Logan Bartlett: public software companies trade at 4x revenue while private comps fetch 400x ARR — the optimism disconnect explained

come through the graph anymore, having your friends on there to have the conversations and the comments, there's still a lot of left.

If they could make an AI agent of you that instantly reacts to every video I send you

and feature

killer feature. Killer feature. There's some Yeah, between our DMs, there's a lot of stuff that you got to still react to. Well, without further ado, we have Logan Bartlett from Redpoint, his managing partner there. Welcome to the show, Logan. How you doing?

Good, gentlemen. How are you?

We are fantastic.

It's great to see you.

I like this camera setup. This looks fantastic.

You know, once upon a time,

yeah,

I was a, you know, I was a semi-professional podcaster before you guys stole all the thunder in the industry and forced us into oblivion.

Three cartoon avatars was

back to market.

Just put the investments in the bag, bro.

I know. I That's exactly right. Yeah. the McDonald's bag of cash I have. That's what I'm doing these days.

But you're also uh writing market analysis, which I uh always look forward to.

Yeah, this has been consistently some of like the the best content in the entire industrial complex and I've enjoyed it for many years. It was it was extremely valuable during the interest rate crisis as well and and also the conversations that you were having on the podcast, but it felt like a really rational reset that wasn't a total black pill, wasn't a total white pill. It was just actually like here's some data. There are obviously some conclusions, but you can also make your own. So, thank you for everything you do. Take us through the biggest findings. Take us through the process that led to this particular research report. Yeah, it turns out there's a little bit of nuance that 75 slides give you more uh than 140 or 280 characters to kind of tease out in some ways. I um so it started uh it started probably in January. I have this uh process every year where I have a a panic attack that we have an annual meeting coming up and uh I I I got tricked in 2020 when I joined the firm. They were like, "We're going to give you this this really illustrious honor that you get to do the market update. We so trust you and what you have to say." And I thought that, "Oh my gosh, this is amazing. I'm being bestowed this honor of doing this market update deck." Little did I know, no one else wanted to do it. Uh, and so every every January I get a mild anxiety attack that I have this coming up. And uh over the past couple years there's been a bunch of different I mean that year it was co then it was kind of the zerp fallout zer era 2021 then zer fallout then 23 I think was sv 24 maybe I got like a little bit of a respbit then last year was the tariffs and so every year there's like something going on that forces uh us to recalibrate but this year it became pretty clear it was going to be the software selloff and what was going on in the public markets and so um monitoring that I sort of started from a process of talking to a bunch of smart friends in the industry uh about what they're thinking about and trying to probe on questions that they wanted answered. And uh this generally involves a lot of public investors because private investors in some ways are like fish in water uh where like you sort of just operate in the world around you. And so if you're doing defense, you really just focus on defense. If you're doing software, you just focus on you know that. If you're doing whatever healthcare, you're focusing on that. Public market investors I find are a little bit more zoomed out and they typically have an opportunity to play across different scale of businesses, different sectors, different um you know, types of companies, all that stuff. And so I talked to a bunch of them and and software and like what the hell's going on was the big narrative. And there felt like there was a major disconnect between what private folks were seeing going on and what uh public folks were thinking about. And so trying to bridge that gap of how do we have this world where you know software companies are now trading at 4.1 times NTM in the public markets but also getting priced at 2 3 400 times ARR in the private markets and so sort of setting out to bridge that gap was kind of the goal.

Is it a is it a gap or is it a gulf?

A golf uh I would say it's a optimism disconnect maybe. Uh

that's a good phrase. I like that

it is it is amazing. You know, I think about the um I did a panel recently with a bunch of private equity investors and in hearing them talk, what I concluded and some of this is true I think for public investors as well is like

what is the risk of going to zero and optimizing your process around like hey we really can't have a zero X in the portfolio versus private market investors you're optimizing on like what are the chances you're missing out on a 30 50 100x and if you take those two lens It ends up with a very different place of like optimism versus cynicism, upside versus downside, you know, all the questions you ask.

Yeah. So, let's uh let's start.

You'll appreciate this, Logan. I had a a portfolio company at the end of last year that is a software as a service business. And in one of their updates, they they made the announcement that workflows are now called agents in in the product. And I was like, they were like, "This workflow stuff seems like people are not that excited about it now. We're we're switching gears. These are now agents. And if we just

Do you know that Breaking Bad meme that like he says, "We had a good thing, you stupid son of a bitch." I feel like that was that was like all SAS investors over the course of the last

100% when

being like you you mfers who had to go mess up this like really good thing we had going on with this AI pixie dust

with a nonprofit that didn't even raise a seed round until they were multi-billions. It's like we couldn't even get in early.

