Redpoint's Erica Brescia on why margins don't matter yet and the rise of the 20-year-old founder

Sales tax on autopilot. Spend less than five minutes per month on sales tax compliance. Uh you can get started for free. Uh up next we have Erica from Redpoint Ventures. Very excited for this. Welcome to the show, Erica. How are you doing? Welcome. Hey, happy Monday. You guys, same to you.

I have to tell you, I was watching the show from Friday this morning and I can't and see your costumes. They were [laughter] rocking like very impressive. Having the hairline back is uh What was your read? Did you think that John looked much more like Ilia than I look like Mark? Cuz that was our read. I kept I think so.

I think so. But I saw it start to crinkle up over time and I'm like [laughter] starting to after surprised it wasn't just falling off. It's a very weird thing to be under like 10 layers of just stuff. Crazy. And just be inside this. Think about wearing makeup every day as a woman. What must that feel like now?

No, this is a level this is a level beyond that. We were in the chair for like three and three hours. Three and a half hours where they applied lay it was like they basically had spray paint. They were spraying doing a layer doing another layer. Literally spray painting.

Uh anyway, thank you so much for hopping on the show. uh could you could you give us a little bit of an uh little bit of backstory on on how you wound up at Redpoint and then I have a bunch of particular questions about about Redpoint and and and the current markets. I uh I call myself an accidental VC.

Um I do think venture is the best job in the world but I actually had no interest in being a venture capitalist. I met my partner Satish Darrage like 17 years ago. He was building this company called Zimbra. I had a startup that was trying to sell we're trying to close him as a customer.

It was like our first year of sales and he was the only customer we didn't close which really pissed me [laughter] off and we became friends, stayed in touch, funny enough like he introduced me to Sati Nadella who I know you had on last week who was awesome too.

And uh that like changed the trajectory of my company years and years ago. Wow. And then he called me and said, "Hey, I want you to to come to Redpoint. " And I was like, "No, no, no. That seems like a terrible idea. " and uh he'd done so much for me. He like convinced me to come and hang out with the team.

I fell in love. I left GitHub. I was COO there for a couple years and uh never looked back. Uh you were COO at at GitHub like right around co-pilot launching right before you saw glimmers of of co-pilot. Oh yeah, I was there when we launched. Yeah, I um so I came in following the Microsoft acquisition.

when I was there was there um through launching co-pilot and then list specifically to to join Redpoint and had had a couple saw what was happening internally and you were like the big tech approach is doomed to fail. I got to go fund startups instead. Is [laughter] that what happened?

It was amazing to be part of everything here is a zero. I'm going out into the private markets. Startups are so much more fun early notoriously easy too.

[laughter] Yeah, I was saying I I I still I mean I I still think Copilot is so I was saying this on the show it's it's it's underhyped because they're not announcing a fun round. Yeah. Yeah.

You don't realize how big the business is because so people have no idea of like you know that was you know when when Carpathy was on Dwar and like saying like this isn't the year of agents like one argument against that point was that you see this explosive growth of of products like co-pilot and in many ways agents are working even if it's like primarily in a in a coding capacity.

Yeah. Yeah. it probably doesn't get the the credit it really deserves for the reason that you mentioned, but I also think there's just been so much innovation in the ecosystem since then. Lot of changes on the on the GitHub side, too. But it was a pretty remarkable thing to be a part of.

And honestly, after we shipped it, I went through like a little bit of a a darkness. I have a son who's 12 who's like super into coding, and I'm like, what is my son gonna do? Like, what is what are his jobs going to look like in the future? Um, it's been really transformative.

It was it was very cool to get to be a part of like the early days. Yeah. Uh we were we were spending the early part of the show reflecting on Sam Alman and Satcha on Brad Gersonner's show. Uh and just this question of the 1. 4 trillion in spending commitments versus 14 billion.

And I'm wondering what did you think of Sam's answer? Yeah, I mean that's a great place to start, but I do have more questions about impact for startups. But yes. Yeah. Not to not Yeah. Do you want to I was looking for just one person besides Brad and the altimeter team to defend Sam. What are you talking about?

John John defended it. He put the Steelman helmet. Yeah. I mean [laughter] I have a Steelman helmet. I can defend anything. Look, we are going through such an extraordinary period in human history.

