Annie Lamont：管理140亿美元资产、70+次退出、15次IPO、7次登上 Midas 榜单的投资人

You have managed $14 billion over your career, invested in healthcare, fintech, and technology for over 40 years, made over 70 successful exits and 15 IPOs, and been ranked number 1 in healthcare on the Forbes Midas List 7 times.

We've been watching AI for the last decade and haven't seen it create more products or therapeutics in development. Everything has changed in the last 2 years. With Devoted, AI has now entered the picture. Over the past year, they have tripled the size of their company, halved their operating expenses, and significantly increased their EBITDA.

In my 30-plus years of investing, there has been nothing more interesting or more defining in terms of reshaping the entire economy.

When do you think these outdated institutions will really feel the impact?

I'm so excited to be with you. We're now at the New York Stock Exchange. I want to start with your experience in numbers, because you are a true legend, as they say. You're an icon and a legend. You've managed $14 billion over your career and spent over 40 years investing in healthcare, fintech, and technology. You've had over 70 successful exits and 15 IPOs, and you've been the number 1 healthcare investor on the Forbes Midas List, I think, 7 times.

We'll talk about the portfolio and everything else, but some of the notable investments include athenahealth, Devoted Health, One Medical, CareBridge, Cotiviti, VillageMD, Main Street Health, Komodo Health, Chai Discovery, and a few others. But first, once again, it's great to have you with us. The last time I saw you was in Napa. It was a great event. Could you explain what was happening there?

We invited all of our CEOs, as well as a group of industry experts and advisors, and held panel discussions. The main goal was to network within our portfolio, discuss strategy, and just have a great time.

I want to talk about Oak today. You're known as a fund specializing in healthcare and fintech, and that has certainly changed with the development of AI. How has this tension affected you and the evolution of the firm?

I don't think there is any fundamental tension because, over time, we have invested in horizontal platforms that are used in healthcare and fintech. Fintech is the movement of money, and this can be applied to anything and everything. We have invested in supply chains before. We've invested in risk, cybersecurity, and antifraud.

When you think about the new world of AI and look at horizontal platforms, what's interesting is that our practices in fintech and healthcare cover 50% of the economy. We know many of the businesses and clients to whom these companies sell their services.

It's very difficult, especially in medicine, to sell to medical companies—to understand the procurement process, what interests them, and who these people are. We know all of this. This is the smallest of the big markets you've ever seen: There are only 100 providers that matter, and there are 10 big payers.

Having that history of time, experience, and relationships is incredibly useful for a lot of companies selling horizontal solutions. What's the advantage of AI? It's that you can create a horizontal product that really works deeply with workflows or specifically in a certain industry.

What do you see in the market today? What are we not seeing?

I would say the interesting things that have changed for us are in healthcare, which is about 70% of our business. Life sciences is where I started my career in biotech, from the early days of Genzyme, Supplin, Alkermes, and Alexion. We understand it deeply, and we've been in pharma services for a very long time.

We've been watching AI for the last decade and haven't seen it create more products or therapeutics in development. But in the last 2 years, everything has changed.

We are incredibly excited about last year's investment in Chai Discovery, which is now building great models and products focused on drug development and discovery. We consciously entered this space and will dive deeper and deeper into it.

1. Why AI in biotech is finally exploding

We're going to add partners in San Francisco and expand our office there, because a lot of AI development—whether in life sciences or any other industry—is happening in San Francisco. I recently spoke with Ben Lamm, CEO of Colossal Biosciences. I haven't had many conversations about biotechnology and life sciences before, but we're going to do it more often because it's really at its peak right now.

This is an explosion.

Could you explain why this is developing so rapidly now? Why is AI so successfully penetrating this field? Why has it become so mature now?

I think the most interesting thing is the emergence of large language models with corresponding infrastructure. We have created biological and chemical models that are not language models. They are very specific to this industry, but people see the possibilities: physical AI and robotics in laboratories.

There are so many opportunities to change the cumbersome process of drug development and creation. It feels like every other industry is transforming, and this is one of them. It's probably the most difficult and expensive product-development industry, the least regulated, with probably the highest failure rate of any products being developed today.

The ability to increase the chances of success and accelerate drug development to deliver life-saving products to people is simply a game changer. I find that incredibly fascinating.

This is a moment of scientific development at the intersection of immunology, oncology, and some of the great research approaches that are currently being implemented. It's a confluence of events coming together to inspire and advance therapy.

