Investing Billions - E377: Midas List VC: Why Most VCs Miss the Biggest Companies

Episode Date: May 27, 2026

What if the biggest venture returns are already gone by the time a category has a name? In this episode, I sit down with Niko Bonatsos, Founder and Managing Partner of Verdict, to discuss why the best venture opportunities emerge before consensus exists. Niko explains why “50% of the profits are made before a vertical even has a name,” how he identifies “freak” founders with extreme rates of learning, and why most VCs are structurally incentivized to follow momentum instead of creating conviction. We also explore why consumer and gaming are deeply undervalued today, how AI is changing company formation, and why relationship-building compounds harder than capital in venture investing.

So, Nico, you were at General Catalyst for 15 years before you spun out to start your own firm. Last time we tried, you said something really interesting, which is 50% of the profits are made in a vertical before it even has a name. Talk to me about that. Oh, yeah. So I'll do it by virtue of giving you an example. So when vibe coding, as a term was coined, cursor was already sitting at the $10 billion valuation. Not only that, Anthropic had just started copying them through cloud code. Not only that, lavable and replant adjacent markets were already minted as unicorns.

The vast majority of the profits, over, you know, half of the profits that will ever be realized in any of these companies, have already been spoken by the founders, founding team members, as well as the very early investors in any of the companies mentioned. So for anyone who is thinking of themselves as a very early investor, if they want to invest in, Fipe coding today or they did so last year. They're betting on one, the founders themselves out executing any of the incumbents that I mentioned, as well as the category of VIP coding to continue to be relevant five to seven years from today. I'd rather buy a bunch of lottery tickets instead. 50% is 50% is not 90%. But what's crazy about that is oftentimes this is one or two years and then the industry proliferates for another 20 years. And within that one to two years, they're getting

50% of the profits of two decades. You're still spot on. So I've been a very early investor for over 15 years now. I actually have studied when does the vast majority of seed money get into a space. And it actually happens the two to three years after a company has already been minted as a decacorn and or there's a big exit in that space. You can go category after category. VR with Oculus exiting. Space with SpaceX getting minted as a decacorn.

Autonomous vehicles. with Waymo being a decacorn and crews getting sold to GM. You go category after category. Well, guess what? That seed funding doesn't work as well. Is this why you call VCs sheep? Most VCs, it's hard to be an original thing here and somebody who wants to make a decision on the back of your own conviction as the original one.

It's just really hard. There's a place for everyone. There's plenty of money to be made in the... late stage, there is plenty of money to be made at the very early state. We need everyone. Ian Sigelow, who's sitting right where you're sitting from Greycroft, he said because of that, early stage venture is not really an asset class. It's a artisan craft. It's almost impossible to scale. I agree with that. Yeah, so if you want to have 100 Xers from your original like a check, it's really hard to scale in general. The average VC fund doesn't perform. So it's about the very few.

to really go the distance. Most of them really suck. Especially now, how VC looks like today. Tell me about that. You either want to be the original investor, like we had verdict, they're making this claim, that want to be the best first-money venture capital firm, or you want to be in the very late stage game,

taking companies from $10 billion dollar valuation to $1 trillion plus in the private markets and plowing in billions of dollars. Anyone else in between, I think they're going to do very well. Why is that? Because the best founders today are thinking about capitalizing the companies very differently than even a year ago.

Why is that? Two founders today with one round of funding. All the AI tools. In two months, oh my God, they can make so much more progress than what a year ago. You needed 10 people, two rounds of funding, and a year worth of time. It's changing how companies capitalize themselves. Not only that, I think one of the most under-repressing, aspects of AI is not just that it's bringing down costs.

It's also increasing revenue. Spot on. You're making every single person 10, 15 times more efficient in getting that incremental customer. So if you think about startup, typically you have to spend tens of millions of dollars to get to probability. Today you don't necessarily have to do that. You could spend, you could wait until you're a series, the equivalent of a series B,

series C, C, series D company and take those large checks. You're spot on. We're seeing it on the field right now. So your dollar as a first money investor goes so much further. So those founders are going to skip them between rounds, and they're going to go from what you would call in the old world precede to series B, basically. I've known you now for eight, nine years, and you've always been this contrarian thinker going in early while you're at General Catalyst.

