Inside a16z’s Growth Bets on Waymo, ElevenLabs, Coinbase, Robinhood, Stripe, Revolut & Kalshi

[00:00] There are fewer than five companies growing north of 30% this year. We didn't invest in a company last year growing 30%. There's just a major disconnect in those growth rates. OpenAI and Anthropic alone added as much revenue last year as half of the public cloud universe. The most underappreciated company in America right now is Flock Safety. Garrett Langley should be a national hero. The most common question right now is, like, do gross margins matter? [00:30] to 50% gross margins and we're used to looking at companies that have 70% gross margins. Who do you think will be the world's first trillionaire? Well, if that market existed today, I think it would probably be like 90% plus odds. [00:44] alex immerman welcome to sorcery [00:56] Thanks for having me. Excited to be here. [00:58] okay well so you work on the growth fund and you have a basket of some pretty amazing portfolio companies waymo [01:06] Kalshi, Robin Hood, Stripe. [01:08] Revolut, Eleven Labs, what am I missing? Coinbase? - Elise AI, Hebbia, Sardine. [01:17] - Anderl. - Okay, so let's break this down. [01:21] How do you manage all of these companies? - Yeah, I mean, we're very fortunate to [01:27] work with what I would think of as the best early stage team in the business. And so we get tremendous leverage and opportunity from them.

[01:37] Of the companies you named and of our portfolio at large, [01:41] Roughly 50% of our investments are follow-ons to our early stage winners, companies breaking out. Those are companies where we're on the board, we have access to information, they're excited to partner with us. [01:55] that provides tremendous opportunity for us to invest in them. And then [02:00] The ones that are outside the portfolio, like a Calci or Revolut, [02:05] We've met with them many times over the years. 90% of the companies we're investing in out of our growth fund, our early stage team has met. And so we get to take advantage of those opportunities, even though they didn't, you know, [02:20] pursue them or you know it didn't work out for one reason or another. [02:24] What is the most underrated company you've invested in? [02:28] The most underappreciated company in America right now [02:32] is flock safety. Garrett Langley should be a national hero. [02:37] They got a lot of positive press attention in December around the Brown and MIT case. Their camera helped solve and find the criminal. [02:51] When we look at it, though, that's just like a normal day. [02:56] in Phlox Life [02:57] flock [02:58] solves over 2,800... [03:01] Cases? [03:02] every day. [03:04] That's 15% of reported crime in America. And so like,

[03:08] Thank you. [03:09] There's a lot of, oh, is tech doing good in the world? AI, is it good for humanity? Like, [03:15] Flock is [03:16] an incredible example, like one I'm so proud, proud of and like, [03:21] We need flock. [03:23] If we want to eliminate crime in America, [03:27] We need to deter criminals from doing bad things, right? Like we don't want bad guys to think they can get away with it. 50% of murders are unsolved in America. We need flock to be deployed and eliminate all crime. [03:40] What are you seeing right now as the biggest difference between private and public markets? There's a big disconnect between public markets and private markets in terms of growth rates they're seeing. So my partners, David and Santi, put out a report calling private markets the new high growth public markets. If you were to scan public internet software fintech, there are fewer than 5%. [04:10] five companies growing north of 30% this year. We didn't invest in a company last year growing 30%. There's just a major disconnect in those growth rates. If you look at OpenAI and Anthropic alone, [04:26] Those two companies added as much revenue last year as half of the public cloud universe, excluding the Mag7. I mean, just all the growth, if you're a growth investor, is in the private markets. I mean, I think the most common question right now is, like, do gross margins matter? A lot of these AI companies are showing up with 0 to 50% gross margins, and we're used to looking at companies that have...

[04:50] 70% close margins and like, do they matter? Of course they matter. They always have mattered, always will matter. I think how we make sense of it. [05:00] are the lower margins because of LLM costs? If they are, we're cool that we can make sense of that. The real question is, as we look out, [05:10] Are you a company that's value is primarily related to someone else's model? Are you building something meaningful on top of it? And so through the metrics, [05:20] Can we see differentiation? Can we see defensibility in the workflows, the integrations and the data? And so that's how we've been thinking about gross margins and like is the topic de jure today. I think engagement today has really come into the light around us. I mean, if you think about engagement, it's like a leading indicator of retention. A lot of these companies, they sign annual contracts, they're growing so fast. [05:46] all of the revenue base that hasn't come up for renewal. And so like, are people actually using the product? [05:53] We're really excited about Harvey. We led their last round. One of the most exciting parts of that company is if you look at their engagement cohorts, they're increasing over and over and over. And so you can just see that becoming the lifeblood of a law firm or lawyers inside corporates. [06:09] So [06:10] It was not too long ago, but everyone was going after $100 million revenue benchmarks. Yeah. Are you still seeing that? [06:16] The meme has definitely slowed down. I think it's going to become a billion, hopefully. Cursor shared that they reached that in record time. I expect other companies are going to try and get there. Of your portfolio, a couple of them just had some really huge announcements.