I think we also have China. Over the past 4 years, China's trajectory in life sciences has become extremely threatening to the United States—not only to our trade, pharmaceutical, and biotechnology industries, but also to the supply of medicines to the United States.

During COVID, we found out that we shouldn't let them produce 90% of all the ingredients for antibiotics. It's not that companies won't collaborate with them here, but over the last 4 years, 50% of the external dollars that pharmaceutical companies spend on research have gone to China. Five years ago, this did not happen.

We have an existential threat in this country: an industry that has been hijacked. We need to use technology, tools, investments, and a complete reorganization of our FDA and processes to fix that quickly.

2. The China threat to American drug development

Can you elaborate on that a little more and outline the situation with China and drug development in general? I know India is also playing a big role, but can you outline the structure and perhaps the roadmap for that?

It all starts with basic research, and I think people would say, “China lacks creativity, so they haven't created as many patents, and it's all just generic drugs.”

The reality is that they really do have a lot of generic drugs. They're definitely taking something, maybe changing it a little bit, and reintroducing it in America as a new drug.

But the truth is that, in terms of research, they now have as many or even more patents coming out of universities and their research units than we do. This is something we should think about, because the NIH is taking money away from investment and research at our universities.

Our universities are the foundation of all the discoveries in America—all these products and medicines in America. If we fundamentally undermine them internationally, if they come to our universities, and if we cut grants for these people, we will jeopardize the entire process of developing new drugs.

This is not a problem today. I'm just afraid it will become a bigger problem in the future.

As an industry, we are now, like China, engaged in drug design, creating models and products that can be effectively used even by nontechnical professionals in pharmaceuticals to create new drugs or improve existing ones. So it's drug design and discovery, but it's also a rethinking of what's already been created.

Every step of the drug development and discovery process, all the way to clinical trials, can be redesigned and reimagined. A lot of that can be done with simulations and AI, provided you test the design results and compare them to the results of the wet labs. Then you compare them to the results of animal studies, look at the molecules, and realize that we are creating computational models that are close to the results of the models that we have been using for 40 years.

Regarding the categories of discoveries that China is pursuing, what is their roadmap? What are their goals?

Their roadmap starts with antibodies. They've handled it, and they are succeeding in this. It's getting better every day, but they're already incredibly productive—about 100 times more productive than a lab without them.

Next will be peptides, and then small molecules. They've already come pretty far in peptides. There's nothing they're ready to show clients yet, but the progress is significant.

Yes. It's great to see all of this spreading, because I think you've probably seen it in the headlines. This is evident in the funds that are directed toward philanthropy or similar causes, but some of the biggest names, like the Zuckerbergs, are putting all their time and attention into life sciences, biotechnology, biology, and all of that.

Other people are doing it, too, but the main takeaway, I think, is that science will be one of the biggest beneficiaries of AI.

And what's happening now with artificial intelligence? As you and your firm see things taking shape with AI, how do you define the time frames for when to enter this category, when to start researching, and what categories are you looking at?

I think we've always had a diversified strategy in healthcare. I think there are opportunities, of course, in the payer and provider markets, in life sciences, and in pharmaceuticals. And I think what we're thinking now is: you're right, the biggest impact is probably going to be in life sciences and drug development.

Of course, we are concerned about the results. I think these tools and the medicines that come from them will dramatically change people's lives. So, as I said, we've been studying AI in this field for 10 years now, and we felt like we were on the cusp of change. Now, we are at the stage of real impact, and that is usually when we get involved.

I would say you still have to look at Devoted Health. I think it's such an exciting example of a company that started 10 years ago. When you talk about scaling and power laws, it's interesting because you have to think not only about the speed of growth, but also about the security of the business, right?

The reality is that they created, starting with a Medicare Advantage health insurance plan, something that is very expensive to develop and extremely difficult to grow, competing with the giants that own these markets, including the Blues. They spent time getting licenses in every state. They spent time building a network of providers in every state. They developed a strategy of going to market through brokers and directly to participants. All of this takes a huge amount of time, energy, and money.

At the same time, they were creating their own platform, a technology platform, which no one else in the payer world was doing. And at the same time, they were building Devoted Medical Group, which is essentially their own primary care network—a virtual superstructure for patient management.

