137 Ventures' Christian Garrett: $1–10B horizontal SaaS companies are orphaned, and a new semi-liquid asset class is emerging

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Go to asleep. com. Use code TBPN. Uh, speaking of Father's Day, Kendall from uh, Ken Kenny Rose, the best gift you can give your father today is just the space to speak for 20 minutes unin uninterrupted on any one of the various geopolitical issues he's been monitoring this week. It's great. Fantastic gift.

Just give us give us the It's free to give, but it's priceless to receive. It is. It's fantastic. Uh, well, we have Christian Garrett from 137 Ventures in the studio. Welcome to the stream, Christian. How you doing? Good to see you guys. Glad to be here. We're at three sessions. Okay.

Recently, I think the promise was five for a rocket engine. Oh, yeah. We got to up these. We got What are you doing tomorrow? What are you doing Wednesday? To be clear, I I tried to book this like weeks ago and uh you know, so two Justin was on debt pretty soon. We're opening it. We're open it.

Well, we got the space for it here. We're we're in the new studio. We definitely have the space. You can come by and hang in person. Andrew sent some Legos. Uh we're we're getting to the physical stuff in the building slowly and surely. Uh we have the big gong.

Anyway, uh I want to have you on talk about uh growth stage venture trends, LP dynamics, Bill Gurley's appearance on Invest Like the Best. Thought it'd be interesting to get your reaction to that. Uh let's kick it off with this Logan Bartlett post though first. I'll read it and uh and I want your reaction.

Oh, uh, Logan says, "Have had a few conversations with bankers and friends and private equity over the last few weeks, and it's kind of remarkable how orphaned most of these 1 to10 billion horizontal software companies are right now. There will be some strategic acquisitions, i. e.

Informatica, but few and far between as those acquirers are getting their own house in order with AI. And some of these companies aren't just big enough, just aren't big enough to move the needle.

and private equity players are all worried about the Pluralsight acqu uh Pluralsight situation where AI just takes a leap and steamrolls something. It seems a lot of them are just on the sidelines from buying a horizontal player.

We're going to see some frustrated public shareholders with very little recourse other than mix up management. Weird times. So, break it down for us. What's your reaction? How real is this? What's what's correct about this? What's what's maybe off? Yeah.

No, Logan makes a great point and Logan's a great investor and um he's he's absolutely right. Uh I think there's definitely going to be consolidation. It's just like he hit at right what price um for context, right? Like a sauna trades at a 4x NTM multiple right now.

They're forecasted to grow 8% this year with 1% free cash flow margins. That was a business that during COVID, right, was trading at like multiples, higher multiples than than a ton of software businesses. Uh, workday now is is is trades at a premium to a sauna. Bill.

com was once the highest multiple in software and fintech. Now trades at like a 2 and a2x multiple. On topline, there's a ton of these companies that are real businesses, but they're not long-term compounders with power to grow margins. Sure. And they're kind of stuck as point solutions.

Um, we at 137 heavily focus on durability when investing due to our focus on partnering with companies across the entire growth life cycle of a business. Right. So we want to be excited about continually holding and investing into a company 10, 20, 30 years from now.

And I think venture is kind of realizing this dynamic here. Uh there's a Michael Mabusen paper on what's called the competitive advantage period that I encourage a lot of people to go read. Um and it's focused on how companies end up competing and being publicly traded on average for about 10 years, 10 to 15 years.

Um and then it ultimately ends up delisting or getting bought.

And so you just kind of realize that you know there are businesses that you could be right on at one point in its life cycle but then you know after 10 years 15 20 years margins compress growth slows and the business ends up kind of with a very different story and moniker.

Um, and I think a lot of the ultimate winners within these categories, front-end software development, fintech, they're actually the bundles, right? And the stories we're talking about are point solutions, uh, or companies at risk, uh, uh, where growth slowing down due to AI.

I think the bundled winners are going to end up having opportunity to consolidate, whether that's Figma across front-end application development. Sure, you have uh, RAMP and and BAS uh, and Mercury within fintech. Um, I think that's a real opportunity there, but the question is still going to be on what price, right?

Yeah. Can you explain to me a little bit more about the the horizontal software companies versus vertical software companies? Uh, Toast is like the classic vertical example, I think.

But, um, these are kind of buzzwords and I feel like when one gets hot, you're going to see a lot of CEOs be like, "Oh, we're the we're in the hot category or vice versa. " So, how do you how do you see the the landscape of like horizontal versus vertical software? or what are some examples? Can you explain that to me?