[06:37] I'm going to give you some options. [06:38] You can pick between Waymo and Eleven Labs, and then we'll just talk through them. We can start with Waymo. Let's start with Waymo. Waymo raised $16 billion at $126 billion valuation. It was their Series D. We're really excited to be a major participant there. We've participated in all four of their external rounds dating back to the Series A. [07:08] In San Francisco, it got to 25% market share really quickly with very few cars, surpassing Lyft and being a formidable competitor to Uber. [07:20] That is without having full coverage of the Bay Area, without having highway access or airports until recently. So that market share was really constrained based on those dimensions. [07:33] And it was also constrained by the number of cars. Like Waymo today still... [07:37] is constrained by the number of cars they put on the road. If they put more cars on the road in San Francisco, that market share would be much closer to Uber, but they're opting to grow across the country. They're scaling to over 20 new cities this year. And so the growth is very much limited by just getting cars on the road. They have incredible utilization. Look, ride sharing is a great market. Today, it's like $125 billion market growing low double digits, which is a

[08:07] relatively mature industry. 40% of that is in the US where Waymo plays today. [08:14] Waymo, as I alluded to, you put cars on the road, they're taking share, high utilization. There's only 1,000-ish cars in the Bay Area, and you can't go down the street without seeing one on each block. It's truly tremendous. But as far as ride share goes, thinking about the ride share market today is kind of like looking at the early days of Uber and looking at the taxi market. [08:42] It's just the tip of the iceberg. [08:45] Ride hailing in that aggregate large number I just shared is less than 1%. [08:52] of vehicle miles in the US. So really like massive, massive way to go. [08:59] already [09:00] You can look at a Waymo and say, wow, there's a bunch of new use cases opening up. You might be like talking to someone about confidential information that you wouldn't have felt comfortable. I got a text this morning about a parent who got injured and was so excited because they were able to put their child in a Waymo and they wouldn't have felt comfortable doing that in an Uber. [09:20] But that's before the price goes down. And today, Waymo is pricing similar to Uber and Lyft. If you look across the country in San Francisco, it's a premium product. You can think of it like Uber Comfort. It's still growing like wildfire.

[09:37] When the price goes down and it's meaningfully cheaper than human-led cars... [09:44] people are going to think about the trade-off between driving themselves or getting in a human car. [09:49] or getting an UAMO, and it's going to be cheaper to get an UAMO. And so the rideshare market is going to grow by, you know, at least an order of magnitude in the coming years. So where does the value accrue? [10:01] The value, look, I think the value is going to accrue to the driver and whoever is making the driver. There's been a lot of investment. It's a really hard technical challenge. And so I think the driver is where the value is going to accrue. That would be Waymo in this case. I think where margins land over time is an interesting question. [10:23] Like on one hand, Waymo could go the route that they are today and own and operate cities like in San Francisco and Los Angeles. They own the experience with Waymo One. They are managing the operations and the depots. [10:38] as an alternative, they could outsource some of that as they are in Phoenix, Atlanta, and Austin, where third parties like an Uber or a Move are managing the operations. And so when you outsource that, and those are real costs, you could lead to a higher margin product. This is never going to be like high margin software, but it'll be better than operating the fleet themselves. [11:04] From a deal perspective, I want to unpack the process. How do you underwrite a company like this? Do you look at Tesla? Yeah, so this is one where you have to think about a variety of scenarios off into the future. And so to make it simple,

