Hemant Taneja on AI-era growth rates, healthcare transformation, and why venture is becoming beta

he's the CEO of General Catalyst. He has a new book out called the transformation principles. You can go and buy it today. He is in the reream waiting room and now he's in the TBP and Ultradome. Welcome to the show Hamant. Great to meet you. Great to see you. How are you doing? I'm great. Thanks for having me.

Uh please introduce the book. What was the thesis? I'd love to uh start with the overall principles that you were trying to uh convey and then we can dig into some of the the the more uh nuanced topics. Absolutely.

So I started writing the book around November 2022 when you start thinking about uh when chatbt was launched. Yeah. And um the observation was that there is peak ambiguity. I've talked a lot about it.

Uh you look at all the major industries they're changing because of geopolitics and you've got this technology that also is uh it's unclear what its capabilities is going to be. Obviously, we're all developing and figuring that out.

So, when you have complete ambiguity of what what you're building in, only thing you have uh to give you a clarity of purpose is your principles. So, I want to take a step back and think about what is it that our true north really is as we blankly uh power the world with AI, which is what the next 20 years is about.

That's my life's work, that's your life's work, you know, it's all sort of we're all sort of living that era. So, that's why I wrote the book. Uh was your goal to give people a uh a framework for developing their own principles or to instead share your principles that you think other people should adopt?

I guess a little bit of both. Like I I what I did was I showed there were three through lines to the book. One is um the nine principles I put in there when I learned them, what how I learned them.

uh and uh um some examples of some of the founders in our ecosystem you know folks like Casard applied intuition Brian and Andrew what are they doing how are they actually applying these principles in the way they're building the company so that was one second is I think as you may know I'm u probably a decade into transformation of the healthare system and talk about ambiguity and and complexity there and what are the principles that are working for us as we're making progress start to enumerate those and the Last is you know I'm very keen on you know how do we retool the founder proposition in our own industry and and transform ourselves you know what is the what what does it mean to go beyond venture uh in in serving founders to build next generation most important companies in today's world where the conditions are different and talked a lot about that so that's another transformation we're in the midst of so those are those are the things I leaned on yeah I mean I'd love to zoom in on on healthcare specifically I mean there's principles like the hypocratic oath uh doing no harm uh protecting patient information.

Uh but then there's also principles about you know like agile software development like that is in in many ways a principle uh where do you like how how how are you thinking about transforming healthcare uh how are you thinking AI fits in there and then also the work general catalyst has been doing is uh definitely on both extreme ends both high-tech and also almost like Wall Street not to put it in those terms but I'd love to know more about your thoughts on healthcare it's such a great juxtaposition of the the agility in technology and the hypocratic oath and the seriousness of healthcare as sort of as a sort of framework for learning.

The the way I have um always thought about transformations is to put different cultures together. Mhm. So over the last 10 years I've been part of um uh starting a bunch of businesses in healthcare. Lebongo was one of those. We did hypocratic AI recently when the language models came out.

speak of hypocratic oath and we built Kimure uh which is at some at this point probably the largest software company serving the health systems uh and uh we did transparent focusing on delivering healthcare to consumers that are employees of large companies and every one of those the key was you want to be interdisciplinary you actually want to bring in people from healthcare that understand the seriousness of the work and the fact that it's not a pre free market and then you want to bring people from Silicon Valley that actually will cut through the inertia and and I always say bring the ignorance and imagination uh to to make a difference and transform uh the industry.

Yeah. Do you think that there's uh more opportunity in healthcare at the seed stage or the growth stage?

This is something we keep going back to where we've talked to a lot of founders who have built a piece of kind of SAS and they got an install base and they have a bunch of customers and they're still in founder mode and they're still have a bunch of really hardworking, highly entrepreneurial folks in the organization and now AI is here and they can just amplify everything that they're doing.

um versus trying to you know come to market with something that's very AI laden with you have aai domain and like you you have to really convince someone that you're the new solution then the thing that they just got excited about a couple years ago and onboarded to that was the new thing they have to rip that out now or they have to bring you in um and I'm wondering how you're seeing the opportunity in healthcare from like scaleups versus like completely new groundup solutions is such a great uh Uh great question actually especially given that we've been through a pandemic 5 years ago.