Yeah.

Um I mean I think when looking at either I think the our investment framework is is around powers and we look for sustainable competitive advantages and so whether that's a vertical software business or horizontal software business the key thing is are they building these defensible notes whether it's switching costs whether there's network effects is there some durability to this business getting better the bigger it gets and then a big key function of that is multi-product and it is much easier for a bundled offering to end up going after these horizontal points solutions or it's much easier for vertical software business to run that playbook, right, of moving into financial products, launching more modules within that vertical uh to end up in that story and building more defensibility.

If you end up kind of a single product company within the horizontal space, it it does become very difficult to have a long-term kind of defensible story. Um, so I think, you know, there's like inherent business model dynamics to pay attention to and the ability to go multi-product, right, is key.

Um, a lot of the stories that we're talking about are companies that have multiple business lines with nine to 10 figures of ARR. Sure. Uh, these companies that haven't worked have a very different story. Yeah.

Is is an example there like uh what happened with like Slack and Teams where Slack was kind of this point solution. Yes. It eventually got plugged into the Salesforce ecosystem, but uh a lot of Outlook users and Microsoft Exchange users were just like we'll just add on Teams.

And so that's more of the the horizontal playbook. Um, I'm because I'm I'm wondering about that Asauna example specifically, like is there a horizontal player that's eating them?

Because I when I think about what ASA does, yes, it's a point solution, but it feels like something that I can't immediately think of, oh, well, like if you're on the Microsoft stack, you'll just be using Microsoft's version of project management, but I'm sure they have one.

So, uh, I don't know if there's more to say there about like what what areas are most are what what vertical areas are most fragile when it comes to a horizontal player coming in and kind of like eating their lunch. Yeah. Know, it's it's a great question.

I think it's areas where the software becomes or the product becomes commoditized. Sure. Right. And so, you know, within fintech, you're seeing that with bill pay. Yep. And within a space, like I think most of front-end software development is in that category.

and you see Figma moving into more and more uh uh uh watching more and more products that kind of go after that. Um and so yeah, you you just kind of see like there's either a cap on how large the market actually is.

So you sort of saturate the market uh whether that's based on kind of sector um or sizing of business uh or it's based on the actual kind of use case or you end up running into just and it ends up being a commoditized product, right?

It's very easy for the marginal competitor to launch a competitive offering and get there on feature parity over time.

Um so yeah there's not a particular formula but and it's always not easy right especially in a growing market it's very easy to extrapolate out how you know a market will grow uh in perpetuity I mean Bill Aman has this good line around growth annuities right not every business has that dynamic right where they can continue to own a large percentage or some meaningful percentage of a continually growing market and therefore they have durable growth a lot of these things end up saturating out and their market size is actually much more constrained than uh investors anticipated uh or they end up just getting commoditized and so it gets really hard and that leads to margin uh or pricing pressure or uh growth stalling.

Yeah.

Do you have a current thinking around like the the Parker Conrad like the compound startup idea of like let's build like everything as fast as possible and get our get our fingers in every single pie um vers versus like the more methodical like let's go dominate one point solution and then add on another and then add on another.

We're certainly seeing that at like ramp and we're seeing that at Figma with you know a really really strong point solution and then using that as a platform for the rest of the of the horizontality to come into the business.

Um I'm wondering I'm wondering if there's like is it too early to do like a postmortem on like the right time to go broad? I've always thought about the consumer neo banks.

Like there still hasn't been a consumer neo bank that I'm aware of where I can go and get a checking account, a savings account, a uh public trading like trade stocks, also a home mortgage, also an auto loan. Like those are five different point solution consumer fintech companies.

And I was and everyone will always say like, well, there's a lot of regulation. It's really hard to build all of them at once. And I was like, but five of them are being built in YC like every single batch. Like what if we just merged all those companies? you would have a compound consumer startup, but it didn't happen.

Um, and I'm always wondering like like where is is that like a unique thing to Parker? Like what is the full like post-mortem on the idea of the compound startup? Yeah, I mean I think the fundamentally it's it's hard to pick a playbook for each, right?

We've seen to your point, you know, Ripplet tries to move much faster and get to 50 plus% feature feature parody before launching products within their bundle. And then you have startups that are much more methodical, right? Um different business line.

