The Pomp Podcast - #1280 Peter Berg | Microsoft’s VC on Artificial Intelligence & Bitcoin

Episode Date: December 7, 2023

Peter Berg is a Managing Partner at M12, Microsoft’s venture capital arm. He leads the fund’s vertical SaaS invests & work. Peter is also a two-time founder, and most recently ran strategy & business development for Very Good Security. In this conversation, we talk about corporate venture capital, success stories for M12 & his career, artificial intelligence, recent OpenAI news, and advice for founders & entrepreneurs.  ======================= Auradine, a leader in web infrastructure solutions including blockchain, AI, and privacy, has unveiled the world's first 4nm Bitcoin mining systems, featuring breakthrough EnergyTune™ technology, setting new standards in performance and energy efficiency. The Teraflux™ product line from Auradine offers best-in-class performance, efficiency, and total cost of ownership (TCO), positioning it as the optimal choice for Bitcoin mining needs. With EnergyTune™, a patent-pending technology, Auradine's Teraflux™ systems enable rapid demand response and optimal energy usage, fostering a symbiotic relationship with electrical grids, and contributing to sustainable energy practices. Designed and manufactured in the US, Auradine's Teraflux™ product line not only ensures cutting-edge technology but also mitigates supply chain risks and provides increased supply chain resiliency. Visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠www.auradine.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ for more information the Teraflux bitcoin mining systems. ======================= Cal.com is leading the charge of scheduling platforms in the open-source sphere, offering you the chance to harness the efficiency previously reserved for elite corporations and tech gurus. That's right, Cal.com is transforming sophisticated calendar management into an accessible tool for all via a user-friendly interface. Discover how countless users are optimizing their time in unprecedented ways. Use code “POMP” for $500 off when you set your team up with Cal.com. ======================= Pomp writes a daily letter to over 250,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/

What's up, everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. Peter Berg is a managing partner at M12, Microsoft's venture capital arm. There, he leads the fund's vertical SaaS investments and work. He previously is a two-time founder, and he most recently ran strategy and business

development for Very Good Security. And prior to that role, Peter also spent six years leading Visa Ventures, where he directed a team of investment and portfolio development professionals focused on investments in the fintech ecosystem. In this conversation, we talk about corporate venture capital, what many of the success stories are for M12 and Peter's career, how they're thinking about artificial intelligence, especially with all of the recent open AI news, and what exactly founders and entrepreneurs should be thinking about when approaching a firm like M12 and how to work with corporate venture capital to your advantage. I really enjoyed this conversation with Peter, and I think you guys will find this incredibly valuable. So I'm excited for you all

to listen to my conversation with Peter Berg. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. This episode is brought to you by Auradon. They're a brand new startup led by a number of Silicon Valley legends who just raised $81 million to build the future of internet infrastructure. You're probably wondering what that means, so let me explain. There are numerous new disruptive

technologies that are being adopted simultaneously, from blockchain to artificial intelligence to zero-knowledge technologies. In order to ensure that these technologies thrive in this new world, we need new infrastructure, and that is where Auradine comes in. They just launched their first product line called Teraflux, which is a Bitcoin miner powered by the world's first 4nm silicon chip technology. These air-cooled, single-phase and dual-phase immersion cooling miners have unrivaled speed and efficiency. They have superior uptime, and they leverage a brand new innovation called EnergyTune that allows miners to dynamically adjust the energy consumption and Bitcoin hash rate based on demand response needs of the electrical grids.

Auradine is an ambitious company working on hard problems. I'm really impressed with them, And if you want to check out more, you can go to Auradine.com. That's A-U-R-A-D-I-N-E.com. Go check them out at Auradine.com today. This episode is brought to you by Cal.com. What do I have in common with Chad Hurley from YouTube, Toby from Shopify, and Alexis from 776 and the co-founder of Reddit? We all use Cal.com instead of Calendly, and we are all early investors as well.

Cal.com is leading the charge of scheduling platforms in the open source sphere, offering you the chance to harness the efficiency previously reserved for elite corporations and tech gurus. If you like to have your calendar organized and be able to have an efficient exchange when scheduling, but you love all of the benefits of open source technology, then Cal.com is for you. They are transforming sophisticated calendar management into an accessible tool for all via a user-friendly interface. You can customize it, and you can make your calendar work for you.