[11:22] I would frame it as there are three like base scenarios. The first is [11:27] Waymo stays the only game in town. I certainly hope that is the case. Their dominant market share of a market that grows quite significantly. [11:38] The second case is the market still grows significantly because it's such a great value proposition, self-driving. However, there are multiple players. That might be a Tesla, it could be a Zoox, it could be a Wave. There are Chinese players as well. [11:55] But because of the technical challenge, I think it's a productive oligopoly. [12:00] And then the third scenario is where things don't work out as well for Waymo. And, you know, maybe there's impairment, maybe one of those other providers has an advantage over them in the fullness of time. [12:11] I think the most likely scenario of those is that it is a productive oligopoly, that there are many players, but we expect Waymo to be a meaningful share of that overall market. [12:24] And how do you compare Tesla's FSD versus Waymo's full stack approach? [12:29] So, we love Elon. We're investors in SpaceX, XAI, which you may have heard are a single company or soon to be a single company. So we're huge fans of his. We have tremendous respect. Tesla, from a hardware stack perspective, they have taken a camera only approach. [12:51] Critics would say that Lidar

[12:56] provides more data [12:58] and is better performance in [13:02] adverse weather, so like fog, snow, rain. And so, [13:07] We believe like the Waymo approach today is clearly like safer. [13:13] That said, like, [13:15] If you look at FSD, like the publicly available data, they have shown significant improvement. The slope is promising. FSD 14.1, I think, showed an order of magnitude improvement in terms of disengagements. [13:30] There's a lot of puts and takes with disengagement metrics, but they are definitely improving. [13:35] But when you take a step back and compare the data, whether it's disengagements, reported accidents in Austin, Waymo is still significantly ahead today. And we feel really good about their position. Have you taken a Waymo in every single market? [13:49] I have not been in every single one of their markets, so I have not taken one. But I've taken one here. I've taken one in Los Angeles. They're dominating all the streets there. I love to hear that. I love to hear that. They're growing really nicely there. They're growing nicely across all their markets. And each subsequent market is growing faster and faster, which... [14:07] is a reflection of how their brand is growing across the country, which I think will be a powerful force for them as you think about their position long term. Nobody wants to have [14:20] five rideshare apps in their phone, right? So, [14:24] I expect that there could be several players at the end state, but there's not going to be endless. So they've announced partnerships with Uber and Lyft. How those relationships evolve over time is like TBD. In Austin and Atlanta, you can order a Waymo through the Uber app.

[14:54] pedestrians and civilians can interact with such futuristic technology. Robots. Yeah, autonomous vehicles. That's crazy. It's magic. It's the best manifestation of... [15:06] physical ai today and the ads for it are like awesome when you have like a grandpa on the back of well when they were like yeah the the the grandparents are like more likely to be like fearful before they get in their first one and then they realize how amazing it is so if waymos are step grandparents are probably going to need to be the first to get their driver's license taken [15:26] Oh, gosh. Yeah, honestly. I mean, I don't know if I should, never mind. But if Waymo is step one of humans interacting with robots, what comes next? [15:39] Look, I mean, you brought up Elon. He announced last week that... [15:45] Tesla is shifting production from some of their older vehicles to Optimus. I think it would be really cool to see their robots and their humanoids be more involved in our life. China has done a really good job on that front. And I think the US needs Elon, needs to continue to push that forward. [16:07] Sorcery is brought to you by Brex, the financial stack trusted by more than 30,000 companies, including one in three venture-backed startups in the U.S. Nearly 40% of startups fail because they run out of cash. Brex is literally built to help founders avoid that. Unlike traditional banks that let your money sit idle, chipping away at it with fees, Brex is designed to help you spend smarter and move faster.

[16:37] powerful account. You can send and receive money globally at lightning speeds, get 20 times the standard FDIC coverage through their partner banks, and even high yield from day one. With same day and even same hour liquidity, access your funds anytime. Companies like Scale AI, DoorDash, Service Titan, HIMSS, Anthropic, Flexport, Robinhood, and Plaid trust and use Brex. [17:07] Turing is training the next generation of AI with tasks that require real expertise and real world judgment. That's why companies like NVIDIA, Anthropic, Salesforce, and Gemini partner with Turing. Turing builds realistic reinforcement learning environments and data systems based on real operational traces. The kind of infrastructure Frontier Labs need to train superintelligence. Visit Turing.com slash S-O-U-R-C-E-R-Y. [17:37] Are you at all worried about [17:39] the AI taking over, especially with Claudebot and Moldbot. No, I mean, I think it's really exciting. I think that whole phenomena this weekend and last week... [17:49] is like a great representation of like how fast distribution is today. Like we kind of take for granted OpenAI got to a billion users in lightning fast speed. And it's because like... [18:02] Anyone can get access to these things immediately and immediately deploy. [18:07] We saw a bunch of our founders messaging back and forth about how they were using it. One of them set up a personal assistant where they wake up each morning. It reminds them of birthdays like

