Nabeel Hyatt，Spark Capital 普通合伙人：要在 AI 时代胜出，投资人需要改变方法 | E1255

The industry today is run basically by principals, associates, and junior GPs. A principal is not actually waiting for an exit. They just want a promotion, man. We are in the industrialization of startups playbook land, where everybody's trying to churn out some piece of ridiculous arbitrage every week in order to get through the end of their incubator and raise their seed round. There is absolutely a belief that too much capital can mess up a company.

Ready to go? Nabeel, it is so good to have you here, dude. I'm also excited because you said before that we have quite different views, and that always makes for a great show. Thank you for letting me turn a coffee meeting into an interview.

It's your business, man. You're doing your job. I get it.

Dude, it is great to have you here. I want to dive right in. You said to me that your single biggest concern right now—or, sorry, something that you're thinking about—is how we need to change our investing mindset in the new world of AI. I'm really concerned that the way that we've always invested, maybe with more spreadsheets, is going to make us dinosaurs if we don't move with the times. How do you think about this and the mindset shift that needs to happen in investing?

I think it's happening already, whether we like it or not. We can't really preach that a founder is supposed to adapt to a market and understand that the market is there. There's a thing called founder-market fit, and there's also, frankly, a thing called VC-market fit. This market for AI is wildly different. I don't think anyone would argue that it's not wildly different.

The question is: In what way is it different? We had a B2B SaaS, amazing, wonderful bull run in 2021 and a little bit afterward, and I think we got really good at—Greg Treverton uses this phrase—puzzles versus mysteries. Puzzles are something that you can use raw horsepower to solve, and mysteries are where you have to go on the journey. There's fog of war, and you cannot work it out ahead of time.

In many ways, the B2B SaaS blow-up of that era was all about the industrialization of venture capital. It was all about figuring out all the puzzles needed to hire 100 associates to do all of the work, figure out exactly the right SaaS metrics, and then grind it all out. No one has any idea what a model is even going to do in a week, so I don't know how that isn't a mystery. I think you have to build a firm with that set of talent.

Can we invest in mysteries alone? Puzzles are doable, but challenging. The mysteries are what I find so challenging. The world was turned upside down by DeepSeek, and it is something that'll happen again in 3 months. You know that.

I do. How long have you been doing this—the show?

10 years.

I've been a VC for a little over 10 years, so we're in the same generation, in a sense, of trying to think about unpacking this puzzle. I was a founder beforehand, and I would say the early stages of venture capital—the real early stages of venture capital, if we're thinking about the beginning of Sequoia and so on—that was all mysteries, man. That wasn't puzzles.

The truth is, it may sound incredibly old school, but it's going back to the way things were really done before. It is an artisanal business. There's a reason it's an artisanal business, and that's because—

But you actually think so? If we look at your Ramp or your Brex, or any of the successful companies of the last era, so to speak: serial founder, pedigree founder, a good big market, knowable go-to-market, knowable customer base. This is completely different.

Yeah, it is. I'm not saying that if you built an awesome strategy to dominate the world, and therefore you're probably regarded as a tier-one brand or whatever you were 4 years ago, you're probably dead without completely changing. There was exactly the right strategy for that era. You could tick down the box.

We were in late-stage capitalism for startups. Everything was a red ocean, and so it was all about optimization and speed and minor arbitrages. We are now in a world where you need rampant creativity inside an organization. All of it is in the nuances, and so you need to build a firm that can grok to that and can understand that.

Are firms adapting in the way that they need to?

No. I think most—

You know this cycle, because the cycle in VC, if evolution is like horribly, horribly slow, also loops back to LPs. They don't get to act on their own. They don't get to just make a decision tomorrow. They have to go back and raise another fund against a new mandate, which probably requires—I don't know—maybe you turn over half the team, three-quarters of the team.

By the way, what's right for the firm may actually lead to bad messaging to LPs, because if you're managing a firm that needs to be very drastically reshaped for this new age, LPs find instability very disconcerting. That is a red mark in your books, and it may take 3 years to show that transition worked, by which point they will have churned, because they will have gone, "Nabeel, you changed your team entirely. You moved this, this, and this. Next fund, no."

LPs want stability at a time when there's rapid change, so it's the wrong market fit. You have to ask who the person making that decision at that firm is. If they were sitting on all the wonderful, amazing B2B SaaS markups from 4 years ago, and now they're the head honcho at that place, do you think they're really making this call?

What should we be doing? I learn from amazing guests like you on the show. I am building a firm, and when we think about reshaping our firms for a new world of venture and startups, what needs to be done?

I think you need to think like a founder. I think you need to be okay with a small team that makes subjective bets, and go think about the craft of what a founder needs today. Honestly, what a founder needed 4 years ago was a lot of playbooks. You needed every single arbitrage-y, simple way to make everything move a little bit faster.

The conversations I have with founders calling me now, after a board meeting or before a board meeting, are all unknowables. They're all trying to figure out what the new user experience should be when models go multimodal. They're explorations, not necessarily things I have the answer for. They're not coming to me for answers; it's a sounding board.

They need a sounding board of board members that are actually using their products and actually have a curiosity to use the rest of the AI products and get more native, instead of just watching Twitter and looking at market markups.

In terms of the heuristics for how you define quality, a lot of traditional investments are made with, "They're at X million in ARR, and it's been 18 months to X million in ARR." That was a classic 18 months to $10 million ARR, gold standard. AI has just completely blown that out of the water, and we see multiple products hit $10 million ARR in a couple of months.

They will probably be dead in 2 years.

They will probably be dead in 2 years, also. How do we think about revenue as a heuristic for quality?

Can I push back a little bit, or step up one level from even that? Why did these simple heuristics evolve? Revenue—you can pick one. You have to hit $10 million. You can pick another set of metrics or dashboards that turn green so that you can get your partnership to agree to let you go do the thing you really want to go do. How did those things evolve? That's not how partnerships worked 20 years ago, so why did that happen?

That happened because you added people to the partnership. You have to look at the core of the organization and then work downstream from that. What happens is, if you take a room that used to have 7 partners and that room becomes 25 partners or 30 partners or 500 partners at a certain set of firms, what really happens?

I think the industry today is run basically by principals, associates, and junior GPs. That incentive system is what we're all swimming in, and it did not exist 20 years ago. Why does that matter? What does a principal want? A principal is not actually waiting for an exit. They just want a promotion, man. They want to move up the ladder.

They want to bounce to Sequoia or become a GP somewhere else. The industry moves fast enough that they're not going to wait until an exit or cash to get that other job. You're giving them a promotion or more respect in 2 years, or they're going to try to go somewhere else that's better.

What does that mean? If I want to get a promotion and I'm inside Schmooby Schmooby VC firm, then I need markups. If I need markups, how do I quickly get markups? I figure out what the person one stage after me is interested in. My job is not really to go figure out what the future is, or how to be aligned with a founder and do great work, or how to get really deep with AI and figure it out.

My job is to go have a dinner with Coatue or whoever else and figure out what they're into this month, then invest in it 1 month earlier and get the markup 4 months later so I can get a promotion. That's basically the entire industry right now.

Jason Lemkin always says that venture is a packaging industry. I need to get this, package it up, and then ship it on to the next person.

Yeah. Do you hate that analogy?

I hate that analogy deeply.

To a certain extent, you understand it. You just hate it.

I understand it. I don't think it's good for startups, and I don't think it's good for founders. More importantly than just some kind of value judgment, I think it's a losing strategy when no one knows what's about to be hot in 9 months without being very, very deep in the work. A winning strategy, respectfully, is to back amazing founders with unique insights and go long.