But with Devoted Health, you have artificial intelligence, along with the fact that they actually take on the risk and the care of the participants through the primary care physician and the healthcare system. They've tripled the size of their company in the last year. They've changed their operating expense ratio, and they've increased their EBITDA significantly.

You get a company that I would say is almost impossible to compete with in the future. They're going to enter the commercial market, and that's exactly what we all want. We want someone who virtually takes care of our health ahead of time, has an interface with artificial intelligence, a doctor behind that AI in the medical part, and also has your insurer provide the most seamless experience possible for the participant.

From a payments and process perspective, it's just a great thing. I have to say, this is definitely the most AI-driven, probably the best example of AI in healthcare in the world right now.

Really?

Yes. Wow. I'm not usually one to exaggerate, but it's true.

3. Are Hospitals actually at risk from AI?

Okay, I'll take your word for it. I know, I know, you speak from your own experience. I'm curious: when do you think these outdated institutions will really feel the impact? Will they feel it? Does healthcare have a long delay because of how deeply embedded everything is—the tie-in to customers, patients, providers, and so on?

I think our hospital systems and providers are not going anywhere. I mean, our acute-care hospitals are much needed, and we need them to be the best they can be. And I feel like we're at the very beginning of a transformation that AI will help with, taking the administrative costs and burdens off doctors so they can focus on patients. It's probably the first technology to do that.

Electronic health records have become a big repository of data that artificial intelligence can now use. I don't know how much of a difference it will make, but I really feel that the costs need to be reduced because the administrative costs are such a burden on the system. This is 25–30% of all healthcare costs that are actually administrative.

In terms of clinical service, there's no doubt that AI is going to have an impact. Just think about how many people are using ChatGPT to actually diagnose themselves. It could be better than your doctor at that.

Taking this one step further, and looking at radiology images, 30% of the images are read incorrectly by radiologists. Something is missed, and it may or may not be life-threatening, but sometimes it is. If you have AI behind that radiologist making sure nothing is missed, we're not going to replace radiologists. We probably need more of them, but the reality is that with AI behind you, you probably won't miss much.

Yes. Me, I would like that.

You would like that, wouldn't you? So, I think there's just going to be so many ways that AI is going to help in terms of improving care, along with the drugs that it's going to help develop faster.

I think it's also—if you think about robotics, AI, and vision, these vision models—you will actually be able to see better. The surgeon will be able to see better than he can now. The robot will eventually, probably with the help of a surgeon, be able to see and better manipulate things in your body during surgery.

So all of that is changing. I mean, the da Vinci system was so “brute force” compared with what we'll see now.

Still, this is madness. Recently, through friends, I ended up seeing a specialist. I wasn't at the appointment, but we spoke with this doctor. She does specialized surgery, and I don't know how it even came up in the conversation, but she said, “Yeah, I don't think AI is going to take my job.”

I'm like, “What do you mean? Who said AI is going to take your job anyway? You're doing some things manually, but I think robotics and computer vision will definitely help reduce the time of the procedure because you'll be able to do everything much faster. Maybe it can be automated to some extent if it's a repetitive function.”

But I was even surprised to hear, “I don't think I'll disappear completely.” This is simply impossible, especially in a field like healthcare. You want a person to treat you. You really want a person to be mostly like that.

Just think about the difference between cancer care in rural areas and cancer care next to leading research hospitals, right? The results are impressive near the leading research hospitals. They're worse in rural communities, and the same goes for surgery, right?

Will you be able to make it to the same surgeon? Will you be able to do it at all? Do you have the means to get to a hospital where a surgeon has done this particular operation a thousand times, compared with someone who has done it twice in their life? Just think about being able to remotely control a surgeon or remotely control robotics in those conditions to perform surgeries at the highest level.

4. How AI will transform your healthcare experience

This is perhaps more of a macro thought or question, but it's interesting to realize that healthcare is going to be such a big beneficiary of AI, while patients will almost never know about it. They won't even know that AI is involved in the process, because it happens so far behind the scenes and on so many different levels.

They won't know that, say, their nurse or the doctor they're talking to is having a better day because they don't have to write everything down, or that they have better access to tools and aren't burdened by this routine, or that they're making a diagnosis more easily because of access to these things.

But it's a really interesting paradox, because healthcare is going to be the category that AI impacts the most positively, even though healthcare affects all of us and we're usually very upset about the outcomes or the process itself. Maybe you spend a lot of time in the waiting room.