Use code POMP for $500 off when you set up your team with Cal.com today. Again, go to Cal.com, C-A-L.com, and use code POMP to get $500 off when you sign up. Cal.com, an open source tool that allows you to take back control of your calendar, be efficient when scheduling, and make sure that no one can steal your time. All right, guys. Bang, bang. I've got Peter here. uh peter you're at m12 microsoft's venture arm open ai absolute chaos controversy uncertainty

for an entire weekend every single person in tech was like buried with their nose in their phone what is going on in your head or m12's uh kind of internal communications when all the chaos is happening like are you guys freaking out or is it cool comment collected the whole time uh you know we we try to keep a cool uh head about these things generally speaking i will say just for the for in the interest of transparency and disclosure mem 12 so we are microsoft's venture arm we did not actually do the direct investment in open ai just for the sake of clarity uh microsoft's the parent company invested in that and so i you know i'm not even privy to the all the details of that arrangement um suffice it to say i think we're happy kind of where it netted

out um you know i mean satya's comments he talked about it publicly we're very encouraged by kind of how things landed and how it was navigated i know it was a little probably a little touch and go who who knows. But I think overall, you know, we have a lot of confidence in OpenAI. We have a great relationship there. And then from the M12 perspective, specifically, like we also have a good relationship with OpenAI. So we actually collaborate with them from time to time. In fact, recently, not that long ago, about 30 of our portfolio companies had like a day on site with OpenAI, walking through their latest technology, you know, some hands-on kind of keyboard engineering, there was co-engineering.

It was a really productive sort of collaboration session. So we do that type of stuff and provide kind of that level of access to the extent we can for our portfolio companies. Kind of the, you know, membership has its privileges, so to speak, with the M12 portfolio. So, you know, big fans of OpenAI generally and hope things continue to go well. Now, as you mentioned, you guys may not have made

the direct investment in OpenAI, but you have made an investment in a plethora other artificial intelligence startups. Talk a little bit in terms of a corporate venture capital firm. How much of the investment decisions is like, I want to make money versus I'm trying to do something that's in the best interest of Microsoft or give them an edge in the market? It's a really good question because I think there are as many flavors of corporate venture capital or CVC as there are probably corporations that do it. And you mentioned the kind of strategic versus financial spectrum. We're actually evaluated on both metrics, which I think makes

sense. Frankly, it aligns incentives in an interesting way. So we're evaluated on financial returns. We have to make money. Our leadership is quite clear about that. And then on the other hand, we're trying to deliver strategic impact. And so that takes a variety of different forms. And we usually, it's whatever makes the most sense with and for a given portfolio company. So one thing I want to be clear about is we don't actually, we deliver signal and kind of insights in both directions, but we're very clear about sharing information. We do not share information without express permission of our startups with Microsoft. So we actually operate what I'll call pseudo-independently.

We are Microsoft's venture arm, but we have our own investment process. We have our own investment committee. We make our own decisions. We're very grateful and thankful and fortunate to have support from our senior leadership has been very supportive of M12. but we do make our own decisions and we don't necessarily cross-pollinate or share any information back with Microsoft. Again, without the express permission of our portfolio companies or the startups we talk to. It's an important distinction because I think not every CVC runs

that way. And so we do, back to the strategic impact question, we try always pre and post investment to look for ways that we can add value to our portfolio companies, right? So it may not surprise you to learn that people take our money in large part because of who our LP is not in spite of. And so they're looking for ways to either partner with Microsoft or get exposure to our partner or customer ecosystem. And so we actually have an entire portfolio development team stacked against this objective. They're like my superpower. The previous gig, I didn't have a team that was dedicated to kind of portfolio success. We do have that at M12. We're very fortunate to have that. And so they look, they help the investing side, which I'm on the investing side

to find ways to accelerate outcomes for our portfolio companies. And those can be product partnerships. Recently, we just announced something with InWorld. We're one of our portfolio companies. They're doing a really deep partnership with Xbox and the gaming side. So that was a long... A lot of effort went into making that real. But Typeface is another one we did recently in the AI space.