Some of the hardest parts are the ones where the things you say out loud are easy to say but hard to execute.

Yeah. I remember Bruce Dunlevie. I said to him once, "What do you think of all of these transitions in the industry and how difficult it is?" He said, "Venture is an incredibly simple business." Very hard, but very simple. It's very simple, and I always kind of go back to that.

Okay, so that's not the right way to do it. You mentioned principals and associates running firms; I totally agree. Is it not also just the explosion of startups that we actually have? Meaning, we need simple heuristics to gauge yes or no: worth meeting, not worth meeting. There are so many companies. If you don't have a framework for whether something is interesting enough, you're just going to be meeting everyone.

Yeah, but the principals and associates don't even solve that problem, right? You have a 100x increase in the number of startups, and then you added 9 principals. I'm sorry, you didn't suddenly cover the industry unless you're doing pattern matching, right? I think the more fundamental question is: Can you pattern-match in this market? I don't know that the Brita filter version of investing is the right way to evaluate, or at least I'm not executing the way that I want to do my job and the way that I think my partners should do their jobs together when they're trying to win the coverage game.

What's a Brita filter of investing?

You know, you take all the founders, put them in the top, and then you hope you sift out a handful of the good ones at the bottom. That's a very inbound, inbox-oriented view of the world. If you do that, then your job is to tweet as much as humanly possible, market as much as humanly possible, bring everything into the top of the filter, and then do a really, really fast job of filtering this incredible amount of inbound in order to be very transactional in nature: get through the funnel as quickly as possible, say no as quickly as possible, and move on to the next one.

When you reflect back on your prior portfolio in the last decade, was that a pattern-matching approach that was successful? Have you had to change?

No. I also think I was really badly shaped to be an investor in 2021. I think we got lucky. Spark was started in the early Web 2.0 era, right at that age, in the same cohort as USV and Benchmark 2.0, at the beginning of that early era, and a handful of other firms that I think all treated mobile really well and did mobile really well, which felt similar.

You didn't know what the metrics were supposed to be. It was a wide-open, crazy world, and you were looking at something that was maybe a fart app in the morning and then Uber in the afternoon. It was an insane situation.

Our DNA was very much fixed by that, and our values were very much set by navigating that. I'll be the first to say that I don't know that we navigated the B2B SaaS era 4 years ago, during this kind of industrialization. We didn't do the things that a lot of our peer firms did.

We had been very successful. We could have very easily raised $5 million. We could have very easily tripled or quadrupled the size of the team. We didn't do that. We stayed at 7 people, with a 6-person partnership. We all write checks, we all do work with our founders, and we like the service work.

I would argue that made our job a lot harder 4 or 5 years ago, to be honest, and it makes it a lot easier now because we feel very well shaped for this phase.

Do you agree with Doug Leone that we've seen the transition of venture from a high-margin, boutique industry—a kind of village community—to a low-margin, commoditized industry?

Who am I to disagree with what Doug Leone says? I think he is executing Sequoia's strategy as if that is true and still trying to keep the rest of it compact and true, right? They're trying to execute a strategy, but they're doing all the things right. I would argue they're actually in the same vein as Spark, which is kind of sitting in the middle. That seed fund is $190 million.

That's what I was going to say. Their funds are like $1.5 billion or $2 billion. Don't get me wrong, it's a huge amount of money combined, as is Spark, by the way. I'm not going to let you just get away with that one.

But it's not mega-mega.

That's right. So I think they kind of sit in the middle. But do you agree that it's moved to this low-margin, commoditized industry?

I think when you look back at this specific era right now, it will not feel that way.

Why?

For all of the reasons that we said right now, which is that if you believe that most of the firms are executing strategies that are not particularly effective in this market, that means you're actually only competing with a smaller segment or subsegment of people on any given deal.

One thing I find challenging is that it is very difficult to win great companies when you are optimizing for performance and your competitor is optimizing for deployment.

That's true. We've lost 2 deals in 24 months where, literally, they tripled the price and went to common stock.

Yeah. To the founder, you should take it. It's free money.

Yeah, yeah. But that is a different game. That is a different game, and we won't win all of those. I have that same list. I have the same list of FOMO deals that you wish you had done, and then the price just got insane and got crazy.

And were your best deals all highly priced?

Yes. I'm not a value investor.

No, I get you, but everyone often says, "The hottest deals don't turn out to be the best."

Often, that is said. No, they weren't compatible at all, actually, and then they turned into something great.

Are any of these things totally true? I think we forget—dude, you're on a podcast. Just give us a sound bite. Just say yes.

I reject that notion. This industry is all about exceptions. That's literally the industry we're in. Why are we building a bunch of playbooks if the whole thing is about exceptions? You have to build a firm and, as a founder, you have to be okay with the idea that there's going to be an exception next week to all the things you knew before, or else you wouldn't be doing this.

Do you give a shit if something is one of many? What I mean by that is, we're looking at a company now, and I'm fighting with someone on the team about it because I'm saying, "It's not a generation-defining company, and they're one of 50 data providers, for fuck's sake. I'm just not interested in being one of 50." They're like, "Well, there are 15 data providers that make over $1 billion a year."

That's a good response back. Fair enough if you're thinking about enterprise value, but being one of many others—do they have some competitive barrier to entry, some reason that they might build a lasting institution, or is it an iceberg in the sun?

It's lots of boats in the sea. They all have their own individual slice, but it's a data provider like all the others are. I think that one feels like an easy no. If you just don't feel like they have a competitive edge, then that's hard.

All these things are going to be big. Maybe it's not big enough, or maybe it's fine if you're a small enough fund, but we're trying to invest in companies that we hope will be public, long-lasting institutions decades from now. You have to believe that they have some enduring value that will last for a long time, right?

You guys move a lot of money on large checks, especially growth checks.

Yep.

Can you do that on mysteries where companies can be turned upside down overnight?

I don't think so. We operate an early-stage fund and a growth fund.

How big's the early? How big's the growth?

The early-stage fund is a little over $700 million, and the growth fund is double that.

I mean, it's not small for an early fund, is it?

It's 7 partners. I didn't say you have to write small checks. I said you have to be subjective and come from first principles in your investing. If you're spending all of your time trying to set up checklists for what is okay or not to bring into a partnership, and if you're spending all of your time trying to work the politics of the organization in order to get something done, that is all taking away from trying to figure out the fundamental truth of whether this set of founders with this amazing idea is going to turn into something great. That's what I mean.

Love that. How do you remove the politics? How do you remove the politics within a partnership?

I mean, I think venture—somebody said at one point, and you probably know the quote because you're good with quotes—is the most politics per human inside of almost any organization.

I think there's a reason for that, right? The reason is that all of the measurements before exit are false prophets, right? Until the thing actually returns capital on a pretax basis and you see this wonderful, enduring institution, it's all just games and packaging.

That really means that if I internalize trying to build up respect with my peers in order to be thought of as being able to do good deals, I'm in a packaging-product business for just my peers. So you just have to work to a point where people start with respect.

How do you approach coaching and mentorship within a partnership? How do you think about coaching in a partnership effectively?

Yeah, it's really hard because people call this an apprenticeship business, but I think in many ways, especially the way that Spark does our job, it's more of a process of self-actualization.