Gusto's focused on really small businesses, but Gusto has been very very methodical on rolling out products and they have, you know, two core businesses that are massive. Um and uh they are slowly kind of rolling out more and more products, but they're very methodical. Um I think the biggest key is right to win, right?

Uh and so in that case, as long as you have a core business that has a right to win, you give yourself the ability to think about how and what strategy you want to run for going multi-product.

And also the other key is I mentioned this feature parity point for certain product offerings I think feature parity matters less in regards to how much depth you have within the product and then for certain offerings it matters a tough right and so you have to sort of think about do we want to get something out quick as possible and cross-ell or do we want to wait until we sort of have a a real offering and that also depends on what customer you're servicing an SMB is very different than an enterprise customer and you're going to take a lot more time to launch an enterpriseg grade product uh you know if you're going after this bundled opportunity.

So, it's not a particularly it's not a clear answer. It definitely does depend, but these are the kind of the fun things to think about when trying to invest in businesses over, you know, 10 20 year time frames.

You have to walk through kind of the strategy and these stories and make bets on how you think it's going to play out and and founders obviously will inform those bets on their thoughts and we'll respond and iterate accordingly. Yeah. Is there is there enough capital out there to do a roll up of like a sauna and bill.

com like some crazy take private of these two companies because like they are let's go buy two slow growing companies who were category leaders that are getting eaten alive if you work it might be crazy enough to work if you're if you can raise money for that rollup do you you might be gated you should do I mean, this is this is private equity, right?

But I mean, the real question is Logan, why haven't they bought them, right? Or why haven't these other companies, you know, decide to try to consolidate them or do a tech private or merge more in the private markets?

There really hasn't been as much consolidation in the categories I'm I'm particularly excited about around front application development in fintech. Why is that?

And I think this gets into a little bit some of the points on Bill Gurley's podcast recently, but there are all these companies where if you're cash flow positive, you're not a force seller.

Um, and if you're still hold on or hung on a expensive price, then it's not very clear from the buyer side why they should take all that dilution, especially if you believe that AI is going to uh lower the ceiling on uh or increase the ceiling and sort of lower the floor bit on on development and product development.

So, in some sense, maybe you should just build, right? Like the bioverse build dynamic is really interesting right now. Sure. um given sort of the the the the unlocks within AI on software development and where kind of pricing is for these companies. Um so it isn't clear what's going to happen with all these things.

Do I think you know as interest rates drop there's a lower cost of capital that maybe changes the calculus but right now a lot of these things are kind of stuck in a pause right now and there hasn't been a lot of consolidation like I thought there was going to be but uh I think that will change over time mainly as a function of the cost of capital dropping.

Yeah. Throughout this year, people have been calling 2025 the year of agents. I feel like that's come up quite a lot from a variety of of different hosts. There seems to be this or sorry, not host, but guests. There seems to be this collective belief that this is the year that we unlock power of agents.

We've seen consumer agents like deep research. We see coding agents, things like that.

Um my question from an investing standpoint is is um it seems like every you know scaleup SAS company is aware of the potential of agents and is just launching their own agents and given the distribution advantage they have how do you think about the the investability of of sort of net new agentic software when when there's yeah yeah intercom intercom's a good example right they they have hundreds millions in ARR.

They have, you know, a traditional SAS offering than they have Finn. And so, or even in like bill pay, it's like is is bill pay is is bill.

com more threatened by a startup that's going to move much faster with codegen and generate something that's like just has different economics or or should they be more worried about like Microsoft spinning up a clone very quickly because Microsoft's able to move faster because of AI?

because we have this weird like arms race dynamic where you know everyone has access to AI even though the startups might be the only ones that are slapping it on the front door and the and the domain name but in theory like AI should improve everyone. Yeah.

And if you're a if you're a CEO who started your company seven years ago and you have 100 million of it's not like you just didn't check X. It's not like you have it's not like you haven't tried research or anything like that. Yeah. Yeah. I want your reaction. Yeah. I mean I it's it's a great point.

Um I think that you're you mentioned like Intercom is a good example, right? Where you have an incumbent that you know is one of the winners in a category. Um and you've seen them execute incredibly well, right? In launching agents in in the AI in an AI race.

Uh I know Owen tweeted out and we're investors in intercom for for a long time now and Owen tweeted out a bit about the performance of the company and how AI has been pretty transformative to them. Um, I think you've seen other companies, you know, launch their their their own agents out to mixed degrees.