So they're a degenerative AI company helping enterprises use AI for their marketing and content generation. And, and so we're working, we're finding interesting ways to work with these companies and then connect them to the right folks, both within Microsoft directly, as well as our broader ecosystem. So both dimensions matter. Yeah, let's talk a couple of success stories, maybe kind of the examples will prove the point. What's like an example of you guys make an investment in a company and you are able to bring them into Microsoft and you're like, man, that wouldn't have happened or that company wouldn't be nearly as successful as it is today without being brought inside of Microsoft. uh yeah i think in world is a great example right so the one we just announced recently but that was an investment that we made we then introduced them to the gaming team um number of conversations uh ensued and a lot of work on both you know both the m12 side as well as the microsoft and xbox teams ultimately what that led to was so in world is uh an ai driven

as a generative ai company they focus on like non-playing characters and games and so think this is like enabling an infinite combination of choose your own adventures within a game right you can every time you interact with a game you can have a new experience because there's ai brains essentially powering these npcs in the games um to uh power essentially creative gameplay like side quests like you know to power dialogue that is contextually relevant and so in world and xbox have this now deeper product partnership that wouldn't have come about had it not been for the m12 investment and for the work that our portfolio development and our investing teams did alongside the xbox teams kind of embed their technology into some of these uh into the

platform so that's one example um i think noble ai is another one we're doing a lot of interesting things in like material science development so microsoft uh quantum azure quantum elements our quantum computing initiative and noble have partnered um they're very uh very complementary technologies uh noble is helping companies like do new chemical formulations instead of running physical experiments which take a lot of time and are costly and you know you can only do a set number of physical experiments in a certain amount of time you can now run ai powered simulations to do you know thousands of these for a fraction of the cost so those are two examples of things where you know kind of better together now those are examples where you guys made an

investment you bring them inside of microsoft there's more value that's accreting uh to uh these startups how many of these startups is the end goal for them or for microsoft is microsoft to acquire the business versus actually the success story ends up being the businesses successful outside of microsoft microsoft's having to be a shareholder and kind of you know get some sort of benefit uh in terms of either partnering or you being a user or whatever but it's not actually to go and acquire those businesses yeah it's a good question we do not um set out in m12 to find companies for acquisition right we're not hunting for acquisition targets we are a dedicated venture fund and we are really trying to do you know true venture investing in the sense we invest

in early stage seed through series b let's call it companies that are doing transformative things in technology and part of that is to bring signal and insight from the mac from generally what's happening in the market back to microsoft not in an individualized fashion because i mentioned the firewall around information but more like where is the market headed what technologies are emerging what should we maybe be paying attention to and we're trying to see kind of see around corners or see into the future right to a certain extent to figure out where the technology landscape is headed and so that's really one of the uh you know information signal is like that's one of the ways we we bring that back on the m12 side and then of course direct investment in companies

right and finding meaningful ways to work with them and we learn things each party learns things through that and so um we don't go out hunting you know that we have a very capable and a corporate team and we have a good relationship with them and they'll send us deals that are you know true venture deals and we'll you know also funnel i guess help folks connect folks within microsoft to the relevant teams whether it's business development or corp dev or whomever as needed now there's another group of people that you seem to be able to help these startups with. So you can bring Microsoft, you can bring capital, but also sometimes you can bring Microsoft's customers or Microsoft's partners. So it's kind of like a step away from the company.

Talk a little bit about how that works. Yeah. So we have a number of, there's a whole range of different resources available. And oftentimes M12 can help act as the front door to Microsoft and the different resources that we have for startups. We work really closely with the Microsoft for startups team, for example, they, you know, have a whole suite of capabilities that they roll out for early stage startups, Azure credits, access to a wide variety of internal resources, including sometimes AI assistance. They actually run our AI co-innovation labs. We have a number of these around the globe, including in San Francisco and a bunch of other places. We just opened the SF1 recently. And those are like hands-on keyboard, like engineering help

to optimize and test new things like real, you know, building with AI. And they also run a program called Pegasus, which is an invite-only co-sell program for really high promise, or I guess, very promising startups or ones that are highly aligned to kind of our own business objectives. And so we will actually provide co-sell assistance where Microsoft sellers can, I guess, go in and co-sell alongside these early stage startups and get them access to our customer and partner ecosystem. So we've done this with and for a number of companies, and it really meaningfully accelerates

their trajectory. It gets them in front of a large number of enterprise and other customers. In some cases, there's also product integrations where it makes sense. And so that can really move the needle for a lot of these companies to be able to co-sell. They can also be on the Microsoft marketplace. So a number of our both M12 portfolio companies and just generalist startups can put in offerings on our marketplace. And those can be then companies, Microsoft customers can then take advantage of those, in some cases, also use that as credits to their cloud commitments. So there are a wide range of ways we can accelerate outcomes on the go to market side. We have a very capable sales team,