If I was trying to be Bijan when I joined, or trying to be Santo when I joined, I can't be the mini-me version of that person. The single biggest mistake I made was trying to be Fred Destin, my former partner, for many years. I'm just not Fred Destin, and you've got to be your best self. I think the mentorship has to come from that phrasing. It's really the journey of trying to get to know another person and trying to figure out what their superpowers are.

How are they going to be the best partner to a founder? How are they going to fall in love with a founder? A lot of this really is falling in love and then pulling that out of them. If you're doing a good job with somebody, then 3 months in, 6 months in, you're noticing things about them: their pattern of investing, their weaknesses, and the bad deals they fall in love with all the time.

We call each other out all the time. I would not want to do this alone because I actually think my partners know me better than I know myself. We use a phrase internally: being your brother's keeper. We actually feel like the debate is not a political fight to try and get something approved; it's a room that's a search for truth.

I totally agree with you. When did you doubt yourself most as an investor?

COVID era.

Why?

It was the worst version of venture, and of what I really didn't want startups to become, which was everything pushing to Zoom. There's a reason we're doing this in person. I like making eye contact with people. I like connecting with people. It's the reason I like doing this. I like being of service to founders.

I can't be of service to founders and try to work with them if all we're doing is being on Zoom for an hour, and then it's just, “Write a term sheet” 8 hours later. That was that era. I generally thought about leaving this industry.

How many of your investments went down, do you think?

I didn't write checks. The best thing I did during that era was, while everything was being marked up like crazy and everybody was having a go-go couple of years, I wrote the fewest checks I've ever written in my career. I think I wrote 2 checks in a year and a half.

Do you think Spark's quality went down?

I think our quality of investing went down on the early-stage team and has since recovered. Our growth team navigated it quite well. I think they actually did an incredibly good job of processing things.

There's a reason we have a separate growth team and an early-stage team. I do think they're different sports, man. They're just different animals, and we do them in our Spark way, but they're different things.

Because I have someone incredibly smart like you, and then someone incredibly smart like Kush, who tells me the opposite. Why do you think that they are very different and that it actually requires different teams?

I just watch what our growth team does, and they do their job incredibly well. We talk about deals all the time. Again, they're 7 people. They're also a small team, but they can be a little bit more hierarchical. They can have principals, they can have associates, and they can do a bit more diligence.

They can look at the numbers and call 25 customers. I'm not calling 25 customers most of the time I'm investing; there aren't 25 customers. It's a different process and a different muscle.

I'm not saying I couldn't do it, but in a world where, as you said earlier, just doing the job simply at the highest possible level is incredibly hard, why would I try and play 2 sports? You can try and be Jordan and play basketball and baseball.

You say that you actually become a better early-stage investor, especially with a late-stage mindset. You know what late stage wants, but you're also closer to public markets. You have a closer understanding of what makes a fundamentally great business.

Again, these are all amazing and wonderful pitches for 2021.

Mhm.

Who knows what the public markets are going to like in AI in 7 years? What are you doing? Think of these VC armchair investors who love macro. You just have to hope that the cycle comes back around for them in exactly 7 to 10 years, when those companies want to go public. If it does, they'll do great.

You said “service” as a word quite a few times. Keith Rabois says on the show and very publicly, “The best founders don't need the help of a VC.” Do you agree, and how do you think about that in conjunction with service?

Look, I raised a bunch of venture as a founder. I raised 8 rounds of venture capital as a founder. I never had a horror story from a VC. I had nobody who was terrible and horrible. I basically had mostly VCs that were fine. They fall into the Keith Rabois camp: they show up to board meetings, it's okay, fine, and I'm just going to run my company.

I just imagine that in any other context of life, if I had somebody who was on my team—anyone else on my team—and they were fine, what would be the feedback?

Marriage.

Actually, it wouldn't be fine. It's disastrous. That's a bad marriage. If your executive assistant, your VP of engineering, or your head of product was fine, you'd be furious. So why are we accepting mediocrity at that level?

I think what you want is people who are engaged, who look at the details, who are invested emotionally, who want you to win, and who are doing the detail work to be able to give you more than armchair VC advice that they got from the 1 other board meeting they were in that week with the other hot company they're in.

Every single startup is a different journey. Until you get under the covers of what's really going on inside of this organization—how these co-founders fight, what the problems are inside of the executive team—you're going to give different advice to somebody if you really understand them. So it's worth understanding them.

I've had really tough rounds to raise, both as a founder and as a VC who's backed a seed company or a Series A that's not working out well. So, if you can't find that amazing and wonderful VC that you think is going to be deeply engaged and use your product, then go for the no-op VC. Go for the VC who will at least do no harm. High price, fine. I get it. But when you flip that to being the goal, mediocrity is the goal? That's not the goal.

Every time you have an ability to have an investor, an employee, or really anyone enter your orbit as a founder, your goal should be somebody who is going to be obsessed with you, think about your mission, and try and help you. Otherwise, you shouldn't be engaging. If you fail at it, fine.

Many second-time founders I meet say, “Listen, the thing I've learned about the first time is that what I want from my venture investors is good money, good terms, and get out of the way.”

Sure. Sure. Again, I just say they're setting their bar too low. That's the bottom line. They're settling for mediocrity because they're afraid of risk.

And that's why it's important you do more marketing.

There we go. I win this debate.

Can you do that at scale, though? I mean, you do 2 checks a year?

2 to 4 at the most, but yeah. You can't do many. You can't have high service and high volume. Absolutely not.

Mhm. Yeah, it's a model. What do you do when you lose faith in the founders?

Hopefully, you've had many, many conversations before you get to that point. When I use a word like service, or falling in love with a founder, or being dedicated or loyal, that doesn't mean it doesn't come with tough love.

You use the marriage analogy. If you're just smiling all the way through marriage, you're not executing it right.

Right.

You need to have tough conversations. Sometimes you're having a tough conversation because you feel like that person has lost their way.

When they've lost their way, what did you not see that you should have seen?

It hasn't gone well mostly for 2 reasons. The first is that they're conflict-avoidant and I didn't pick up on it early enough. It's very hard to pick up on early because you're going through a period where, ideally, you love them and they love you. There's not that much conflict, maybe until the late term sheet or something like that.

Then you go through 25 conflicts in the first month of the company, or 3 months of the company, and you realize that they're conflict-avoidant. They're not facing the problems of that company, because every company has 1,000 problems, obviously. That's the first one. You try to read for it, but you can get it wrong.

The second one is that every founder wants to move really, really fast. This is one of those things that I did not have as a framework 10 years ago, but after you make a bunch of mistakes and look back on things, things become clearer.

We all talk about execution speed. You can imagine somebody on the very, very far end of execution speed. We also want them to have taste and judgment, right? Especially in the world of AI, only taste is going to matter in the future, because execution is just going to happen.

These 2 things are directly in conflict. If you are always the shoot-first, ask-questions-later person, you probably are not really deeply introspective about the choices that you're making.

You’re just a shiny penny running after whatever happened on Twitter yesterday. And if you are deeply, deeply, deeply full of taste, you didn’t ship anything. You just sat navel-gazing forever, trying to find the perfect thing. So I think the casting for a founder needs to match the opportunity of that startup.

You have to have good taste, especially in this world, and you have to be very fast. But where you are on that spectrum is incredibly illuminating.

You mentioned earlier that you were talking about getting a company that was very, very competitive, and at a 35, should I invest in this thing?

It’s like, well, that’s an execution play. That person needs to be in the top tier on the planet at executing, because the roadmap ideally is probably pretty clear. And even if it’s not clear, some competitor’s about to do it tomorrow. You can see it, and you can run faster than them. If you can aggregate everybody’s innovation happening in the industry across all 25 of your competitors, you will win.