How do you know exactly when to go before there's consensus? Because if you're truly really early, even if you're right, even if it should exist, it doesn't really help if there's not follow-in captain. That is true. actually 70% of the times, I get it wrong. So everything I say today, assume it's 70% wrong. Look, my partner Michael Ferdick and myself, we are maniacs who work founder ours, and we're in the business of investing in freaks, also known as learning animals that are working on creating new categories. So we're specialists when it comes to exactly what we're looking for, freaks,

who are building companies in markets that have no name yet. That's all we do. And 70% of the time or timing will be off because the freaks that we're investing in will go after a market that might actually pan out five, ten years later. But 10% of the times we're going to be very right. That's how we think about it. This is the term freaks multiple times.

How do you define that? What does a freak look like? So a freak is in the startup context. It's very much like professional sports. Few people break all the records, make all the money. So a freak in the startup context, somebody who is a learning animal, and in one day they can learn, they can mature, they can make so much progress that takes the average fair smart founder whole week.

They treat every meeting, every decision as a learning opportunity. They're sponge. Oh, yeah. So if you meet such a person today, and then you meet them again in two days, and everything they tell you sounds the same, that is not a freak. Because at a minimum, they're not listening. It's the rate of growth. That's it.

Rate of growth. So for me, even if the initial idea is wrong, but these guys are freaks, dude. Like in a few weeks at the latest, they will move on the right idea. Being back at your 15 years at General Catalyst, the 70% times that you were wrong, Was it just probabilities in that you didn't necessarily make a mistake, you just got unlucky with the timing? Or were there specific lessons on timing? It's not just one thing, but I would say quite a few times we were just so early. Other times, we picked the founders who didn't end up, you know, becoming the winners in the space.

They were good in the zero-to-one game. They were good as entrepreneurial CEOs, but they didn't become the enduring CEO in the space. Some other times in the context of a larger venture capital firm, you also do investments in other deals. So you get conflicted out of the more amazing ones that go to the distance. And also, you know, I'm now 15 years in, but when I got started, I was not 15 years in. So I made the number of judgment errors along the way. What's a common mistake that SmartVCs make early in their career? They don't take enough risk.

They tried to play it safe and do the doable deal that gets them promoted, do the doable deal that will get a quick markup from some other notable people because it's in a hot, you know, space right now, but might not be the one that they're really swinging for the fences. Have you seen average teams get pulled up by momentum in hot sectors, and if so, what does that look like? I've seen it again and again, and sometimes I paid the price for that. So it happens in particular when the times are good.

Actually, today, no joke. I met a 19-year-old, who is a founder that I've known since he was 16. He raised venture funding. Now he is an angel investor and a venture partner at another firm. In the last four months, he's made six angel investments. All six of them already have received a markup. I asked him, do you think that's normal? He said no.

I'm glad you said that. So if you remember, I'll just use an example from the past, Once upon a time, SoftBank showed up, and they started overcapitalizing companies. So a lot of the earlier stage VCs started organizing themselves around what a softbong wants to invest, lets you know make some early investments and serve it to them. And sometimes overcapitalizing a company before they're really ready could really destroy them. But if you're the early investor in that company, you can benefit temporarily career-wise. You mentioned this 19-year-old, now venture partner and Angel investor, who was 16,

when you met him as an entrepreneur. It seems like today VCs are fetishizing age. Why is that? This happened a big time right now. I think the primary reason is because some of the most successful later states companies in the private tech markets today were founded by very young founders.

We're 18, 19, 20, 21 years old three, four, five years ago. So when Michael Fertick and I were investing exclusively in Gen Z founders in 2021, 22, 23, there were probably 10 other VCs in the U.S. who were investing in them. But now some of those founders are the founders of Kersh, Merckor, many others. YC also in the meantime, back in 2012, average age was like 30 plus years old. Now, after Garretan came back, he brought it back down to like very, very young founders.

And VCs want to invest in what other VCs are investing, because you feel more secure. You feel that that founder is going to raise more easily the next round. That's what's happening today. So you're 22 years old today. You're in San Francisco. You're building your tech startup. Oh, my God. You check your mailbox.