We had a good time.

We had a good time. Uh so uh let's start with the the public markets. How much of how much of this is driven by the Catrini article? How much of this is driven by actual data points where we're seeing uh I was I was just pulling like the top 50 SAS companies sort of pure place SAS companies and trying to ask answer the question like is revenue decelerating yet? Are we seeing a kink in the graph like some change in the data? And I didn't go nearly as deep as you go, but uh but how much of this is just like narrative and anxiety about a changing uh a changing curve to the financials versus uh actual data points where people are saying, "Okay, like we're not going to be growing as fast. We're not going to be as profitable as before." Something else that would change the valuation.

Yeah. I mean, I think broad buckets, there's two main things. One is like the public market investors are fed up with stockbased comp. And so like let's put that in a bucket. And I I actually I do think venture investors and public market CEOs are um to blame for some of the softness and the cultures and like how bloated some of these businesses got. But also you have to be practical. There is a game on the field to play and like you could triage and say, "Hey, you know, we're really going to reduce the number of employees we have." Uh, and you really have to be careful there because, you know, they could, your best people could just walk out the door if their friends are all getting fired and they could walk out the door and go work at Anthropic or Lora or uh, you know, one of the businesses that's growing at this crazy crazy rate and get

stockbased comp. And so I am sensitive to that, but that is a real part of it that like there's not true profits going on. And so I think let's put that in a bucket though. That that's like sort of a side. The other thing, the far more interesting conversation to have is like are financials um uh deteriorating and the answer is really no right now. It's more of this like long-term uh existential question of what terminal value of these businesses are worth. And it used to be hey uh 85 to 90% of a business's value was tied up in the period beyond the DCF, right? the the terminal value of the you know the the long-term duration of it and that's really what people are asking questions on and to be honest I think what's really happened is the public investors are saying I can't tell the difference between Salesforce and Service Now and Snowflake and Crowd Strike and Guidewire and Samsara and all these businesses and to be honest I don't even really want to go dig in and figure out all the little specifics here I'm just going to go put my my bankroll in Nvidia or Google or AMC or something else and I'll wait for this to sort itself out, wait for the market to do its thing and figure out what the buying opportunities actually are when it's a little more uh a little less uncertain. And so I think it's it's that and people are asking like what is the long-term terminal value and saying I'll wait on the sidelines until other people really show the proof points that they're going to be able to survive this AI thing.

Yeah. Is there is there a world where we move into a regime where we're talking about not revenue multiples but like EBITDA multiples for these software companies? So I was looking at a company that was three billion market cap, 100 million of EBITDA, very stable the last five years and and one one one investor was making the case like oh AI winner and I was like I don't see that but also I don't see these customers turning I just see them doing AI stuff on top of this particular company because they're more infrastructure layer more data storage that type of thing and so I was like I think you can count on a 100 million EBIDA and probably cash flow for 10 years, 20 years, but do you want to be paying 30 times that? Is that enough? And I don't know if that's a rational framework.

Nobody nobody knows anything. You have to apply the discount. The other the slide that one of the slides I loved was was the slide on newspaper earnings.

Oh, yeah. Slide 22.

You say newspaper earnings.

I mean, it is an interesting It's funny. I I actually had that up on my uh screen here as well. But yeah, newspaper earnings. I mean, when these platform shifts happen,

uh, you might not see it in the earnings or revenue initially at all. And so, the newspaper example in the deck was that newspaper earnings were actually fairly stable for like the 5 years post internet while their value collapsed. And so, everyone saw the writing on the wall of where this was headed, but it took a while for that to actually come through and show up in the uh in the actual financials themselves. So John, I guess to your question on it, like I I I use revenue as a proxy. Uh and maybe it's like too too flip of a nomenclature. We really should be talking about like free cash flow with uh deductions for stockbased cop or whatever, but like all these things are growing at different rates and that's sort of been the historical lingua frana that that I've kind of used. But to be clear, it makes it impossible to comp to the private markets because no one's generating any any so it's a useless comp. But I'm just thinking like if I'm a public markets investor and I'm just and I'm choosing between Google, Apple, and then some small cap midcap software company, I probably want to have an IBA hat on or something like it to sort of understand my just my rate of return, which is going to be a lot less like, oh, all of a sudden they're growing at some unpredictable rate, so the DCF gets crazy and I'm paying some high rate. Yeah. And and this might be a little uh uh simple for for some of your listeners and maybe helpful for others, but like at the end of the day, uh a business is valued at the the current value of all future free cash flows. And so