There are many other situations, especially for the deals that we do at Spark, which are often creating a new market that didn’t exist before. We look at your Granolas of the world, respectfully. I put him in the “incredible taste” category. Yes, I’m sure he’s great at execution, too, but he’s got real taste. Real taste.

I’d say Granola’s a great example of a situation where everybody else competing in that market would have taken the execution angle. They would have built a me-too product—slight arbitrage, something that looks like Fireflies or any of the other things, only a little bit faster, or maybe a chatbot in a slightly larger box, or whatever it is. They would try to run faster than their competitors.

Chris’s product changed completely from the seed round to the Series A, which we led. Complete reset. Even though the internal metrics were okay, it was because it didn’t feel right to him. He could self-inspect and realize it wasn’t working, and that takes real taste.

But he’s in a competitive market, to be clear, and he knows it. He’s got to be pretty high on the execution path as well. God, he’s a whole combination of both, actually.

That is where I think the best founders can manage and understand, at any given moment, what muscle they’re using and how they’re using it. I think the mistake for founders is realizing that, one, I got them wrong on one of these axes quite a lot. Or I cast correctly—maybe you cast somebody who’s very execution-oriented with a good amount of taste—and then the market flipped.

Something crazy happened. That’s what I was going to say. Something crazy happens, and the sustainability of value today seems to have completely eroded. What I mean by that is something crazy happens, OpenAI releases a new model, and it just completely kills Granola overnight.

Or take the data-provider example that we have. I don’t know if any of the large foundation models decide that it’s actually a prime, easy market for them. They have all the data, and overnight the data provider goes and gets rolled into their core products. How do you think about sustainability of value in such a changing world?

I think you have to find a founder who is continually innovating. You can ask all the simple questions about barriers to entry and all the rest of it and have some decent answers. But the truth is, if you are not reinventing yourself, the idea behind a deep moat tells you you’ve got no idea about barriers to entry.

I’m saying you have to justify it to yourself to go to sleep at night and maybe have some base case that says, “For right now, this is what I think the barrier to entry is. This is how I think the next year is going to go.” But you need some kind of compounding effect where you think, no matter what happens after this year, it’s eBay.

They just launch a product, and 40 years later the product looks basically exactly the same, and it’s just fine. Those days are not right now. It might be that those metastasize inside smaller vertical markets in AI over the next couple of years, but by and large, it is a sea of speed and taste at the same time right now.

Do you give a shit about market size? You said something about the market-creation angle there. How do you think about market size?

It’s such a simple heuristic for investors to fall back on. We don’t talk about or look at market size at all, unless sometimes there’s confirmation that it’s a small market. If the guy is starting an ice cream truck, then it’s probably not for us.

I didn't say they can't be good businesses. I said they're not Spark businesses.

We’re not, again, trying to canvass the entire world for every single possible thing that we can invest in. We’re not trying to be the Brita filter of venture capital firms that has to look at absolutely everything. I need to do a good deal a year. That’s the job. It’s not that hard to execute, but it is incredibly hard to execute.

It is a simple thing in its essence. If I try to win every single war across every single front, I will be average across the whole board. So we try to be good at what we’re doing. We try to partner well with founders who want that product. We try to look for new market opportunities, which, by the way, in the world of AI—you can imagine why I’m a kid in a candy store right now.

I’m the most excited I’ve literally ever been in my entire career, including as a founder. It’s just an amazing opportunity. If you’re asking what makes a new market opportunity, I think you’re looking for a new behavior. You’re looking for a new behavior where, when you try it, it just sears into your brain and you can’t stop thinking about it.

That sounds simple. But if you just ask, “Is this really a 10x-better product?” you don’t see that many of those. That simple thing—you just don’t see it very often at all.

You’re such a product-centric investor. I spoke to Kyle at The Bot Company, Andrew at Descript, and Ritu before. I really stole the shit out of you. Very impressive.

But everyone was saying that his product centricity makes him such a unique investor. I thought it was so interesting because product is the one transient element of investing. If you think about market, people, and product, it’s the one thing that will really change. The market can change, too, but often less so. People iterate around the same market.

Why do you focus on the one that is so transient? You use market, people, and product as your 3 cores.

I think if you just look at the market right now, do we understand any of these markets? How fast are they all changing in the world of AI? They’re all shifting like crazy, and who knows which ones are going to become commodity markets with absolutely no margin whatsoever anyway.

If it’s a big market, maybe it was a big market 2 years ago and it’s about to become a really small market, and the same thing in reverse. People are very interesting.

I think there are firms that do a really good job at just making people bets. I think you have an instinct about people that gets you over the line and you make your bet on people.

Thank you. My turning down of Chris at Granola on the pre-seed shows that, doesn’t it? You can’t be 100% all of the time.

Or Alex at Deel. Or Christina at Vanta. I have my fair share of misses because I just managed to miss the real best.

Yeah, thanks. I don’t think of product like, “Am I the product master?” I think of product as an instantiation of what the founder does.

Let me recast it a different way: How do we separate hucksters from good executors? They’re here pitching us as VCs. The way we separate hucksters who do a good pitch from people who are real executors is that you look at the thing that comes out of their hands. You look at the thing that this petri dish of humans has created in the world, and you try to evaluate it and ask questions about it.

When you say I’m a product investor, I would push back slightly in that I’ve never evaluated a company by looking at the product, using the website, and being like, “This person should have a $15 million check.” I don’t think that’s right. You look at the product and try to learn about the humans behind the product by evaluating it.

You look at the product decisions and ask questions of somebody like Kyle, who started Cruise and is now doing The Bot Company. You ask him why he made the decisions he made in this thing that you were using, and that’s where you can get a sense of who this person is and what they’re going to do from there.

I had an absolute shit meltdown with the team the other day, because I have a CEO template for how we analyze CEOs, and they took that CEO template and put it on a CPO and asked the same things. I’m like, “That is criminal.”

We changed the template entirely: What product decision are you most proud of? What would you most like to build, but you have constraints that mean you can’t build it? What are you most embarrassed about building?

I don’t actually care about the specific answers. It’s the way that they think around those questions.

That’s right. Totally. It’s the way we conduct any deep-level investigation on a person. You’re not asking them, “Give me your TAM answer and give me your margin answer.” You’re trying to figure out how they think about the things they’re doing.

If you’re talking about an early-stage startup, what is the thing they have thought about the most? Nabeel Hyatt

They produce a TAM slide, or they produce something they did for the deck for you.

They put 2 hours into that, 3 hours into that, or nowadays they probably sent it over to Gem or some other product and had it spit out those slides. If you're trying to get to what they've been obsessed about, it's this thing that they're using that they spent the most time thinking about. That's where you're going to get the most insight into who the human is.

How many companies do you meet a week, honestly?

I don't even know. 20, 30.

20 to 30 a week?

Sometimes.

Yeah, by email. But, like, on a call?

On a call, I don't do that many. I probably do 2 a day.

Okay, 1 to 2 a day. How long do you have?

I think the 1-hour call is the worst call anywhere because it's too short to get a real read and too long to get the kind of speed-dating version of the world. So, for half an hour, I'm just trying to figure out whether I like the person at all and whether I want to have a second call. Then I'd rather go from half an hour to 2 hours.

So you do the first one and you're just trying to get a read. Is there a kismet? Is there a connection? Is there any chemistry here? Do you feel it?

Yeah, we should just go for a walk. Let's go have a conversation. Let's really talk about everything.