There's a C-term set. You're 18, 19 years old. You check your mailbox. There might be a series A term set. It's a second saying. This is a devil's advocate. I think the thesis there is that these are AI native founders. They don't have the scar tissue of having to manage some of the

legacy software, legacy processes, they're obviously young enough to work the 996. Are none of these good reasons to invest into young founders? It's an exceptions-based business. Sure. If you come across a freak and you're sure that they're a freak, you should invest, no matter what they do. Even if the price is super high, invest. But a lot of the young founders are not doing the stuff that you talked about. They might be trying to build a nuclear submarine. that's less likely that they're going to be successful than somebody who is more experienced than them. In general, you take this contrarian view on the market,

and you invest into the underappreciated sectors of the startup ecosystem, and you sell or avoid the overbought and the overhike parts of the startup ecosystem. What today is most overhyped? Anything that has to do with American dynamism overhiked. Today, anything that has to deal with AI broadly, Overhyped. So like you're two, three founders leaving cursor, Merckor, Open AI, Anthropic, boom. You can raise $15 to $25 million if you do something in AI without having anything to show for. You're somebody who's leaving SpaceX. You want to do something in American dynamism? Great. You are going to raise a very large

acidron. Could be a straight Series A. What about on the other side? What's undervalued? What are you bullish on? consumer undervalued, fintech undervalued, crypto, undervalued, can keep going on. Let's start with consumer. Why are you bullish on consumer? I'm bullish on consumer because you have a next generation of founders, young gensiers who want to build stuff for themselves. They're tired of the existing set of brands or like online regimes.

We're really tired. They don't speak to them and their generation. And also, nobody really, today has managed to build something for Gen Alpha. Like if you want to hire today, the most amazing designer, was built legendary products for Gen Alpha, there's no company that you can go and hire from. In addition to that, thanks to AI, new hardware that's going to come out,

we're going to be interacting with technology in ways that we can't even imagine. Young brains have an advantage when it comes to having enhanced imagination about designing new experiences for new markets. Some pretty bullish. other VCs, aren't they also investing in the space? Why do you think that's under a value? It's what Charlie Munger used to say, you know, show me the incentives I'll tell you the outcome. So the venture capital industry now has a lot more firms and a lot more people than ever before. So it's almost like a factory where it's like, I'm investing in you and your

company. What are you going to do for me in the next six to nine months? You need to deliver me a markup and show me a two, three X markup. It's just harder to do this. that if you're the original versus you showing up at a demo day, picking what is the theme that is in vogue, and then three months later, you have a markup. So I think it's only a matter of time when you have enough of the awesome freaks who are building in consumer that one year from today you will start saying the markups and everyone else will start flocking in. Expert calls have always been one of the most powerful ways to build conviction. But today, investors are asked to cover more companies, move faster.

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That's the whole game. So my partner, Michael, and I have a shared vocabulary about our pre-leading indicators, of future promise and success to really make sure that the founders we're investing in are freaks. So we don't take any risk

on the founders we're investing in. But we're very comfortable, as you said before, to take a lot of risk on the markets we're investing it. So what is the common trait

of the founders we're investing in? Basically, in one day, they can learn, mature, make the progress that takes the average founder a whole week. And why is that very important?

Because when you're building for a new, new market, a market that doesn't have a name yet, and you have that kind of ability to learn and make progress, it's almost guaranteed that in two years from today you will be the world expert in that new market. I have this thought experiment of the Nepo baby. Second generation, wealthy kid,

goes to Silicon Valley with the worst idea in the world, meets with every VC, and the VC wants a check from him in the future or from his family. So they give him actually good advice. By the end of a couple months, he has a good business. Do you think that's true? I'm very pleased you ask me that question, and especially now being the best city in the country and the world, New York City.

I do think that at the moment, in May, 2026, Nepo Babies are a founder demo that is underappreciated. I'm intrigued. Why? For many of the reasons, you're articulated. You need to pick the right Nepo Baby, the one who has huge chips on their shoulders, because they're not the ones that are in line to take over the family business.