This is such a complex environment that will be hugely impacted. At least, that's what I would assume. But this would be the best place for people to understand that the growing negative narrative about AI is actually not that bad. This is the only place where there is an opportunity to change the narrative, but patients probably won't notice.

I think the most interesting thing is that they will feel it positively. Their doctor won't be sitting at a laptop anymore, right? Doctors won't stand with their backs to patients while entering data. So, actually, they should get a better experience, but you're right. Will they link it to AI? Will they know that the diagnosis was refined using AI? Will they eventually know about the operation? You're right: no.

But I think that's what's going to be exciting about AI in general. People are afraid of it, and to some extent, that is justified, but I would say that in healthcare it will be something extraordinary, and in many aspects of our lives it will make things better. It will expand our capabilities. I already feel like I'm learning much, much faster, and this does not deprive us of insight or judgment. It's just teaching me while the world moves forward. Isn't that right?

This, I think, should transform education. All these things, which are so hard to make and so hard to adapt, might be helped by this. This will not replace teachers. I don't think there's anything better than a great teacher. But personalizing the teacher's work with the child—maybe she should be studying 8th-grade math instead of 4th-grade math. A child can remain in 4th grade but learn differently. So, I think the benefits to society will be just extraordinary.

5. How the AI shift changed the way Oak evaluates companies

How has this macro shift—let's move a little bit to the investment perspective—changed the valuation of companies? Are there 1 or 2 other criteria you consider when screening? And how do you check the statements? I'm sure people are claiming more than before.

Well, first of all, everything always starts with an entrepreneur. It's simple: do you trust this person? Does this person inspire you? Is she the best person to talk about this topic and really build a company around it? Do they have intelligence and intent?

I've never seen a group of entrepreneurs work harder than this generation. It's really extraordinary, and I think part of it is the world moving so fast. The pace of change is so rapid and great that the bar for the entrepreneur has now changed. The people you support should be better than they were in the past. Not necessarily the top 0.1%, but there need to be a lot more entrepreneurs close to that level to build big companies and compete with all the firms and capital that are being created right now.

So, I think everything is centered around the entrepreneur. They must be able to change course. They must be able to develop. I think there are more companies focused on product and technology now. It's funny because people said we wouldn't need engineers, that product-oriented people would do everything, but I don't think that's really happening in the first wave.

I think there is a connection even in healthcare. This has always been about healthcare. Everything has always been about healthcare. Take Josh and Jack from Chai, for example: both have backgrounds in computer science, chemistry, and biology. The CEO of Devoted had a computer science degree from Harvard, and he worked in healthcare for 30 years. Eddie Park and Todd Park were the founders of Athena Health.

What you're going to see now is that more and more entrepreneurs, especially in every industry, are product-oriented. They're product-oriented, and they're exploring a new market. So, I find out if they really understand the go-to-market strategy. Are they humble enough to gather the right people around them and ask the right questions?

And finally, with a great entrepreneur, it's about a feeling: I should be excited, right? I have to walk into a room, and when I met Brad Smith or Todd Park or Josh and Jack from Chai, you know within 5 minutes that you want to support these people. You just know they have it. They have this intensity, this understanding, and this intelligence. They will just do it, and they will do it honestly.

In many cases, you supported them again. Can you share some stories of when you supported founders multiple times?

Yeah, of course. We really support repeat founders, and I think what I'm most proud of is that they choose us to support them again. Of course, with Todd and Ed at athenahealth, and then Castlight—Todd was one of the founders, although he went into the Obama administration—and then Devoted, we led a Series A round.

Then there was Brad Smith, another guy from Harvard. I always try to support the guys from Stanford, and I always support the guys from Harvard. Brad came along while I was looking. We had invested in the first commercial hospice company, and I was looking for a palliative-care model that would make sense for 15 to 20 years. Brad described a palliative-care model that was a win-win for everyone: a win for patients, a win for payers, and a win for the healthcare system, which brought costs down. It was a win for the company, too, but it was a win for patients and for the people who pay the bills.

This is the perfect team composition for healthcare. So, I immediately supported him. It was a quick win for him, and then we started 2 more companies together, CareBridge and Main Street. We spent a whole year working on ideas for both. We thought there would be 1, but in the end both became really exciting companies.

I think I said to Brad, “What do you think I'm doing differently?” He said, “You're building something that no one else is doing.” There are so many copycat companies. There are so many of them, and that was one of the reasons why, in healthcare, we didn't do as much in the Valley at one time: someone starts a company and you immediately have 5 others just like it.

