Former CAA Talent Agent Turned Investor with $70B in AUM on AI and Venture Strategy | Ep. 29

[00:00] I looked at maybe the top 10 to 15 P&L winners that I've had over my career on the private side. Without exception, my first opportunity to invest [00:10] was a no. It might have been a no from me to the company passing or vice versa, the company passing on me. I am really excited to be here with you today, Thomas. Thanks so much for taking the time for this. Very excited. [00:25] So my note to myself on this first topic is this time it's different and [00:32] A lot of people recently in the last few weeks have been saying things that are, you know, [00:38] implying that a bubble might be going. And you know, it's like, you know, there was a tweet from Brian at Sequoia that was like, you know, this is a good time to sell your company. There have been a lot of blog posts written, you know, behind, you know, closed doors. It's a frequent topic of conversation, like valuations are expensive. We're back to 2021 multiples for a certain flavor of company. [00:59] Obviously, Kotu has gone [01:02] through over its last 25 years of existence, a bunch of cycles. So you've seen this happen many times. And so I'm curious, sort of your spot temp check, [01:12] fall 2025. How do you make sense of where we are in the cycle and sort of in capital deployment? [01:20] Thank you. [01:20] Yeah, so... [01:22] I've been lucky to be doing this for a while, almost 25 years now. There are a few seminal moments that I recall as a tech investor.

[01:30] The first was the iPhone and Apple and the quarterly earnings that would come out and the absolute blowout. If consensus was one, they would print three or five. You just didn't see those kinds of beats and the magnitude of – [01:46] the transformation that Apple was bringing into the market with the iPhone. So that was kind of one, right? [01:52] The second I remember like it was yesterday was NVIDIA when it guided its data center business to be up 100% year over year. No one thought that that could be possible. So that was obviously that and the chat GPT moment kind of happening at the same time, right? [02:09] I do think the Oracle announcement from two weeks ago was – [02:15] really profound and important as well. [02:20] just a fascinating story of how long Oracle's been around and how it's been able to shed its skin and reinvent itself. [02:28] What was interesting about that specific company is... [02:33] If you look at the AI infrastructure build out up to this point, it had really been funded with cash flows from big companies, right? So Meta, Google, Apple, Microsoft generating incredible amounts of revenue, having very high operating margins, very high cash flow margins, and the ability to invest some of those cash flows into this AI build.

[03:03] Thank you. [03:05] What was different about the Oracle announcement... [03:09] is now you're seeing kind of some leverage come into, right, where it's actually not just the free cash flow positive companies that are investing. It's actually free cash flow negative companies that are investing, right? So OpenAI, as an example, right, is making a huge bet, right? It's not producing free cash yet, but it kind of sees a version of the future where demand for its products kind of keep increasing. [03:39] that [03:41] we spend a lot of time kind of looking at and thinking about. The question now will be, [03:47] does the competitive intensity between the hyperscalers really start to intensify, right? We kind of had a staid oligopoly, I would say, where Amazon kind of started, then Microsoft, and then Google kind of crept in, and it was kind of the three of them for a bit. [04:04] Boy, does that feel different today, right? You've got Oracle putting its foot into the ground, and now I think establishing itself as an absolutely key player. You could see them getting to maybe 15% market share of cloud in a few years from essentially zero. You have companies like CoreWeave, right, GPU-only cloud. So... [04:27] I do think the market competition is intensifying. There's more companies now. It's not just cash flow companies that are investing. Both OpenAI and Thropic are making huge investments. I do think the stakes to me feel different than they were maybe two years ago.

[04:48] how it would change the environment feels a little bit different to me. It's one thing if Meta is saying, "Well, I'm so profitable. I have so much money. I'm just going to choose to sprinkle some of my cash flows into AI." That's one thing. We've now moved into a different phase where I think companies are saying, "No, it feels more existential. I'm actually willing to invest significantly more, maybe even more than the cash flows that I'm producing in the case of some players in the ecosystem to go and win this market." [05:18] Thank you. [05:18] It's a sign of multiple things, right? And to me, the biggest one is the intensity and the criticalness is increasing. And so I think… [05:27] our vigilance has to increase as well. [05:31] The companies that you just talked about, for the most part, you know, [05:34] huge behemoth public companies. And what's interesting is if you look back at like the ZARP [05:40] bubble. [05:42] the [05:42] the private company bubble happened. But I would argue that the, like... [05:47] then QQQ, like the Mag-7. [05:50] I think it looks like they were undervalued. And they took a dip, but it's much higher now in a way that's different than what happened in... [05:57] private markets, in particular early stage private markets. [06:01] Obviously, KOTU invests from inception round through IPO. And so when you're thinking about this AI transformational moment that you're talking about that I think we kind of all agree is real. [06:13] you could look at that and say, "Okay, I can invest in these huge public companies. I can invest in Oracle. I could invest in the labs."

[06:22] I could invest in growth private. I could invest in seed. You've got a big team that's capable of walking and chewing gum at the same time. To what extent do you think at a high level about... [06:34] the market and where should [06:36] buckets of capital be deployed versus finding just individual, I like this seed and I like Oracle and I'm not thinking about, you know, the buckets. I'm just thinking about birds. Yeah. So we do tend to be very thematic and I use this often, but having a wide aperture lens into the world of technology globally, public and private, US and kind of rest of the world. So I think about, okay, what do I know and have conviction in, right? Well, [07:06] for Kotu, partially because I was trying to find a semi-analyst and couldn't find one. And Philippe one day came into my office and dropped a universe, which was essentially like all the semi-names in a spreadsheet that was printed and said, well, we can't find anybody, so you do it. And so I just took it upon myself to kind of learn the semi-business. This was in the early 2000s. So what do I know? I know that we're not going to have AI without semis. So [07:36] layer. So when I think about AI infrastructure, I think about we're going to need semis, we're [07:44] So all three of those to me present really interesting investing opportunities, right? Across both actually public and private. So if you think about semis, obviously, NVIDIA.