The one that is really curious to do things differently, they're independent thinkers. But, oh my God, you know, they have managed to be fluent and comfortable in rooms that another very young founder might take decades, if ever, to even get access to. If things are going to go faster and you can have the beginnings of a business that has momentum. Being an apple baby, you can even further accelerate all that stuff. And in certain categories where you need to be able to converse with the government or large enterprise contracts with non-tech companies, those individuals can have a significant and for advantage

over others. I think in general, people underestimate information alpha and overestimate IQ. You could obviously argue the opposite. There's well-known cases where people with just exceptionally high IQs like a Vitalik from Ethereum have went on to be very successful. But information alpha, the way that I think about it is if somebody feeds you the information, you don't need to use the mental compute of a high IQ person to get to the same exact outcome that that high IQ person from first principles would probably still take years and years to get to.

Well said. And especially now that intelligence is becoming a commodity and the cost of tokens is coming down. Just have to have agency. You need to have great taste and access. Some NEPA babies have all three. So right now, if you find the right one, invest. Speaking of NEPA babies, as you mentioned, you were one of the only VCs in the world investing to Gen Z in 2020, 2021. Today, you're really doubling down on Generation Alpha, the next generation. What differentiates Generation Alpha from Generation C and maybe Millennials? Look, we're all finding out as we go, right?

And as you know, most of the Gen Alpha today, they're not even of like working aids. So who are the Gen Z folks? The Gen Z folks are the ones who were born from 1997 until 2000, roughly, you know, 13. So afterwards, we have the Gen Alpha. So the Gen Alpha folks, we have not invested in anyone yet, okay? But we're investing in the young Gen Z years. The youngest one is, the oldest one is nine years old. Anyone who's born after in 2017, yeah, let's say, you know, 10, 12 years old, right?

But we're investing in young gen Zeres. We're building for Gen. All right. Every generation has their own beliefs. And we're all products of the times and the markets we operate in. And these conditions shape us. So what Michael and I are open-minded is to update at all times our priors and find the singular individuals, the freaks, will be able to.

to navigate and build something for their own generation with authenticity and credibility. We love to invest, of course, in very young people, but that's not the only demo we're investing in. I would actually say to you now, you're somebody who is a very commercial, but unfortunately for you, a non-AI researcher who is in your early 40s. Tough luck. Support for today's episode comes from Square, the all-in-one way for business owners to take payments, book appointments, manage staff, and keep everything running in one place. whether you're selling lattes, cutting hair, running a boutique, or managing a service business,

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The Square, you get all the tools to run your business with none of the contracts nor complexity. Run your business smarter as Square. Get started today. Support for today's episode comes from Square, the all-in-one way for business owners to take payments, book appointments, manage staff, and keep everything running in one place. Whether you're selling lattes, cutting hair, running a boutique, or managing a service business, Square helps you run your business without running yourself into the ground. I was actually thinking about this other day when I stopped by a local cafe here.

They use Square and everything just works. Check out is fast. Receipts are instant and sometimes I even get loyalty rewards automatically. There's something about businesses that use Square. They just feel more put together. The experience is smoother for them and it's smoother for me as a customer. Square makes it easy to sell wherever your customers are, in store, online, on your phone, or even at pop-ups and everything stays synced in real time.

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I was actually thinking about this other day when I stopped by a local cafe here. They use Square and everything just works. Check out is fast, receipts are instant, and sometimes I even get loyalty rewards automatically. There's something about businesses that use Square. They just feel more put together. The experience is smoother for them, and it's smoother for me as a customer. Square makes it easy to sell wherever your customers are, in store, online, on your phone, or even at pop-ups, and everything stays synced in real-time.

You could track sales, manage inventory, book appointments, and see reports instantly whether you're in your shop or on the go. And when you make a sale, you don't have to wait days to get paid. Square gives you fast access to your earnings through Square checking. They also have built-in tools like loyalty and marketing. marketing, so your best customers keep coming back. And right now, you can get up to $200 off square hardware when you sign up at square.com slash go slash how I invest.

Square, you get all the tools to run your business with none of the contracts nor complexity. Run your business smartos Square. Get started today. Nobody wants to meet you. Even if you're a tenure professor at Stanford. You won't get a meeting with a VC. Because it doesn't match the pattern of the last couple years. Yeah.

It's like standing, you know. Or you're a gaming founder. Like I went to GDC, the game developer conference in the SF a month and a half ago, 50% fewer attendees than two years ago. Not only that. The founders who had raised pre-seed and seed rounds, they were willing to reopen the pre-seed round. And these are companies that have product market fit. Why is that? Because no one in the VICE industry wants to do gaming, which is a hatch structure to me, because gaming is larger than film, music, sports combined.

