs, mind you, do sell pretty quickly after getting stock by mandate. That left a lot of money on the table for a lot of folks. We absolutely wish that we had held on to Shopify and not distributed when we did. Hopefully, some of our LPs—and certainly some of my partners—have held and been able to benefit from the run-up. At the end of the day, it's a fantastic company. I think there's still a long journey ahead, and that's why you see people still buying even at these valuations.

Toby's one of those force-of-nature, generational entrepreneurs as well.

I completely agree with you. Do you agree with Sequoia's evergreen fund structure in terms of a strategy?

Yeah, I agree that there's a lot of positives to it. This idea that you have incentives to manage all the way through. Bessemer actually has a heritage where, many decades ago, we had some evergreen components to it. But I do think it's hard. I think public-market management is a different beast. I do think that the economics should be different.

At the end of the day, especially in a DPI world, our LPs get paid to manage capital and do the allocation, and a lot of them want the capital back. The merits of consistency and fund flows and those things have some trade-offs with hold periods and public duration. I love innovation in capital markets. We're seeing other firms adding asset-management businesses and debt products and rollups and doing all sorts of things. There are some kernels in there that we agree with.

10. Is venture now just a game of scale?

There’s a lot in there we probably aren’t going to pursue. But as a fan of capital markets and innovation, I applaud creativity and pushing bounds.

Capital markets and innovation, baby. Is venture a game of just pure scale? We’re seeing General Catalyst. We’re seeing Lightspeed. We’re seeing Andreessen Horowitz. You need money to play this game now, it would seem. Do you agree with the world that is being often articulated? I call it Chanel and Walmart: a boutique provider with a specialist customer, and then Walmart, an enormous provider with a wall of cash that sells everything. Do you agree with that or not?

Do I agree with the Walmart analogy? No. But do I agree that scale is important? Yes.

Why don’t you agree with the Walmart analogy?

Well, actually, the direct analogy of the low-cost provider with a lower cost of capital, pushing to the bottom—I think you’re seeing a maturation of the asset class. I think the analogy might be the investment banking world, in that you have platforms like Goldman Sachs, Morgan Stanley, and J.P. Morgan that are providers of broad, global, multi-asset, multi-stage, multi-sector services and can be full-service shops. That’s very much the path that Bessemer’s on.

We have 9 offices around the world and manage tens of billions in assets. We’re multi-stage, and we want to be able to support our companies all the way through. That’s very much the mindset we’re in. I also believe that there are specialists, and maybe the Tiffany’s analogy is—I don’t know—in the banking world, maybe that’s the catalyst or what have you, where they’re very good at very specific things.

That’s very much the strategy that Benchmark continues to run, and I think there’s a lot of opportunity there. There can be a bimodal curve in terms of approaches. In particular, I think geographic firms or very specific sector firms—healthcare has been an example where sector expertise has been a real advantage. But you need scale, and so I think healthcare-specific firms have had success for that reason. This maturation is going to make it tough in the middle.

How do you think about that? That’s an interesting one. I don’t like thematic funds. I think healthcare and cyber are 2 areas where it really pays to be thematic, because deep sectoral knowledge and networks are so required. But if you actually look at the majority of great venture firms, in terms of the winners that they’ve had, they’ve been generalist funds.

I don’t buy the defense firm, climate firm, or fintech-focused firm. Actually, do you know what? Stripe was won by your General Catalysts of the world, not by others.

I actually agree with you for the most part. I would say that you will get alpha from some of those funds, but the important thing is not to get calcified in an approach. This is very much why we don’t hire sector-specific investors, and we don’t give you air cover if your sector goes out of favor.

Our job is to make our LPs money. If you’re in a sector that’s cooling off, you better get the hell out and go somewhere else that’s going to make money, or you should stop investing. The risk of having a semiconductor fund or a semiconductor team is that you carve out, pick a number, 500 million to invest there. You bet your ass they’re going to invest 500 million in semis, whether the right answer was 2 billion or zero. That’s the risk.