Yeah. So you know at the core of GC seed is very much uh what we focus on.

We brought on three different seed firms around the world onto the platform in the last 2 years and so there's a ton of serendipitous innovation that's happening because of AI because of advances in hardware uh in the way you think about healthcare delivery sort of solutions um uh for this next generation.

So seed is very interesting for us. You know applying AI to life sciences big is starting to finally work and we think is interesting. So seed is quite interesting.

But then if you take a step back 5 years ago there was a Camrian explosion of innovation to change the architecture of our healthcare delivery system because we didn't have the test trace isolate capabilities. The system wasn't resilient.

Insurance companies were u getting big balance sheets because no one was getting procedures and hospitals were looking for bailouts. Right? complete sort of misalignment of business models. So we um we built and invested in a bunch of companies in that period and those are now scaling really nicely.

some of the ones I mentioned earlier and a few others like AID do and Sword and City Block and others. And so at the growth stage, I think there are probably 25 to 30 companies in the healthcare ecosystem that are very important uh for our system going forward.

And we're very focused on how do we help them become truly enduring parts of the healthcare system. And then we're constantly looking for founders that are using these new technologies at the seed stage to reinvent uh you know parts of uh the stack in that overall architecture.

Where do you what categories do you think the winners are decided and then what categories do you think are still up for grabs? We had a lot Gillan. He was saying if I I'll probably botch it, but something along the lines of like in the medical scribe space, there's enough heavily funded players that have real traction.

You probably don't want to start the next one that's maybe four or five years behind. Um but how how do you view uh where the biggest opportunities are and then what categories you think hey maybe maybe look out there's already a power lock company basically.

So if I take a step back and say uh we were we're going to do a product ccentric transformation to the sector not a business modelcentric one you would say at the end of the day our delivery organizations provide the product which is we take care of people's health and and so there uh when somebody engages with our health system broader health system not just a hospital patient engagement uh physician tools which is where the scribing solution that Eli mentioned fits uh you think about payment you think about um AI workforce, if you think about um uh sort of diagnostics using AI, huge amount of progress in all those areas.

Mhm. And then and then you say, you know, what's what's missing? What's missing still is the the interplayer of the pair provider relationship that still sort of is a place where there's not a lot of trust. Payers think providers build too much. Providers think pairs too pay too little.

So it's this like army of solutions in the middle of them to create that arbitrage. I think we need to do something about that. And then there's one other thing where there is a new movement which is around longevity.

If you look at Brian Johnson's work that there's cultural movement happening around that and uh you look at the work that row is doing with GLP1s which is the beginning of that longevity move. These are real phenomenon. Yeah.

And uh and I think um that's a place there's a ton more that that needs to be done so that the system moves towards incentives that keep us healthy and out of the hospital versus a high performance but really expensive unaffordable care if we go into the hospital which is how do you think of the interplay between the longevity movement and the traditional health ecosystem in my in my own life as somebody who discovered biohacking maybe a decade ago and just started reading online.

I would always just try to solve problems myself and then you know hopefully you know at some point or another you're like ah actually you should probably go to the hospital now. Um and so it's kind of a harsh transition and maybe it doesn't need to be that way. It it's it's very different.

One's focused on staying healthy, the other's focused on fixing your health when it's broken. Yeah. So they literally are like two different mindsets and the reality is that all of our incentive structures are about you going to the hospital. Hospitals want heads and beds. That's how they they thrive, right?

They actually want to see revenue. Consumer wants to not ever go to the hospital. Mhm. So, we need to kind of rearchitect the system in a way that we we solve for this cognitive dissonance. So, it's all about incentives. Yeah.

Is there some uh incentive shift from I mean a lot of like there there's some general meme about like when private equity buys a hospital like quality of care goes down and I'm wondering if there's like uh bringing a venture mindset a growth mindset a turn like a growth instead of like cut cost mindset could actually like improve those incentives like how are you grappling with with that trade-off?