and they've been certainly a force multiplier for a lot of startups we were with. Yeah. Now, this isn't the first time that you've done corporate venture capital, you were previously at Visa. And I think if I went around and asked a bunch of people across the industry, like, hey, who's done this well as a corporate venture capital firm? Visa is one of the organizations they'd point to and say, hey, those guys seem to have figured it out. Talk a little bit about lessons you learned at Visa and then things that maybe you were able to bring to M12 and help implement and say, hey, look, these are ways that we can be really successful here. Yeah. As you pointed out, I helped start what is now Visa Ventures. So we had some

great support from the top. I think that's key. We're very fortunate to enjoy that at M12 as well, but we had a CEO at the time at Visa who really leaned in and wanted us to do more with the technology ecosystem. So we were engaging with everyone from Apple and Microsoft and Google all the way down to early stage startups, which was actually the world I had come from prior to joining Visa. Most of my career has actually been spent on the operating side, building companies. And so I helped to stand up Visa Ventures and did a number of investments in early stage companies, everything from Stripe, Chain, Marquetta, a number of other now high flying companies. They were emergent companies at the time. And interestingly, we were actually structured when I was running it very similarly to how M12 is built.

And I think there are probably as many flavors of corporate venture capital as there are corporations that do it. I really feel strongly about not requiring any unnatural acts from the startups that you work with. We don't do that in 12 either. We try to do only things that are organic or additive, mutually beneficial, and then finding ways to genuinely help. I think actually, my opinion, corporate VC can often be maligned. There are many things that have been said about CVC. I won't repeat all of them. But I think actually right now is a great time. And folks like visa and certainly m12 are like ideally positioned to be able to meaningfully add value to the startups you know the macro headwinds are real uh we see this all the time and i think the the

ability you know the the joke in vc is like oh let me know how i can how it can help right well we're actually being helpful like in a quantitative quantifiable way right like we're meaningfully um you know changing outcomes with and for our startups and so that's i think the best world and i think the other thing is startups and enterprises don't always speak the same language If you can find ways to connect the strengths of a startup, the speed, the agility, the creativity with the resources of an incumbent, the distribution, capital, access, and if you can actually find ways to constructively marry the two, I've long believed that magic can happen. We were fortunate to do some of that at Visa, and I think we're doing that at M12 as well. So I feel very strongly about the opportunity. If you really do it well and set it up the right way, magic can happen. What are the downsides or maybe the challenges with having usually one LP, it's a corporation, there's kind of this like impact or signal component along with making money? Or what have you seen there in terms of just things that maybe other venture capital firms don't have to handle that you guys do that maybe either slow things down, make it more difficult or potentially could just change things?

Yeah, it's a good question in that, you know, a lot of people compare the sort of the financial VC like, oh, we don't have to manage any corporate stakeholder. We don't have to, like, you know, ask permission to do a deal, et cetera. Thankfully, at M12, we don't have to ask permission either. We actually have our own investment committee. So, like, things get a lot more streamlined there. And the governance is, you know, set up in a constructive way. Definitely, you know, again, it varies by corporate VC. And so if you're a startup looking to take money, I would say, you know, just understand how whatever corporation you're talking to or whatever CBC you're talking to, how they're structured, what their deal process looks like.

We're very transparent with founders in terms of like how what it looks like on our end, like what are the state, what are the things we need to get through? It's pretty streamlined for the most part, actually, partly because of the way we've set up our governance structure. And, you know, people talk a lot about like, oh, you have to like deal with your corporate LP. Like to me, that's actually a benefit, right? Like this is what we were just talking about it, like having a relationship with internal stakeholders at Microsoft allows us to do a lot more for our companies, right? If we didn't have those relationships, we wouldn't be able to open those doors. And I think the flip side is, you know, financial VCs, I don't, as a CBC, I don't have to raise a new fund every three years, right? And go out to LPs, like a lot of startups don't realize like VCs actually are beholden to their LPs, right?

they're they have bosses so to speak right that they need to they need to manage they have to deliver fund returns they have to manage a whole set of stakeholders which is non-trivial so i don't have to do any of that necessarily but in return what i am doing is engaging my my leadership team uh engaging key stakeholders across microsoft and that all accrues to the benefit of our portfolio at the end of the day um and so you know it's just there's extra work to do on both sides i think it's just the nature of the work and i i feel very good about kind of of the the end product that comes out of the engagement that we have with our with our parent parent lp that makes a ton of sense let's talk about artificial intelligence um there's a lot