We have a very different approach, which is that we’re constantly optimizing the incremental dollar across sector, but also stage and geography. We compete for dollars, and that is a mindset that we love. It requires constant reinvention.

The term we use internally is “road maps.” At every one of our offsites, partners are presenting new road maps and talking about themes, sectors, subsectors, and investment hypotheses that they have and are going after. They’re getting feedback, sharing it, and iterating.

If you don’t constantly reinvent yourself, you don’t have a future because the markets are moving fast. It’s our imperative to get ahead of the next trend, not sit comfortably in a sector that has had a good run and believe that you’re entitled to another good 10 years ahead.

Byron, I love you, dude, and your track record is just so good. Did you ever have a bump in the investing period? No, I’m being serious.

I know. That’s why I’m laughing. It’s not a silly question. It’s a painful question.

13 unicorns. I was shouting to my mother before this, and she’s like, “Oh, what are you doing this afternoon?” I’m like, “I’m interviewing Byron.” I told her about you, and I’m like, “13 unicorns out of, I don’t know, 30 companies.” Your hit rate is ridiculous. Did you have a moment of self-doubt or a crisis of identity as an investor, like many are having post the 2021 era?

Oh, Harry, I’ve had so many. In our industry, you just wake up and read TechCrunch or listen to some of your podcasts, and you’re reminded how bad we are at this job because there are so many cool things happening that we’ve missed.

My first road map at Bessemer was RFID—radio-frequency identification—which was and is a zero-trillion-dollar market. It was a total dud, and thankfully I only made 1 investment there. It also had a SaaS underpinning, so we ended up pivoting and making a few bucks, but it was a stupid idea.

What I credit my partners with is, 1, patience, but 2, direct feedback. We iterated and pivoted. Because I wasn’t hired as a radio-frequency-identification investor, I was given the opportunity to pivot. My secondary road map was cloud, by the way, which ended up being a pretty nice second act.

It was a really bad idea. My first 3 investments were all very bad. My next 2 ended up being billion-dollar IPOs.

I spoke to Doug Leone about this, where you have young people who make bad first investments. I certainly did the same. I thought WhatsApp for doctors and nurses would be a good business. How did you get out of the trough, or not get in it? 3 bad is tough.

Again, I think that this is patience and support from the partnership to make enough shots on goal to get some statistical relevance out of the sample size. I remember one of my great senior partners, Phil Hardman, who was a professor at HBS for years. I would go sit in one of his classes and have a long dinner or lunch with him, and he drew on the board my career, which was basically this straight line, with some bumps, and then a little bit of a tick up with Cornerstone OnDemand and Loquin and some of my early things.

He was like, “Just give it time, dude. You’re wandering in the desert a bit. I know you’re anxious. You’re Type A and want success, but this business is all about building a portfolio and putting yourself in position to be successful. Don’t shoot crazy big checks out of the gate, so if you go 0 for 3, you’re done.”

That was hard to take at the time because we’re all aggressive and enthusiastic in this industry, but it was the right feedback. Resetting and learning and trying to get better allowed me to be in a good headspace for subsequent investments, to keep going, and to have some confidence.

I remember back when I was an entrepreneur, one of my board members was Rob Vasan. He was at Mayfield at the time. I went to see him when I was going back into venture and joined Bessemer, to get some advice, and he said, “Your first investment is going to suck. It always does.”

I was talking to him about a deal specifically, and he basically said, “Well, so don’t do it.” I’m like, “But Rob, by definition, then, I’ll never do an investment, because you have to get over that first one.” He’s like, “Yeah, but this one really sucks.”

Unfortunately, he was right on both. My first investment did suck, and I shouldn’t have done that one. But I think the point applies, which is that it’s a learning game. You need to be in it to have enough shots on goal to score some.

Cycles matter a lot. I really feel bad for great potential investors who joined our industry with checkbooks in 2020 and 2021. They did great deals, but at market prices that were way too high. Many of those people got washed out of the industry and never got a chance to make their 4th and 5th investments like I did. We may never know if they could have been great investors.

Cycles matter a lot, and having enough bullets in the gun to hit a target matters a lot.