I think Intercom's a really successful example. Salesforce has been mixed. Um, and, uh, and then you have, you know, some other legacy incumbents that have done pretty well actually in launch agents like Service Now, right? We've seen a ton of growth there. Um, it's an interesting dynamic.

I think there's a debate now as well where some of these companies are talking about gating uh, access to their core data within as a system of record. Um, and uh I think Oh, that was great. Hello, Dorothy. Um, so, uh, and I think that's also going to be another a big one, right?

If if you believe and sort of extrapolate out the role that agents are going to play, um, I think some of these companies are going to look and try to maintain their kind of position system record and not give access uh to kind of some of the cordly data.

So, that folks are going to have to use their agent for certain workflows.

Um and so this is also going to be I think a continual debate on how people respond where the value will acrue and what does it look like to have agents in the workforce right is it going to be agents within sort of the gated ecosystem uh within data bricks within service now within kind of your existing SAS providers or you're going to have this kind of abstraction layer above and one agent to kind of you know that that that rules them all and and abstracts and coordinates across them all um very interesting to see how it all plays out.

Yeah. Uh let's go to Bill Gurley. Hot takes a retired We love a retired venture capitalist speaking freely. Um I hope we'll be there one day. Yeah. Yeah. What what was your what was your takeaway on his his uh state of the venture markets?

He's very worried about uh capital wars, the zombie unicorns, the what's going to happen with the decacorns. What stuck out to you in his appearance on I mean I thought Bill Gly on the market was really good. um he's a legend in our industry and I'm one of many who's learned a lot from him sharing his knowledge.

He's absolutely right about the dynamics around the overhang from 2021 and how there are a thousand or so companies that are still hanging on to marks uh from 2021 in people's books and that's still working its way through the system.

Um he's absolutely right in the loss of the kind of singles or doubles that used to matter to funds and that's just a function of the growth in fund sizing, right? So you were more incentivized to go for larger and larger outcomes and put more and more capital into these businesses.

um which is a you know real change from the beginnings of the industry as kind of a a niche fledging industry decades ago and I think we're going through the same growth dynamic that private equity went through you know in the 90s and 2000s as it became a really mature and large asset class.

Um I agree with him that we're repeating the same mistakes from 2021 a little bit and a lot of AI companies may end up zombie AI companies with a ton of fun. Yeah. The challenge now is like how do you avoid false positives? A team is in an interesting category.

they get to 15 million of ARR in 6 months and you're looking at the business and you're like this team is incredibly talented. The the company is growing at at such an incredible clip.

But then it's so easy for them to just kind of fall, you know, fall off a cliff and and um not actually break out into the into the sort of type of company that really ends up mattering. But absolutely. Yeah. Absolutely.

Um and uh and the one point that he he did hit on which I definitely would want to dive a bit more into is something that we talk a lot about. Um but he talked about this kind of category within those you know thousand plus unicorns and he you know he he he hit on Stripe for a bit in data bricks. Mhm.

There's a category of company now that I I would say is probably like maybe 10 to 20 or so um that we call the semi-liquid category of technology company. It's really unique.

I I'd say our bet 15 years ago on the trend of companies staying private longer post Facebook didn't even really appreciate or see the ultimate magnitude of this trend. If you look right now these kind of top 10 20 or so companies we all know about from SpaceX to Stripe to Android.

Uh these companies would otherwise be large cap publicly traded companies. Some might even argue in the Max 7 if they were public and had the cycle not changed they probably majority of them would be public.

venture hasn't really seen this many companies stay private this long at this kind of growth and profitability and magnitude. Um, and it's actually being met with a matching liquidity profile as well.

Uh, and so for context, right, like a bunch of these companies are doing billions and tens of billions of dollars in topline and they're extremely profitable. They're all growing faster than what's in the public markets. Uh, I'd say within the bucket of companies I'm talking about, they're all growing 50 to 100%.

Um, Palunteer is the fastest growing publicly traded software business and it's growing 30%. So, the only way to access this kind of growth is in the private markets within these high growth technology businesses.

And of that group, not only are they larger than many large cap businesses and growing faster, but they're also running a liquid market and that liquid market is extending to the founders and employees as well as the investors and the LPs.

So, having these companies on your books is entirely different and almost like holding a public stock given the recency of the marks and liquidity around them. So it is almost entirely like a whole new sort of sub subset of company or whole new asset class within venture.