[18:19] Gives them an email summary, a great dashboard of what's been done by their team. That happened in a day by one personal agent. We're all super excited about that. I think CISOs are really concerned about the security, what these agents are going to do in corporate systems. But agents are here. It's really promising. [18:39] You don't think they're going to take over? I do not think they're going to take over. So is software still eating the world? Software is eating the world. Mark was pretty prescient in 2011. Okay. [18:52] So moving through the portfolio. So let's talk about Eleven Labs. Eleven Labs just raised a $500 million announced today. I don't know when this is going to come out, but it was announced today. Yeah, big round. Huge round. 11 at 11. How did Andreessen originally invest into 11? [19:09] you come in with the growth fund? What was the process? Yeah, it's a great representation of what we were talking about before. Jennifer, Brian, and Justine on our early stage team got to know Maddie, swooped in, led the Series A, involved a flight over to London to get the term she had signed, all those fun things. But they maintained a really special relationship [19:39] the A and B our early stage team did we co-led the the C last year and our big participants in this round [19:49] It's one where we got to know Maddie through the B, stayed close to him throughout the year, watched his progress, tried to be helpful. We engaged our operating team a lot there too. Our revenue operations team plugged in. This is a company that has grown in record time. And what's unique about it relative to a lot of companies is they have this beautiful, organic consumer business that people look at 11 Labs and they're like,

[20:19] consumers, prosumers, influencers are going to use this. It's going to run out of room on the consumer side. It continues to hum. It's amazing and highly organic. [20:31] The enterprise business has also been beautiful, and it's very rare to have a great consumer business and a great enterprise business. Fast forward to today, the enterprise business has customers like Meta and Salesforce and Deutsche Telekom. They announced Revolut last week. These are massive companies that are building agents on top of their platform. [20:52] Why have they broken out amongst a sea of voice AI agents? Yeah, I mean, like... [20:58] The answer that I keep coming back to is like Maddie is an exceptionally fast executor. He is really curious. He's really hungry. He's hired well around him. [21:10] I think the starting place for a lot of these AI companies is... [21:15] they have the market leading model. If you look at OpenAI with ChatGPT, their lead came with having the leading LLM. Midjourney's origins came from having the best image model. I think what Matty has done really well is a lot of people in the early days would look at him and say, "Yeah, you do have the best model. [21:35] But is that going to commoditize over time? Is open source going to come? Audio models aren't that expensive. It should be really competitive. [21:42] And I think like that chip on the shoulder, like the critics, like maybe motivate someone like him to just keep moving faster and faster and build more defensibility and ship product. And so.

[21:54] They've shipped more models in terms of breadth. The consumer product has evolved. And then now on the enterprise side, they have a huge platform that addresses needs across sectors, across use cases. And so it's been pretty phenomenal to watch. What are the main use cases? [22:10] So there's sales, there's customer support, there's interviewing. [22:17] There's healthcare, there's consumer, there's financial services. They really have a broad array, which is like when you study the company, it's actually really impressive how diversified [22:28] the basis. It's a platform already with all these different modules where their customers can pick and choose and buy multiple things. Like audio, like another one of the criticisms in the early days is like, is audio just a feature? No, like audio is a platform and like the way main way today or main way in the future that humans may interact with computers. So how did you... [22:54] Meet the Cal She team. What was the process like there? Yeah, so this is another one where... [23:00] Alex Rampell and Anish on our early stage team were close with Tarek from the early rounds. For one reason or another, it didn't work out. And so dating back two years ago, I was just like, [23:15] intellectually interested in prediction markets. I thought it was pretty cool. I was in New York, I met up with Tarek. This is before they had legal approval. He's walking me through how they're fighting. And I'm like, "I'm a growth investor. I don't invest in companies before they have regulatory market fit, let alone product market fit." And so I got to know him,

[23:45] And [23:46] The election was like a boon for them. And the growth has been phenomenal since. We stayed close until it started to like really grow. And we believe that it was more than just the elections. And like, boy, has it become way more than just the 2024 elections. Did we build convection in them and the company? [24:08] Why did you choose... [24:09] Kalshi over Polymarket. Did you look at Polymarket too? I am familiar with both companies. It would be hard to study the space and not be [24:19] When you look at Kalshi, um... [24:22] and their origins with Tarek and Luana, it's hard to find two more resilient founders. [24:30] They were getting punched in the face for four years and told no. [24:37] And they took the... [24:39] Thank you. [24:40] difficult, but let's say more responsible path. [24:44] towards getting licenses, being the first CFTC regulated prediction market. And [24:51] As we reflect on why that was important to us, I think a lot of what we saw in them stem from our investment in Coinbase. [24:59] and them taking a regulatory first approach. Taking a regulatory first approach builds trust with consumers, [25:07] regulators, partners. And so if you fast forward, [25:12] For Kalshi's journey,