[07:55] . [07:56] Uh, [07:56] To me, maybe the other great tech story that I think very few people know about but Hocktan at Avago Broadcom, right? 1.7 trillion of market cap might soon be – [08:09] Um. [08:10] as big as Meta. I think Meta is 1.7 and I think Avago is 1.4 so he's kind of closing in, which is an amazing story. [08:20] So I know that and then private companies like Cerebras that are innovating and doing interesting things, right? So I'm a big believer kind of in that layer. How would you play power out of curiosity? [08:31] Nuclear is one. Fusion or fission or... [08:35] I would say we don't quite have the conviction yet on fusion and whether it's going to work or not. [08:42] I do think there's two technologies today that are critical. One is nuclear. Constellation Energy, as an example, has now done what's called behind the meter deals with Amazon and Microsoft, where those can tie directly into some of their plants. They just did a deal with Josh Shapiro in Pennsylvania to reactivate one of the reactors there. [09:06] So that's one. And then G, Vernova, right, with liquid gas generators. So as it turns out, we have a lot of liquid gas in this country. It's clean. It's extractable. [09:20] The issue is they're basically sold out of capacity for the next five years. But that's an example of the trend and I think we have a lot of

[09:32] belief that value is going to accrue there and you're not going to be able to have AI without that foundational layer. So that's kind of maybe kind of layer one, right? High conviction. [09:44] I think layer two now moving up the value chain one is we definitely think models are going to be important. [09:51] It does feel like the world is kind of coalescing around a handful of companies. I would probably put OpenAI, Anthropic, [10:02] I would definitely put Google right kind of in there. [10:07] And maybe there's, you know, we'll see what meta... [10:09] ends up doing. We'll see what kind of Microsoft and Amazon end up doing. [10:14] So I think that's going to be, the foundational models are going to be incredibly important. They're going to power transformative apps like ChatGPT, which, as you know, has completely transformed how we work and our expectations of how software is going to work. [10:31] So I would say very high conviction in kind of each of those, right? [10:36] I think now as I start to get to layer three, my lens probably gets a little bit fuzzier. Now we're talking applications. Correct. Right. So what do I know there? Well, I do think the data layer is going to be foundational and really important. [10:51] I think, curious to get your view as a SaaS founder, but my view is the era of data being locked into SaaS platforms is over. [11:00] There was an underreported, but in my opinion,

[11:04] very significant press release put out two weeks ago by Workday, where it essentially came out and said – [11:13] we're giving up on trying to kind of keep all of our data inside of our lock SaaS ecosystem. We're going to plug into Snowflake. We're going to plug into Databricks, right? We're going to give customers the ability to merge their workday HR data with some of their other data to kind of power an objective future, right? To me – [11:32] I think that's critical. [11:34] And [11:35] Carl, the CEO of Workday, was on the board of Snowflake, right? So he understands the data landscape really well. [11:41] I think that's going to unlock now Workday. Its future is about building the best Fortune 500 grade agents for HR and finance. [11:50] Not, where's my data store? Like does that, do I even really care about that? I mean, of course, it's got to be secure and stuff like that, but boy, I want an amazing agent and stuff like that. So I do think that data layer, I think Snowflake and Databricks and other companies like that is going to be kind of foundational. [12:08] Now I get to the apps, right? And one area where I'm spending a lot of time personally is trying to think through [12:18] what does this mean for a workday, for the whole SaaS ecosystem as we've known it? Is software dead, as a lot of people have been writing about over the past 12 to 18 months? Or does it get reinvented? It almost sounds like what you're describing is...

[12:35] like, is the system of record dead? Like, you know, kind of like what I'm imagining as I'm listening to what you're saying is you've got, [12:42] Snowflake or Databricks. There's a system of record that's traditionally stores the data that then integrates with a lot of ecosystem apps. And many of those ecosystem apps today might look like companies that are agents or like doing work for you. And so then the question is, what's the role of where that data is stored? Does it just go straight to the databases? [12:59] So I do think the system record is dead. [13:02] I'm not sure. [13:03] I also think, by the way, another belief that I have is that every interaction within the enterprise within three years will be recorded. [13:11] Thank you. [13:12] And I think the default is going to be record on versus ironic since we're taping right now. But the default is just going to be an assumption that this meeting is being recorded. So why is that? Because if you think about the intelligence of an enterprise that should get fed into a system of record, it's all coming from interactions online. [13:33] that are in meetings [13:35] that are over email or slack or over zooms right [13:39] How's my customer doing? How's my sales process doing? All of that is by and large captured and even in person meetings, right? I think people will start recording. So all of that can be fed into... [13:51] automatically, why do I even really need to write a note on what was just discussed? Actually, the system is listening, we'll extract all the information and knowledge, and then it can just be kind of quarried later. [14:04] It's an interesting prompt about the system of record. So obviously one of the things that a system of record does is it holds the data, which I agree with you, I don't think that is like, that doesn't seem like that important in the future.

[14:17] I'm thinking through in real time right now, but other things it does is coordination between the other apps, making sure the data is consistent. [14:23] It makes it tamper-proof, so security is a big deal. [14:28] it gives the customer a central place so that they're not working with [14:34] nine million vendors all the time and they have some sense of how their business systems are working. So there's some other things there and I'm curious how that could [14:42] shake out otherwise. I mean, maybe you could see a world where like the Databricks, Snowflake Lair become massive companies because they start kind of really being the hub of all that stuff. But it does feel like there's some ecosystem, you know, as I think about a Workday, a ServiceNow, a Salesforce, there are some functions of those products that aren't just [15:02] I agree. So I do think [15:04] the databases of, and I think Snowflake and Databricks will be. [15:09] very large companies. [15:10] I think the role of Workday will, A, sit on top of it as a validator of, okay, this is like important data and we validate it and kind of stand by it. But the future will be, okay, now actually think about Workday that in the past only saw kind of its own data, right? Now Workday is going to be able to make HR and coaching decisions based on the entire data set, right? Potentially even – [15:33] the recorded meeting dataset. So yesterday we hosted for one of our early stage companies an AI compliance summit. [15:42] So we have the head of AI for the SEC and the GCs and compliance of all the kind of major kind of investing firms. And with the chief compliance officer of Meta as an example. And I was discussing with him my view that meetings will be recorded, right? And