We try to focus on cost training here and are lucky to be major shareholders in a lot of these businesses. But it is definitely something that I think no one could have sort of uh forecasted.

Um is that usually companies they stayed private longer but they went public when they were still burning cash when they were still early in the growth curve.

Now you're looking at companies that are not just growing fast but they're extremely profitable and given the liquidity around them they kind of don't have a reason to go public. Um, and that is a pretty interesting dynamic. And you know, he talked about Stripe.

I think there's a lot more of these companies, but it is still relatively small. It's, I'd say, 10 to 20. Yeah.

I mean, I feel like Stripe was the first private company that was really getting whispered around in like the Centicorn conversation and then we just blew past it with SpaceX and OpenAI, both in like the 300 plus billion range, heavily heavily liquid. Uh, what is what does that mean for the LP dynamic?

because if I'm paying 2 and 20 or something on holding something and maybe there's like uh like an opportunity to go direct is is there some pressure to distribute those shares earlier since they are semi-liquid?

Is there anything that's changing on the LP side with these like ultra late stage ultra mega cap scentorn private companies? Uh I mean I think back on the earlier point if you're in these companies and you're in managers in these businesses it's a different dynamic.

I think if you're in the thousand unicorns, right, and a lot of them are still holding on to marks and uh and kind of it's unclear what's going to ultimately happen there, that creates a different dynamic. Totally. We talk about the gap between TVPI and DPI.

If that gap are in these companies that are extremely profitable, they're marketing every six to 12 months because they're running tenders regularly. Um you know, the the fundamentals uh uh you have visibility into. Um these companies the pressure around liquidity is very different.

In fact, they kind of want that part of the book to still keep compounding because it's where the growth is in the public markets. The growth is not there compared to here.

And so if you're, you know, have the ability to be within a power law asset class and you're in the power law companies and they're performing this well and there's liquidity around them, we've actually seen less of a pressure, which has been kind of interesting.

And when there is demand, it's very easy to facilitate it, right? That's why I mentioned like you're holding the ST in your book. You can close the gap between TPPI and DPI relatively easily. Um and uh and so I think it's creating a different decision for the LPS within these funds.

And we've seen increased demand to hold, increased demand to buy. And when there is demand to sell, you're able to facilitate that really easily. Uh as if you were holding a public stock.

And once again, that's just very different than than than kind of what Growth Venture has has experienced, you know, over the previous decade plus. Yeah. You mentioned a number of companies that are uh maybe public and cash flow positive, so there isn't that pressure to sell.

Uh what about those unicorns where they are burning money still? They're hanging on to those high marks.

We've seen a couple companies go out at haircuts to their all-time high valuation, but it seems like historically when companies get out at rational valuations, they're somewhat set up for success and they can go into kind of the next chapter of their lives and start growing.

Um there's also this dynamic around M&A maybe being back on the menu. We saw the whiz acquisition news. Uh scale just happened. And there's been a few of these wind surfs been rumored. And so like the multi-billion dollar acquisitions seem to be happening.

Lena's out, but the administration isn't fully, you know, embracing M&A. It's not happening constantly. But how do you think all of this unwinds? Yeah. Um I think M&A will pick up. I think some companies are, you know, at the tail end of growing back into those marks. Sure. Um and that just takes time.

You know, some grew back within 12 to 24 months. some it's taken, you know, 36 to 48 months. Y um and then there's a large swath that are going to just have to take the pain and think about the business long term and remark. Um and there's some that's like super unclear. I don't know what percentage breakdown it is.

I can probably confidently say the majority of that thousand are going to be in that sort of latter bucket where it's very unclear what's going to happen to them. Yep. Um and I don't think founders are going to want to operate zombie companies forever, right?

So, at some point they're going to have to find a home and the investors are going to have to be willing to take the pain. Y um but look, there's a lot of companies that grew back into the marks from 2021 over varying degrees of time frame.

You know, I mean, people forget there are companies in that top 10 to 20 bucket I mentioned that are growing fast and have very efficient profitable growth and a bunch of them also had to go through 2021, right? And and and adjusting kind of their their views on pricing. If you can compound past it, great.

If not, at some point you're gonna have to make a decision whether it's remarketing the business or selling at something that maybe doesn't clear path. And this is just a cycle. It's just taking a lot longer to work its way through.

Do you think these bigger fund sizes and these more aggressive revenue ramps and these more aggressive valuations getting up into I mean time to unicorn for companies that are anywhere near product market fit seems like it's like three to six months now.