And now with AI, the cost of content production for gaming is coming down. So like, what the hell? It's hard for me to believe that all these reasons are purely memetic and just VCs following VCs. There should be some structural disadvantages to consumer, to gaming, to crypto today. That's keeping the next generation of founders from building these large companies. But you would say, no, it's purely memetic. There hasn't been any big wins, so people aren't building. You got exactly right.

How could that be? It always is. It always is because all of us as humans are looking for the quick, easy wins. And you probably have seen that online. There's that chart that shows 2016. What was the hottest category? Autonomous vehicles. Which was, you know, the most successful, valuable company from that era,

company that had nothing to do with autonomous vehicles. So, like, for every year, the most valuable company that was founded that year was not the one that was in the hottest theme. So when I started in the venture capital industry in 2010-11, over half of the GPs in every venture capital firm were only doing consumer investing. Just think about that. And today?

Today, very different. So like from all the major venture capital firms, they might have half to one person doing consumer investing. The large platforms. Yeah. Others, you know, who were legendary venture capital consumer investors, they completely got out of consumer. It's wild.

Even Excel back in the day, they had that awesome growth teams that they were calling bootstrap companies anywhere in the country to invest in them. In the outreach emails they were saying were the first investor in Facebook and all the consumer companies.

And you would explain this in that the reason they got out of consumer is not because there's not opportunities there. It's because they couldn't get the quick markups or why did they get? For quite some time, this was not where the next generation of amazing companies good sorted.

That's why. But like I'm arguing that today, if we look back to this very moment in time, five years from today, some of the very best companies will be consumer companies. If anything, Open AI is a consumer company, man. Just think about that. Or like Cerebras, right? You know Cerebris. One of our portfolio companies.

Congratulations. So you're like the mind of the hour. It's been a phenomenal week, right? Yeah. So when this guy is good sorted in 2014, 15, 16, around that time, right? Yeah. How many people were investing in semiconductor? in Silicon Valley.

Not many. Practically no one. Like every firm that in previous generations, like a lot of the partners were only doing semiconductors, they had all been retired or like had moved on to new fields. Let's say that I accept your premise that it's memetic and it's momentum driven. Yes. You could also argue that it becomes self-fulfilling.

What do I mean? SpaceX builds its rocket. Now they're suppliers supplying space companies. Now there's actually a company that could take different things into orbits. So now you have literally companies like Varda, another portfolio company that does biology in space. Would have been impossible without SpaceX. Does that not start to build on itself and become its own self-fulfilling prophecy? In other words, it could have been started.

It could have become popular and become popular maybe for the quote-unquote wrong reasons. But now it's a situation where you could actually build that business and that's where the net new opportunities are. This could happen to. But Varda is trying to create a new market, right? Your portfolio company Varda is creating a new market on its own. So they could very well be super successful. And it's cheaper. It was cheaper to start Varda when they got started because they could put stuff in orbit.

Before, they would have to be even more vertically integrated and could have been impossible, right? Absolutely. So when I look at probably the most interesting mistake that I see a lot of smart VCs make, Joe Lonsdale's talked about. this is investing into the right founders with a clearly wrong business, expecting them to pivot. What do you think about the strategy? And do you ever invest into a company where you think there's no way this could ever work? Look, there's a lot of paths to success. And Joel Donstale is a legendary founder and investor. And there's a very strong survivor bias in our industry. And sometimes when you're older and you've been around for long enough, you can also rewrite

history, right? So what I would say to you, and from at least, you know, my humble experience, it's all about the people. Like what I think about their idea, what I think about their initial market, actually, I don't care much. Because, sure, you know, if I know more about that initial, you know, market than what they do, if those founders are freaks, within like two weeks, they will know more than me. And you've said that I have this thesis on founders. I think founder attributes, I think pretty much everybody knows what makes the best founders. What people do not know, unless they've been at a top firm for several decades, is the degree to those traits.