Will you ever invest if you haven't met them in person?

If I've never met them in person, probably not. There's some world where you met them 5 years ago and you know them quite well.

You know Chris from Granola is a prior Spark founder. He was one of the first people I met after I joined Spark because I was supposed to go sprinkle growth fairy dust on him in New York and talk about growth marketing, growth hacking, and all the rest of those metrics things that I don't really aspire to now.

And Jason from Discord—I knew him for 7 years. We were founders together before investing in Discord, and we also smartly passed twice on Discord before investing. A lot of long-term relationships. And a lot of shots. Cruise back in the day with Kyle, I passed.

We did a huge deep dive on why I thought his business wasn't going to work. He disappeared for 9 months and wouldn't return my emails. Then he came back 9 months later and said, "We've pivoted. We've gone from trying to put aftermarket things on top of Audis, and we're now going to build a full self-driving stack. I'm going to show you and 5 other investors a demo because I really liked our last conversation."

So you knew somebody for 8 or 9 months. You've thought about how they internalize information, and you really know them. That can't always happen with every investor.

The last investment I did was a company called Wordware, and that was a very, very fast, very, very competitive process. They had term sheets for quite a bit higher. But I was getting dinner with the founders and going for walks in the morning. I met with those guys 6 or 7 times before we invested, in the span of a week. You don't have time, but in the span of a week, because you care.

Wordware, Granola, Descript—these are all pretty big valuations, actually, and pretty hot rounds.

They were.

How price-sensitive are you?

I'm not that price-sensitive. I mean, there's always a number. We could go through the deals that we didn't do because the price got away. There's always a price where it just doesn't make economic sense anymore.

But we're looking at a Series A now, and we put down 10 on 60. The founder's saying, "I want 100," and then the partner's saying, "Well, we'd do 80." I'm saying, "We'd do 80 but not 100?" I feel like, for us, valuation is always a test on conviction. If you liked it at 60 but don't like it at 65, that's different.

But 60 to 100 is different. But 60 to 80 isn't that different, and then 80 to 100 isn't that different. Do you see what I mean?

We can push it.

This is a hard job. What did you turn down because of price that you most regret?

Because we run a fund the way that we run it—a small number of investors, 6 investors with a $700 million fund—is kind of broken in venture capital. Usually, it's not about valuation. Usually, it's about check size.

In our model, if you really believe in the company, want to have the ownership that you have, and believe that they're at the right stage, then it's about whether you're going to write a $5 million check, a $10 million check, a $15 million check, or a $20 million check.

Sometimes you say valuation, but I root it back to maybe that founder is raising a round and you don't think they're going to spend $20 million very well, and it will mess up the company. There is absolutely a belief, for me at least, that too much capital can mess up a company.

Sometimes it's not about valuation, although obviously it's algebra and these things are all related. It's about how a $25 million round here is probably going to kill this company. If it were a $10 million round, I'd be in, and we'd have the ownership properly and it would be a good partnership. But I think this company will be different with this amount of capital put into it. The company changes.

Which one stands out most?

Mine is Figma. It was quite a while ago now. It was still pre-launch, so I was trying to write a very large check pre-launch.

For me, it's that because there was also a connection with Dylan. It's not just that it was a large valuation. I think that journey would have been really fruitful and interesting—an amazing way to spend 5 to 10 years of your life.

Before we dig in on AI, you said something there about capital inefficiency within companies. One challenge and real concern that I have is that a lot of growth investors who have too much cash, bluntly, are saying, "I'm willing to pay up because I believe it's going to be a $5 billion company. Fine, I might not get a 5x, but I'll get a 3x, and I'm playing a deployment game."

But it's the wrong actual thinking because you're assuming that it's equiprobable and that putting a preemptive round in place will still lead to that $5 billion. You and I both know that if I try to shove cash in before it's ready, I could destroy that potential $5 billion and make it a $1 billion.

It's another good example of how we have a different world now than we had 4 years ago. That company will probably raise another $100 million, and then they might just die. In fact, they probably will die.

Their probability of dying eventually—it'll take a long time because they have a lot of money—goes up. If you feel like that company has raised too much capital, you can watch their hiring velocity, look at the quality of the people they're hiring, and look at their execution speed. You can see it all teetering and then maybe invest in something else in the market, even though there's a lot of money in the market.

When you say, "No, don't raise that round," do they listen?

Never.

Do you engage in secondary markets actively?

No.

Why not? With the huge influx of private late-stage capital and the continuing delays of public markets, we need liquidity. At some point, you have to deliver cash to your investors. I do too. Do you not think that becomes an ever more important part of our role?

I'm not saying you never sell secondary. I'm not saying it never happens. It's just that I think the primary job of trying to figure out a little bit about the future, listening to those founders who have that little glimmer of the future, and having a beginner's mind enough to be open to it—that when somebody comes to you with some cockamamie idea that was way off-piste from how you thought the world was going to work, you're open to shifting to it—that takes time, energy, and research.

It takes trying every product. It takes curiosity. The question is: where are your hours going in the day? Sure, secondary happens. Sure, later-stage valuations happen. Sure, you can decide you want to do growth. Sure, you could run a conference every month. There are a thousand things you can do.

But doing the simple thing at the highest level takes time and energy, and I don't even think I'm good at it yet. I'm still just trying to get good at my first job before I do the second, third, and fifth job.

When we think about AI companies specifically, you said to me before—and I love this—there are 3 categories of AI startups.

Yeah, I love a framework. I know you do.

But we're not in the age of frameworks anymore, guys. Just remember that. Says the guy with 3 categories of AI startups. Just saying.

It's helpful to bucket things and have lenses.

Totally. It very much is. Can we say lenses and not frameworks? Then I'm with you. Lenses works well for me. But what are the 3 categories of AI startups, and how should we think about that?

This actually is a framework that came in the mobile revolution for us at Spark and then was reapplied. This isn't a new lens; it's an old lens reapplied.

For us, it can I use the mobile analogy to kind of get you there? Adaptation, evolution, and revolution. There are versions of this that have existed as people have talked about AI generally.

Adaptation is the obvious, "I'm going to take the thing and make a copy of the thing for AI." In the mobile revolution, this was The New York Times making The New York Times on mobile, and that's the product, right?

That's obviously a world where 2023 was the big adaptation push. That was when Adobe Firefly launched, when Spotify DJ launched, and when Canva Create—I think that's what it's called—launched.

It's when the big boys came to town with their AI products, and everybody had about a year to think about what they were going to do after the GPT era and ship their incumbent-advantage stuff. That's all adaptation.

Evolution, I think the easiest way to separate it is that it's when there's a new workflow, when the behavior has changed slightly. A good example of this in the mobile era is Instagram, where you're suddenly doing a different behavior than you used to when you think about Flickr or prior photo websites. It's a new behavior that's native to that medium.

Today, you'd think about things like this. It can be done by incumbents and by startups, by the way. Sometimes a really fast-moving startup will do it, and sometimes it's an incumbent.

Granola is a good example of this, right? They are an evolved product. You're treating it—I don't know if you want to call it AI meeting-notes software, transcription software, or just Apple Notes with AI in it—but it's a different behavior and a different way of using the product. I think Replit Agents, the way they've rebuilt it, are another really good example of evolving the medium. Descript is another example. You cannot take the incumbent UI and just slap AI on it. It's a rethinking of how you would do audio and video editing from scratch, with AI in mind.