Uh, is that putting downward pressure on like the the, you know, low hundred million tuckin acquisition that used to be just like such a win for everyone? It's like, yeah, they only raised 10 million, everyone made money, the founders got, you know, liquid 10 million plus or something.

Everyone everyone's happy and then they can kind of move on with whatever the next chapter is and they built something cool. It feels like maybe I'm just not hearing those because all the numbers if it doesn't if it doesn't if it's not in the billions, no one's even breaking through. It's not even going viral.

Uh, but it does feel like there's just there's just less of those happening. And I'm wondering if it's more driven by, you know, just, hey, it's a lot of overhead to do post merger integration even if we could get it approved. There's the FTC angle. There's also just the pricing angle.

What do you think's driving like early stage M&A uh, you know, the status of early stage M&A? I mean, so many things, right? I mean, one, to your point, you did have an administration that was a lot harder on M&A. And so I think big tech who was the traditional buyer you know called let's say pre last the last cycle.

Yeah I'm thinking about that VR company that Zuck bought that was like it was VR fitness and it was like you know not a huge deal not in the billions and and they were like you're do you're monopolizing VR fitness.

It's like I don't know anyone who does VR Amazon and Roomba right I mean like it's like the the hundred million to couple billion dollar talking from big tech definitely got put on pause one factor. Um, another is pricing expectations.

I mean, the growth of the asset class, the growth of funds, people kept funding these companies a little longer to keep pushing for product market fit and therefore you start looking at valuations that become less attractive, right?

So, that, you know, one to $300 million tuckin was based on a company at series A that did their series A $50 million post, right? Or something like that. That world is gone, right? So, now you've priced yourself out of an acquisition because you've raised too much money. Um, it's a seed round now. $50 million post.

It's like it's a watermelon seed. We're calling it watermelon. We You keep saying watermelon seed, but watermelon seeds are smaller than any other seeds. Like the mango seed was seed round. Yes. Yes. The mango has the biggest seed. We're beyond seeds now. Yes. Yes. It's just the whole fruit. Yeah. The whole fruit. Yeah.

I mean I I think that's another that's another dynamic. Um and so yeah, I just think a lot of this is just structural. Sure. Do I think it comes back? I think on the margins, but It's on the founders.

The founders have to say no to the higher valuations if they want to have that as an option because once once you have 200 million 200 million in the prep stack it's like yeah you're not going to take $150 million aqua hire offer acquisition offer or tuck in like it's just not going to happen.

Jordi I wanted you to ask about capital wars a little bit if you had that question but if you have something else feel free to run to that. I mean, I I my issue with capital wars is they can have a negative effect on outcomes, but it sounds so awesome. You just want to get involved, right? Capital is the best.

I just um I I had a I mean uh I don't know how much there is to say or if you have any comments there, Christian.

And it just it just feels like yeah in every category now you have at least two big fast growing players and then a couple multi-stage investors on each side that are just sort of saying let's ride and just putting in hundreds of billions and and you know I think uh gurly had a front row seat to that with Uber andyft and how being funded just as though they were you know really really competitive with Uber um even though they they there was pretty material differences harmed Uber for years and years, but it felt like Uber it was worth it to fight the capital war because Uber won so hard and now trades at what 100x lift or something like that.

So, I don't know any any thoughts on capital wars and where we are right now. Yeah, it's obviously it's an inefficiency in the market. Uh it' be much better if all the venture dollars that were funding R&D and sales and marketing were consolidated into one company after one opportunity. Mhm.

Um do I think also it's a sign of a vibrant ecosystem as well that there is that level of competition and there is that level of entrepreneurship where founders all want to go after some opportunities and sort of have their version or strategy around it. Absolutely.

Um so you know like if the business of America is business as Calvin Kulwood said I think it's great that there is the ability to have multiple businesses going after the same opportunity. If you look in other ecosystems when there's one dominant player, there's not 20 startups that get funding and go compete.

And so although it's extremely inefficient and from as an investor perspective, you would like to see everyone just kind of back into the winner, assuming you're in the winner. Um at the same time, it's also a sign of a vibrant ecosystem where other other sort of tech markets don't have this dynamic, right?