And I have two examples for that. One is grit. Let's say there's 10 points of grit the average person has. And a founder might be thinking, man, I have two and a half times more grit than anybody, anybody that I've ever met. I'm two and a half times. I'm just unlucky. Not knowing that the founder actually needs 100.

points or 300 points of grit they're off by an order of magnitude of 10x that's something that you can't something that needs to be observed from the inside almost impossible to observe from the outside the second thing is independent thinking first principles thinking it's almost it's first principles thinking has now become such a trite and overused term but a lot of people think well I'm smart I'm extremely smart I see a bunch of dumb people on TV clearly I'm a great first principles thinker and then when you look at the data 50% of founders, last time I checked, were first or second generation immigrants,

meaning they're thinking so differently that they grew up from outside the system. Both of us are immigrants. And then another, call it 20, 30%, more controversial, are neurodivergent. So 80% of the top founders, they're not thinking differently. They're not smart. They're not the smartest in a class. 50% of them have been like essentially socially shunned for society from a young age. Another 30% literally have a neurodivergency and just their brain,

is literally wired differently. And then obviously there's other 20%. But one of the things I think about on these founder attributes is people just can't internalize the scale of these attributes aren't either. Here's spot on. One of the things I love about my partner, Michael Ferdick, is that he's a freak himself. And growing up here in New York City,

he played chess competitively as a kid. Who were his friends back then playing chess with him? Kids that they were described back then as the shy kids. How do we talk about them today? neurodivergent, autistic on the spectrum. He said it really well. At least 20% of the mega outcomes in tech come from those people.

What is my partner Michael Ferdick's reputation with them? You need to talk to Michael because he knows how to talk to people. As you know, those neurodivergent people, if they were to be having a conversation like us now, they might not be able to establish eye contact for 30 minutes straight. Or they might stare in your eyes and not say anything for like 20 minutes.

this would make the average person feel uncomfortable with them. Michael, it's pretty chill. That's the other misconception I think people have about founders as they think, as you would call a freak or an epic founder the same as a great person or a likable person. There's no correlation. No correlation.

In fact, some would argue there's a negative correlation. There's that concept, right? Like what makes a great founder is not necessarily what's going to make a great politician, second, third generation, you know, like later states. company CEO. Because if you're a founder, you need to have

beliefs that, at least in the beginning, nobody else agrees with you. You see the future very clearly and you want to bring to the world your version of the future. Whereas if you're a manager, executive, CEO and the making leader, you might want, you know, to be a people pleaser. And you're glorified, you know, HR manager.

And that's much harder. And it's a different way. You train yourself about. about how you think of success day to day, every week, every year. When you talk about these freaks, are they all idiosyncratic? They're just freaks in one thing, or do they have some patterns in the things that make them freaks? The rate of learning for each one of them is astounding. But then they're idiosyncratic.

The attributes that you mentioned, I did like, and I agree with, like, perseverance. Like, any idea at some point in the future will be a... timely idea, but you just need to be around long enough and be in the dominant position when the right time comes. So you need to have perseverance and greed in spades. You came from General Callis where you were there for 15 years. You saw one of the greatest firms in the world. Now you're building your own firm. What first principles do you bring to building verdict? I had the privilege of a lifetime to having been part of GZ from year 10 to year 25.

What was the AUM growth during those years? So when I joined GSI in total had a billion seven. G.C. was 10 years old. I was one of the founding team members of the Palo Alto office. G.C. back then had 35 people in total. 31 in Boston, where the firm

got started. Four of us in Palo Alto. And G.C. back then was only doing incubation, series A and some series B investing. Chris Farmer and myself were two what of the original four, were tasked with bringing GC into the magical world of seed investing, which was a new idea back then.

So since then, yeah, GC has emerged as one of the top five global franchises, and the motto of there now is that we ventured beyond. GC is a global investment and transformation company today, so investing is part of what they do. They own a hospital, they took a public asset manager private, they own an AI transformation company, they fully own a wealth management platform, they fully own a public policy institute, a lot of other wonderful things. So I do love the differentiation over there. AUM, I don't know what the latest is. Yeah, it depends on the public

markets, but I think probably you're right. So going back to verdict, what lessons do you bring from G.C. to building your own firm? Ambition, entrepreneurial DNA. the power of relationships. GSI was founded by two non-tech founders, David Fialco and Joel Cutler, who were incredible at building relationships with people from all different walks of life. What does that mean exactly?