So that's evolution. And then the last one, revolution—this is the canonical example. I'm sure this gets talked about every week on your podcast, but this is Uber. It's an entirely new platform that would only exist because this technology exists.

Where do we have the most, and where do we have the least?

You mean today in the market? Oh, I mean, we are in the industrialization-of-startups-playbook land, where everybody's trying to churn out some piece of ridiculous arbitrage every week in order to get through the end of their incubator and raise their seed round. So we mostly have evolved products that are not good enough, or we have adapted products with a coat of paint on top that says “AI.”

What do you find most interesting?

Where we invest most of our time, our largest exits at Spark over time, and the most satisfying work over time has been in the revolution and sometimes the evolution categories. So we have no desire to invest in anything that's an adaptation. We're trying to lean toward the more disruptive, higher-risk opportunities, knowing that they won't always work out, but at least it's a journey worth traveling.

When we think about value accrual in the new landscape, Kyle at The Bot Company said that, bluntly, you've hedged this. You have bets in foundation models and models, and then you also have bets in the application layer. How do you think about where sustainable value accrues, and the GPT wrapper—there's no value in the thin application layer?

So I wouldn't call that hedging. I believe both could win. We were a very early investor in Anthropic, and we're very happy about the investment. We think there's a lot ahead for it and feel really, really positive about it.

Can you paint the bull case for me with Anthropic?

Sure. The thing to understand about Anthropic and OpenAI's ChatGPT—they're direct competitors, obviously—is to think about them in terms of this adaptation, evolution, revolution framework. I'll use the thing we just talked about a minute ago to make this point.

If you're trying to make the next-best model and you're running out of data, what do you need? You need to understand how people want to use your model. If you want to understand how people want to use your model, then you need a lot of people using your model.

The fact that those 2 companies have a user interface that gives them insight into how a user would use it, but also, frankly, data exhaust on how people are trying to navigate a model and get through it, gives them insight that no one in some academic lab somewhere, just popping up a model, is going to be able to match. You can make a faster algorithm, but you can't get new data and new data exhaust from consumers.

But the level of consumer data is probably 10 times greater for OpenAI than it is for Anthropic.

I didn't say it was the only competitive benefit. But for both of those companies—you said, “Make the case for these”—I think that's a major, major case. They will have a user interface and user data that will help them become smarter.

I'm sorry, does everyone know? DeepSeek sitting at number 1 is getting more consumer data and more consumer insight than anyone else. Xi Jinping's having a data feast.

But, respectfully, there are so many that do. You.com has a pretty good user interface. I wouldn't say it's that much worse than Claude. It's okay. Do they have enough users and enough growth? No. Do they have enough scale? No.

I think you want to own the interface with the customer. If you own the interface with the customer, you have the chance to iterate on that interface and stay ahead of everybody else.

So, if you just look at Anthropic and Artifacts, which OpenAI has now copied, and you look at the next phase of the things that are going to come out of insights from the customer, those things matter. It's not just model quality.

I don't think foundational models are just about model quality. There's also your ability to continue to innovate, your taste, your execution speed, and whether you have a direct relationship with the customer that allows you to keep iterating with them faster than everybody else.

If I compare that to somebody who's spending a bunch of money on compute for an academic lab to build a very large foundational model, I don't think those advantages accrue very well over time. I think you need to be full-stack.

Does DeepSeek change how OpenAI and Anthropic should operate? I just had Jonathan from Grok on the show, and he said, “If I were Sam Altman, I would open-source today. You will die if you don't open-source.”

I don't know that DeepSeek changes that much about the way I think about the future, strangely enough. Maybe that's an odd thing to say when everybody in the world is freaking out about DeepSeek this week.

I don't know that I ever really believed, personally, that a $100 billion, $500 billion, or $1 trillion training run was the only barrier to entry for making these models. In fact, if we had believed that only capital was going to win, then we would not have invested in Anthropic. Surely Sam was telling us and everybody else, “We're going to win the capital game. The capital game is the only way to win, and so there's no reason to build a competitor.”

We didn't believe that back then, or else we wouldn't have invested in Anthropic. It's still true today. I think Anthropic wins for the same reason that every company wins: they're executing very fast with taste. They're listening to their customers and delivering what their customers want.

What do you think will be a bigger business, the API business or the consumer business?

I think when you're at the front end of innovation, when you're moving really fast, you want to be vertical. You want to have as much connectivity as possible between the model you're trying to build and the thing that the consumer is trying to wrestle with the world to make happen.

You said something to me before about data exhaust. I just want to make sure I got the quote right: “The data exhaust is more important than models.”

I'll give you an example. If you're Descript today, you don't just sit on this amazing and wonderful interface, which changed the market and reinvented what this was. You also sit on every single edit that every single person has done to try to go from a rough cut—where somebody might, like me, come on your podcast and say ridiculous things—and cut that down to something that actually sounds like a wonderful production.

That's internalizing the wisdom of experts. One of the things we're seeing right now in this world is that OpenAI and lots of other companies are paying a bunch of PhDs to, by hand, figure out PhD math equations so they can internalize them in the model.

I think Web 2.0 was very much the wisdom of crowds, and we're in an age where it's the wisdom of experts. We're not trying to get the average output of every single human. We're trying to get what really amazing people in whatever their field is, across every field in the world, would do in this situation.

If you're running a next-generation product with AI deeply embedded, and you have the best users using that product, that will inform you to make better products for those users and inform the models that you're building.

This is about trying to build a top-of-market product and then trying to make decisions for—AI, the promise of AI, is that this little alien in your computer is going to help you be as smart as the best person who does this thing.

I just walked with Manny Medina from Outreach, and he's building essentially a Stripe for agents. He was talking to me about the future of agents, and he was saying, “The future is actually hyper-verticalized in what would have been uninteresting, small markets. But because you're replacing labor, it's actually so much bigger than you could have ever thought.”

An example is HappyRobot, the Andreessen company, which brokers calls to truckers to organize loads and transportation.

Before you're like, “That's not very interesting.” But actually, if you replace the broker, that's a multi-multi-billion-dollar market. How do you think about the future of an agent economy in that respect? Are you excited by that? Do you spend time thinking about it?

I spend a lot of time thinking about it. I think most of them, if you really think through the second-order effects, fall into near-term arbitrage, which might just take that whole market to zero, especially if you're meeting the market where it is today with today's models. You need to assume that you still have a second, third, and fourth act in your business, because you're going to need to keep innovating. Otherwise, how are you not going to get lapped by 25 other competitors who are also going to build call agents into your vertical market tomorrow?

I think you do have to ask some of these questions. Essentially, how hard is the job to be done? This is a direct contrast. If I just took my $200K check and did an incubator, trying to show 10% week-over-week growth so I can raise my seed round in 3 months, then I want something that the models can solve for tomorrow, right? I might go into a market where a little bit of transcription from AI solves it, and we're kind of done. If that's really the extent of your innovation, you're probably going to be awash with 50 other people who also joined all the other incubators and are doing the exact same thing. Your marginal benefit to the world is zero.

If you're doing something at the very edge, I'm constantly trying to advise and encourage founders to think about what the models might do in 6 months or 9 months and start to chart there. Is that a worthy exercise? What I mean by that is, it's so unpredictable. Six to 9 months of product roadmap prediction for model providers—good luck. You can try and figure out what it is, but I'll put it in my simple example: 18 months later, they decide to change. DeepSeek comes out, and they get hit by that.

