Michael Mignano joins Union Square Ventures as GP, betting on hardware as the next defensible AI wedge

stock is down 23% in the past six months and investors are starting to get to get concerned about autonomous vehicles. So Uber is responding. Well, without further ado, we have Michael McNano from Union Square Ventures now in the waiting room. Let's bring him in to the TVP and Ultradome.

Let's hit the gong for you.

We're going straight to the gong.

Oh man, I love that. I love that gong. Thank you guys. Thank you so much. Thanks for having me.

Questions. uh re reintroduce yourself. Tell us where you were and where are you now?

Yeah, of course. I'm Michael Mcnano. Uh I am a GP at Union Square Ventures. Uh most recently

a partner at Lightseed and then before that uh co-founded Ankor, which sold to Spotify, and I'm very excited to see you guys again. Thanks for having me.

Yeah. What uh what motivated the move?

Did you just want to go to New York? You want to work with Fred Wilson? like what was the what was the reason uh to jump over to Union Square?

Well, I'm from New York. I've always been here. I've always lived on the East Coast. I've always been somewhere in or around New York City and I've known USV forever. So, you know, I built Anchor here in New York City. Pitched them back in the day for our seed and series A and uh they passed both times unfortunately. But

laugh.

Sorry.

No, I I love it. I love it. got, you know, got to know the team obviously and um after we sold Ankor to Spotify, became an LP in the funds and stayed close and uh

just always loved their approach. You know, USV is famously thesis driven, right? They've always been sort of willing to bet early on the stuff that looks weird, the stuff that looks funny, and I've always really appreciated that approach. And so, uh late last year, they approached me and they said, "Hey, how about coming over to USV and joining us and joining the partnership?" and uh had to do it. So here I am.

Yeah. H how should I think about uh USV right now? How big is the firm? How big is the partnership? Uh it feels like a unique firm at a time when many firms are just going for insane scale.

Yeah. Building platforms. But it feels like it feels like Benchmark and USV are two two funds that that could have built platforms and you know have made the decision to you know stay stay true to venture.

Yeah. Yeah. I think I think this has always been USV's approach, right? It's been it's been a famously small partnership for a very long time. Small in terms of the number of general partners. Um, and small in terms of the fund size relative to lots of other bigger platforms as you mentioned. And I think they've made it work because what we talked about a little bit earlier, they've always been willing to have a thesis and have a point of view and go really really early when you know a lot of the other big firms and the big platforms are chasing more consensus deals to their credit, right? I think the platforms have been very very successful at using you know large large vast quantities of capital uh and speed as a weapon to to back the winners. But I think what USV has always always done well is said, you know what, we think the world is going in this direction. We're going to bet really really early. Sometimes we'll get it wrong, but every once in a while we'll be one of the first investors in Coinbase or Twitter or [ __ ] And obviously for a fund of this size, that ends up having a massive impact. And I think, you know, I think that that is the right playbook to be playing moving forward. Obviously AI is going to create a proliferation of startups like we've never seen before. And I'm not actually sure it will be possible to see them all. And I think the only way you're really going to be able to have a great bet is if you know what you're looking for before you see it. And that's always what USV has done.

Uh yeah, I still am surprised when I look at the app store charts and see that we really just have LLMs in the charts and not much else. And it feels like that has to that has to change uh at some point in the next in the in the next year or two and and uh yeah, fully expect that. So where where do you want to focus uh your time? What's exciting?

Yeah, you know, I've always been uh somebody that's been excited by great products. Um you know, I'm a product builder myself. You know, we mentioned Ankor. Uh I have another startup which we've talked about on here, Obo. So I'm naturally drawn towards products great, you know, great product oriented founders. When I was at Lightseed, you know, I led deals like Sunno and Granola, which I think for me have always fit that bill, but also, you know, I think take a little bit of an interesting approach that's relevant to building startups uh in AI moving forward. Um, you know, Sunno is is a company that's taking a form of media and it's leveraging the democratization of that media to not just, you know, uh, optimize an existing workflow or optimize an existing market. They're doing it to build a completely new format and unlock a whole new form of creativity for people. And so, I think we're going to see a lot of that moving forward. I think AI is going to unlock use cases and applications that we can't really dream up. Now, maybe to your point about there only being like three LLMs at the top of the app store now. Um, in fact, I I believe that software is starting to represent more and more uh a form of media, right? It's so easy to create this stuff. I'm sure you guys just like me and everyone watching are building apps and creating agents every day. Think about what happened with video. Think about what happened with podcast, with text. It wasn't just about building the media. It was about the enablement that goes under it, the platforms, the payment rails, the distribution. I think there's probably going to be a massive amount of enablement that goes into the massive long tale of software about

well said. Uh wanted to get your take on synthetic podcast. We saw Pomp launched a a a synthetic uh an AI generated podcast today called Best Stocks.