discounted back to today's dollars. And so when when the reason software businesses have been so good is the the you you have annuity streams going out into the future and you're able to with some level of precision figure out what the discount back uh the the value as uh in the future. And so that's a that was a great thing particularly when we had retention rates at you know 95 96 97% net retention rates at 1201 130 140 you could really do very little and you could discount back those dollars with pretty good certainty of figuring out what those are worth today. It was almost bondlike and I think this equity made a bunch of money saying like actually you know this is this is better than a debt instrument. this actually sits on top of the the debt in terms of your vendors are going to get paid before your debt providers will because the business needs to keep going. Now, I think we're seeing a little bit of cracks in the armor and I think your analogy is a good one where it's actually not I worry less about the like the churn risk. Are people really going to turn off of Salesforce or Workday or Service Now or whatever it is? Like maybe, but I I worry less about that. I worry more about the value abstraction that cap is captured on top of it. And if if if the AI dollars, which we we found in one of the reports, AI dollars this year are are it's a bigger pie uh of net new dollar opportunities in AI than all of software combined by like 50% or something. And so if you're not capturing the AI dollars, then your growth rate is going to go to near zero. And if your growth rate goes to near zero, then

it's worth something. But it's not worth, you're right, like the

think about it almost like a real estate investment. It's like what's your cap rate? You know, like if I'm giving you 100 bucks, am I getting five bucks this year, 10 bucks this year? Because there's a lot of other options. And then, yeah, the other thing historically with uh with software has been just low interest rates. So, oh, oh, that cash flow is coming in 20 years. Fine. Like, it's basically the same as today with zero interest rates. But when you're at 6%, you know, you do discount it back and you get a lot lower number. Um anyway, uh where where should we go next? Uh I'm interested in uh

did I'm I'm curious any of the public markets investors, you said a lot of them were just like I don't want to try to be the smartest person in the room and lean in and figure everything out. It's safer to just like you know bet energy, bet semis, etc. Was anyone like licking their chops being like this is the greatest buying opportunity? like actually had some wellthoughtout thesis around how it's like Toma Bravo some of their slides leaked from their LP summit uh and and they obviously are in the position where like they have no choice but they can't be bearish now you know they have to like you know create the like 4D chess of how this is like a huge accelerant to to their uh to their businesses but

yeah I think some of the public uh some of the public guys um they are uh very interested in trying to discern what's going on. And this is actually a really good buying opportunity if you believe people are going to figure out um the agentic opportunity or the AI opportunity because it's certainly not being priced in in a material way. And the incumbent vendors are going to get every chance from their existing customers to get this right. Uh, and so I think that's the if you were to paint the optimistic lens about, you know, Toma got dragged a little bit for some of their, you know, talking their own book, but I actually think some of the slides that people were were dunking on were it, it's true fundamentally that like, hey, your incumbent vendors are going to get shot one, two, three and getting it right. I think the problem and at least what we're seeing in the private markets is that the culture of building these AI companies is just so different than the culture of building what the historical software company looked like and and you guys uh I think I think you know uh I was an investor in in RAMP and uh and and the stuff that they did uh like

investors don't get enough credit let's keep it up

it it is my crossar Logan in particular, he's he's never takes victory laps. That's the thing about it. We'll take it forward.