[25:15] They... [25:16] have the most consumers and users today, that wasn't always the case, and I can talk about that in a minute. [25:21] They were first to get regulatory approval. [25:25] They have Robin Hood and Coinbase as partners, CNN, CNBC as partners. These are like real mature organizations that are entrusting [25:34] Kalshi, you can't get those types of relationships unless you play by the rules. [25:40] Thank you. [25:41] When we made our investment, CalSHI was number two in reported volume. And [25:49] Uh... [25:50] We take great pride in backing market leaders. And so when someone's in a number two position, we have to have a really strong thesis. [26:00] A lot of that stems to what I just said about Tarek and Luana and the regulatory first approach. [26:05] But if you looked at their slope at the time, [26:08] The company was absolutely ripping. The space was growing, but their share gains suggested that in a few months, particularly with sports and the products that they were shipping around sports, that we had conviction that they were going to surpass and become number one. And today they're number one across users, revenue, volume, any metric that [26:31] than anyone would care about. [26:32] What do you think about the space now that it's evolved? I talked about this on the podcast with Vlad of Robinhood because when they first got into prediction markets, Tariq and Moana and Kalshi, you can do some really sophisticated things.

[26:48] But it kind of all shifts over to sports and elections, and that looks like gambling. How do you decipher that? [26:56] I mean, you just referenced Robinhood is trading stocks and options on Robinhood. [27:02] Gambling? [27:04] Those behaviors received similar criticism, but I think are now pretty accepted. Back in the day, grain futures were considered gambling, as ridiculous as that sounds. So much of the financial market at one point in time has been considered gambling. [27:21] I think in each of these, [27:24] There is speculative behavior. Speculation is important because it enables liquidity. And liquidity is important for hedging. What I would say, though, is a lot of the association... [27:39] with gambling stems from sports books. [27:43] And today a lot of Cal Shoes volume does come from sports. There's no hiding that. [27:48] If you look at sports books, [27:50] They set the odds and they profit. [27:54] when you lose. [27:55] CalShe is not like that. They match you with other market participants. [28:00] And they have a take whether you win or you lose. So there's not the misalignment that you find in traditional gambling. [28:07] I've never seen a more competitive market and it was entirely very, very fun and thrilling to have them as a sponsor and to partner with them last year. But it was also extremely exhausting because every day there's another battle. It's like you see people copying you left and right with your marketing campaigns, like fighting to the death to get partnerships and this kind of thing. So, like, what do you think the end result will be?

[28:37] as many partnerships, as many [28:39] maybe like [28:40] internet real estate spots, media real estate, and then what happens after that? [28:46] Look, I think we are at a unique moment in time where, yes, there are two companies that are solely focused on prediction markets in Calci and Polymarket. [28:56] But there is an evolving ecosystem [28:59] Robinhood and Coinbase we named are two of the other participants. [29:04] Today, [29:06] there is an opportunity as this market is in its early days [29:12] to gain mind share and be known as the breakout. At the end of the day, I think best product is going to win. I think that is fueled Calci's success. And I expect it to continue over the years to come. [29:26] Fintech was seen as dead for a bit. It was in a cold spell. Totally. And you have quite... [29:33] the number of very large fintech companies in your portfolio. So between [29:38] Coinbase, Robinhood, Calci's coming up. How do you see these platforms evolve? I mean, Robinhood in particular, they have 11 lines of business that are doing 100 million or more in revenue. It's amazing. They're incredibly diversified. That's one of the reasons I love Revolut as well. I mean, [29:53] Revolut. [29:55] is like the true fintech super app. You can save, send, spend, [30:02] borrow, invest. You can't find that many places. And I think that's like a core reason they've broken out as well. But if they're all converging to the same products, how do you feel as an investor? And what does that mean about the market in general? Yeah, I mean, look, I do think they spike in different areas. Like Coinbase definitely spikes in crypto. Robinhood definitely spikes in investing. Revolut to date has been primarily focused on Europe and ex-US. I do expect them