I'm assuming they talk about the best stocks. Uh but wanted to just get your kind of overall take. We've seen some other AI generated podcasts start to uh top the charts. What's your perspective there? Not not not not a venture opportunity, but uh certainly I would say interesting.

Yeah, look, I think it's I think it's super interesting. You know, back in the day when when I was building Anchor uh inside of Spotify, we actually had a partnership with with WordPress um where if you had a WordPress blog, you could tap a button and it would immediately turn the text and the blog content into a podcast, right? So, it was a way for the creators to get more and more distribution. And, you know, I think it was great. We saw a lot of demand from the creators, but it may have been too early on the timeline in terms of the quality of the content and sort of the that uncanny valley. And I think that has a lot to

say. The voice models just were not good. Voice models were not good or we were using

Exactly. The voice models were not that good yet. Obviously, they're a lot better right now. 11 Labs creates phenomenal voice models. I don't know what this this podcast you mentioned is is using, but I think the closer and closer we get not only to great voice quality, but also a humanlike experience for these hosts, whoever they are on this show, I think the closer we can get we can get to getting it to work. I mean, one of the reasons people tune in to TBPN is not only to kind of hear the news and hear people speak, but it's to watch you guys, right? They like you guys as the hosts and they like the personality and the human aspect of you guys. And so, um, I think the agents that are hosting these shows are probably going to have to get closer and closer to that end of the spectrum before it really takes off. Did you explore any version of that WordPress to podcast workflow that would sort of on demand hire a voiceover artist? Was there any demand for that or did you ever explore that? We did explore that and we you know it was one of those things where again at the time um it was it was going to be challenging to spin up the content for that

sure

quickly enough such that we were confident that there would be enough demand to make it worth worth it. You know, I think with media and with publishing, people people really want immediiacy, right? Um, we, you know, when we were first building Anchor, actually, the way that we went from being a social audio app to a podcasting platform is we found that all the people that were publishing just inside the Ankor app said, "We want a podcast. We want this to be on Spotify. We want this to be on Apple." But there were no APIs at the time. So the way that we did that was we actually had human beings uh sitting in our office and manually creating RSS feeds and posting those RSS feeds to Apple podcast in real time. And fortunately we were able to do that quick enough you know within a couple of hours that it satisfied the creators. But I think you know at the time your idea what you're talking about now the gap just would have been too long. It would have been days or weeks before uh the content was ever delivered.

Yeah. uh have you have you reflected on um the just like like there's such incredible model progress and such incredible AI functionality progress but I I the I would have expected to have found in in the same ways that the AI generated podcasts seem to be working and we've seen some audio stuff work I would have expected to see like a substack that was AI generated text that got really popular and that seems somehow easier from an from just an AI capability perspective. There's less steps in the chain, but it hasn't really broken through in that way. And I'm wondering if you've ever like grappled with that question of like why that hasn't uh why even like the simpler, more condensed text. I don't even know if I follow I mean maybe I do, but I I don't know if I follow any uh Twitter accounts that are like fully AI generated news headlines

that you know.

This was actually going to be my question to you. I mean, it's possible that that already exists and maybe these publications or these writers or these journalists aren't really admitting it yet. I mean, I have to imagine a lot of the content we now consume on the internet is AI generated. We may just not know that it is.

Yeah, it feels like a lot of it is like the we're in the centaur period where uh you know, the human plus AI works well and so you you see people doing research and then processing it and adding their own spin and twist. Alex Heath was talking about how he's a ton of AI in his writing process. He can he can say that because people are paying to subscribe to sources to get like net new information that doesn't exist anywhere else, right? And so no one

but I think that that only makes, you know, humanpowered content that more valuable. Again, not to keep bringing it back to you guys. I mean, I think this is a reason that people like this and I think there's a reason that, you know, sports live sports viewership is at an all-time high and people are going to concerts, right? I think I think people crave this uh this farm-totable human experience.