It's I um I'm unknown. I was a silent investor for a long time. And so it's I'm glad to come come out of the closet as a ramp investor here for you guys. But uh you know, one of the things that

Yeah. One of the things they did culturally for a long time that uh that I thought was kind of crazy was they they shipped a lot of stuff and would just put it out in the market and see how uh people react to it. And that was very different than the way that I learned you know the companies I invested in 2014 15 16 and how they built products was they had a very tight product roadmap. They communicated with their customers, you know, they they had it over a three, six, 12 month period of time. And they would only really release it when it was fully ready out of initially an alpha, then a beta, then they would take a GA with a handful of customers, then take a ramp guys sort of put that on its head where they would move really f fast, iterate, get it in front of customers, ship it at like 90% readiness, and then see how the market took to it. And if they if it resonated, then they would continue to build around it. And like that mindset is actually what I've seen with a lot of AI native companies now, which is like you're not totally sure what the model capabilities are going to be in 3 months time. And so what you need to do is internalize what your customers are going to want like have enough of an appreciation for their job that you sort of know what workflows exist or like what existing pain points are. And then when the model capabilities keep getting better and better, you need to internalize what that customer is going to want and what the capabilities of the models are or where they're headed and sort of let those two things intersect and then deliver that to the customer. And so it's a very different way of like building product. And that's one example and we have a slide in there of like all the different examples, but like it's sort of been flipped on its head. And so I actually don't worry from a is it possible standpoint for the for the big public companies to do this. I think it's totally possible and and I think some of them will figure it out, but the vast majority are going to have to totally change their culture that they built over the last 10, 15, 20 years. And that's really painful and and I think that's where they're going to end up falling down more than anything else.

Yeah, this is fascinating. I'm like sort of an earlyish adopter, I think. And uh we I I recently wanted to know like how much have we spent on Apple products and I was able to get that answer in like ramps AI mode basically and I didn't need to like export any data but then I wanted to know how many how how many what I've spent with Apple over the last year on my personal financials and for that I had to vibe code something that exported all the data and did it manually. And so the question of like you have a system of record there's going to be some new feature where where is that value going to be captured? Are you going to capture that value or is another system going to come down and it's going to be a feature of a chatbot or a feature of another platform like this is entail as old as time.

Uh

yeah it's abstracting the value on top of it which is uh which is interesting. I mean, I guess if you guys think about like my direct visiting of websites has definitely gone down because I interface with Claude or or Chat GBT in a meaningful way. And I think that same thing's going to play out within the enterprise as well. And it's not just going to be retrieval of information. It's going to be actually taking actions. And so now I don't totally care. I'm sure you didn't totally care if that information was coming from on ramp side, if it was by bill pay or credit card. And ultimately once you vcoded that application, you didn't care if that information ended up coming from a credit card statement or an email receipt or whatever it was. Like

in fact, I wanted to I wanted to unify credit card and uh and like checks and and uh and like bank transactions as well and I wanted to put all of that in one bucket and that's something that's it's not a feature in my bank right now, but it will be if they move quickly, but it already was a year ago in ramp. And so it just like the pace of play is like still on the order of years in a very interesting way and yeah definitely like encourage all the uh all of those companies have like opportunities but they have to go win them. No one just like gets granted you know monopoly on the new uh on the new capabilities that emerge on top of their platform. So sorry. uh in the in the deck you talk about, you know, you have some bub talk talking about are we in a bubble? Uh and and with with every advancement with coding agents and things like that, it seems like there's plenty of demand. There's plenty of demand for tokens right now. People are willing to give real dollars

for tokens and that's just going up and up and up. And but I think there's a tendency right now at least for kind of the early stage private markets crew to say like AI is not a bubble. So I should still be investing like tens of millions of dollars into all these different early stage companies and things like that. And I've been like I've been kind of feeling the bubble in in private markets like just based on the number of companies coming out every single day that seem to all be doing kind of variations on like the you know the AI CMO, right? And I'm like maybe maybe that ends up being a big category

like a sort of niche vertical SAS player that's like AI will be like at a 50 cap or a seed.

Yeah. And I guess my my my point is like we can AI maybe isn't a bubble but that does not mean we're not experiencing like a massive bubble

in the kind of venture world right now.