It means that you deeply care about where somebody is coming from and building a relationship based on trust and not what is the transaction that we can, you know, facilitate right now and move on. especially in finance. So I look at everything on a macro level. If you understand the macro, you could predict kind of the micro. And this wasn't the case in VC before, but a lot of VCs now come from traditional finance, from investment banking and all these things in. The second order effects of that, unfortunately, I think investment banking is a great training ground for people.

I know a lot of people in Silicon Valley disagree, but I think it's actually more intense than most tech cultures, probably more than 99%. But the incentives there, the people that make it to second, third year, there's a very zero-sum nature to it. And it does not breed relationship or long-term-oriented people. And that's very positive for people that are relationship and oriented that make it through. Because I think when people talk about long-term greedy and being long-term thinking in venture capital, in pretty much any asset class, the bar for that is actually very low. The short-term greedy-greedness is so dominant that if you could think two to three years in terms of a relationship, you're going to be top desal.

It's almost the opposite of these founder attributes. The bar is so extremely low. And paradoxically, something that I've found, and people will of course try to game this. But the more long-term greedy you act, the closer, the faster you close business. Now venture capital has become a career for so many people. The biggest issue in VC today in May, 2006,

is that if you have a portfolio and you want those founders to raise capital from another VC, How can you make sure that that other individual will be in the role in their seat for two more years to separate them for the next round? It's one of the hardest problems today. So many people are treating their VC career day-to-day. Which deals can I do in order to move to another firm, start my own to very few people. I want to be where they are because they have the long-term thinking attributes that you mentioned, and they also understand the power of relationships for like a decade plus.

They're doing the corporate ladder. Corporate ladder. It's like, I'm in Seattle, I'm on Microsoft. How can I become an executive vice president? I need to do a couple of things in between Amazon, back to Microsoft, then Amazon, then back to Microsoft. It's goodhart's law, which is at some point the metric becomes the driver. There's no long-term view. It's just, well, what could I measure?

Well, I'm associate VP. How do I become VP? clearly that's the next step. That's the next step in the level. Therefore, I'm going to optimize on this metric because that's the only thing that I could think of. Yeah, and that's easier to see, right? Because it's almost in front of you.

It's linear. You can grab it. It's linear. How did the founders of GC? How did that help them build the firm? So what does it mean to be a relationship-oriented in the context of VC? And what are the second-order effects of that?

It gets started in Boston. They had a very high trust in this whole team because all of them were friends since they were like in high school and they had started several companies together. One of the second order effects was that they turned out to be amazing at fundraising. And sure, when the times are good, everyone is amazing at fundraising. But when the times are rough, like in the financial crisis, that's when certain VC firms managed to elevate and separate from the rest.

And G.C. was one of them. And do you think that was a fundraising skill or is that a relationship building skill? Relationship building skill. Yeah. I find it's very difficult to gain very large checks. Not that I've tried and just observing, I think the best bluff is no bluff. The best way to show that you'll have a good relationship with someone is to treat them well through different time periods. There's no shortcut. There's no shortcut. That's why you need to understand where they're coming from, how they think, and what really motivates them. Sometimes, you know, we as human beings, we say one thing, but we do something else, right? So you need to really understand what motivates that person. You have to first understand yourself. Yeah, self-awareness is one of the hardest things to muster, yeah. And investing to an extent is a journey to self-awareness. I love this whole practice of looking at how I behave and then questioning why I behave that way and then starting to bridge the gap between what I think drives me and what actually drives me.

That's right. So I had the privilege of meeting Charlie Munger several times. and Tralemonger's Warren Buffett's long time business partner who unfortunately passed away recently so one of the piece of advice he had given me

when we're discussing about managing your calendar and managing your time and I explained to him I'm in the business of meeting so many people in hopes that I can find a freak is like you're out of your mind

that's not going to work it's about the 10 big decisions that you can make in your life so try to ask yourself the following question would be 80-year-old self, would your 80-year-old self be happy that you put that person in your calendar before you actually do that with anyone? So taking a 50-year perspective? Correct.