Yeah, I I feel like you've done a good job of that with your content. Uh can you sort of uh reintroduce it for folks who might not be fully familiar because uh the the the production quality is extremely high. Uh but it feels like you're sort of playing a different game in terms of uh release cadence like making sure that everything is special and not formulaic. But how are you thinking about your own the the content that you're putting out these days?

To to be clear, I think you're referring to the podcast I was running at Lightseed called Out of Office, which which I'm no longer the host of now that I'm not at Lightseed. However, the philosophy that we and I had for that I think holds true and I believe in it which is there's so much content out there on the internet and the tools have gotten so good at clipping and mass-producing video content or you know two people sort of sitting in the same setting having the same style of conversation that you really have to do something different. You guys did something different. There are a number of podcasts out there that are now doing something different. But one of the ideas that that I had that that we ran, what's that?

There's five total.

There's there's about five uh maybe six.

Yeah.

Um the the the thing the idea that we had for out of office was,

you know, why does this conversation have to happen in a studio or why does it have to happen around a table? Um, how great is it to watch an episode of comedians and cars getting coffee and watching these guys behind the wheel of an awesome car or in their favorite coffee shop or watching something like Anthony Bourdain, Parts Unknown, and watching these two iconic people travel around a really iconic familiar place. And we thought, hey, can we bring that to the tech podcast? And so that was that that's out of office at Lightseed again. You know, no longer uh something I'm involved with, but

stay tuned because uh I do think, you know, I and maybe USV will have something similar in that vein uh coming soon. I actually just posted a little bit of a teaser photo on my ex a few hours ago. Uh go check that out if you haven't already. But but look, I think the I think the the theme is like to break through right now and break through the noise, you've got to do something that looks a little bit different and you have to do something really really high quality because the tools have gotten good enough there's a baseline quality that you just get out of the box. So if you want to stand out, you actually have to go above that.

Yeah.

Jordy,

how many investments do you expect to make? You know, what percentage of investments do you expect to make in New York versus the West Coast? you know, listing off some of USV uh USV's iconic investments. Of course,

you know, the the Coinbases, the Twitters, etc. Many of them were on the West Coast. So, are you going to be over here a lot?

USV's always been a sort of oneoff New York ccentric firm, obviously, the namesake Union Square Ventures, but USV has also made a lot of money all over the world. You know, you just rattled off some of the locations. When I was at Lightseed, I was based in New York and uh even though I was based in New York, I was making investments all over. I think I think most of my portfolio actually was on the West Coast. Obviously uh had had um Suno, which we just mentioned in Boston, Granola in London, but a lot of them were in the West Coast. Going to continue to operate that same way. Uh you know, we'll invest wherever the opportunities are, but uh the home base is going to stay in New York City.

Yeah. What's this what's the secret to uh getting good deal flow at the early stage? I feel like that's such a differentiator for Fred Wilson throughout his career. You uh are teasing, you know, some sort of conversation. You've clearly been working with him for a while. Uh what do you think uh makes USV particularly differentiated in finding great companies early on? I I know it sounds simple simple but I think it's a willingness to be wrong and and and and actually make predictions. I think so much of this industry is focused on momentum and focused on consensus driven bets which again can be very very lucrative if you get in them and you have the capital to to fund them. Um, but I think what Fred and the team have always been great at is having a conversation which lasts maybe not just one partner meeting but lasts weeks or months or in some cases years and along the way making some bets against that idea and against that thesis which which may look wrong for a very very long period of time. You know, you mentioned Coinbase. USV famously made that really early Coinbase investment, but they had invested in crypto before that, right? uh they had a strong thesis around crypto before that and it took it took some cycles for them to to gain conviction in in you know what they ended up seeing in Coinbase. So I think it's about it's about engaging in honest discussion with your partners. It's about not being afraid to have a crazy idea to like the weird and uh and and to keep that conversation going for a long term a long time.

How are you thinking about wearables these days? It feels like the meta ray bands are having like an inflection point. There's, you know, Apple's coming to market with stuff. There were a few startups that Aura Whoop have seen.

It feels like it's uh maybe undercovered, but have you processed any of that as like an interesting end point for uh technology broadly?

