00:00Seeds rounds have become astronomically large in many ways. So are you doing what you've always done. You having to
00:07change with the times. How is your VC model looking. Well first off thank you for having me. I think
00:11we right now live in a world of giants both on the venture capital side and the company side. And
00:16we've really stuck to our craft which is early stage investing backing founders with an idea of raising a few
00:22million dollars and looking to build a giant of tomorrow. And we wanted a fun size that allowed us to
00:28execute on this strategy where we could
00:29be a close partner to these founders as funds get larger incentive shift and they increasingly put larger amounts of
00:36capital in the later stage rounds. And you see that with anthropic and open AI raising many billions of dollars.
00:41We tend to start more at the ground floor and have crafted our fund and our team to be a
00:48partner to founders when it's not obvious and before the technology is clear and before the market opportunity is present.
00:54But the size of the seed rounds even when a product hasn't developed. I mean you're thinking what was it
00:59reporting around 2 billion being raised by Thinking Machines Lab. You're thinking about safer super intelligence again a 2 billion
01:06seed round. I know Ed's going to come in with the avocados and the mangoes but but how do you
01:11stick to your knitting. Oh you just you ignore those sorts of companies. No it's a great question. I think
01:16there's a bifurcation in the market. I think there's traditional seed rounds which increasingly companies started by younger founders graduates
01:22from Harvard, MIT, Stanford. They're raising what we call more traditional seed round of between three to five million dollars.
01:27In many cases they're building on top of foundational model companies. So they're leveraging the the technology and the capital
01:34invested in open
01:35ianthropic. And we've backed a number of those companies and they build on what we call the application layer. On
01:40the flip side is exactly the types of rounds you're talking
01:42about. It's typically researchers that are spinning out of established model companies. They're raising in many cases could be hundreds
01:49of millions could be billions of
01:50dollars out of the gate to go and do research and perhaps commercialize a future technology. We've largely avoided those
01:56rounds and those rounds
01:57have been led by companies like Andreessen Horowitz and others. We will pick our spots. But in many cases founders
02:03don't really need
02:04five hundred million dollars out of the gate though in this capital markets environment they're able to get it and
02:08there are funds that will
02:09back them to do so. Bennett before co-founding A-Star you did four years at Cotu and I imagine
02:17focused on slightly different scale
02:19and domains. But would you just reflect a little bit on the difference in your experience. What that was like
02:25investing out of
02:26Cotu versus the seed stage at these check sizes and round sizes. Yeah it's a great question. I think incentives
02:34do matter. And
02:35there's a reason that funds increasingly rage raise larger amounts of money over time. And when they raise larger quantities
02:40of
02:41capital they tend to invest at the later stages and they tend to focus on large dollar deployment. You know
02:45Cotu is a multi-stage fund.
02:47They invest venture through public markets. Most of the focus tends to be on the growth stages when there's already
02:51clear winners. And you
02:53could invest hundreds of millions of dollars in a company and look to earn a multiple on that. You know
02:58where we play at the
02:59seed stage. We're investing. Typically it starts out at a couple million dollars. We're backing a founder before there's an
03:05idea
03:06before there's consensus around a market. And we're working with them to build their business. The beauty of our model
03:11is we can actually
03:12make venture type returns and we can make 100 200 300 times our money. But we have to go and
03:18find these you know incredible
03:19opportunities early. And it takes many years for the companies to sort of grow and mature. The other aspect of
03:25our model which is
03:25different from coaches will continue to invest which we've done in our best companies over time and be one of
03:31the largest shareholders in the
03:32cap table. So be much more concentrated with a handful of companies that we hope will go from inception stage
03:37the public markets over a decade or
03:39longer. What Caroline was referring to about coconut rounds, avocado rounds, mango seed rounds is I wrote a column a
03:46few
03:46months ago that it's pointless saying seed because in some cases, the entry level is so high. But you're committed
03:54to this two to
03:55five million dollar level. You know, that's that would counter that that the seed market is alive and well and
04:02true to its
04:03definition. Look, we're going to play the game in the field. We've modestly grown in fund size. We started out
04:08with a
04:09300 million dollar fund. We're now in fund three or 450 million. So we see inflation in round size. And
04:14you know, our goal is to
04:16partner with the best founders in Silicon Valley. So we will do what we need to do to accomplish that.
04:20That said, it's still rare for
04:23founders to raise a hundred million dollars out of the gate with no product or prior track record. That is
04:30a rare I would say
04:31circumstance of particularly researchers coming out of labs. What we've seen in other cases, for instance, with a company called
04:37Decagon, which is one of the leaders in AI customer support. It's one of the killer use cases that AI
04:42where you could replace a lot of
04:43folks in the call center functions. You know, we co-led a seed round at a twenty two point five
04:48million dollar valuation. In less than three
04:50years, the company is valued at nearly five billion dollars. And we've invested in every single round and worked with
04:56them to build the business. I think there are a
04:57number of examples like that where you can do a lot with less capital. And in fact, it forces discipline
05:03on the teams and the companies.
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