Because when you're older, you don't have the benefit of having a lot of time. And you also don't have a lot of energy. Similar to that, the best framework I got from a previous two-time guest, Alex Hermosey. He's a big on YouTube and I think one of the most underrated minds. in private equity and finance in general. And he uses this thought experiment that it's etched in my brain, which every day I wake up and I say, what is the one thing that I could do today

that'll make everything else completely irrelevant? What is that next thing? Obviously, that doesn't mean you don't, that doesn't mean that you skip all your calls, but just constantly re-asking, is this the one thing? And you get to some really interesting takeaway. So I actually had just sitting where you're sitting ahead, James Montgomery, also close friends with Charles

He had breakfast with him for 10 years every weekend. And he started this Montgomery Summit and Montgomery Summit. And through this question of what is the one thing that we could do, that's 10x, me and my business partner, Curtis, we decided we're going to do a conference. One day we woke up and we realized so many of our friends were doing conferences, whether it's Ron Descarti from IConnections or Jamie or Max Greenstein from GP Stakes or even our friend Brent that was doing a tax elephant. summit and then you basically execute on that one thing. But it goes back to this whole career ladder and incremental thinking. Sometimes it's very non-obvious. What is that one big thing that's going to take you the next level?

Agreed. And that's why I think there are some pre-leading indicators to that. So what if you start asking yourself every day? What did I learn today? Or what if every morning that you get up, you write down the two things you need to do. And you actually do them. These are the small things that if you actually accomplish every day, oh my God, it's inevitable that you will become successful.

I have a Google sheet. It's very tech sophisticated where I write the most important things every day. Excellent. The other thing that I've learned that's very counterintuitive is that working in the business distracts you from working on the business. Is that another way? Small thinking competes for the same brain space as large thinking. So what does that mean?

How do you actually operationalize that? Because I started reflecting, why do I always get the best ideas on the weekend? Is it because I'm going biking? Is it because I'm outside? And I realize it's because I don't have the day-to-day tasks that are basically taking all my compute. So now I try to recreate that during the week. I go to the sauna and I try to completely wipe my brain free of busy work. And lo and behold, I started getting ideas during the week as well.

Great practice. Have you thought about starting weighting yourself? Rating or? Yeah, it's just like writing down. So for example, you know, if one of the key things you care about tracking is big idea, thinking versus ordinary way of doing business every day, you can rate yourself at the end of the day. Did I do that or not? I think we actually do the opposite. So we celebrate shitty first versions.

That's one of our cultural norms because the hit rate is so low, but the upside is so big. Just to give you an example, and this is a dumb example, but it is telling we do five episodes a week. We do five LinkedIn posts about the episode. I had an idea to embed the YouTube directly in the episode to basically help with the algorithm and the YouTube. We did that. It was a long shot. You're not supposed to do that.

There's all these algorithm reasons. We just said, hey, screw it. We'll try it for one episode. That's been a huge success. And this is a success that compounds every single episode. If I held myself to the standard of did it work or not, or if I held myself to this like 50% of time, I should be right. There's no way I would do anything like that.

Look, many of the good ideas that turned out to be brilliant start in the beginning as a toy, something stupid, something controversial. So I have that as part of my thesis for investing in consumer. So yes, like, it's like what I like to do is like every day to rate myself for the key dimensions of what I want to do. Because that's how I, at the minimum, hold myself accountable if I'm making progress or not. My partner, Michael, is even more extreme.

He's like, today, I made a decision. I wrote something. I exercised. He has like four dimensions. Every day he's tracking. You're training your L-LM without the backwards-looking advice. That's right. If you could go back 15 years ago when you had just started at General Catalyst,

what is one piece of advice, timeless advice you give yourself that would have either accelerated your career or helped you avoid cost of mistakes? Called email your way to success. It's the one piece of advice I would give. give. Any examples? Whoever you look up to at any given moment in time, reach out to. Like I reached out to Elon Musk

when I was a Stanford student. I called emailed pretty much all of the most awesome founders that I've ever invested in in my early years, like the founders of Discord, the founders of Snapchat. This is something that anyone on the planet can do.

Especially in the world of business, if you live and work at a place like New York city. For San Francisco, do you have no excuse? Speaking of cold emails, I think I cold emailed you about eight years ago, so it's been great to build a relationship with you. Congrats on the spin-out and looking forward to doing this many times more. Thank you so much, David. I appreciate you.