Let me try a different wording: pick a job that's hard, like being a doctor, or a decision that isn't perfectly solved by today's AI. Pick a job that you think will be worth pursuing for the next decade, because that's the nature of a startup. If you can solve it fully—which is one of the most satisfying things as a founder—“I can satisfy this fully by the time I get to the end of my 3-month incubation period, in my little seed round, and I'll be done”—then you probably are going to get lapped.

If you think the best you can get is an MVP that hallucinates constantly because this particular problem is incredibly hard, but people will pay a little bit and you'll get a little bit of traction, and you can make a little bit more progress, and you can imagine working on this project for the next 10 years and still innovating 7 years from now, then you're on the right path. By the way, if the model takes an extra 3 months, or 3 months less, to hit its level of fidelity, you'll be okay.

What's been your biggest loss, Nabeel?

Loss? Yeah. I'd push back, man. I don't know that you should look at your losses. Maybe if you felt that the decision you made at the time, when you look back on it, was made when you were in a bad place, you should try not to be in that bad place the next time you make a choice. So you made the choice for the wrong reason. But I don't know. We're in the business of the things that work.

I agree. And so, you study your successes.

Yeah. How did I find that founder? What were the signals that happened there? What are the lessons I can learn? What are the types of founders that connect well with me, and that I connect well with? What are the market dynamics of that time? What was the product like at that time? I think those are things worth deeply investigating.

Are you incredibly bullish about the future of the US right now?

I am incredibly bullish about the long-term future of the US right now.

I don't understand you Americans, respectfully. A lot of you are like, “Oh, you know, Harris, Harris, Harris.” Trump comes in, does a load of really efficient stuff, markets go to the moon, and you're still like, “Meh.” I'm like, “You ungrateful, ungrateful champagne socialist.” We sit here with the Lego-head chancellor who does negative growth on us, and we're meant to just take it.

I don't know that the president affects the economy in the US as much as you would think any president affects the economy in the US.

I think you'd normally be right, except Trump.

The confidence that is instilled now in the US public markets, I think, is unparalleled. I'm not investing in the US public markets today. So when you ask me how I feel about America—am I optimistic about America, and all the rest of that stuff?—my immediate way of thinking about the world is, “Oh, well, why do I think about 10 years from now?” That's my thinking. I'm a long-term thinker. I don't get to do anything today. I get to invest today for something 7 to 10 years from now. I want to invest in the US in data centers, in real estate, and you name it, because of the state of the economy.

Sure. And that trickles down.

Sure, it does. It does. But what's your point? I'm optimistic. I would be optimistic about the US in either case. No matter who won this election, I'd be optimistic about the US.

Are you optimistic about Europe? You've got Granola here. You spend some time here.

No. There are exceptions to every rule. I think great founders can make a great company anywhere. So I'll invest in the right founder, in the right environment, anywhere in the world.

What do you think are the challenges that Europe faces, then?

If I was a founder starting a company, my default state is dead. Things are really hard. It's hard to recruit. It's hard to raise money. All of it's hard. You're pitching the rest of the world that you're dedicating your life to this thing, and you're all-in, quote-unquote. So if that's true, and you're trying to risk-mitigate all the things that are going to kill you, and it's the age of AI, I don't know why you're not in San Francisco.

Just from a raw perspective—forget the opposite case. Can somebody succeed in London? Can somebody succeed in Berlin? Of course they can. But the real question is, as a founder, why would you make that choice? I just think that's the problem. The problem is that more of the people who are actually all-in, not just telling you they're all-in—more of the people who are actually all-in, who are actually trying to do everything on the planet to put themselves in the best position to win and are willing to sacrifice for it, are going to want to be at the dinner where they're learning about AI people.

They're going to want to be able to recruit the best people. All those people are in San Francisco right now. So why wouldn't you do it?

They are. I can totally understand that and semi-agree. The only challenge I push back on is that talent acquisition is so freaking hard there. Competition for talent is so high. Salaries are so high. Churn is so high. You guys are very promiscuous with your jobs. It's like, “Oh, well, you know what? This isn't that hard anymore. I'm jumping off to somewhere else that's way harder. Oh, well, Anthropic's new up-round isn't as big as xAI's, so we're moving.” Christ, you jump around.

So what does that incentivize? That incentivizes a system where you have to keep innovating and you have to have speed. Or you have to have synthetic growth. There's a downside to it.

I agree. So you have to be smart enough to separate those 2 things.

Final one before we do a quick-fire. So much of our job is that you sit down with a founder after investing, and they're like, “What do I need to get to raise my Series A?” And you're like, “Well,” and then you kind of plot the path to a Series A.

Yeah, yeah. And then you kind of plot the path to a Series A. It goes back to that—I don't like that conversation. I understand it, and I have it. But it goes back to the packaging and just putting a ribbon on you and then passing you along.

How do you feel about that conversation of “What do I need to get a Series A?” How do you approach it, or a Series B, or whatever that is?

How do you get to the next round? I usually try and start by asking them a lot of questions about how they think about the future and trying to separate them from the way a VC thinks about the future, because ultimately, we're listeners more than we are tellers. I get that part of this job is for us to be tweeting, to be on podcasts like this, and so on and so forth. But the future is invented by founders.

The question is, what can you surprise an investor with in the next year that they weren't asking, versus the other way around?

A down round?

If that conversation has often led to situations like, “Well, everybody kind of expects us to do 8 million to 10 million in ARR,” I'm like, “Oh, well, if everybody expects you to do 8 million to 10 million in ARR, then I have to tell you they probably won't invest if you do it, because what they want is for you to exceed expectations. What they're trying to invest in is the best. If they think you've already got 8 million to 10 million in the bag, then it's not going to work.”

I'm so glad we had this conversation. Now, what do you think would really surprise yourself about this business? If you woke up a year from now, what would shock you? What would make you feel amazing? Do you think you can storytell that to VCs? Can we work on packaging that? About 20% to 25% of the time, the founders are down for it.

After we invest, I immediately try to have a conversation and get a pitch deck together for the next round. What would the next pitch be? Just a glossary, just a table of contents. What would you want your next pitch to be? From a data standpoint, it could be numbers, customers, story, product, data—it could be anything.

It’s storytelling. It’s always storytelling, right? Let’s get the story down. I think people default back to numbers when they have no other story to tell. So let’s start from the beginning. Tell the story about what you want to be able to tell the world in 18 months about this product that you’re building, this company that you’re building. Then we can figure out whether we think that’s actually viable enough, or whether you’re sandbagging.

I love that. I’m going to take that. Sorry. It’s just a one-pager. It’s like a memo. Yeah. Okay. Final one, and I promise, before we do a quick fire.

When we look at the whole cohort of enterprise companies that have raised seed and Series A rounds over the last 3 to 5 years, and they’re brought up on the triple-triple-double-double-style pathway, and they’re at $8 million to $20 million in ARR, what happens to them when new growth investors are going, “Doesn’t fit my AI-company growth cycles. Lovable’s at $10 million so fast. X is—Bolt’s at X so fast”? Do they have a smart answer here, man?

I don’t know.

You don’t know?

I don’t know.

I don’t either. I don’t know. I’m worried.

Yeah. I can tell you that some of the founders I’ve worked with who are stagnating and don’t have that next chapter are doing the things that founders do. It’s not even stagnation. They’re doubling, and that’s not exciting enough now for VCs who are used to AI revenues, and they’re like, “But—”

Yeah, I even used the word “stagnating,” and you’re right, it’s not. They’re still growing. They’re still growing. Yeah. Okay. Listen, I want to do a quick fire, my friend. I’ll say a short statement. You ready?