The reality was that Brad was starting a company with a different model that no one else was offering. This ultimately made it unique and successful. So, we backed it 3 times, and all 3 attempts were quite successful. We sold CareBridge to Elevance.

We like it because it's a long-standing company that's been built and is working. It's a strategic move that can sometimes disrupt other things. So, I think those are the 2 best examples we have.

Of course, I think it's going to be interesting with Jack and Josh. This could be a company for the ages because I think they can capture a huge part of the continuum in healthcare, in drug development and design, and they're already on their way to doing that. Soon, most of the major pharmaceutical companies will be collaborating with them at a very deep level.

They're in a creation mode that's causing a real stir because of the data that they're working with. Their models evolve and develop faster than any other, and this is the true sign of an AI company that can be differentiated, secure, and sustainable.

6. How M&A is changing in Healthcare

I think this is a very valid observation. I'm curious, from your perspective, what you see, because the players on the field change very often—very rapidly. How is the mergers and acquisitions landscape changing? How is the healthcare business exit landscape changing?

Yes. We are excited because it expands the possibilities. We've always had McKesson, Cardinal Health, and all the payers—basically 5 major companies that are worth buying from.

But, in the ISP space, I don't usually buy anything, so if you build a software company, eventually it goes public and is now traded in the private equity world. You can create companies with very positive EBITDA, but now you have the technology. You actually have software in the AI world where leading labs are interested in these spaces, and it's very difficult to create companies that are integrated into providers or labs.

But it is certainly possible that they will want to own 20% of the economy, covering pharmaceuticals, life sciences, software, and ISPs. So, this could be a good opportunity. Microsoft has tried before; they bought Nuance, which is used elsewhere, but Nuance mainly specializes in healthcare. So, they could operate more broadly and deeply. Many of these companies could.

Oracle apparently bought Cerner, and they might want to delve into this even more. It seems to me that there are many more opportunities in technology now than before because we are emerging from the technological stagnation that healthcare was in in the past. We are rapidly moving into the 21st century and beyond.

The key word in M&A is synergy, but how much of this do you think is real synergy, and how much is a play on momentum?

I think that in the new world there will be so many companies with such high valuations that they will not be able to pioneer new directions on their own. They will not have built-in expertise. They won't have the best specialists to create them, and they will have to buy such companies. If they want to continue to expand their total addressable market, or TAM, this will be a great way to do it.

7. What a great Healthcare acquisition looks like

What were the best-case scenarios for a successful M&A deal and integration experience?

I would say that, in healthcare, CareBridge is the latest great example. It's working very effectively within Elevance and is rapidly expanding within the company itself. So, we are pleased and very excited about this.

We have already sold companies that are service aggregators, and it is probably easier for service companies to acquire them. In the past, we built PBMs that were acquired and proved to be useful in the middle market. But it's not easy. I would say there are probably more failures than successes, but it largely depends on how the buyer treats people.

Yes, and whether it retains people and talent or is just a product acquisition or a data acquisition. They can be extremely successful. Isn’t that right? If you just want the product and the data, that’s what you get. If you want the product to evolve, you probably need to find a way to inspire the team or keep them separate so they can evolve it.

This is a very interesting topic, and I’ve been delving deeper into it through recent conversations in various categories. I interviewed Kashi Arora from Palo Alto Networks. He has been working there for 8 years and has made 40 acquisitions. Cybersecurity is an environment where takeovers are constantly taking place. You’re always trying to outsmart hackers, attackers, and similar individuals.

So acquisitions became part of the structure to stay on the cutting edge and work with the best teams. He made it clear—that’s something you don’t often hear from CEOs when they explain acquisitions—because some people just say, “Oh, we’re buying it. We dominate you. We’re emperors. We know better.”

But he was very clear: “They are the experts. We have to make sure we maintain that, that they know that, and that we are no better than them. We buy them because they are smarter than us.” It was a very interesting look at things in that category.

Then, in this recent series with Rocket Lab, we moved into the aerospace industry. He has made what seems to be 7 acquisitions to date, from small to large companies, and he said there’s no such thing as a “small acquisition.” They’re all big. They all take up a lot of your time.