[15:56] his mind as a chief compliance officer went like, "Oh my God, this is a nightmare. I don't want to know. I want no transcripts. I don't want the data." And I said, "Okay, well, let me give you two scenarios. Okay." [16:08] Scenario one is you have a bad actor in your enterprise. He's belligerent in meetings, says completely awful things. [16:17] He's demeaning to other people. All the vile things that you can imagine, right? No one speaks up because they're too afraid and turns out six years later, one person actually speaks up. Now everybody comes out of the woodwork. Now you're on defense. You have to go on, "Well, why didn't you tell me? Well, I was afraid because the boss likes him." Now you got a whole... [16:36] shit show to deal with right so that's [16:38] Version 1 of the world. [16:40] my version of the world is actually the meetings being recorded right and the compliance agent afterwards [16:46] seeks out that individual and says, by the way, [16:49] Um, [16:51] your behavior wasn't appropriate. [16:55] for this reason and I'm going to suggest some coaching to you. Or it's not even just necessarily like an HR thing, it could be what you actually talked about is anti-competitive. [17:06] and it's not something that we can do, right? So only the agent's reading the stuff, it's not something visible to employees. That could be kind of step one is the agent just goes to the actor and [17:18] offers remediation. [17:19] Assuming it's not so egregious that it has to be. Stage two might be, I'm sorry, that's your second violation, right? Now you have to go through a mandatory three-day compliance process. And step three is actually now it's been flat to HR, right? Yeah. I'm just kind of inventing the system, right? But you can see that now companies are going to be able to diffuse issues before the grenade's gone off, right? Yeah. I mean, definitely, like, the trend line here is comfort with this stuff.

[17:49] a recorded meeting and you didn't know about it or somebody brought an agent into a Zoom meeting, people would be like, "What are you doing?" And now I just, even if I don't see the granola agent, I'm just like, "Anything I say on Zoom is recorded." That's just like the plan now. Yeah. So one of our portfolio companies, Gong, which is in sales intelligence, right, and listens to the calls of salespeople, [18:08] has completely re-accelerated now because generative AI has enabled that [18:15] Corpus of data to be so much more powerful. Right? So now if you're a great salesperson, and you know exactly how to sell against company X I can extract [18:26] What makes you so good? Is it that you pitch the company this way, that you pitch the competitor that way? So they're seeing significant increases in ramp of – [18:39] lower ramp time for reps, right? So I just think we're going to start seeing that through the whole enterprise. So I'm curious, as we've been talking about public, private, early, late stage, [18:51] I asked you before if you identify as a VC. You're like, no, not really an investor. That includes making investments that look like VC investments. When you sort of look at the world around you and sort of how VC is evolving, I'm curious your... [19:06] read on what's the winningest strategy or strategies in venture today. Like when you think about who's really doing venture in the right way and [19:15] in your estimation today. [19:16] How do you think about that? Who do you sort of... [19:19] look towards or what are the models that make the most sense to you now?

[19:23] Yeah, so look, we started, which is a couple million under management, right? So we kind of grew the business organically by kind of compounding over time, right? [19:33] Um, and Philippe and I have always run, um, [19:36] the business in a way where we just try and think what's in the best kind of long-term interests of our business, right? And don't make kind of short-term decisions. [19:43] We never had the luxury and venture of [19:47] I sometimes use this analogy of venture and investing is kind of a river and the good investments are kind of swimming in the river. [19:58] If you got there early, you got the best spot that protrudes into and you kind of capture the best fish. We didn't get there early. I don't have the best spot on the river like some of the firms that have been doing it for a really long time or… [20:14] a founder that started a generational internet company right so we had to to just try and rub shoulders and elbow and be the seventh player on that that wasn't kind of interesting to me as a founder right I'm sure when you decided to do your podcast well there's a ton of podcasts out there so I'm not going to just do like [20:34] the 17 other people are doing, I'm going to try and do something different. Well, we kind of brought the same approach and we thought that what was uniquely suited to us, right, was, well, since I don't have the best plot of land on the riverbank, right, where maybe like benchmark and sequoia sit, I'm actually just going to be the fisherman that just could just travels up and down, right? I'm just going to try and find the best opportunities kind of as I see them. And I think it's more common now, but

[21:01] Back then it really was, no, you stay in your place. We're going to be here on our part of the river and then there'll be another cast of characters on the other and so forth and so on. And then to their credit, players like... [21:16] Yuri Milner and Tiger came in and said, "Well, hold on. Why is that the case?" [21:23] It happens it also tends to suit my personality right which is [21:30] I don't tend to think about whether a company is private or public. I don't tend to think about whether my time is spent between public or private, right? Because some of the best research that I do for my public investing is by meeting private companies. [21:44] or vice versa. So sometimes investors will ask me, investors in our platform, they'll ask me, "How do you spend your time?" I think from a research basis, [21:56] I don't-- [21:56] think about it that way i really talk to companies find big themes find big trends and then find companies that can kind of uh [22:05] benefit from them. Yeah, I think in venture one of the things that has morphed recently that probably has [22:12] moved I would imagine directionally more towards your way of thinking is it's okay to scale [22:19] and [22:20] there are many ways to be successful and you don't just have to have 20x small early stage funds. Like a lot of [22:28] venture capitalists who I think maybe started small have gotten much bigger and are saying, we're still going to get...

[22:33] you know, very good returns. But it's going to look different. It's going to be a much bigger capital base. And it's okay if we didn't hit it at the seed because we can get it at the B or C or D. [22:42] And that's certainly my thinking and [22:45] The thing I dislike the most about Venture [22:48] is... [22:51] the zero sum nature of the business at times right where there's a round there's only [22:56] X amount of dollars and every dollar that you take is a dollar that I don't have. [23:02] Um... [23:03] Which is the source of competition between firms, obviously. Correct. And it feeds into a lot of different types of behavior and things like that. [23:11] My approach as a public market investor was always like, "Great. If you have a great idea, let's bat it around because guess what? We can both do it. We can both benefit." [23:20] So, [23:21] I'm... [23:22] have built my whole life and business model basically against being a, um, zero sum thinker. Right. Right. [23:30] So that's the piece that is the toughest for me, right, is when I run into, you know, on either end, a situation where somebody has to win and somebody has to lose. Yeah. So how do you navigate that? Because I guess in your public world, maybe to some extent in your very late stage private world, there's probably more supply or there's probably more demand for dollars from the companies than, you know, any given firm, even as big as Koto is going to supply it.