Yeah. I mean it sort of goes to like where value is going to acrue and like if you we did a slide on percentage of GDP in there and if if if you were obviously investing in airlines like it was a transformative technology that didn't end up proving to be a material investment opportunity and what actually presented opportunity was the second derivative considerations of like business travel or like you know lounges and airports or uh whatever B2B sales and all that stuff like there were second derivative things that were far more impactful. And you're right, like it's possible, and this is what I I I've told our LPs that have asked is like I think we're operating in a world in which our mortality rate of companies we invest in is going to be higher than it's been in the past. Uh it just like it is uh even at the stage we're investing in, I think um we're going to see a lot more businesses die. I hope we will also invest in things with a lot more upside. And so we'll end up with, you know, hopefully uh things that could be hundreds of billions of dollars, which used to be not in the realm of possibility. And so I do think we're entering this like extreme period of uncertainty. And the only thing I've really been able to come back to in all this is because you're right, these categories end up so crowded and they end up very dynamic in terms of like how the category evolves, what the product surface area ends up looking like, all that. And so in some ways we're we're we're back to like investing in teams and investing in like the wedge or the general space that they're operating in and then hoping that those doors open or that that C parts and they're able to run through that in a meaningful way. But it's it's very possible that the model providers end up soaking up a ton of the equity value. And so just because there will be a CMO in the AI world that a company starts like it doesn't mean that any of these companies will be the one to capture that value. Uh and actually it probably be very unlikely that it would and so that individual investment you might be very rational in in uh doing it or not doing it. Uh and the opportunity will ultimately create a ton of value but it might not be a private early stage specialized company that's going to be the one to Yeah, the uh yeah, it's been interesting to to look at these businesses ramping revenue so quickly and still and and have like real customer love and pull from the market and still have that question in the back of your head of like does this eventually just get zeroed out, you know? Yeah. And and for me, that's the one people

Sorry, go ahead.

Yeah. For me, the my the only real comp I have because I kind of came I came kind of online in my career in 2018. And so I got to see the you know Zerp era uh very closely. But I I remember with OpenC, you know, and the NFT boom that was you I I remember the way that they ramped revenue even the thing that made, you know, I think a lot of otherwise, you know, great funds like pile money into it, what at what ended up being the top is there was like you could kind of just say like, okay, even if revenue drops by like 90% and this doesn't end up being like this mainstream, you know, opportunity, there's still like a business here and and maybe you can just own the category and and but but then revenue ended up dropping like 99% or something like and and I think that's still so that that still stays in the back of my mind that that was more of a demand issue versus like new kind of competition from from an adjacent player. Uh but but still uh

are there any previous booms that you do like as comparison points? If not do you like railroads? It's electricity.

Yeah, electricity. What do you like?

Um, that's a good question. I haven't actually uh I haven't actually thought of the right analog for what time we're I mean people, you know, the industrial revolution is the one that people come back to the most and uh that wasn't on our like GDP calculation chart. Uh but I do I think there's there's elements of like the shifting balance of of uh of uh worker dynamic and like where people are actually going to uh totally the leverage employ themselves in that way going forward and like wealth you know there's a lot of considerations on uh wealth capture and what percentage of the population that's going to go to and there's definitely a lot of like populist rhetoric out there and so I think this is more of a uh I I think revolution than like a techn I mean it's both a revolution and a technological shift in some ways and so I think like the car or the airplane or the railroad or whatever like that didn't fundamentally shift the balance of an entire workforce in some ways uh the way that I think this has the chance of doing and so that's the one I kind of come back to but it it's it's a good question I'll I'll think more about it

how are you thinking about uh capability overhang diffusion the the the copability overhang

this yeah the debate about like the models are good uh and they're getting better really really quickly but there's just like you know teams in companies where they're like yeah I'm actually fine doing my spreadsheet job and you know I yeah I gota I've heard this direct quote I got to check that AI thing out

I got to check that out and

when did Jordy say that to you was that recent or was it

uh I I think I you know it is interesting. I mean that's where you're seeing a lot of this like FDE

uh Palunteer era where bridging the last mile is really really hard and I think we assume that um that like if we build it they will come in some ways but it's obviously that's not the case. AI to most people, I guarantee if you took whatever I 350 300 million Americans or something and you asked them like name an AI company, I would guess I'm making this up, but like 25% wouldn't actually be able to name an AI company. And like 70% would say, oh, that's that chat GPT thing or something.

I talked with a guy I talked with a guy and said like, "What what a are you using any AI products?" And he was like, "Nope." And then I was like, "What about chat GPT?" And he's like, "I use that every day. I love it."

But he just doesn't think about it. It's just a website. Like we've been to websites before, you know?