[30:32] come here full throttle and it'll be interesting to see that evolve. But they're more banking oriented relative to the other two. [30:40] How is it structurally different? [30:42] So Revolut, [30:44] has [30:46] 10 different revenue streams. Not a single one is more than 20% of revenue, so incredibly diversified, as we mentioned. [30:53] But if you look, if you zoom out and look at their revenue base, it is primarily... [30:59] like transactional payments. [31:02] very little is associated with lending. And so if you were to compare it to like a new bank, which is, you know, majority net interest income, very different credit profile. [31:13] And that has resulted in Revolut already having like 40% ROEs, which are higher than a new bank. And like if you were to look across the public universe of neobanks, like, [31:25] NewBank is beautiful. It is the gold star. And so this transactional focus is structurally what differentiates Revolut from them. [31:35] I think another piece just like relative to neobanks at large is just how phenomenal their unit economics are. They have really fast paybacks. [31:46] but also have like enterprise like retention. They have over 100% net revenue retention. And so that like combination allows them to move really aggressively but also maintain high margins. [32:00] Yeah. [32:01] I just want to point out one thing because this headline was

[32:05] a little gripping, but... [32:07] There was a recent headline on Coinbase, and it was the crypto CEO who's become enemy number one on Wall Street. [32:14] um we love brian uh brian's a phenomenal founder he like probably should get more credit for reminding the world that companies should be mission focused [32:25] With regard to that headline, it reminds me of that quote, they ignore you, then they laugh at you, then they fight you, then you win. Why are stable coins becoming so significant? So there's a wide variety of use cases. A lot of them are happening in B2B with Treasury, international remittance. [32:47] I think like you fast forward, you know, a few more years and we're going to see increasingly payouts to all types of workers coming that way and eventually consumers having it. You can imagine a world in which like your store credit. [33:03] is a stable coin that can be used anywhere and you get that instantly versus like having to wait five to seven days for like the return to hit your credit card statement and flow back [33:14] And working with Brian, what are the biggest lessons you've learned from him? I think the number one thing that stands out about Brian is that mission... [33:24] orientation and like his willingness to stand up in like a really difficult time. I mean, you just look back. We made our growth investment in 2019. There was a lot of craziness happening shortly thereafter, between COVID, all of the, you know, activist movements.

[33:44] And for him to stand up and be like the first, I think it was like September 2020, was just like an amazing move for him, for the company. It was bold. It was decisive. And like if you transpire like or move forward, like it's had phenomenal impact on. [34:04] the entire industry and how businesses are grown, particularly in this AI era with so many companies being in person and moving faster in that way. [34:14] When you're evaluating these companies, what are the through lines you're looking through them? And then what are the metrics, the tangible numbers and kinds of slopes you're looking for? Yeah, I mean, look, each company is bespoke. And like we don't. [34:29] bring the same lens cookie cutter to every company. Um, [34:33] We... [34:34] are snobs around growth. We [34:38] I mentioned earlier our portfolio is growing on average over 100%. If you're an early growth company, you have to be growing several hundred percent for us to get excited. I think part of the through line of that is... [34:56] We want to be invested in these companies time after time, round after round. There are many companies across our first four funds that we invest in all of them. If you're growing like 60% [35:07] at moderate scale. [35:09] the likelihood that we're going to invest many times over time just isn't that great. And so we tend to be pretty snobbish about growth.

[35:19] We think a lot about end state margin. So like I talked about gross margins earlier, like [35:26] We can give you a bit of a pass today if your margins are lower, if we believe there's a believable path to higher margins. And ultimately, we're thinking about what can free cash flow margins be at scale. That doesn't mean it needs to hit that in five years or necessarily even 10. But we need to see the through line thereafter to make sense of things. [35:56] key one. If you have high gross retention, obviously that means your go-get for next year isn't as large on the revenue side. If you have high net dollar retention, you've got expansion that takes care of itself on the growth as well. That's a great underpinning and has been a great story for a company like Stripe, even at their scale. [36:17] And then on like the margin side, we're looking at like [36:21] like about how much companies are increasing margins year over year as a trajectory. But like retention plays into that because if you have higher retention, you don't need to spend as much on sales and marketing. And you can continue to invest more and more dollars in R&D and making the product better. And if the product continues to get better, that obviously increases. [36:44] Fuel is the top line. Where you're seeing most of the spend right now, is it in the marketing or is it in R&D?

