David George on AI-native companies running 5-10x revenue per employee vs. traditional software benchmarks

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We are running late. David, good to see you again. How are you doing? Congratulations on all the progress. How does this change growth, the growth practice? Is this just more of the same strategy or can you do new things with this new fund?

It's more of the same, honestly. Uh, first of all, I I'm still like thrown off because I've worked with Rampel for seven years and we're close friends and I just realized that his favorite book is Counter Money Cristo and that's my favorite book. We've never

Yeah. Yeah. Yeah. It's a great one.

Yeah. No, more the same for the growth fund. I mean, look, you know, the last uh the last seven years since we started it, it's been a pretty simple mandate. It's like best, you know, best companies in the world, best founders in the world with huge ambitions. Typically the bet that we're making is that it can be bigger than other people believe it can be. Um you know PY wrote a whole a whole long 16,000word essay about this today. Uh but if I were to summarize our views and what defines like you know quintessential growth investment for us it's it's a belief that it can be bigger than people would realize. Uh and we got a ton of success stories on that. So more of the same in terms of our strategy and it just so happens that we're on the back of like the best trend of my lifetime. Do you think there's something changing in the psychology of startup founders where uh the new crop of mega corns the SpaceX is it sort of gives the next generation permission to stay private longer maybe hey you know previously it was maybe a hundred billion dollar IPO would be crazy big now we're maybe having a few trillion dollar IPOs happening soon all of a sudden the logically you know even if you're not in that category you're like I'll stay private until 100 billion. Is the psychology changing for founders?

Yeah, it is changing. I'm going to talk about the psychology of founders in two different ways. So, one that I'm more excited about like we can talk about capital markets and public markets and private markets. The thing I'm more excited about is the psychology of the founders that has changed postco like this generation of founders is just way more hardcore. M like I I for one am all for you know the being back in the office the working really hard you know unabashed you know pursuit of success and I think it's a big change like in the last five or six years that's happened. Uh I think it's part of what's propelling these companies to be so good so fast. Obviously AI is the big technological driver but I think the vibe shift is a huge part of it. You know, we were looking last night at some stats and going back and forth on some of our best companies and we have a bunch of the AI native companies that are application companies that that are kind of 100 million plus 100 million to a billion dollars of revenue. Yeah.

Uh and we were looking at uh do we think they're running themselves differently? So to this point of like, you know, different vibes, what they what they what they care about,

and it turns out like the old rule of thumb for companies was, you know, if you look at like revenue divided by all their employees, it's like $400,000 of revenue per employee. Like you look at like public software companies, that's kind of where it shakes out.

All these AI native companies, they were basically like 500,000, 900,000, 2 million, 2 million, 2 million, 5 million. So,

they're they're they're totally different. I think they're being run totally differently. Uh we're really excited about that. And the biggest thing is just like there's a tsunami of demand uh coming their way, which I think enables them to run, you know, much much faster. So, I'm super excited about that. You know, as it relates to the the capital markets thing, the staying private longer, it's totally rational. Look, there's a bunch of it that is our own, you know, sort of government doing as it relates to being a public company and how difficult and expensive that has become. Um, you know, we have a robust private market. Uh, it's it's been a benefit to us. Uh, you know, it's allowed us to invest in a bunch of companies that otherwise would have gone public, you know, sooner,

uh, when we can still invest in them and they're growing really fast. Um, and, you know, the value proposition for founders is pretty good to be a private company. uh you know they can they can stay private. It's probably a little bit of a higher cost of capital for them. Uh but the trade-off for them is you know they can sort of avoid the daily kind of volatility of of the stock price and what that means for

pay more M&A options as well. There's a lot of

what is uh what is your day like? What are your weeks what are your weeks like? Cuz I imagine like you the the balancing and like prioritizing when

most of it's adding Zoom to spreadsheets. So okay, we got to add the model's breaking. The model's breaking. No, but but uh I imagine it's hard to prioritize when you can write everything from like a a hundred million dollar check up to you know at times like you know

multi-billion dollar rounds are coming together

multi-billion dollar rounds are coming together like how like what what uh how do you prioritize your day and your week?

Yeah. Yeah, I mean the reason we raised this fund that's a little bit larger, you know, one, it's a reflection of the opportunity set and two, you know, we want to be able to say, hey, we can write a billion dollar check into a company directly out of the fund and we have resources to be able to do more than that beyond it. But that was a big part, you know, if we're high conviction in a company, we want to be able to do that.

There's not very many of those. And so, you know, we have to use our time wisely.

Fortunately, given our brand and given our coverage, you know, we're able to see most things. We're able to meet a lot of entrepreneurs. Uh and so you know we we we see you know probably as a firm hundreds of deals or investment opportunities or companies a week.

Uh and then you know we have the you know we have the the luxury of getting to kind of matchmake with the ones that want to work with us that we think are really special.

You know after this I I just uh you know was texting with a founder and and he was like he kind of cracked open the door that he might do a fund raise and uh and I'm like great. All right. I'll meet you in our office in a couple minutes. in their office at 4:00 like you know we we got to do it. So the way I try to spend my time is like you know the thing that gives me the most energy is to to meet those founders and make investments.

Yeah. Well, we'll let you get back to chasing deals. Good luck with that particular founder. Hopefully that founder will be on the show ringing the gong in just a few weeks.

Yeah. This uh I'm excited to see what what you do with this uh with this new fun preparation, timing, opportunity. Uh this is uh going to be an amazing