It was interesting to hear all these different perspectives on what happens during a takeover, and I lean toward that because we live in a takeover environment. Mergers and acquisitions have certainly become part of the strategy, growth, and momentum of what’s happening in the AI era. These companies are growing faster than ever before, so you want to choose them and make sure they’re a good part of your process. Even small startups are now acquiring companies much earlier than they used to. That was an interesting point to delve into a little further. Have you seen smaller companies make acquisitions like this before?

Yes, I think from a product perspective, and I would call them more mergers than acquisitions. There are a lot of smaller companies that understand that they are a product, not a full-fledged company. That can work, right? If you inspire people, respect the team, essentially buy into the product, integrate it into what you do, and empower those people, then it absolutely works.

I think in technology companies, there’s more respect for the product, so they’ve generally done it better. It’s just interesting. If you look at the analogy with investment banks, there were certain groups—for example, J.P. Morgan did it very well. They brought them in, figured out who was the best, whether it was J.P. Morgan or the acquired company, and put the right people in the right places.

I think in the Credit Suisse world, they didn’t do it very well. They actually favored those who were already in the company instead of understanding, “We are buying a company, and they are the best in the world in lending and debt.” Yet they showed disrespect for these people and did not appoint them to leadership positions. So why did you buy this company in the first place, right? I think it’s a question of whether you’re truly strategic. Do you care about creating the best enterprise, or are you in a culture of political intrigue that is only interested in preserving the status quo and building an empire?

Yes, that’s a valid observation. So, we’ve come this far, but we haven’t talked about the Oak model yet. You have a broad investment strategy: check sizes range from $1 million to $100 million. Could you talk about the evolution of the fund, how you developed it over time, and the investment structure and things like that?

Yes, of course. We’ve always dealt with both early and growth stages. That was our past experience, both for me and for my co-founder, Andrea Adams. We started in the early stages of growth, but we started with a fund of $500 million. We wanted to get started quickly and raise capital quickly, and I think the model hasn’t really changed. The world has changed.

So we went from $500 million to $2 billion in the last 2 funds because there are so many more opportunities in the world. More capital is needed for the companies being created now. We want to be a full life-cycle investor.

We can invest $1 million, but often to that $1 million we add a commitment to invest $100 million in the company from day 1. Or we go in at the seed stage, expecting to participate in most rounds, but we are very loyal to the founders. If we have a sufficient stake in the company and the founder wants to bring in 2 new investors because they will be useful and it is best for the company, then great. Let them bring them in. We believe they will be good partners, because having good partners is the most important thing.

We all know that a board of directors can destroy a company. It is possible. So we pay a lot of attention to this. We believe this is the best option for entrepreneurs, and it allows us to understand whether we’re interested in a certain area: Should we invest sooner or later? At what stage should we invest?

We can even invest 10% of our fund in common stock. We’ve done PIPE investments in the past, for example with Psych Solutions in behavioral health, and this is very common in biotech and life sciences. We can come back to this because you’re actually getting confidential information in a public company. When you invest in a lot of these things, especially in life sciences, it’s really a funding mechanism through the public markets, not just access to liquidity.

For us, the main thing is the best entrepreneur, the best opportunity in a topic that we like. We just have to be flexible, because the world has changed, and I feel like we have a barbell-like world of investment now. Early-stage and seed funds have their place in this world, and being early-stage is a really important part of the ecosystem. We also have late-stage capital that has come back to some extent, as well as crossover funds.

But from a brand perspective, and from the opportunity to fund growing companies and be influential in this world, you need to be able to write relatively large checks. Otherwise, you simply won’t be a player for entrepreneurs. Why should it matter to them? So I think an important part of the strategy is to be big enough to write big checks, but also make enough early-stage investments, which is what we’ve always done.

The share of early investments in the fund ranges from 20% to 40%. If you think about our fund, that’s between $400 million and $800 million at the early stage. It’s not that small; it’s a pretty significant portion of the fund, especially in an environment where valuations are rising extremely quickly due to high growth rates. Sometimes it’s hard to get in at a price you think is fair.

I think that market inflation is only justified for 10%—I don’t know, maybe 5%—of these companies that meet the stated valuations of $10 billion or $20 billion. But only a few of them really have that kind of total addressable market, or TAM.

Yes, so big.

Since the market size is not only software but also services, it’s obviously much larger for many companies, but in general, there are many that will not exceed $1 billion or $2 billion in total value. So you have to be aware of that, and I think we’re in a period where everything is distorted. Every company is probably getting inflated valuations. It’ll get fixed someday, like it always does, and I just think that only 10% of the companies in the world are worth it, and 90% aren’t.