[36:50] I mean, again, it depends on the type of company. I think in our portfolio, disproportionately, I think we invest in higher R&D businesses who are investing in large, exciting roadmaps. But as companies scale, they're certainly spending a lot on sales and marketing. [37:07] VCX by Fundrise, the public ticker for private tech, allowing investors of all sizes to invest in venture capital. View the portfolio at GetVCX.com. That's GetVCX.com. [37:22] Some of you may not have heard this yet, but our sponsor Public just launched something called Generated Assets, and it brings AI into investing in a way I've honestly never seen before. Here's how it works. You type in an idea like AI-powered supply chain companies with positive free cash flow or defense tech companies growing revenue over 25% year over year. Public's AI then dispatches a swarm of agents that scan every single US stock, evaluates them, and instantly builds a custom [37:52] why each stock is included. And before you invest, you can even backtest your idea against the S&P 500, so you're making decisions with real context, not just guessing. And beyond generated assets, Public lets you invest in stocks, bonds, options, crypto, all in one place. They'll even give you an uncapped 1% match when you transfer your investments over from another platform. If you want to build a portfolio that actually reflects your thesis, visit public.com slash sorcery. [38:18] Paid for by Public Investing. Full disclosures in the description.

[38:22] Founders ship faster on deal. Set up payroll for any country in minutes, hire anyone anywhere, get visas handled fast and get back to building. Visit D-E-E-L dot com slash sorcery. That's D-E-E-L dot com slash S-O-U-R-C-E-R-Y. What do you see as like the biggest, I don't know, it could be mistakes or bottlenecks that companies at this size usually tend to run into that you're then evaluating risks off of? [38:52] we're asking ourselves when we're looking at our memos is like the act two or act three. They've got a really good core business and maybe that can itself generate a three X, but you start to have concerns about market size and opportunity for that core. And so you need to believe the second act. And so like, is it a platform company? Can they attach multiple modules? One of the things I got most excited about with Elise AI is they started with a wedge product [39:22] a leasing assistant. [39:24] it has taken like the property management world by storm. [39:29] But it's just one product. Can they sell a whole suite of products? And so they have added a bunch of products across the board that address maintenance, collections, delinquencies, products. [39:44] maintenance requests, like the whole gamut. And today they've got two additional products that have 60% attached and two more that have 40% attached. And so

[39:55] their ability to have that second act has really played out. And we look for that across the board in our companies. [40:02] A16Z raised... [40:05] 18% of all US venture dollars last year. Big number. It's a big number. Big number. So if you were to [40:13] look back at when [40:15] Mark and Ben founded the firm in 2009 and [40:19] There was this like, [40:20] common wisdom that there were 15 companies [40:24] that would get to 100 million in revenue. [40:28] Today, we believe that's like 10x larger, like 150 every year. [40:33] Back then also, the top 1% outcome [40:39] Yeah. [40:40] was [40:41] a bit under $1.5 billion. [40:45] Today... [40:46] That's 10 billion every five years. [40:49] that top 1% outcome doubles. [40:52] And so if you were to fast forward another eight to 10 years, that's 40 billion is the top 1% outcome. [41:00] In our job, particularly in growth land, we're focused on backing the companies that have that potential. [41:07] Why is that happening? Well, I think tech markets are larger than ever. Companies are staying private because they're pursuing these much larger roadmaps. They are more capital consumptive. There are also larger tenders because these companies are staying private. And so. [41:23] We're raising capital that we think is commiserate with that opportunity and are really excited about it.

[41:30] Do you feel pressure for... [41:32] getting trillion dollar IPOs. [41:34] like base case assumption that they need to be a trillion dollar company of course like i i think there's gonna be more trillion dollar companies um i think it's gonna become you know more common in the venture landscape but for across our portfolio we don't need that to deliver you know incredible returns to our lps [41:51] Given Stripe has been private for forever, what have you learned from their tenders and how they manage to stay private? [41:58] They have run a really efficient process with their tenders. They've done it annually to deliver liquidity to their employees and stay competitive in the market. So it is an important attribute of what their finance teams does. [42:13] Hmm. [42:14] Okay. Well, I guess here's a difficult one for you. [42:18] What is a piece of Marc Andreessen lore that you would like to share? [42:24] Growth team has always been small. We ranged from like seven to 12 people. When we started, we were seven, including Mark, [42:33] There are so many... [42:35] pieces of information in that encyclopedia inside his head that I tried to absorb. [42:40] I think [42:41] One that stands out and we as a team come back to with high frequency is... [42:49] A quote from a movie. So Alec Baldwin in Glengarry Glen Ross, his character is managing a failing [42:59] sales team and he goes to his sales team and says,