As you may know we just bought a health system. Yeah. Uh it's in Akran Ohio. It's it's actually got a you know large it's the largest employer in Aker and it's it's a big hospital system and has an insurance company. Yeah.

And we're trying to show is like if you could close your eyes and you said what is the one thing that if it could exist uh will solve a lot of this that longevity solutions or investment in our health is reimburseable. It's not today.

There's there's no uh model that'll show what's the RO on this where insurance companies pay for it. insurance companies don't pay for reimbursement.

So the cultural movement around longevity and the reason just just a I uh I'm an investor in function health and from my understanding of that market like insurance providers are not so inclined to pay for something like function because people switch insurance all the time.

So they're like I don't care that you're going to be healthier maybe in like 30 years. Like I just took the sentence out of my mouth. That's exactly what I was going to say because the the insurers don't know if they make an investment in longevity, they're going to be able to capture the value on the other side.

So, it's just like lighting money on fire for them potentially. Exactly. So, that's the misalignment I'm talking about. So, the question is how do you really um change a system where the ROI on on longevity is understood and financable? We we need to do that, you know, as a system. Yeah.

when you uh this may be a totally stupid question, but when you see some of these data center buildouts, do you ever get inspired to try to not just buy a hospital system, but just create something, you know, your own mega project? Is there even any potential ROI and like building something from the ground up?

Um, it's a great question and uh we're actually doing that um with a company in India. No way. Cool. And I think the there's a leaf frog opportunity in some emerging market. We want to show the model there.

And the other place where I'm very focused on this is, you know, we have a large amount of capital that's allocated for rural health system rebuild. The government's allocated about $50 billion for it.

And I think if we went and deployed that money in old school hospitals again, that's going to be a falling knife that we've created. And we'll we'll burn that money uh into the ground. And so there's an opportunity to rethink the topology and the architecture. What do we do there? Yeah.

So, so that's a place where I'm also focused in the US focused on rural health and what do we do about it?

We actually built a company called Homeward Healthcare that's focused on this particular problem uh sort of post pandemic because all those systems got eviscerated and then the future hospitals I just think it's easier to build in some of these high growth emerging economies to show the models and then then we'll bring that here.

So it's a long game. It's going to be in the next 20 years. Yeah. Yeah. A couple weeks ago, you probably need longevity. Yeah. Yeah. Uh, a couple weeks ago, you were going uh sort of viral for some comments about triple triple double double double startup growth rates.

Uh, can you kind of un I don't know why people get so triggered by growth rates. Oh, yeah. Yeah. Yeah. Any anytime you try and quantify what success looks like, you know, you're you're stepping in the in the bees neck. I found this counter example that proves you're categorically false.

But but uh but maybe walk me through like what you're seeing in venture. Are growth rates really faster than ever before? Yeah. Yeah. Give us more context around those comments. Um uh and I never go viral, by the way. Like my my boring systems content that nobody cares about. This is not boring. I love this.

We're going to we're going to get 10 million views on this. We're going to turn this into a Tik Tok. We're going to Okay, there we go. Let me say something crazy then. Actually, the last time I went viral was when I was working on saving Silicon Valley Bank. Oh, yeah. Freak out what was going to happen.

So, it takes three, four years for me to create another viral moment. That's good. Um, look, I would I would say it was a very innocent empirical comment because I just look at how fast the companies are getting built and they are getting built a lot faster.

Durability is a is a separate question uh because we'll see which of these can then transition into durability or not. But as far as growth goes, it makes all the sense if AI is truly an accelerant. Yep.

You know, and you've seen we've done significant amount of work uh I think the deepest amount of work around these AI rollups.

We have 10 companies we're building there where you can actually acquire these uh service businesses and transform them with AI almost treat those acquisitions as customer acquisition and apply AI.

So you're just you just have all these different ways to accelerate growth and take share in this AI world that it's happening.

So so when when somebody comes and says we're going to go from 1 to 3 to 9 and we're routinely seeing companies that are you know 1 to 15 to 20 to something fairly large which by the way there were very few companies that did that in the last iteration.

You know, Samsara was one of those that I was part of that sort of grew that way, but there were very few when you see that routinely. I mean, I I had actually just gone to our team saying, "Guys, just recalibrate.