That is really interesting. Does anyone remember what it was? 2021, 2022—when were private markets cut by 80%? Some companies still exist because they’ve raised so much money that they can continue operating, but they have to reevaluate everything, and their preferred-stock structures are completely distorted.

Yes, yes, it’s so funny, because you look back and ask, “Why, actually? Why? Why was 2021 so hyped? Where does this excitement come from?” It’s interesting, but back then it was about the digital economy. AI is obviously fundamentally different. It has created so many truly extraordinary opportunities that are unique. In my 30-plus years of investing, there has been nothing more interesting or important in terms of reshaping the entire economy.

So, do you think AI justifies valuation inflation, or do you think—

I think definitely for about 10% of the market, yes.

But do you think this really increases the market tenfold, a hundredfold? At what point does the line between rationality and discipline come? Where does it manifest itself?

Where it's just like, “Okay, this is already beyond our limits.” As you said, the TAM—the total addressable market—doesn't even reach a billion dollars for a certain part of the economy.

Corporate technology, global real estate, and ERP have huge prospects. There are markets in healthcare that have tremendous growth opportunities: pharmaceuticals, Chai, and, of course, some companies like Ambience and others. But many of these companies are niche and won't get too big.

And then you think, who will buy it? Who will buy it, even if it's AI applied to TPA software? They will buy this based on EBITDA.

Do you know who would buy this?

Maybe it will end up being incredibly profitable. But I don't understand why some random technology company would buy this with a strategic multiplier.

I think we've always done that. When we look at what companies are doing when they go public, we can usually sell assets at a 30% strategic multiplier because there's a certain strategic element to the strategic buyer.

Yes. And some of these companies will live to become neocloud.

True. True.

8. What Halluminate actually does

I'm curious. We haven't talked too much about the newer part of the portfolio. I know we mentioned Real It, Chai, and Devoted as some of the key companies, but Halluminate is a company that's on your radar and is a major position right now, right?

Oh, yes.

Can you tell us about Halluminate?

We are thrilled with these founders. Jerry is incredible.

This is an interesting case. This is a horizontal solution, but it is also relevant to our sector and our expertise. This is a reinforcement-learning environment. The client creates agents, and these agents create financial and economic models. In essence, they mimic environments.

Their clients are large laboratories, and they are actually engaged in teaching. It's really a reinforcement-learning model where they look at the things a financial analyst does in an investment environment.

It's not just about pressing keys in spreadsheets. This is an analysis of financial elements. This is a consideration of how you arrive at an investment thesis, how you form a recommendation, your scorecards, and how you review the legal work applied to it.

So they create a whole financial environment and then a simulated environment that can be used for testing. Obviously, these agents will eventually be used by financial institutions or any corporation that evaluates investments.

In one case, they actually created a simulation for an entire real estate brokerage. You could test a new business model with it and figure out what works and what doesn't, because it's actually a real estate broker. How would that work, and what would be the best way to put the pieces of that business together?

This is exciting. They went from 0 to 100 in 6 months, and we think that's an incredible trajectory. It's a very interesting horizontal but applicable approach to our markets.

How did you come across them?

Just networking, talking to people, YC, and talking to others. I think what's nice is that they found us because of our experience in financial services, and some of the clients that we're integrated with in a lot of these labs know about us and have recommended us.

9. What Augur actually does

Another of these companies is Auger. What is Auger, and how did you get involved?

Auger. We have a great talent-acquisition function at Oak, and it's really built into our investment strategy. They find people every day that we should talk to who are great entrepreneurs and great talent, whether they're in existing big legacy companies, new startups, or they're 20-year-old college dropouts.

They introduced us to Dave Clark, the CEO. We spent a very long time generating ideas with him. His experience and his team's experience are with Amazon. He spent 22 years building the entire supply chain and logistics operation at Amazon.

Yes.

He then ran e-commerce—he's pretty famous in this world.

I know his name for sure.

Yes, no, he's incredible. His team is incredible.

At first, to be honest, he wanted to buy the company or take a controlling stake in it, more like a private-equity investment. But that quickly passed, and we decided to build AI for supply chain. It's essentially an orchestration layer, data analytics, and an operational layer for supply-chain and logistics.