I think with every other shift we've ever seen, we tend to like overestimate how quickly it will change things and then underestimate the long-term impact that it will have on society. I think there's a bunch we don't understand.

I'm certainly not betting against Sam right now as being one of the major players in the space. And I guarantee you there's so much detail in these contracts about like, you know, outs and rolling things back and everything. I've seen what these things look like. Yeah.

I just thought the question was not you could ask that question without being bearish on open AI and like I look at that as I if I'm an investor in any of the compan any of the counterparties to open AAI. Yeah. I want to know like how how are you how are you going to do how are you going to do this?

Let me reformulate this. So if if if the if there is like risk of OpenAI not hitting 1. 4 4 trillion. Uh there's tactics that you could do if you're a hyperscaler who's on the other end, right?

Like like the outs of the contracts, maybe you don't build as aggressively, if you don't think that the demand's actually going to materialize even though you have a contract. There's a bunch of strategies that you could do if you're running those companies.

What's less clear to me is what are you talking to folks in your portfolio about? What what advice do you have for founders where you say, "Hey, the future's a little hard to predict what how this compute buildout. There might be this big glut like you don't want to get caught in front of the steamroller.

You want to be drafting and riding the big wave and catching the wave at the right time. " How do you how are you thinking about that with founders in the portfolio? Because we've interviewed some folks that you've backed. Uh Lorra came on. It's incredible. The the the growth rates are so fast. Yeah. Yeah.

Look, I I don't believe there's going to be any time kind of material glut. I think there's just too much happening. I mean, look at what Poolside's doing, right? Building out their own data center. This was like a plan from the day zero. You know, a lot of people think those guys just like got caught off guard.

Oh, we need to go build this to get, you know, control over our own destiny. That's totally not true. Like, they have seen this coming for a long time. I think, you know, if you're at the model layer, the smartest thing to do is to have control over the full stack.

And the reason I believe that's to be that's true is because people uh there's going to be so much demand and it's so hard to get access to not just the chips, but the power that you need. Like I I'm just not worried that we're going to run into any kind of a glut.

And at the application layer, what we're telling people generally is like, I know this is such a VC cliche. I don't care about margins at all right now. Like I care about winning in the market. Let's give it up for not caring. Let's give it up for growth, for burn. Let's give it up for aggression. I know.

I never I never I never thought I would be that person, but I I I genuinely believe that. I think like it's very clear that we're at like day zero at figuring out how to wield [clears throat] these super powerful instruments. The costs of inference are going to come way down.

We're getting better at building more efficient uh models for like task specific models. Um I think what you need to do is figure out like what is the UX like how are humans going to get work done? What does that look like? How can you build some kind of defensive ability into your product?

And I think we're seeing a lot of kingmaking happening across the market in different categories where companies are just getting out in front of the market, raising a bunch of money, building their brand, and being seen as the winner, even if the product is really early.

And you know, I know there's a lot of folks that are talking about the recklessness that's happening across VC. And on the one hand, I get it, but on the other hand, I think in a market shift like this, you got to play to win.

And like, you know, you some of these are going to flame out, but if you get one or two that really makes it, all of your crazy wild bets are going to going to have paid off. And yeah, the CEO the CEO of Fireworks AI came on the show last week and and said she was worried some people were going to scale into bankruptcy.

Scaling into bankruptcy was the quote, which is hilarious. It's probably a skill issue. Yeah. Uh I mean, yeah, let's keep it focused on on on the advice for founders.

Uh, I've been interested in this in this question of like in the previous era of Silicon Valley like the the the founders the founder archetype that you were looking for was somebody who could who could find a problem, build a solution, learn to code and it feels like increasingly one of the skills, maybe not the only skill, but one of the skills that we need to add to the portfolio of great founders is dealmaker, is deal guy, be deal girl, like becoming really good at aligning incentives.

We see this with Sam Alman, but we see this up and down the stack. Are you seeing that in your portfolio in the founders that are seeing breakout success?

Just the ability for them to walk into a much bigger company or much bigger uh you know financeier and marshall capital or resources get people around a table and get everyone to say yes to whatever the plan is. I mean yes to some degree. I think it depends on the category.