You have to change the terminology on what best-in-class is cuz we want to we want to be if we're going to do when we do seed, we want to back every amazing founder. When we do growth, we want to be in the best-in-class growth companies. That's our business. " And uh it's it's just very clear that the bar has shifted.

Okay. So, um I want to I want to dive deeper on some nuance there. Uh we have this uh like kind of coinage that we're trying to get to go viral. Maybe it'll work one day of like the barnacle economy.

The idea that same time there's other companies operating in legacy industries that are also growing fast but there's always the risk of durability and pilots. So, where does where do you start?

Are you more worried or more digging in on a company that's overly indexed on a foundation model company's growth or or more risky to oh yes, they're getting Fortune 500 pilots in this one niche like the oil and gas industry, but it might not be sticky because that big company moves slowly and even though they're ramping up revenues, we don't know if they're actually going to stick around in 10 years.

Yeah. So, I think I think um let's just actually split those bars.

It's a it's a great great question and something that we take a step back on everything that's coming in the applied eye layer and like looking at with that lens if you have a company bringing in the foundation model capabilities into an enterprise which I think tends to be the most durable relationships that are on the big enterprise side.

We are looking for are you going in and are you learning how to expand your relationship with those customers. Mhm.

So before what used to happen was you would build this like MVP you get product market fit and then you figure out how to create repeatability to go do that over and over again in the AI world and so there what the the the advantage is great product design and precision in the AI world you get into a customer you do forward deployed engineering let's think about big enterprises and you build trust with them and then you figure out how to do more for them all the ones that are scaling really really fast that's what they're doing very effectively so if you're building that kind of a deeper and deeper relationship with customers that are going to be around for a long time.

That's durable. We like that. We we're looking for a lot of that. And those companies are not growing triple triple double double. They're growing way faster. Yeah. You know, in different verticals. I mean, that's that's just the reality of it cuz like you know, we we're meeting a lot of these.

On the other side, I think the the companies that are creating rappers on top of these models, um, many of them are not durable. If you remember when chat GPD3 happened, you had a bunch of companies that got created and they disappeared. Yeah.

So every time there's new modalities and capabilities, some stuff happens and a lot of that doesn't exist. But there are some companies getting built there that are cultural movements. Mhm. And they are going to redefine human interaction with technology and software.

And I think those are quite interesting and they will they may look like lightweight products, but they're going to be durable long term. And then there's a bunch that's going to disappear.

I mean that's that's that's the way I sort of think about it because a bunch is just going to get absorbed into the models but the ones that are focused on rethinking design and rethinking the human relationship they will have durability on top of these models. Yeah.

Uh ambiguity that's what I always say it's like hard to figure out what's what right now. Yeah. Yeah.

you you've you've made a bunch of uh I don't know you call them like American dynamisms type investments but uh I'm wondering if you could rank a few other international markets that are interesting or underrated you mentioned uh doing some work in India are there any other countries that you think where there might be pockets of opportunity for your business over the next decade yeah look we we we do 2/3 in the US about 25% in Europe and 10% in India and I'll actually say I was used to say this a couple years ago, US is going to be the consensus market.

Europe is a contrarian market and India is a FOMO market got the high growth and and that we need to be in all of these and and be intentional about what it takes to create value. And I think Europe is super interesting. There's like so much talent um uh there there's people are waking up that they need to innovate.

We can take the classic view of you know there's not intensity but we're just seeing pockets of like interesting collaboration. we're actually catalyzing a lot of it. Uh our European team is doing a lot of that.

Um and then our um and in India we're just looking at saying what is the US India sort of collaboration going to look like because there's a lot of complexity there and then what is required for building societal systems inside of India in education in defense uh you know in healthcare that we can help build because we've learned a bunch from here and probably mostly learned what not to do.

Yeah.

because of the like the healthcare business models and we can help them think about it from first principles so we can be good partners there and so the way that works out is as I said we're building hospitals in India we're transforming healthcare we're innovating in India we're transforming in the US we built the defense prime we're you know working with defense primes in all the markets we've got and here we've got housing in Europe we've got rafi in India because you need to create you know our phrase that we use is global resilience uh and and and abundance and so each of these markets in key industries wants to be resilient and there's founders there working on great stuff.