I think that’s why temporal diversification is so important. I look at our first fund and it’s like, you know what, a lot of it is high-priced and good companies but high-priced, and then the second half is much more reasonably priced. That’s where not shooting your load in 18 months is so important.

Very much so. Time diversification is one of the few things we can manage in our industry. You mentioned it in terms of exits with the LP comment, where concentration matters. That tends to be true, but it’s not something we can control because there tend to be IPO windows and M&A windows. Our job is to try to take advantage of them, and they’ll cluster, but we can’t usually create those when markets are closed.

However, entry diversification we can create. Few of us are good enough to actually play the markets counter to trends, be most aggressive when things are cool, and really pull back when they’re hot, which is probably what you should do.

But at least some notion of smooth and consistent returns to weather those storms, so that you can take advantage of the cluster of exits, tends to be about the most successful model for time diversification in venture.

We’ve seen a ton of young people start their own firms. You’ve seen people even leave Bessemer. Do you think, though, that the spinout time is up? We saw this compressed period where there were a lot of spinouts very quickly. Do you think that was a new normal, or do you think that was a compressed period where people realized that carry would be less than they thought and it would actually be better to be a solo GP or a GP of their own fund?

The latter. I do think that this was a point in time where people were looking for that reset, where, for positive or negative reasons, they wanted a fresh start. In venture, I do think partnerships and platforms matter, and ultimately, a lot of those goals are to then go out and build another firm. You’re either running from something or to something, but at the end of the day, I think the best firms are pretty flat at the top, and so you’re not seeking better economics. You’re really seeking a better environment or better structure.

I do think that a lot of great partners were able to launch out, get funded, and kick off. We’ll see platforms then built out of some of those new funds, and probably more reinvention in the industry than we’d seen before.

But it is one of the few asset classes where past performance is an indicator of future success. Private markets are very much networking- and ecosystem-based. You see that very analytically. I referenced my partner Phil Hardman, who taught at Harvard before. He would quantify this, and he wrote the textbook *Venture Capital and Private Equity: A Casebook* and would do the data. I forget the exact numbers, but it was something like 8 out of the top 10 firms in one cycle would repeat in the next because there was this virtuous cycle.

The challenge is which of the new funds are going to break in and be those next 2 that disrupt. There’s opportunity there, and maybe it goes up to 3 or 4. But I also think that there’s a benefit to being a consistent, stable platform, and many of those will persist.

11. Can PE Turn the Tide in Tough Markets?

Final one before we do a quick fire. Everyone’s always saying, “PE is going to come save the day. There’s going to be a wave of PE acquisitions.” Do you think PE will come in and save the day? And, number 2, do you think the rollup strategy that they’re trying now with your Salesloft and your Clari will actually work?

I think the next wave of liquidity is going to come from a combination of several buckets. I think PE will be one of them, and it’s going to be a pretty fun time for PE as these companies are long in the tooth. The vast majority are not going to go public, and consolidation will make sense because, at the core, a lot of these businesses have very high gross margins and are run pretty inefficiently because we’ve got a growth mindset and we’re certainly not optimizing for cost in the early days. There will be a lot of opportunity to work through those portfolios, and I think private equity will have a run there.

I also think big M&A is coming back. I do think that the incumbents responding to the cloud and AI imperatives are going to need to get back in the buying game. The FTC is finally taking a more rational posture on antitrust and blocking deals and these things. I think they’re going to let market forces operate there again.

There will be this buying imperative that rolls through the public markets, and companies like SAP, Oracle, and IBM need to buy or they’re going to get crushed. I do think that the IPO markets are going to open up again, and we’re going to see a pull-through there.

The big wild card, this fourth bucket, is what we talked about briefly. I thought that one of the great questions you asked was, will secondary liquidity start to flow through from different capital providers, and will crossover investors be comfortable doing more secondaries and things? I think yes.

I’m not totally sold on these exchanges for private markets or these sorts of things, but I do think incrementally we’re going to see people get more comfortable with secondary transactions and stop looking for signaling risk in that. We’re going to take pressure out from all these sources, which will then get capital flows coming back, which ironically may then just feed the engine at the front end even more.