I think go to market muscle and just sheer velocity matters a lot. Um and so from that perspective the folks that can go out and start closing customers and like the storytelling behind it and the trust building I think is super important.

um for most people above the model layer like I don't know that like deal making in the at least in the altman sense of like hey we have to go secure data centers and chips and and like control our own supply chain I think that's less important for most people but I will tell you we're more likely to back like really young just insanely like high velocity founders that we think will like run through walls to win that just have such dogged determination um and and and are willing to go at it so hard um that they might not even have like the founder market fit that we we used to look for pretty consistently in founders.

And we're seeing these crazy, you know, 20some founders who have never really had a job before that are building these companies that are scaling like crazy just because they're in at the right time, they can tell the right story, and they just um they just ship so fast. Yeah.

And it's always uh you guys I've always enjoyed Red Point's reporting on on SAS specifically and and multiples and at at times a disconnect between multiples in in the public markets versus the private markets.

How are you uh how are you what's your view on that with with uh like how much do you guys read into uh you know traditional SAS companies in the public markets being I think it's like the average right now is like a 7x revenue multiple versus private markets obviously if you're an AI native company you're getting you know some some you know massive multiple on top of that um does that does that is that is that nerve-wracking is that uh does that makes me but I mean [laughter] I'm on the early side and so we're not looking at multiples as much as perhaps the growth folks that are coming in at later rounds.

But I think the the really key difference here is most of the companies that we're investing in are doing like direct labor replacement, right? This is no longer just like SAS software that's going to make people x times more efficient. It's literally, you know, replacing an entire chunk of your workforce.

And I think that uh those companies are able to grow so much more quickly because of the value that they can capture that um that like the velocity of the businesses ends up priced into the rounds and they're just growing to your earlier point so much faster than a traditional SAS company. I think that's justified.

You know, we try to be like very first principal thinkers and just in terms of like how big can this business get and how quickly do we think it can get there and you know, we value companies based on that, not based on what's happening right now in the private markets with like legacy SAS companies.

We have to ask Redpoint has been accused of manning the anonymous X account for Rock. Is it true? Are you behind? Are you personally behind the R for Rock account? [laughter] Maybe we're all R for Rock. No, not it is not somebody at Redpoint. I we would uh it's not someone.

We would not take kindly to that, but yeah, the uh the conspiracy theories. Yeah, I I would I would appreciate I think it's a compliment to be accused of having that much insight into the whole market. I I I could be a shared account, right? It's like a handful handful of it's it's got to be junior folks.

It has to be associates cuz nobody's senior would be that stupid and reckless. And I will tell you one thing that has shocked me getting into venture from, you know, the the builder side is like there's almost perfect information spread like everybody knows everything instantaneously. It's absolutely wild.

I don't I don't know if we've ever been surprised by something that ended up on R for Rock, but we have been quite irritated when things have been leaked when they weren't supposed to be.

Yeah, it it does feel like it's a little bit of a hassle if you're a founder and you're planning planning to do like a specific PR push. Um but also there's this weird dynamic where it kind of takes some of the energy or some of the leverage out of the existing scoopers in the tech ecosystem.

because they're they're losing scoops to R for Rock, then they don't have as much uh cache or power, soft power in the ecosystem. It might inspire it might inspire some media companies to try to basically plant spies, like plant plant a spy at each tier one and then you can just leak every single round. Yes.

I I don't know. That might be that might be against like probably extremely illegal. I think you'd be better off like hosting a party and a punch or whatever. Yeah. [laughter] Yeah. Just ju just grab some drinks with some people, get them to open up and uh you'll have scoop in no time. Something else flip. Yeah.

Well, thank you so much for hopping on the show. Great. Fantastic. We'd love to talk to you again soon. And uh yeah, we'll talk soon. Have a great Monday. Wait, wait, before you leave, uh before you leave, you haven't hung up yet. What are are you in like a tower in a castle?

Like what what is [laughter] Yeah, what this is awesome. What is this? This is my home office. Home office. It is not a turret, though. I people think it's a yurt or a touret. It is. It is neither. It's just the corner of a castle. I just live in a castle. [laughter] I am a venture capitalist. I've done very well.

And you know, it's somewhat of an it's somewhat of a dome, so it makes sense to call it. Oh, it's a great sign of respect. We also we also record the show from a dome. The Ultra Dome. There you go. I did this in reference to you guys. Yes. Yes. That makes sense. Been waiting for this moment. Fantastic. Amazing.

Well, so so great to loves the background. Come back on again soon.