And I think that's an interesting thing. You know, Brett Taylor talks about this from Sierra where there's so many capabilities that you're raising the waterline of and that they're needing to build inhouse themselves knowing ultimately the model providers are going to need to productize that are going to productize that and so they end up building things that they throw out six months later all the time. Interesting. And I think I think that's kind of true on the go to market or like education side as well where like a lot of these customers if you're going into an industrial business or a healthcare business or an energy company or whatever it is like you're having to bridge the capability to competency uh and like bridge that gap to the individual person at the end of the day and so I do think this diffusion when everyone talks about like are we in a bubble structurally at a big picture I don't I sort of reject that notion because of both the demand and when people talk about the power supply and all that, I actually think it's going to be it's going to take far longer to get this out into society in a really meaningful way than people on the internet tend to think because the real world's a lot more complicated than I think we make it out to be when we're just, you know, living in our techno utopia.

It's a good point.

If you can call X a techno,

the techno nightmare except in Japan. In Japan, it seems they love it apparently. Uh I I did want to ask about buy versus build economics. You talked about how you could just buy

that's the one that people have been asking all about by the way today. Uh it's Yeah, people like that one.

So So Logan makes a point. You can buy Slack for a thousand employees for like a quarter million a year

or you could build it in house. You estimated around 2 million a year and then like other kind of random unexpected costs. I'm sure a lot of people I anybody that's pushing back on this just tell them like okay build me Slack build me

it's it's a really funny thing where I I just think it's sort of the 8020 rule in some ways that people assume building a software product is like the getting to the proof of concept or like the credible MVP in some ways

look you can send messages you can create a group and then it's like oh

I vibe coded this thing and it does all of what Slack needs to do but then there's not even to mention the network effect of Slack of you build the perfect clone and then it's like okay do any other companies use it? No. Okay, then we still need Slack.

Yeah.

And so so like let's say I I think I mean people want to argue about the specific math on all this but like let's say that you're willing to do all the integrations and the SSO and the search and the file sharing and the you know whatever the admin controls and compliance and all that stuff. Let's say you do that.

Yeah. The emojis, the the GIF embeds, all all those things. Like let's say you do all that was that whatever that costs like what is the opportunity cost that you spent all this time doing that rather than like focusing on whatever it is your core business is and so actually like I we did the math here and it's 2 million versus 220k or whatever like let's say it's the same or let's say it's cheaper like is is saving you know 40 grand let's say it's 180 versus 220 and

it actually has to be significantly cheaper But but also I mean I I talked to a friend who runs a company and uh just about AI stuff and I was like oh yeah like you should probably you know be aware of this stuff but uh what percent of revenue is going towards like software broadly like what's your IT spending? He's like less than 1%. And so it's like yes like you could take something that costs $1,000 down to $200. Like maybe you take that but not if it's a headache at all because 99% of the time you want to be with your actual customer suppliers because it's completely different business. And so That was the point someone was arguing me about is like most companies actually, you know, aren't growing like uh like uh software or tech companies are and so these costs are really material to them. And I'm like, you know what's material to them is like decreasing their workforce turnover from like 70% a year to like 60% a year and not having to pay incremental recruiter or staffer fees to get people on. Like the difference of the the Slack budget and saving 40k I guarantee does not like resonate at all. and Slack was a simple example because it resonates with people, but I think it's true across the board. So, I was trying to think of like what a good bet would be with someone to try to like come up with. It's a very hard thing to figure out of like what the right framework of of of thinking about this is cuz I love just codifying bets with people and being like, you know, okay, let's let's wager some money on what this is. And I couldn't come up with a good one. So, if you or if anyone listening can come up with a good bet on this, I would love to place whatever a significant sum of money on it. It's funny. It's funny to think about the company building Slack in house and they're like throwing time. They're getting 10 people on a call like, "Hey, like we need to meet and talk about some up. We need to talk about like our road map for our internal Slack. We need to kind of bat some ideas around about different tradeoffs that we're making."

Well, the deep irony here is that Slack was an internal tool for a game studio. Like it was actually like the we need to build our own thing because we communicate so frequently. And then it became

and there's a historical analogy by the way of this that I I didn't include in the deck because I uh really like Drew Hston from Dropbox, but like they built their own data centers and like

I don't know uh like

if that was a good cost decision from them but like from a focus decision should they have just used AWS and you know uh or GCP or or one of the other I don't know I don't know the answer to that and I didn't want to like put him on blast and actually get into the debate because I like him quite a bit but like

I don't know if that's like the right decision for them and that they were even like the furthest you know they're like a tech company that that was their business able to decrease cost and who knows what the opportunity cost of incremental products or mind share or whatever it was going and doing that.

Yeah. No, that makes a ton of sense.

Last question. Uh uh did did uh the current AI suite make making your annual report significantly easier or was it still

handcrafted?