Did Tiger do more to help or to hurt the ecosystem?

Oh boy, the foie gras analogy comes back to me there. Incredibly mixed. I think that there was a lot of happy disruption, big thinking, and creativity that I applaud. There was also a lot of reckless overfunding, deal work, and non-governance that we’re going to have to clean up for quite a while.

I think their returns will be better than people give them credit for. When I look at Scale, when I look at OpenAI, and I look at quite a few that they’re actually in with me, they’re at the top of the preferred stack, and they’re in 50–60 million ARR companies at $300–400 million prices with 3–5 years of runway. I’m like, they’re not going to lose money on those deals. They’re not going to make huge money, but they’ll be okay.

That’s the amazing thing. Over these cycles, an index of the venture industry may be fine.

Yeah. Historically, it has underperformed the S&P and probably will again in this case, but you’ll make money.

I think that very well could be the case there. It certainly wasn’t optimal portfolio construction, but at the end of the day, I think you’re right that they’re going to have some home runs in there that more than make up for a lot of the zeros. In the middle of the pack, there are going to be a lot of 1–3x’s that carry the load.

12. Quick-Fire Round

My friend, are you ready for a quick-fire round?

Well, let’s do it. I’m in your hands.

Who’s the best sourcer on your Bessemer team?

Everyone in our partnership is constantly outbound. I would probably put Jeremy Mavine there in terms of just his ability to see unique deals that are contrarian. Part of sourcing, we think of it as, “Hey, outbound, aggressive, creative,” et cetera. But the insights to see what others don’t is the essential part of that that’s often overlooked. I give many of my partners credit for that, but you asked for one, so that would probably be my answer.

Best picker. Who do you think is the most accurate?

He steadily finds great people in weird places doing bizarre things. Rocket Lab is one—Peter Beck sitting in New Zealand—or Oura, or some of these things, where he just has incredibly high conviction and will pound the table at times on things that may seem non-obvious. He just has an incredible nose and has been doing this a long time.

Dude is a hero. One seed firm, one Series A firm, and one growth firm that you can invest in as an LP. Go.

Oh boy. To be clear, you gave me no prep, so I’m going to give this on reaction. You didn’t do the nice thing and give your speaker the prep notes.

Seed fund: I mentioned Pete Casella before. I’ve got immense respect for what they’re doing at L2 Ventures and where they’re going at the inception stage. They’re literally sitting in the classrooms and labs at Stanford, working with professors. Pete’s done this many times already with Perplexity, Databricks, and many others, where he was literally there at the inception stage of these decacorn businesses. Any one of those deals would be a great fund return or a great career for an investor, and he’s done multiple. From a seed stage, I think they’re going to do some really special things.

Early stage—oh God, there are so many. You know what? I think the First Round folks. This is horrible. I’m forgetting Uncork’s new name. Remind me. Sorry—Uncork is the new name. That’s right, the predecessor. I think Uncork does awesome things and is very aligned in its investment style and approach.

You mentioned Lemkin and what he’s done in very selective ways. I just have a lot of appreciation.

I mean, it’s nice. I love those people. Jason’s like my dearest friend—dearest. None of the new guard there. Those aren’t the sexy names. You chose First Round, Uncork, and Jason. I love them. Again, I love them. I agree. They’re all 10-plus-year firms; they’d all be long in the tooth. You didn’t mention, ironically, your Sarah Guo or the hotter names. I’m just interested. That was interesting.

Harry, you suggest that history is a negative. I think quantitatively history is a positive. I think the data shows that you actually benefit from some pattern of success and platform.

Each of those firms has to go through some cycle, and both First Round and Uncork are certainly going through generational transitions. But I think the next generation are incredibly promising. I think the founders would even say they’re proud that they’ll carry on and exceed them. I think those firms are getting stronger, not weaker.

Please, and no disrespect to them. I didn’t mean it in any horrible way.