We want to help them be successful with that and that's that's the way we've approached it. What what's your primary inspiration for the firm? Um look I think I uh and I would give you I would give I mean the classic example was like CIA and A16Z.

Is there is there an equivalent for you or do you pull from a variety of sources? you know, u my my longest standing LP relationship was with Andy Golden who used to run the Princeton endowment who's who retired last year.

And I used to always look at, hey, we want to be one of the elite when this was when I was in Boston. We want to be one of the elite venture firms, which I don't even consider us purely venture capital even though seed is our core. And he would always say, run your own race. And uh that really stuck with me.

So I try not to focus on mimicking what others are doing. They're like there there's so many smart people, so many creative people here doing interesting things. We got to do our own we got to be on our own journey.

My main the thing I would say though is I do want to transform industry systems, not just um um sort of we be sort of serendipitous venture capital investor in companies.

And so everything we do, all the the stuff people look at us doing is all created to build a mode for the founders so they can just be more successful and become bigger. Because if they get bigger, then we have the opportunity to transform the industries.

If all those companies I mentioned in healthcare can actually be hundred billion dollar companies, many of them we started, then we have the license to actually help rethink the system.

How do you think about how do you think about risk uh across the platform between early and and some of these you know really scaled up investments?

Uh uh we were enjoying a clip from uh rolloff earlier this week calling venture it's a return-free risk he called it but he was just kind of putting all of all of venture more or less in a single bucket.

Um, and there were some comments as well and people saying that, hey, it's actually like it's a big difference between, you know, the the the $100 million, $500 million checks that are going into companies at a later stage and and pure venture. And it's private equity and venture clothing was the comment. Yeah.

Look, I I I think if you want to do really transform transformative stuff, you got to take risk. Sure.

uh if we're not taking um no you don't want to take stupid risk but I think I think you want to be smart about how you you invest across uh different stages in risk but like you got to take risk and and and you have to have a vision and this is some of the stuff I talk about in the book which is incrementally improving these systems is not going to get us there.

I think we're sort of at a interesting uh place in society where AI is so disruptive.

So we got to build new systems and in order to go from deep incumbency to new systems at scale you have to bring the incumbents along and partner with them and also invest in their success and do things that are just radically different from how we're used to building serendipitous companies and sort of classic venture.

So, I do think you have to take a lot of risk. Like, I I I thrive on risk. Uh, you know, failures don't bother me. As long as we're well-intentioned, we're doing the right things. I I want us to do that.

And, you know, otherwise I I'll tell you like venture is is the LPs will say it's becoming more of a beta because anybody can get into it. These companies raise a lot of money.

So if if this is going to become the way the system is behaving now and we don't take on working on large problems which for me a lot of them equate to transformations and and uh sort of thinking more more systemically then then uh you know with the illquidity um premium are the investors excited about the return this this asset class is going to generate I think there is a conversation about that as well in the way things are uh today um I like asking all authors come on the show about their favorite books.

I'd also be interested to know if there's any books that inspire you in how you think about building the firm. Are you more of like a House of Morgan guy or a Steve Jobs biography guy? Are there any books from, you know, through the history of business that uh have remained on your bedside maybe for several years?

Um I mean I I I um focus on individuals that have been inspiring to me and really understanding those as a way to uh look at the journey and actually Ken Chanel who's my chairman he asked me once is you're modeling yourself after it's like another version of the same question you asked earlier and I was like well look uh there are three people that really really inspire me one is you know if you look at Elon's work the problems he takes on and the way he executes I'm just like you know it just makes me feel like the bar is so high in terms of what's doable.

It's like it's inspiring like we want to all we should all be learning from the way he builds. Yeah. You know and and and and the problems he chooses to work on and the passion with which he operates. So as a builder that's very inspiring to me. Yeah. As an investor I'm a fan of Warren Buffett.