I’m ready.

Okay, so what have you changed your mind on in the last 12 months?

I don’t think you should evaluate any company by the models that are underneath it. Even model companies.

Gosh, all the business schools have just gone out of business. I’m thrilled. I can’t work in Excel spreadsheets. Teams are like, “If you do =SUM…” I’m like, “Ooh, I came up with a bracket.” What about the way that your parents brought you up? Did you deliberately do anything differently with your kids?

I don’t know that I did very much differently, because my parents did not understand me at all and yet were incredibly open to me walking my path. My mother was a first-generation immigrant. She just wanted me to be a doctor or a lawyer or whatever, except—unlike a lot of first-generation immigrant families—she never told me that, and I never even felt it.

She could tell that I was going to walk a weird path. She didn’t even know what entrepreneurship was. She didn’t know any of that stuff. She just wanted me to find my place. So no, I’m more trying to mimic my parents than I am doing the opposite.

Are you hands-off as a parent?

No. No, I’m pretty hands-on as a parent.

But you let them do what they want to do.

Consigliere. I like the role of consigliere in the world. We can talk like crazy with a founder or my 2 sons about what they’re going through and then, with earnest, deep, heartfelt advice coming from a real place, be like, “It’s your decision at the end. It’s okay.”

I don’t know what the truth is, so I’m not telling you what’s right or wrong. You have to walk your own path, but it doesn’t mean we can’t exhaustively talk about it all.

I said the other day to my mother, “The best thing you ever did for me was [censored] all when I left university and I was a law scholar to do a podcast.”

Yeah.

To be fair, it’s not [censored]. It’s trusting in your child and their conviction enough.

Yeah. I had a moment where I came home after my sophomore year in college as a computer science major, which is—you’re like, “Oh, he can probably get a job.” It wasn’t even sure then. I was like, “I want to leave, and I’m not even sure if I’m going to go to university. I might just start another company. I don’t know. I just can’t do this.”

I ended up going to art school, and my parents were completely supportive. They could not have been more supportive.

Does being rich make you a better investor?

I have a strong thesis that it does, because you no longer worry about downside. You no longer worry about your next fund. You no longer worry about protection. It’s just like, “I think this could be great.”

And Nabeel sees the world differently. If I’m being super crass, I’ve got X million in the bank. I’m good. But I’m ride-or-die Nabeel.

I think the best thing about joining venture was that I had no long-term desire to be in venture. I was very happy to be in venture if it worked out, and I’m still very happy to go start a company. I would be very happy as a founder as well. It’s just not what I chose to do, and I really love this job deeply.

But if it had not worked out, it was okay. I came in with a nothing-to-lose mentality, which allows you to sit on the front end of creative risk and be willing to take that extra risk. Of course, that’s what this business is about, versus this protectionist mindset: “I just want to make sure I have my job. I just want to get to the next fund,” which is where I think you make most of your mistakes.

If you were sitting down with the HBS, banker-style young investors today who have been used to the last 5 years, what would you advise them to prepare them for the next generation?

The challenge with this cohort is that they have quite rigid minds. They’re brought up in frameworks. They went to Oxford. They went to Imperial. They went to the best school—name it. Then they went to investment banking, then consulting, then became associates, and then principals.

There’s this thing where musicians struggle with their second album when their first one works. That is completely untrue about athletes when they get to their second year of being a professional, right? If you’re a tennis player and you go to your second year, you get better. You get smarter, you get better. Musicians actually find it harder. Why do you have the sophomore album problem?

It’s because one is a core creative exercise where you’re not trying to ace your tests. You don’t know what the next answer is. With athletes, you know it’s a fixed game. Venture is not a fixed game. It’s more a creative exercise than it is a math exercise, because the markets are changing constantly, the venture market is changing constantly, the founders are changing constantly, and the products are changing constantly.

It’s just not like putting a ball in a hoop. I don’t know how to talk to somebody about navigating that, but I’d try to get them to a world where they understand how to navigate uncertainty with confidence and without terror.

Which company in the last 24 months did you not invest in that you reflect on the most?

I think many of the decisions that go wrong in how people build venture firms, how they hire people, and how they invest are about not being fundamentally attuned to that fact. That’s because it’s so unnatural for humans to work in an incredibly intrinsic way.

Do you feel like you did a good job today?

I came in 6 months into this job. I was a guy who had sold a company to Zynga beforehand. I was in these early growth-hacker-of-Silicon-Valley kinds of groups, A/B-testing everything with some of the very first people who were helping Mixpanel and Amplitude build out their data dashboards. I was an all-in data guy.

So you can imagine, I’m 6 months in and I’m like, “Am I doing a good job?” I’m trying to measure literally everything to figure out whether I’m doing a good job. I give so much credit to Bijan, who really recruited me into Spark, and who would always reflect back to me. He was just like, “Did you enjoy the work you did today? Do you think you put it all in? Do you think you want to come back and do it tomorrow?”

That’s it, man. Just do it well.

Did you make much money from selling your company? What I’m getting at here is, how did making money change your mindset?

I don’t think making money changed my mindset very much. I don’t actually think I execute that differently than when I had a term sheet pulled on me and I had to sell my car in order to make payroll for my team.

In those stages of early entrepreneurship, I don’t know that I process the world that differently, mostly because I like playing the game for the joy of playing the game, whatever the game is. The score takes care of itself.

I get that we all get measured on a leaderboard. I don’t get to keep doing this if we don’t make a lot of money for our LPs and our founders aren’t happy and all the rest of it. But I just enjoy the work. I still enjoy the work. I can go do other things if this doesn’t work out.

What question have I not asked that I should have asked?

I don’t know. The big, broad thing I think about right now is how this whole market should actually work. I can complain a lot about the way the VC market is structured today and think that it’s not structured that well, frankly, for innovation. It’s not really in service to founders in the right way.

If you could wave your wand and it were 10 or 15 years from now, we might agree that, especially in worlds of high levels of innovation, you can’t look at a checklist and decide whether a company is amazing or not.

And that's not how you make exceptions. We're in the business of investing in exceptions and exceptional companies.

But that doesn't really lay out what this whole thing should look like. If we really believe that startups are the font of innovation, that they help the world move forward, and that they create great capital value for people and all the rest of it, what should it feel like and what should it look like? I don't know the full answer to that, but I think that's a more productive conversation. Once you've talked about the way you think it should all work, then maybe, piece by piece, we can all try and nudge the world there.

I'm seeing more and more founders want no preferred shares, just all common shares. How do you feel about that?

I'll answer—not to dodge the question, but more broadly—that venture as an industry was a very weird thing when it was invented, right? This idea that you wouldn't take a majority share in a business and you'd be a passive investor with just a board seat, a small voice instead of a loud voice, was unique when it happened.

We've always been a world where we were in the lean-back instead of lean-forward control private equity mechanism of it. Whether that means we're preferred or common, or the term sheet changes and our liquidation preferences are different, and all of these things have altered over time, I'm open to it. I just want to make sure founders can build good companies and that they treat the people they're bringing into their orbit as people who should be committed to the same cause.

I think treating everything transactionally is kind of the enemy of what I'm trying to work on. It's probably as simple as that.

Dude, it's been such a pleasure to have you. I love doing this in person. It makes such a difference being able to see this, so thank you so much. I look forward to you sending me a picture of when you ring the bell for Grenade at the IPO.

I'll just send a picture back of me crying. Thank you so much for having me on. I love what you do. It's insane what you've done over the last 10 years, and it's really, really amazing.