Handcrafted. It's an artisal craft to this, but I will say it is interesting doing this deck every year. It does serve as a uh a snapshot of like what the model capabilities are and like where uh how much progress it's been made. And so I think if I go back like two years ago, uh that version of it, I could word smith like my talking points that I was actually talking, you know, when I get up there in front of the LPs and do it. And last year it was actually a decent um I could ping pong some ideas here. Uh, I would guess I don't know if there's se 68 slides or something. I would guess 75% of them AI had some hand in either helping visually lay it out in some way, writing some of the text, maybe coming up with some of the analogies. And that is such a step function change uh versus where it was 12 months ago. And so it is helpful every year to like revisit, come back and like see what's actually possible because as you just go about your day, you sort of forget what 3 weeks ago was or eight weeks ago or 15 weeks ago. But when I went through the process this year, I was like, "Wow, this is really uh much less painful." And I think the the principal and associate on the team that worked with me on this uh were very much appreciative of where the model capabilities are going because I think if it made my life a little bit easier, it definitely made their life a lot easier.

Totally. Is is that alpha for upandcoming venture capitalists? What what advice do you have for those who want to make a career out of venture capital? Because it feels like coming in and surprising the entire partnership with a very deep analysis.

I I would just say have a non-traditional background. So maybe grow up.

Well, that's the thing PaloAlto area, go to Stanford.

Stanford.

It's actually an interesting thing. So, so, so if you guys uh have a minute, I can I can riff for a second on this, but like historically, so we've hired people out of investment banks largely speaking. And so why do we do that? Well, we hire people out of investment banks because it's an expressed interest in finance and technology. Okay, that's great. Two is they have the model training of like what we need, you know, the cap tables and and you know, projections and all that stuff. Three is there's like a high pain tolerance and like willingness to grind and do the extra thing. And then four is like it's a referential network. uh like we can call the same MD at Morgan Stanley or Goldman Sachs or Catalyst every year and be like, "Hey, how does this person calibrate to that person?" And it gives us a qualified pool of people to to pick in. The the thing that investment banking didn't have uh was you're you're very much like if you ended up in investment banking, you you followed a pretty straight path for the most part in your life. And I say this as a former investment banker myself where like you you went to a high school, got good grades, got into a good college, you know, did interviews, got a good job, then at your investment banking job, you're staffed with like 90% of your day is pre-filled by someone else. And so it's like, okay, well, if I work hard and I stay late and I do this pitchbook, you align the fonts the right way, I'll get a good bonus and then I'll get a good job. Well, then we drop you in. And increasingly now with the model capabilities, the financial modeling, uh, Claude can do it better than, you know, or as well as most of the people on our team. And the the the the sort of remedial tasks are getting the water level keeps going up. And so, uh, when we hire people in now, we've always had to train on the agency thing. And it's a little bit of rewiring your brain where, hey, my day used to be 90% filled by this staffer, and now you're telling me just to go figure out what's a good company. like where do I even start in that? And so in some ways like investment banking is actually a bad pool of how it's wired and prepared people for this world now. Historically it always was but we were willing to forego the agency because we got the modeling capabilities and the remedial tasks and we sort of took that as the basics and then we had to try to figure out if there was agency there. Now increasingly like the models are getting so good that agency might be the only thing that matters and so like are you able to find differentiation?

We're actually working on an internal model for agency at CBPN we hit a huge unlock. we've cracked taste. Now it's

now it's and so so that's the thing that we now are trying to figure out like where do you find pockets of people who still want to do the job talentwise but or have the capability to do the job but also have agency. And you might be finding people that are entrepreneurs. You might find people that are project managers. You might find people that have taken serendipitous paths in some ways. And that actually might be a good sign and not a bad sign. And so it's forcing us to think in a different way of like where we're hiring people from.

So what I'm hearing is that you're pulling up the ladder behind you.

That's right. That's right. That anyone any door I always say when people ask like hey how did you get to where you are in your career? My my answer is always like well it's a specific question what I would do when I was in if I was in your seat cuz I can tell you that the doors I walked through but those doors aren't just shut. They're like shut. They're cemented over. They've like been fortified. You know you're not doing what I did. I luck through this path.

Thank you for joining us. Always a great time hanging out. We'll talk to you soon.

Just with with all the AI progress, try to ship one of these a week.

You got it.