What they do—and right now they have about 8 clients, all big Fortune 500 companies—is not just provide analytics. They provide agents that then execute those insights throughout the supply chain.

The most surprising thing for me was that we all know the supply chain broke during COVID, but we thought all these big companies had very sophisticated software and analytics for their supply chains. Then, when you get into these companies, you think, “Oh my God, are you serious? What did you even do? How did you manage it, and why did the supply chain work so smoothly for so long?” In reality, so many things went wrong.

I think it really raised questions in the minds of executives about what we were doing with the supply chain, because when things changed, they just couldn't adapt fast enough.

So it's real-time analytics on everything that's happening in your supply chain, and then an agent that can actually act on it immediately. We don't know anyone else who does it exactly like them, so we're really excited about this.

We're about to enter our second year with real revenue, real customers, and real results. This is a company that's going to scale. When Dave came to us, we knew he had a big, expensive team and that they needed to do a lot, and do it fast, so we gave them $100 million at launch.

Oh, wow. Yes. Wow. How often do you help build these companies and start them from just an idea?

Yes, that's probably 15% of what we do. Different funds are different; sometimes you see more in the early stages, and that's great. You don't feel the need or desire to seek out great entrepreneurs.

But I think, in general, we do it. We've done a number of developments when you buy in the whole value-creation world. We have a company called Curana, where we bought a business and then built it across the United States, just like Infusion for Health.

This is a case where we've opened outpatient infusion centers all over the country. Sometimes you buy, and sometimes you build. It's all a building process where we've allocated significant funds to them from day one.

10. How AI reshaped the line between Healthcare and Fintech

So, in conclusion, Annie Lamont—

Yes.

What are you most looking forward to in the next 12 months?

What always fascinates me and what I always look forward to in this job is meeting the next great entrepreneur.

Mm-hmm.

It's just incredibly inspiring to see it, and they always teach you something new. I think the reason I love this business and am still so involved in it is because I am a lifelong learner, and I have never learned so much and so quickly in my life.

If you think about how I had to learn about biotechnology and life sciences years ago, it was through books or by visiting professors who would talk to me. Now, using AI, I can learn about anything very quickly.

What's amazing about meeting entrepreneurs—and that's why they're entrepreneurs and we're investors—is that they're inventing this new company. So it's an incredible learning process. Then, of course, there's the joy of working with amazing entrepreneurs, watching them grow, learn, and develop their companies, overcome challenges, and the sense of satisfaction that comes from helping them rise above those obstacles.

This is just an incredible profile, an amazing career. I like it. This is a great answer. I didn't have many answers that described the process or lifestyle, but you genuinely love your job and the role you play.

11. What's kept Annie Lamont going for four decades

I love it. I adore her.

But I wonder about you. Throughout your career, I think that effectiveness depends on who you surround yourself with or who has been a motivating factor for you. This could be someone stoic and very influential, or someone you learned from directly.

Who are these people to you? Who kept you motivated throughout this journey?

I think when I first started my career, I focused more on the theory than on the entrepreneur himself. Although people—and I see this over and over again when we train people in our company to become investors—it's very easy to get carried away with ideas or even numbers.

You look at a company and say, “Oh, it's gone from 0 to 10. It must be great.”

There was this man, the greatest retail investor of all time, Jerry Gallagher, who worked with us. It was Dick's Sporting Goods and PetSmart, and, actually, the whole Office Depot.

You could just list them one by one, and it was incredible. He was a manager himself, and he told me—it’s always good when people are direct and honest—“Your bar for entrepreneurs is not high enough.” This was at the very beginning of my career, and it was extremely important. I know that it’s etched in my memory.

Further down the road, I’m inspired by entrepreneurs every day. They have the hardest job in the world. I can honestly say that I remain excited because I’m constantly learning. As a seasoned investor, I’m learning more from 25-year-olds right now. This is madness, so it’s so much fun.

I’m also very lucky because my partner is Andrew Adams, and we call him my “working man.” We’re not the same person, but we almost always come to the same conclusions when discussing everything. It’s incredible to have a partner you respect so much, with whom you can work through any problem. You feel great, and we’re constantly learning from each other. It brings a lot of energy.

Yes. Well, it was nice talking to you. Thank you very much. It’s so interesting to talk to you. You’re very eloquent, and you explain everything very well. You have deep and thorough knowledge. Few people have these qualities. Thank you for joining us. It was fun.

I was happy to do this with you, Molly.