[43:04] First place. [43:05] gets a Cadillac. [43:07] You know what second place gets? A set of steak knives. Third place, you're fired. [43:13] And if you think about the discrepancy between a Cadillac and steak knives, [43:18] It's enormous. [43:19] And in our business, it is critical to back the market leader. The market leaders accumulate most of the market cap in a given market. [43:27] That's true, certainly in network effect driven businesses, but it turns out it's also pretty common in software. Like you needed to be in Workday, you needed to be in Salesforce. There is only one of those companies. And so [43:41] We want the Cadillac. [43:43] So without looking, what is your favorite book behind you? The cop out answer would be to say Ben's The Hard Thing About Hard Things. In fairness, that is without doubt the most common that our founders refer to or founders that were not invested in come back to and just like, you know, ask about. [44:01] Personally, I love our executive hiring book that our growth team put out. Our founders found it to be quite helpful, very tactical. What is it? It helps explain how to run a process for each specific role. And so founders look at it whenever they have a search. [44:23] All right. [44:24] Practical. So does everybody get a book deal at A16Z? What's the process? I'm trying to avoid the whole book thing. You don't want to write a book? No, thank you. No? Not even an audio book?

[44:36] What if someone ghost writes it? [44:37] That's not how things work around here, unfortunately. No, none of these books were ghostwritten. None of these books were ghostwritten. [44:45] Go look at the executive hiring book. I'll take a look. Look at the authors. So I'm really, yeah, I mean, I think that's like a good thread to pull on because- [44:53] A16Z is a marketing media machine. [44:57] Thank you. [44:57] Mark has talked about this on plenty of podcasts. Totally. We see it with Eric and all the podcasts that are coming out. I can't keep up with them, but it's phenomenal. So how does this marketing machine then help with deal flow and helping these companies? Yeah. So, I mean, you alluded to how it started. I give a lot of credit to Margaret, Grace, Maya, the marketing team of the early days who built the brand before we deserved to have one. We didn't have the returns. [45:27] company is. [45:29] And then, as Mark has alluded to, that gave us the ability to win deals, support our portfolio. It gave us power in the market. Strong venture capitalists have power that they can lend to their portfolio companies to enable them in times that they otherwise couldn't. So that's with hiring executives, corporate partners, customers, the like. [45:55] Fast forward to today, I mean... [45:58] You talk about Eric and his ninjas on the new media team. [46:03] we can go to an early stage founder

[46:06] and almost guarantee [46:08] that their launch is going to go viral. [46:11] That is a differentiated offering. So if you look across the operating platforms, we strive for that differentiation. It helps us up front with deal flow because people hear about it. It helps us with winning because they reference it. And then once they're in the portfolio, we think it helps deliver outsized returns. [46:32] I like it. [46:33] -I'm a fan. -So am I. Sign you up. [46:38] -I would like a book deal and-- [46:42] keynote speaking slot. You'd also like a ghost writer. What can I get you? Maybe an assistant. That would be great. That would be phenomenal. Yeah, I mean, like, let's talk about Open Claw then. Okay, you're right. [46:57] So, [46:58] I want to end on a fun note and go into a Calci predictions market. [47:02] Let's do it. Who do you think will be the world's first trillionaire? [47:07] Well, if that market existed today, I think it would probably be like 90% plus odds on Elon. He's [47:14] like pretty close at this point, depending on, you know, where his companies go out. He's certainly the favorite. [47:23] So I would definitely bet on him. I think the dark horse or maybe the number two, who's going to be the second, I think is probably the more relevant question, would probably put my money today on Larry Page. Quarter trillion. Google, or I should say Alphabet, has woken up. They own...

[47:45] close to 100% of search, they own 100% of DeepMind. They own like mid teens percentage of anthropic. [47:54] at least rumored they own mid single digits of SpaceX. And so Larry, through his alphabet holdings, have [48:02] you know, shares and all these things. And so [48:05] The second trillionaire, Larry Page. [48:07] That's a good answer. I appreciate it. Well, AI. [48:11] Thank you so much. The Real AI. The Real AI. Thank you for coming on. No doubt. [48:15] Hey, it's Molly. If you enjoy our interviews, check out our newsletter, Sorcery.vc, where we deliver a once a week top deals and tech headlines email and also go deeper on our podcast interviews. Subscribe to Sorcery today. And don't forget to subscribe to the podcast on YouTube, Spotify, Apple or wherever you listen. Link in description to sign up.