[24:00] is somewhat tribal in nature, and there are these kinds of [24:04] coopetition, you know, [24:06] friend circles in venture where even people who should be economically competitive decide to play a repeated game and you know So how do you operate you know on the early stage side? Yeah a couple things there's one is [24:20] you're right that VC is really tribal. [24:22] Um... [24:24] My view is I like to visit all the different villagers, you know, so I'm not one of the villagers, but I'm accepted by most of them. And I come in and I try and kind of leave the village better than, you know, when I walked in. So I have a lot of friends at different firms and, you know, I always try and tell them that the bar of whether – [24:43] we were successful or not is, you know, we had a positive contribution on the company. [24:48] or the board or you know [24:51] whatever. Um, [24:53] But [24:56] That tribal element is just kind of part of it. [24:59] uh, [25:00] I was... [25:01] I'm seeing a tweet from Keith Raboy who I love his brain and how he thinks and he had analysis of his deals that he had looked at year to date by geography and it's actually something that I do as well. I look a lot at my own P&L in both public and private. [25:18] One of the elements of my private P&L that's interesting is I looked at maybe the top 10 to 15 P&L winners that I've had over my career on the private side without exception. [25:28] My first opportunity to invest

[25:31] Was a no. [25:34] It might have been a no from me to the company passing, or vice versa, the company passing on me. What's funny about both of those moments is... [25:43] Um, [25:43] you kind of think like, "Wow, it's over." [25:48] And in fact, what ended up happening is opportunities to invest later. [25:52] came around and as it turns out, they were very successful. [25:56] So, [25:57] I've tried a lot to think about what's my learning from that. To me, the way I've thought about it is sometimes it just takes a while for an investor to understand a company and for a company to understand an investor. Obviously, we don't have nearly as wide an aperture of rounds, but we have a little bit. I often will say we didn't miss a company, we just missed a round. If it's going to be great, hopefully there's another way in whether you passed or they [26:22] Um, [26:22] Obviously, it changes the return multiple, but in many situations, it doesn't really make that much of a difference in the exit number of absolute dollars that come out. Correct. [26:34] To me, that mindset is one where, well, if I'm only doing Series A, then I have to think differently because almost by definition of those types of firms – [26:43] I only get one shot. I get one bullet, so I got to be really careful. So that does tend to lead to a more zero sum like this is my one chance to be in this company. I can't afford to lose it. I can't afford to give a single dollar to anybody else because this is my one shot. [27:00] I think that's an increasingly difficult...

[27:02] game, right? [27:06] My way of doing it is, okay, well, I may never be the best at any individual point, but I do have the ability to kind of float around and try and find the best opportunities. Have you ever looked back on the panel or geography question? Have you ever looked back and just been like, ah, we've made the most money at venture stage or growth stage? Do you know where you end up? [27:27] Doing the best. [27:29] I do. [27:31] And... [27:33] Does that influence your behavior then? It changes. There was a time, as an example, where China was an incredible market for investors. [27:41] And we were very successful in that market. [27:44] that market is functionally not available to us anymore. So you do have to just kind of [27:49] adapt, right? There was a time where, you know, SaaS was [27:54] Um... [27:55] everything right and the future and now it seems like [27:59] AI is kind of, so I think you have to, I don't want to read too narrow. [28:04] into it because sectors change, right? Like consumer internet, as an example, was foundational for us. Yeah, and it's a super lagging indicator, I guess. [28:15] What would we say is the greatest consumer internet franchise of the past decade? [28:22] New. [28:24] ChatGPT. [28:25] Correct. Right. So I'd throw ChatGPT in there. I might throw Robinhood in there. Mm-hmm. [28:30] I might throw a revolute. But it's just different than when

[28:35] The phone came out, and it was Uber, and it was Airbnb, and it was Spotify, and it was Snapchat, and it was Instagram, and it was like all of these apps that were coming around, explosion of internet apps. [28:46] Consumers changed. So I don't want to anchor too much on that. So that's why I look more at round composition, patterns of meeting founders, things like that. Because you think thematically… [28:58] I assume, and because you invest late, Sage. [29:01] I would assume a lot of times you want to invest in multiple companies in a sector, and clearly the public [29:06] side, that's totally fine. But you probably also want to do it at the private side. And you and I talked a little bit before, and a lot of the people I've spoken to on this podcast have said that, you know, in venture, conflicts are like a big challenge. And particularly as venture firms scale, it's actually a really big challenge. Yeah. I remember Mark's quote on that, right? His biggest stumbling block towards scaling was... Yeah. He said, what's your number one problem [29:36] I'd be interested to hear it. [29:38] I do think traditional venture capitalists have set themselves up to be the entrepreneur's first call. [29:46] And so think about it as a founder of my own business. [29:51] Do I want to try and compete with every other person that's trying to be the person's first call? Well, no, actually, I'm trying to be your second call. So the first call you're going to call, you're a VC that's been with you for a long time. And then you're going to think, okay, well, what do I do about this now and who can I turn to help? I want to be the second call where it's like, gee, why don't we call Thomas and see if he knows somebody or has a point of view on a market or can make an introduction. It's also a lot more scalable for you, a lot less phone calls.

[30:21] phone calls. I assume they're trickier phone calls. They can be. So, look, I still believe that [30:29] If you're a 20% owner and on a board of a Series A company, that to back another company that does the exact same thing in the exact same framework, I think that's a legitimate conflict and we don't do that. [30:41] but [30:41] I do think that... [30:43] the position of conflict that I have [30:46] Um, [30:47] has also a lot of benefits, right? It might mean domain expertise. [30:51] because I'm able to see the whole playing field, right? It might mean a very deep network in a certain industry. Yeah. [31:00] So I think there can be significant advantages there. [31:04] You have to do it the right way. And so to me, there's a couple of foundational principles of if I'm going to invest in conflicting companies. [31:13] The first thing is I'm going to tell the entrepreneur first. [31:17] I'm a big believer in disclosure. If I'm in two companies that might have or might be perceived, because then you get into, well, is the conflict real or is it just imagined by… [31:29] the founder, right? And... [31:32] Sometimes we might have a different view on what a conflict is, right? But I'm mostly going to kind of disclose it, right? So that's kind of number one. [31:41] And then the second is kind of trust and reputation. [31:44] Right, so the trust of making sure that information doesn't leak. [31:50] we take