I love all three. Jason, if you’re listening, especially, huge love. Don’t disown me. I love you so much, dude. And, Josh Kopelman, don’t eat me.

Yeah, that takes nothing away from a number of the upstarts that you highlighted. By the way, I think they’re less proven. We’re also trying to work with them, but we’re figuring that out.

Which growth firm would you choose? Mine’s Meritech.

Meritech’s fantastic. I love their culture. I love their style. Quantitatively, I think Sequoia continues to mint platinum records, so probably some combination of the two.

What element of your investing style would you most like to change?

My partners would probably say I should be more detail-oriented. I am much more team and gut. I’ll confess I don’t intend to change it, but I do miss some of the small things at times.

I’m not a guy who’s going deep in documents and details and things. I’m not going to be hung up on some deal term or financial thing or whatever. I’m all about working with great people at this phase in life. It’s too short. I love this job, but I just want to have fun.

I want to do big things with great people, and that’ll get me in trouble. Sometimes I’ll commit crimes of commission, where I’ll just fall in love with some things and miss some details. I don’t think I’m going to change that.

I asked one of your biggest competitors, who said, “Can this remain nameless?” what I should ask, and they said, “The dude is just one of the only people who’s done insanely well, respectfully, financially, and it seemingly just doesn’t matter to him. He’s just as hungry as ever. He doesn’t give a fuck; he just wants to win more and more.”

Does the money not matter after a point, and is it just about winning? How do you reflect on that comment from your competitor?

I wish you’d name them because that’s incredibly flattering. I appreciate that, and I love hearing that. I do think I try to live by that.

I’ll confess, when I sold my business long ago, my wife and I sat back and said, “Okay, it’s not life-changing money, but actually, we could retire on that money. Do we want to move somewhere, raise a family, unplug?” I couldn’t conceive of doing that.

We are all so damn fortunate. There’s a lot of great economics in this industry, and we get paid way more than we deserve. But it’s just so damn fun to be in the middle of what we’re doing. I can’t imagine not doing this.

It’s an incredible privilege to sit down with awesome people who want to change the world and help them do it. It is the coolest job on the planet, so I have no intention of stopping anytime soon. The money is a nice byproduct of it, but it’s a cool gig.

Final one: What have you changed your mind on most in the last 12 months?

It’s probably the scale of the opportunities. I thought we understood this next phase we were going into and how big this was going to be, and, very sincerely, we’ve probably added a zero to everything.

I think there are going to be a lot of trillion-dollar businesses created from this. It just—I mean, I said it was kind of embarrassing when you look at our scenario analyses and our memos that we published on our website before, because we talk about a billion-dollar outcome as a big deal and the great success case. These businesses went on to become $10 billion- or $100 billion-dollar companies.

That exact thing is going to happen. We talk about some of these investments, and we hesitate and get really close, and we invest, but we’re anxious and nervous and whatever. At the end of the day, these things just blow through everything that can be.

We’re seeing it in real time. When you actually see the Anthropic numbers that he’s now sharing, this is real. Their path to billions and billions in revenue and really compelling unit economics—I just think we have never seen this in the history of our industry, and it’s playing out.

Anthropic

over or under a trillion within a 3-year period?

We put our money where our mouth is. We’ve been a buyer, so over. And that’s, again, like, a year ago, when we were buyers, we still wouldn’t have conceived of that. We thought that where they’re at now would be the exit, not another entry point, and that is incredibly awesome.

I will never forget having Vince on from Thrive when he led the $30 billion round. I was like, “Dude, what are you doing?” And he’s like, “Harry, if it’s a trillion-dollar company, we’ll make money.” And I was like, “That is the weakest investment rationale I’ve ever heard.” Now I feel like a total fucking idiot.

One of the beauties of this business is you can—you know, fortune favors the bold. There will be those outcomes ahead, and obviously, we placed our bets where we think they’ll happen. There’ll be many more.

Dude, I so appreciate you. I so appreciate the friendship. Thank you for joining me today, man.

Great to see you again. Great to be back. I look forward to seeing you in person, but until then, thank you.