And so um overall I think the biggest question which is going to be very difficult right is when are founders willing to merge forces right and accept and I think you've seen that happen here or there in cyber security and other categories pretty rare still it's it's it's a tall ask yeah the the ex PayPal merger legendary worked out really well you roll the tape and you say what what would happen if some of the codegen companies merged and stuff this had to happen it 100% has to happen and a lot of is preAI or I mean pre AAI but the latest AI cycle from 2021 like we've been talking about they're also going to have to go through this version.

Yeah. But it's it's a tall ask and I think it's just taking a lot longer to work its way through. Deal is already employing rippling employees. So imagine if you merge those companies just one payroll system for all the employees be super efficient. That should on the cap table for both companies.

What are you hoping to see out of uh robotics generally in the next 12 months? Feels like there's just a a massive amount of excitement.

uh everybody's calling it the next in some ways like it it feels like it could turn into another even though a lot of robotics applications are kind of you could bundle them into the American dynamism category broadly feels like it could turn into its own thing and even today uh an AI cleaning robot firm called Cardinal raises 800 million I never I'd never heard of this company I thought you were going to say Gecko because they raised money and they've been No so this company Cardinal just raised 800 100 million.

Wow. Uh I guess Soft Bank is participating, but but this is just one uh of many examples. I'm curious uh if you have any sort of expectations around the category. I'm sure you guys are in a lot of exciting companies already. Yeah. No, we we haven't done much in the robotic space.

Um I think for the for the most part for us, there's kind of two things.

like one there's still we like to think about things between R&D risk and engineering execution risk uh and I think this still feels slightly on the R&D risk side especially some of the humanoid robotics companies and we're just not I think there's better people to underwrite that we're happy to invest once there's a bit more traction in the business as you know growth growth grow growth stage investors um in that I think you know I'm not as close to a lot of these businesses but I do think that you know for an LM to build a world model I think it's very difficult um I I know there are people that are much closer that have really good arguments on either side and I walk away convinced believing their argument based on who the last person I talked to.

Uh and so yeah, I I think overall we're just kind of staying back and paying attention to how this plays out. I think there's a ton of excitement for a lot of reasons.

I do worry that this may be like the first or second wave of autonomous vehicles where like now we're actually living in them beginning to actually play out and uh we may be right on the trend. Um, I'm a big immersive computing believer. I read every sci-fi book as a kid. Everyone read Kevin Kelly, every Kerswell books.

Like 100% we believe in robotics and want to see this, especially human robotics. Um, I wonder if it's too early.

Uh, and I wonder if the main use cases now are going to look more like industrial use cases um or robotics that have been around in manufacturing kind of scaling out versus the kind of human robotics like you're seeing. Um, but we'll see. But obviously, it's a huge opportunity.

unclear if that's going to play out this cycle or in a future cycle. Um, but it's a cool world with PDA. I I'm very much rooting for these companies. Are you seeing a uh last question, are you seeing a slowdown in activity yet? It's June 16th. Yeah, summer's coming. Sanchez popping. Samaritz, you're going.

Do you think any Do you think do you see rounds getting done this summer just because some of these companies are moving so quickly? I think all of Silicon Valley grinds to a halt personally, but we'll see. What What do you think, Christian? I mean, what? Ask me in August what's going on in July.

There's a lot going on still and there's a bunch of fundraisers. We're we're busy. Um and there'll be a lot of announcements coming out, but uh ask me in August. Okay. Yeah, we'll have you back on uh from wherever wherever you're vacationing. Uh thank you so much for joining. This is fantastic. Two more to go.

Two more to go. Let us know what you're doing tomorrow. We got a lot of space for an engine. Come on, hang out. We can even put the we can put a plaque on it that's big enough, you know, if you zoom in that says, you know, the 137 uh engine. That'd be great. Anyways, great to see you. Thanks so much for coming.

Talk to you soon. Cheers. Really quickly, let's tell you about Figma. You heard Christian mention it on that in that interview. Think bigger, build faster. Figma helps design and development teams build great products together.

And we will invite our next guest into the studio, Aaron from Lightseed Venture Partners, lsvp. com. Aaron, how you doing? There he is. Round of applause. Welcome to the stream. First appearance hopefully. First of many. First of many, I would hope. Uh, how are the chickens?

You said you were you were uh you said you were looking after your chickens for a second before you joined. It's awesome. Yeah. Yeah. I had to go feed the chickens uh in the midday sun. Uh they're good. They're good. We have a dozen new ones. Also, that's not a metaphor for seed stage bats. You found feed my chickens.