[31:52] information, actually security really [31:55] seriously. And [31:58] First of all, we're regulated by the SEC. If you think about a bad piece of information that could come into the firm, if a trade happened on our public side, even if it wasn't related and it was never communicated, it could immediately implicate you. [32:14] in [32:16] something really... By the way, I also think when you design for this from the beginning, you can manage it. YC invests in tons of competitive companies, but you're never going to see them share information across. It just will never happen. Yeah. So... [32:30] People know, we have a very stubborn and intrusive compliance department and we would have a zero tolerance policy on anything like that. Again, if I'm in the venture business, I can afford to do things differently and I think for that business model it works. [32:47] We're trying to do something different. I always thought about rounds in venture. It's like, God, I got the best... [32:54] At my first round and then the second or third, now I'm starting to get a Xerox copy of a Xerox. By the fifth round, you can barely tell. So I'm like, well, why don't I just add a complimentary point of view, a complimentary business? [33:07] we have the opportunity to [33:09] think really long term over multiple rounds over an IPO over a company going public um [33:17] So it's just about adding a different perspective and network to a cap table. I also think companies in their later stages really need somebody around them who understands the transition from private to public and what happens in public markets and things. It just becomes a very different set that people who traffic in Series A's all day just don't spend their time on. Yeah, I also think, look, public market investors think really differently, right?

[33:47] or [33:48] They can be very direct, they can be very confrontational. [33:52] because at the end of the day, [33:54] It's a transactional kind of relationship, right? [33:59] venture investors might feel really differently right if i've invested in your company [34:04] I really want to make sure that the next founder that I'm trying to invest in calls you and, boy, you better say something. [34:10] really nice, right? So the incentives can really... [34:14] start to get murky yet I'm so I've always prided myself on [34:20] um, [34:21] being direct and at times saying what everybody else in the room is thinking, but not saying. Yeah. What I think is refreshing. You talked about the like wide aperture lens of investing and sort of, um, [34:34] you know, what it means to sort of have this kind of broader mindset. I'm curious, like, what that particular phrase means to you, because, you know, when we were catching up, you used it a couple times. I really love technology. [34:45] Thank you. [34:46] Um... [34:48] I just have a curious mind, you know, from when I was a kid. [34:53] I was the youngest in my family, and so I read a lot and played a lot of video games. [34:58] So I was just really curious about the world. Um, [35:01] um, [35:02] And I think almost every great investor I've ever met from Stan Druckenmiller to Marc Andreessen are just deeply curious about the world, right? [35:15] And so I'm just lucky where I don't have to be bound in my curiosity. I can just go out and

[35:21] seek out people and information and then I kind of figure it out later on what [35:26] What does it mean or where is it relevant? I don't have to use a filter, right, and say, well, because I can only do this, I probably have to focus. Yeah. Yeah. [35:36] Now, that can have a downside, right? It can mean that [35:41] In crypto, as an example, I think that served us poorly. [35:45] Because I think crypto was an area where deep specialization actually in the beginning really helped you. [35:51] So it's not a perfect formula, it's got trade-offs. [35:57] Um... [35:58] And I think the investors who early on when crypto came around, right, and were willing to deeply go down the rabbit hole and specialize and really understand something that was brand new, right, that had no... [36:11] equivalent in the public market or anywhere else in the world, right? It was almost like this big bang. Yeah, I always think of Bitcoin as like a big bang that just kind of happened. Yeah, right. So I think those investors kind of benefited. So it's not foolproof. [36:25] But I do think it's kind of [36:28] how my mind is tended to work and I've always kind of made it made [36:33] bets on myself and you know on the parts of [36:37] how my work that I thought were the most productive and you know that's [36:42] that's [36:43] Yeah. One of them. We've talked so far mostly about... [36:46] markets and themes, obviously you care a lot about the founder and the person you're investing into. I'm sure this is true at all stages. I would guess even at the

[36:56] you know, latest stages of private [36:58] public companies are still thinking quite a lot about the person [37:01] what guides you on people? [37:03] Thank you. [37:05] A lesson I learned at CAA is star quality is real. [37:09] Thank you. [37:09] um [37:11] Most people don't have it. Some do. What is it? [37:14] You just know it when you see it in a room. [37:17] Um... [37:19] Tom Cruise is maybe my favorite actor growing up. I've seen Top Gun a zillion times. I loved Maverick. I had the opportunity to meet him one day. [37:27] in a very kind of random setting i was delivering a package to him and you know he shook my hand and looked me in the eye and we talked for three minutes and you know for three minutes i i thought wow this [37:37] No one cares more about me in the world right now than Tom Cruise does, right? The way he just commands a room in his presence. [37:45] But also when Colin Farrell came to us and he had never been in a movie before and you spent 30 minutes in a room with him. [37:52] and [37:54] He just had so much magnetism about him, the way he composed himself and talked to you and looked at you and just his general kind of persona. [38:02] So I do think that to me – [38:06] I do look for that in founders. [38:09] It's the combination of a mind at work and an opportunity that they're addressing, right? [38:17] I remember when I first met Evan from Snap, he... [38:22] I basically was making the argument that [38:25] Look at the

[38:28] generation of young people coming up with [38:32] The Iraq War essentially having been [38:34] you might say a hoax, right? The WMDs were never there. Rolling into the financial crisis, oh, you told us we had the best economic system and then it almost collapsed, right? And then COVID, right? [38:48] He built Snap as a platform as a reflection of those trends. So what was it? Well, everything disappears. No one stores your data. You can't trust institutions to look out for you. I think it ended up being incredibly prescient of where we are today as a world, where the institutional breakdown that we've seen. So... [39:10] I think that magnetism about... [39:13] a person in a room [39:16] And... [39:17] an idea and a market that they're going after. Yeah. One of the things I often think about with the magnetism quality is there's examples of people who have... [39:28] who are pure magnets where everybody loves them and everybody wants them to succeed. And then there's examples where people are highly polar, where half the world loves them and half the world hates them. And both of those work, but I think you gotta at least have [39:41] the strong pull, if not the whole thing. Well, Travis from Uber is an example, right? I think if you referenced him, to your point, half the people [39:51] liked him and half hated him, right? [39:53] I remember meeting him at the Goldman Sachs Technology Conference in Vegas and we were in like a little cubicle, we had like 20 minutes.

