00:00Foundation Capital General Partner, Joanne Chen, joins us now.
00:03You know, venture capital supply is there for these founders and for these startups.
00:08I guess what was more interesting at this juncture is like the decision to not invest in something, to be
00:14disciplined.
00:16How real is that struggle?
00:18Very, very real. Thanks for having me, by the way.
00:20It's great.
00:21We are a very early stage venture capital firm, and early stage means different things for different people.
00:26For us, it means investing in founders that have an idea, that have a lot of ambition.
00:33They don't necessarily have customers or a product.
00:35You don't want to see the business plan necessarily.
00:37We're investing in people at the very end of the day.
00:40And we have done this over and over again over the last 31 years of the firm's history.
00:46One of the examples is Cerebras, which went public about three months ago, which we actually incubated in our offices
00:53back in Mellow Park.
00:54And at the time, Cerebras had just a few co-founders, an idea, and an ambition and a prediction that
01:02the AI market was going to explode.
01:05Maybe it's not the same field of technology, but like an interesting example that I find is humans and, so
01:12let's call it a neo lab or something like that.
01:14It was just four founders able to raise hundreds of millions of dollars at multi-billion valuation out of the
01:19gate.
01:20Right. And that's an interesting phenomenon because now we have examples of very large outcomes, right?
01:26As AI has changed and become much more powerful as a technology, there is an impact to organizations that could
01:32create a lot more revenues eventually.
01:34And so investors are looking at OpenAI and Anthropik as examples of, hey, maybe we can invest at these valuations
01:41and have them become this large.
01:43And therefore, the entry valuations or the appetite for these entry valuations have gone way up for some of the
01:48types of companies.
01:50I think what's dangerous, though, is the neo labs don't have commercial traction for and possibly not for a long
01:57time or for even forever.
01:59And I suspect we're going to see that play out over the years.
02:03Some are going to have very large scalability and others may end up not being able to raise capital in
02:10the future.
02:10So how does one do due diligence on an individual or a few individuals who just have an idea?
02:17Yeah, it's not dissimilar from how do you recruit someone awesome, right?
02:21You look for exceptional people, right?
02:23If you think about the Bay Area or even San Francisco, there are fewer than a million people in San
02:28Francisco.
02:28And yes, so many companies are started here.
02:30We look for exceptional people, exceptional founders with big dreams.
02:34Oftentimes they're technical.
02:36Oftentimes they know how to sell.
02:38Oftentimes they have a very strong growth mindset because as the companies grow, the job of the CEO changes and
02:44the founder has to be able to become a CEO and also evolve as a CEO.
02:48So we look for exceptional people at the end of the day with the understanding that they will become someone
02:53different.
02:54It's hard to look for exceptionalism.
02:56There's lots of ways to do that.
02:58And for each of us, we have different ideas what that looks like for us.
03:02And I think this diversity actually gets us a really interesting portfolio of different types of backgrounds.
03:07I'm really interested in how you're investing for the world you foresee.
03:11You published this in March.
03:14I'll get shouted out for doing that.
03:15But the great reorg, a human's guide.
03:18And the conclusion of the 16 pages is that AI won't simply replace people, but it will reorganize companies.
03:26And as part of that, you paint a picture of a world where there are smaller teams, fewer specialists, AI
03:32agents doing a lot more work.
03:34That seems a little contrarian to me because it's still net net, means less people.
03:40I would disagree with that because I think what AI is doing today is removing bottlenecks in organizations.
03:46And in order to remove bottlenecks, we do need possibly fewer teams to start with.
03:51However, if you're an ambitious entrepreneur and you're thinking, hey, I can build a billion dollar company with 100 people.
04:00Why not hire 500 people and build a much larger company?
04:05Right.
04:05It doesn't stop there.
04:06I think the misconception is that AI is just about job automation or job loss.
04:11In fact, I think what's going to happen is AI is going to create a lot of use cases that
04:17we haven't yet thought about.
04:19Think about the early days of mobile.
04:20I think the first mobile app that I used was this beer drinking app where I could tilt my iPhone
04:25and the beer would come this way.
04:27And yet five years later, Uber came about and it really changed our worlds.
04:33And I suspect we're going to see the same things with AI use cases that are going to be transformative
04:39to us.
04:39So you talk about high agency, basically being able to take an idea and actually do something with it, you
04:46know, build, execute it rather than sort of debate the idea.
04:50Do you have some sort of evidence of that in the portfolio since March or otherwise?
04:55One of that is that we're seeing younger and younger founders build big companies.
05:01And I think that's possible because AI can teach someone who knows nothing about a subject and get them up
05:07to speed very quickly.
05:08It can do things like guide how you're going to fundraise, come up with your marketing launch plan, help you
05:15with interview questions, help you prep for a Bloomberg TV interview.
05:18So this is interesting because away from the investor side, the operator side of being a venture capitalist, you would
05:24pitch those services to a founder as well.
05:26We do. And we help with founders with very specific things to help them go through the zero to one
05:30journey.
05:31You can imagine having no customers getting your first is a big deal or not knowing how to fundraise and
05:36doing that for the first time.
05:37And we're also leveraging AI within our organization.
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