He thinks 7500 year horizons. And so the you know the best hold period is forever. Yeah. Is the way they think and that that's the way we want to think. you know, we invested in Stripe in 2010 when it was um just a couple of them and then you know, we've invested 14 times since then, right?

And and then I really think that's a relationship that can be a 30 40 year relationship. You know, those guys are going to do lots of interesting stuff and I I I want us to be sort of bootstrapped to their journey as we think about our journey.

And then I would say from a leadership perspective which is also important I really respect uh Ken who you know obviously is our chairman is is a lead director at Berkshire Hathway on the board of Airbnb and he instills this whole servant mindset and that's just the way I think you want to treat each other in your own company towards your founders which is really an important stakeholder versus and and society at large and are we building with that kind of a mindset and you know and then what do I want to prove with all this I think to your your piercing question before like the inspiration to me is can we take this philosophy and build the world's biggest companies.

Mhm. Can we actually do that cuz cuz uh um uh you know that is going to be required as we think about really transforming with AI. AI is going to be all about transformations and can we go accomplish that? What's your uh guidance to partners at the firm around media?

Because there's certain venture firms that their guidance is broadly get as much attention as you possibly can. However, whatever whatever it takes, but that very much does not seem to be your approach. And I'm curious. I I so I'm going to give you a two-part answer to this.

One is um if we think about transforming industries, you need four levers. You actually need to have you know the capital, the innovation, the policy, but then you do need to create a cultural movement. Yeah.

And so media is a really important part of winning hearts and minds towards what you want the world to look like. And I think in that sense it's very important. Mhm. But it's got sort of a purpose towards it.

And you know uh it's sort of inspiring how you guys have quickly come up to stage and you know I think you can you can actually you intentionally say here's the influence we want to have on this ecosystem and you can drive towards it. Yeah. Cuz cuz you've got a a platform and I'm sure you guys think that way, right?

Totally. The I want to be famous uh so I get noticed uh for the sake of being famous and that's going to give me deal flow. My observation is that you have to become more and more fringe. Mhm. Uh to actually be noticed and it actually starts taking an impact on you as a human being.

I'm seeing that with a lot of people that play this game and uh and is that is that going to allow you to do your best work if you're fundamentally changing in response to how to be successful in your sort of media uh metrics? Yep.

Uh and so if you if you're the person kind of person who can say creative things but stay grounded in your core uh then maybe it's for you.

But if it's going to change your core then then you might have gotten the followers but you may not have the substance to do my big thing that I see uh as a failure mode for a lot of people that go on that path.

What do you look for in young people that join General Catalyst where you're hoping that they'll be with the firm for decades, eventually become partner, have a huge impact on the firm? Uh what are you looking for at the young at the young phase?

Look, I think a true uh sense of purpose because that's what drives conviction. Mhm. you know, and and uh I would say um a lot of people get in this industry because they think they can make a lot of money or they think it's prestigious, you know, gives you power and prestige. There's a lot of that.

If you look at the people that have done really well, they didn't grow up. I mean, just literally think about any of them. They just didn't that's they ended up here. Yeah. I came to GC for four months because I felt like I built a shitty company. This was in in 2002 and I want to do it again. I was 26. Yeah.

And I'm here, you know, and and so everyone that has done really well, not saying I've done well, but like I just I study those people and they just had unique trajectories to to get here. Not a they chose venture as a career. Yeah.

And so so that purposeful uh sort of journey and wanting to do something substantive which then gives you courage and conviction which is the essence. You got to have that to be a good investor. You just can't work. What is AUM now? Somewhere in the 40s. Too small. Too small. 40 what? 40 billion.

I think uh I think 400 400 soon. Congratulations on all the success. I think you've been fantastically successful and thank you so much for coming on the show. Yeah, I wish I wish we had more time. I have I have a lot more questions. Next time you come on, I'd love to get an update on the on the customer value strategy.

We didn't we didn't get to Oh, yes. Yes. That is transformative. That's a big part of how we're thinking about the proposition being changing for companies and how to serve them. We'll talk about it another time. Amazing. We'd love to have you back. We'll talk on. Cheers. Bye. Let me tell you about numeralhq. com.

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