[40:05] And... [40:06] But man, I walked out thinking, wow, that is – [40:09] Someone who's gonna dominate. Yeah, right [40:12] so um [40:14] So it doesn't necessarily mean magnetism like... [40:17] you know, it could just be, yeah, their aura, their energy, you know. Yeah, it doesn't have to all be positive. Yeah. [40:25] Yeah, a competitiveness. But it does have to be strong, I think. Absolutely. Yeah. Yeah. [40:29] Yeah. [40:30] When you're making these investment decisions, [40:33] you know, one of the things that [40:35] is often hard is some of the great founders are [40:39] not to everyone's taste. And so, [40:43] A lot of the best investment decisions were extremely contentious in a firm. [40:48] I think this probably relates to how a firm is run overall. There's the investment decision process, which can either be [40:55] single trigger or fully unanimous or somewhere in the middle. There's how a whole firm is run, which can be a CEO, hierarchical model or an equal partnership. [41:05] I'm curious just to hear your reflections after being in it and around [41:09] both at the decision-making level and at the firm level. [41:12] You know, especially as you think about the fact that a lot of what needs to happen is kind of counterintuitive a lot of times. [41:18] I've always envied firms that had this, quote, investment committee. [41:22] where the wise men and women would get together and decide yes or no. And the smoke's going to go up the chimney. [41:30] Exactly. We've tended not to do well in that environment.

[41:36] What I would say, and we do have an investment committee, but the way we've tended to work is just momentum of deals. [41:43] you know, and we're very collaborative from the very beginning. So, [41:49] People will come in and pitch an idea. The public market team is going to opine. Philippe is going to have a point of view. You're going to be fielding information, [41:57] points of view, possible connection points. You're talking about internal momentum, like there's a ground swell inside code 2. By the time you get to a yes, it's like, come on, we got to do this as a firm. Correct. Right. So, yeah. [42:08] It's not any single meeting. And we do have like these check-ins over time. We pitch the idea, but it's incredibly collaborative where we solicit opinion incredibly early from a wide variety of people. That's similar to how we do it, actually. I've never heard it described that way. But by the time you get there, it's like there have been so many conversations and you've worked so many kinks out that you're not like debating. The investment committee is more like, okay. It's been a process. Correct. Yeah. Or the opposite is that the no's tend to not necessarily happen by then. [42:38] So the way we found more or less it works is – and it's the number one thing I tell people when they join is realize that when people want to come in and – [42:50] chime in about something or help you with something. That's [42:53] Not-- [42:54] credit being taken away or that's actually what makes us better. So yeah, if we're pitching a software idea – [43:03] the software analyst who covers our public business is going to chime in with an idea and with a point of view, right?

[43:10] In fact, if we don't, because you don't want them to be in that meeting and say, "Well, what does so and so say? [43:16] What do you mean you didn't ask him? [43:18] He's an expert in this space. He works at KOTU and you didn't ask him what he thinks about this idea. [43:23] So, [43:25] I solicit input really early on. [43:28] I want to get that feedback, whether it's positive or negative, how to improve the idea, how to make it better. I want to iterate it in real time. Right. Right. [43:36] versus just having this Holy Grail moment in a meeting, the perfect deck where all of the data that you need is there to make this decision and all the Council of Popes. [43:46] of cardinals has gone together, right? We just don't work that way. Yeah. When you think about... [43:54] sort of, you know, that's at the decision-making level. When you think about it at the firm level, because obviously you also need to say, hey, this year we're going to, [44:01] slow down our pacing, or we're going to focus more on this area, this theme, this stage. [44:06] Obviously, you guys are sort of run in not an equal partnership model. How do you think about the trade-offs of those two? And obviously, you guys are running Koto a certain way and have a preference. [44:17] when you think about [44:18] What's the advantage of each? [44:20] What comes to mind? [44:23] I think that [44:25] Because we can run kind of incremental, right, you can get promoted and have an impact, I think, faster at a firm like ours. [44:34] Um, [44:35] because we don't have to say, gee, we're going to have to wait, you know, eight years for you to become a general partner. And by the way, there's these other 12 general partners around and we're going to kind of have to wait for them to term out of this fund. And, you know, so we we don't kind of have any of that. Right. So I think we offer an opportunity for young people who want to have an impact quickly.

[44:55] They can probably do so at, you know, our firm, you know, [45:00] That's going to be a great opportunity for someone like that. Now the converse is we also don't suffer debt weight. By the way, by debt weight, I mean two kinds of debt weight. [45:13] Younger people that come in and just aren't good, they're just not going to last long with us. [45:19] On the flip side, also, we don't want a lot of dead weight at the top either. So it cuts both ways. The expectation has to be whether you're new, whether you're young, or whether you're old, your contributions better match the economics that you have in the business. I think from my time, I was in New York for a few years after college and spent time around a lot of people in private equity and hedge funds. [45:43] contrasting that with venture, I would say it is... [45:47] Maybe a ruthless is a negative word, meritocratic might be a positive word, but [45:53] It is much more clinical, I would say, than the way venture firms are run. [45:58] And I think that comes with both positives and negatives, but it's definitely different. Um, [46:03] Is Kotu run? [46:05] like a West Coast VC, an East Coast financial firm, somewhere in the middle. [46:10] It's in the middle. [46:11] And I will say... [46:13] I think it is very difficult to run an East coast firm and a West coast firm because, um, um, [46:19] They are very different, right? [46:23] Look, if you think about the hedge fund business, right, the hedge fund business is one where

[46:28] every single year. You know if someone did well or not. You do and we get paid out on a yearly basis. We know at the end of the year, did we do well, did we not and who did and so forth and so on. There are so many examples of a venture firm firing a partner because they thought they were a bad investor and then five years progressed and that was the best investor they had. Venture plays out maybe in six or seven year cycles. It's just different. [46:58] Um, [47:00] If I think about what the crossover funds brought, I think we brought a competitive [47:06] metabolism to the industry that I think might not have been there before right [47:13] I think what founders like Andreessen brought is a competitive metabolism born from being an entrepreneur. [47:20] I think both of those energies kind of collided at the same time into the venture market in the late aughts, 2000 post-financial crisis, 2009 kind of timeframe. So they both kind of collided into… [47:36] The World Adventure. Yeah. [47:38] And I think... [47:40] What we're seeing is kind of the outcome of that. What I love about what Mark and Ben have built and ironically, we shared an office building [47:49] when they first started, so... [47:51] I just really like them and what they've built. Mark's father-in-law was someone I care deeply about. Their ability to think as an entrepreneur and say, "We're just going to think about this as a business and a company."