I think there are a couple interesting aspects about it. Jordy, you mentioned earlier at the top of the app store, we're seeing the same three apps now for, you know, the past two years or whatever. um you know hardware which I think has often been thought of uh as too hard right you always hear the term like hardware is hard and so venture capitalists often ignore it you know we might want to rethink that a little bit hardware could be considered a wedge now right maybe it's maybe it's actually a defensible layer where if where if you can actually have a successful product there that's going to be a lot harder for a massive foundation model lab to go and replicate than you know leveraging their distribution for a new form of data collection or whatever the case may be. So I think there could be some interesting uh edge model or edge data uh out on a hardware device that uh is pretty defensible. So that's something interesting I like about it. I think the other thing that's interesting about it is, you know, we've you guys have talked a lot. I've talked a lot about how context is king and finding these edge data sources is really really unique. And that's obviously something that uh has been pretty fascinating about granola, right? They're capturing these conversations that you can't really capture any other way or aren't being captured any other way. And so that provides a lot of model to or a lot of value to the model. Hardware offers a similar opportunity, right? where um using hardware, whether it's the glasses, or maybe something else completely, a pen, uh an aura ring, you're capturing an edge form of data that the labs can't really see unless they have that hardware. So, I I actually find hardware to be quite compelling at the moment, and I think it actually is an area of opportunity.

How are you seeing startup culture change in terms of like who's hiring? I'm thinking about hardware. I was reading this uh report maybe it was in the journal or the financial times about how uh more and more students are choosing uh like electrical engineering, mechanical engineering over computer science because of the rise of AI that can code very effectively and the job market changing and that feels like uh potentially a boom for hardware startups. Like you have to imagine hardware gets less hard if there's just more hardware engineers and it's easier to staff up for that. Uh but I'm wondering if you're noticing any other changes around uh location or work life balance or in in person. We did the COVID thing, we did full remote, then we went back full in person, then we go and hybrid. Uh like how how is how are the startups that you're interacting with like looking different than a decade ago? I think the big difference that's happening right now and this feels like a very recent thing maybe past few months maybe you know past six months is I think we're going to see a swing back towards the missiondriven company. I think you know we've seen a lot of capital flow into the ecosystem over the past few years and I think that that has turned a lot of missionaries into mercenaries and by the way it's worked phenomenally well again we keep talking about the same you know two or three startups that are massively massively valuable

but I think we're also seeing a lot of churn right and a lot of attrition at these companies and I think it has to do with this missionbased thing right if you if you think back maybe 5 years ago or 10 years ago and some of the behemoths that emerged from maybe the previous software and startup cycle. These companies were very very missionoriented. They were all aligned around the same mission. They stayed incredibly lean, incredibly focused on what they were trying to accomplish. They left the politics and the [ __ ] out of the office and they just focused on hitting that mission. And I think right now we're seeing a lot of people get burnt out after just chasing huge, huge paydays at incumbents or insanely well- capitalized startups. And I think we're going to see the pendulum swing back in the other direction.

Mhm.

White pill.

White pill.

Yeah.

Uh how many last question for me uh just because you're the first person from Union Square Ventures to come on the show. How many

That's true.

Yeah.

How many how many how many uh partners are there? Like how big is the investing team, I guess, is a better question.

Um there's about there's about eight of us. Um and uh the whole team in general is under 20.

Wow. So, we're a small team. Like I said, we're all in one office

and uh we talk a lot. Uh you know, when I was at Spotify, Gustav Sodstrom, who I think you've had on the show,

uh had had this famous saying inside of Spotify. Everyone at Spotify knows this saying.

Gustaf says,

"Talk is cheap, so you should talk a lot." And what he means by that is the cost of getting something wrong is actually way more expensive than the time it takes to actually talk and align and earn the right to go invest or spend or bet on something. And what I've always loved about USV is they have a similar philosophy. They talk a lot. It's a small team, but they spend a lot of time together forming their point of view on the world. And to your question earlier, I think that's what's given them the edge.

Yeah. Well, they're very very lucky to have you and uh excited to see what you guys do together. It's great to see you. Thank you. You, too. And by the way, congrats to you guys.

Thank you.

Thank you.

Yeah, we're very excited.

Uh come come uh come see us when you're when you're in LA and we'll do the same. I'd love to.

We'll talk to you. We'll talk to you later. Have a great rest of your day.

You're the man. Thanks. Thanks, Jordy.

Um speaking of Meta, Meta Platforms CEO Mark Zuckerberg reportedly moved his desk into the AI lab working directly