[48:04] ironically modeled after the company CAA, which was the only other job I've ever had was that. [48:10] We love that. So they brought that competitive metabolism from being an entrepreneur and I think we brought it from a bit of that, you know, [48:19] kind of hedge fund, uh, [48:21] you know, culture. Yeah. Okay, total gear change. Um, [48:27] It turned out we have some similar interests. I got into golf last year, which I'm kind of embarrassed to admit, but here I am. Started becoming an investor and I picked up golf and I think it's awesome. I'm still really bad, but we chatted a tiny bit before and you were actually talking about it in... [48:43] a much deeper way than like a, [48:46] excuse to just like get out and have fun. Um, [48:49] What is your experience with golf been? [48:51] Golf changed my life. [48:53] just, [48:55] point blank without... [48:57] Um, [48:58] exception. My life would be completely different if I [49:01] I had chosen not to play. [49:03] And I think that can sound strange to maybe people that don't play or don't understand the game. Like, what do you mean it kind of changed your life? Well, it really has. [49:13] Thank you. [49:13] The amount of people that I've met [49:16] mentors that I've had. [49:18] Thank you. [49:19] through the game of golf has just been incomparable. [49:24] The game is so layered, right? There's an integrity layer which I really like, which is at the end of the day, in golf, you're responsible for your own score. [49:32] There's so many opportunities to cheat in golf where no one would really know. Moving your ball slightly out of a divot.

[49:40] Sometimes an inch can make a complete difference. [49:44] So I love the continuous test of integrity and character that it shows, right? [49:49] Um... [49:50] The competition at the end of the day, you're not really competing against anyone else. You're kind of competing against yourself, right? The ball doesn't move. It's right there. You just have to kind of decide on how to execute the shot. So there's dynamics of the game that I love. [50:04] But to me, those are entirely secondary to... [50:08] the social element, right? And the opportunity to spend [50:13] four hours with... [50:15] um, [50:16] either a close friend... [50:18] who's having a difficult time, or someone I've just met. [50:21] and who I don't know. And we're not looking at our phones, right? We're actually kind of in the open air, [50:29] Right? Walking. Yeah. [50:31] is so rare in this world, right? There's a defined end, right? So it's not like you're having a coffee with someone and someone's wondering like, "Oh gee, do I have to go to my next meeting?" or, "Is it time to go?" Right? So we know, we're on hole one. We're going to go through [redacted address], afterwards we're going to sit and we're going to have an iced tea or a beer and we're going to just kind of catch up, right? It's an incredible test of character. [50:55] Oh, yeah. I mean, it's so frustrating. You have to have such... [50:59] How people respond to adversity, sometimes the inherent randomness of golf and where your ball is going to bounce. [51:08] But for me, fundamentally, it's about the people. Also just the presence to not be on your phone.

[51:16] is so hard to come by. We actually talked about a couple other... [51:20] Interest that we both you know like video games. I love video games and I think partially similar reason I love like listening to vinyl records I think things that force you to just be present are you [51:30] so valuable because we're all just addicted to our phones all the time. Otherwise. Yeah, absolutely. Um, surfing is another really important part of my life. And, uh, [51:40] very similar traits to golf, right? You're kind of out in the water, you're not looking at your phone, [51:44] You're kind of in the moment. You're kind of meeting other people in the lineup. So I always encourage people, do yourself a favor and learn how to play. You're just going to spend... [51:56] incredible time with the friends you already have. And you're going to meet new friends. By the way, you're going to meet new friends of different ages because [52:03] What's also unique about the sport is you can compete with anyone at any level. [52:09] So if I'm an expert, I've been playing my whole life, and you're brand new and you've been playing a month, you and I can have a competitive match. [52:15] Think of how many sports in the world that's actually possible to do. [52:20] tennis, UFC fighting like Zuck or anything like that, impossible. In golf, you can pair people through the handicap system, right? Yes. [52:29] of completely different abilities and have [52:32] a good match. What does that mean? It means you can play with people that are older. It means you can play with people that are younger. It means you can play with men and women and kids. You can all be paired up and you can all be competitive and have fun. What's funny is when I grew up in a suburb of St. Louis and I had like, I don't know why, but I grew up with sort of like an aversion to things that felt pretentious or snooty or country clubby.

[53:02] learned that it's, I do think it's associated with some of that stuff, and that's like a separate thing, but just the game itself and the experience itself. [53:09] It's so good. [53:10] Look, no question. [53:13] It doesn't have to be. [53:14] You know, something else I get is, I got to be good. It's like, no, you don't. Yeah. You just got to understand the rules. And to me, you got to play fast. And if you're not good, you actually have to bring a stronger mentality because it's so frustrating when you're not good. Yeah. [53:27] It also rewards great teachers. [53:30] I've been incredibly lucky to have amazing teachers. [53:33] Right. I love I. [53:37] There's a lot of benefits of doing well and being successful financially. For me, one of the greatest is the ability to seek out true experts in a field and learn from them. [53:49] uh [53:49] Um... [53:50] I have an amazing teacher actually based at Stanford, right? [53:55] And I'm just so lucky to be able to – [53:58] kind of learn from him, right? And I kind of bring that to the different [54:04] you know, approaches that I bring is seeking out amazing, [54:08] people in their field and be able to learn from them. Golf is a game where you will get better with a good teacher. You will not get better by just going out on your own, just trying to make stuff happen. [54:22] So I've been lucky to have great teachers. [54:25] Another question just about sort of your life experiences. You've gotten to work with family. You work with your brother. I think that's like a super enviable...

[54:33] Another example I think of is like at SV Angel, [54:38] Ron came here to work with the Conway's. Yep. And I think that's just special to work with family like that. And you've done it for a long time, and you've done it in an obviously very successful and sort of hyper-competitive way. [54:49] together way. [54:51] Just like, what does that meant for you? Like, what does it meant for the relationship? Yeah. [54:55] Um, [54:56] I mean, Philippe and I talked... [54:58] every day. [55:00] I mean, I can't even count, right? How many times, right? Yeah. [55:03] Um, [55:04] I think to me the biggest positive by far is... [55:07] AND I THINK THAT'S A GREAT [55:08] We don't question each other's motives. [55:11] So there's no politics. Why? Because we know we're kind of stuck with each other, right? No matter what. Even whatever happened with Code 2, we're still going to be brothers, right? So it completely eliminates a whole... [55:22] waste of energy around the politics and all this kind of stuff that can happen at other firms. We just have none of that. [55:31] Thank you. [55:31] He and I... [55:33] I always laugh about this. [55:36] I think we've talked about economics, i.e. what he gets and what I get. [55:41] over the almost 25 years we've been working together, if you accumulated the amount of time that we've discussed that topic, right, for himself and for myself, [55:51] it probably adds up to 30 minutes. And it's just because you trust that it'll be fair. Absolutely. Yeah. [55:57] So I just never think about it. That's amazing. [56:00] And I go to everybody else and I'm like, look, I want to...

[56:03] I want to keep, you know, contributing and [56:07] And if I don't, then my economics have gone diluted over time as others have come on, and I'm delighted by that. [56:13] So, it makes a lot of things simpler. [56:17] Right. [56:18] So that's good. [56:20] The bad is that it just... [56:23] But I think that's just part of being a founder is it is almost all you think about all day long. So it dominates the relationship basically. When you're at a family dinner, when there's a prom at the end of the day, it's [56:37] you know it's kind of upon us right so it can become really overwhelming and it can be difficult [56:44] to turn it off when we're together because it's kind of a lot of what we think about. [56:51] So we've learned to modulate that and find actually activities like golf and others where you can kind of turn the volume down a little bit on that. [56:59] But, you know, I was chatting with Jensen about this one day and... [57:04] Um, [57:06] Yeah. It's like, [57:07] What does it matter where you work in an office this that way? We're kind of working all the time, right? I mean, it's always on my mind. It's always something I'm thinking about. [57:15] Um... [57:16] So that's... [57:17] That can be the downside. Yeah. Makes sense. [57:20] A final question I would ask is... [57:23] you spend a lot of time [57:24] You talked about the importance of mentorship for you. Obviously, you spent a lot of time mentoring people. You talked about sort of young people coming up. [57:31] in Kotu, elsewhere, any sort of things you find yourself repeating often when you're speaking with younger people?

[57:38] First of all, I think having a mentor is a blessing. [57:41] Um, I was really fortunate where, um, [57:44] you know, the first job I had out of college was I went [57:47] to CAA, which is a talent agency in Los Angeles. Um, I got promoted to the desk of an agent. I ended up [57:54] working with him for almost three years. [57:57] And, um... [57:59] to sit with someone in a room for that period of time [58:03] um... [58:04] This is Brian Lord who actually still runs the agency to this day to watch the integrity with which he [58:10] pursued his career, [58:12] Um... [58:14] And the way he just treated me as someone who made mistakes and just said, "Just don't do them again." [58:21] Right? [58:22] Um... [58:22] is something that... [58:24] Yeah, it's kind of helped me my whole life. And I just think it's a more... [58:28] interesting and rewarding way to lead your life. [58:33] I do find sometimes in tech we can be [58:36] very focused on [58:39] the mission that we're driving... [58:42] And [58:43] I think the ability to kind of share it with others is so much more rewarding. So it's both being a mentor and then being a mentee, right? [58:51] It's something that I take a lot of pride in and, um, [58:55] I always tell people when they think about [58:58] coming to Cotu are investing in us. I'm like, talk to everyone that's worked with me, whether they still work with me or not. [59:04] Um... [59:05] I [59:06] I think that's how people kind of define themselves. So, yeah, for me, it's a,

[59:10] fundamentally kind of a core principle that I live by. You mentioned something about gift wrapping. [59:17] Yeah, so when I was at CAA, before you got to work on a desk, you had to work in the mailroom. [59:25] And that's literally what it was. We would sort through mail, we would copy scripts. [59:31] and [59:32] I'm so grateful to have had that job because... [59:36] When you're starting out, I kind of tell young people, I'm like... [59:40] Focus is a luxury. [59:42] Think about Jensen at NVIDIA today, the amount of things that he has to worry about. [59:49] China and what's going on there and he's got Amazon trying to build competing chips and he's got to run his own company and he's got to like the government. I mean every day there's something new that he's got to think about. And he can't afford the luxury of just thinking about one thing. [1:00:05] Well, generally, when you start in the workforce, you have the luxury of actually focusing on one thing. So I always tell people, I'm like, that is a... [1:00:11] luxury and enjoy it. So the example that I use is – [1:00:18] And during the holidays, we would send out a lot of gifts to our clients. [1:00:24] And so we kind of had a gift wrapping station. And the way mostly it worked is an agent would put a gift in their outbox and say, gift wrap it for me. So you would take the gift, you would go down, you'd kind of wrap it as quickly as you could, you know, this, that, and you'd bring it back to the agent, right? [1:00:38] Thank you. [1:00:39] So I looked at it as an opportunity to differentiate myself.

[1:00:44] if I saw an agent, uh, a gift, I would take it. I'd be very meticulous on how I gift wrapped it. And, [1:00:51] I started experimenting with different techniques and one that I really liked is actually putting cellophane around the paper. It just kind of gave it a really glossy feel and it looked really nice. So I bought the film myself and I would put it and I would kind of make these really nice gifts. It's like Joe Dreams of Sushi. Yeah, exactly. [1:01:10] Well, what ended up happening is that agents ended up seeing the nice gifts and I ended up being pulled out of my regular duties and I became the gift wrapping guy. So what was nice is I no longer had to run around everywhere. I had my own little station and for two weeks I was just responsible. [1:01:28] Yeah. [1:01:29] And [1:01:30] Well, as it turns out that when a desk opens, you know, think of an agent who's got, you know, like 15 different trainees that he or she can pick from. [1:01:40] It turns out that being known for being really having attention to detail and doing something well, it turns out that that served me really well. [1:01:48] - Thank you. [1:01:48] And so, um... [1:01:50] So I always think when I tell an analyst and they're just starting, I'm like, you might only have one or two companies. Like, think of that model the way, you know, I was thinking about gift wrapping. Watch over every cell, every line, the formatting, what font you use, right? [1:02:05] every line has to have a purpose, right? Because... [1:02:09] You might live in a world of 10,000 lines, but when you pitch the idea to Philippe, he's got 17 other things. He's worth thinking about that moment. So your ability to crystallize that model in a way that's simple that shows that you understand what you're talking about and that you can do it in 50 lines, not 10,000 is an incredible skill, right?

[1:02:29] And so a lot of how we mentor our analysts are derived from kind of some of those principles. I love it. [1:02:35] Thomas, this was really fun. Thanks a ton for making the time. I learned a ton. All right. Thank you.