going on there's a lot of capital flight uh flying around there's a lot of startups that are getting started where are you guys most excited about or where do you think kind of value is going to accrue and there's really big opportunities for startups and for venture capitals that are funding them yeah so one thing i'll say is m12 actually has been investing in ai well before this latest type cycle i know it's like the hot thing to do these days and certainly we're very focused on ai now again continue or still but we've actually been an ai investor so to speak for a long time and have a pretty strong portfolio um to your point like there's a lot of really interesting stuff happening in in the space we're paying very close attention for everything up and down the

stack right from the the enablement layers the developer tools all the way through the application layer um i'm very focused personally on what is real and like how what is actually driving business value uh at mem 12 we're really only invest in b2b companies we don't really any do any direct-to-consumer plays and so we're focused on b2b primarily software and so the way we see ai i mean certainly it's it's transforming everything i think ai and software inevitably just merge right i mean to say in it in short order it won't make much more sense to say you're an ai investor than it said than it is to say i invest in electricity it's like okay great to what end right like what's the application um that being said there are a lot of like core enablement

technologies that are emerging and we're obviously you know both investing in and paying very close attention to everything that's happening i think the application layer so far what we're seeing is that a lot of the value creation and kind of the differential between like the cost of inference for example and the ability of to capture value at the application layer is there's a pretty big spread there right so you see you know like for example image generation companies right a lot of these folks are making large amounts of money uh even though their inference costs are very very low and so they're able to like capture a lot of that spread and a lot of that value um it'll be interesting to see how long those things stick around and and do they have durability to them

or are they just like early movers that have a lead right now, but that lead might shrink over time or as things become commodified? I'm really looking for enterprise applications. I think what we really want to see, and I think what really needs to happen for AI to have a long lasting, meaningful impact is we need to take this from the bubble of technology centers like Silicon Valley and make sure that Main Street and, you know, the rest of the world really understands and sees the benefit. And so those are the things that I'm looking for is like, how does AI actually move the needle in terms of business impact

or like things that, you know, normal people can understand and see. Now, there's a cohort of people who are scared about AI and all the AI safety stuff. They think we should pause, stop, et cetera. Microsoft doesn't seem to be in that bucket, given the investing, open AI, kind of all that stuff. But then there's another kind of very far extreme of just like accelerate without thinking at all about downsides, etc. How do you balance these two things between like, let's go build and let's go, you know, actually create value, along with people who, you know, seem to have at least genuine concerns about the ramifications of the technology? yeah i understand why people might be apprehensive at the same time i think if you look through the

history of technology there have always been these factions of people that are like oh no like this new technology electricity or whatever is dangerous like yes you can electrocute yourself if you don't use it the right way but it like it's unquestionably that it you know moves the world forward in meaningful ways um microsoft's been very i think vocal about its position on responsible AI, building things responsibly and deploying in a way that is, you know, accounts for, it takes a lot of, you know, things, different things into account. So I won't repeat all the stuff that we've said publicly, but I mean, it's all out there publicly available. And I think we do think about AI as like a great technology. It's going to move the world forward

in meaningful ways. We're already starting to see that. I'm really excited about future waves innovation powered by an ai and what you know what net new experiences that we can't even conceive of yet today um might still come down the pike um but that has to be done in a way that obviously balances that with you know you know you gotta think about bias you have to think about responsible uses of ai um those are meaningful right and like we're as an enterprise company we're very focused on delivering things that our customers and our stakeholders care about right they want ai used in a responsible way that is defensible and understandable by their own businesses right microsoft's been i think had a leadership position in this in terms of indemnifying a lot of our

customers around uses of microsoft technologies that involve ai um so we obviously take a leadership position there um i you know i mean where this goes is anybody get anybody's guess i think it's actually very exciting and so i'm not on the on the doom side of things but i think With every new technology, there are unforeseen implications, and it's just our job to think about those things thoughtfully. Now, there's also maybe a debate between Google, Microsoft, and other large companies. They have tons of data. They have tons of distribution. They have tons of advantages in the market. AI is going to reinforce those advantages, and they're going to capture all of the value versus, hey, Joe Blow and his startup, or some person who's spitting out of

of these big companies can go start a company to try to disrupt and value is going to accrue there what's the balance or how do you all looking at those two things it's really it's a fascinating question to me and i think it's one that continues to evolve one of the things this is the one of the fastest technology adoption curves that i've seen in my investing career in order my career in startups so i'm old enough to have seen a few cycles now um but enough enough data points to know that like this is pretty impressive the speed at which both startups and incumbents are leaning into this i think we're seeing both part both ends of the spectrum really like uh eagerly embrace this new technology i think certainly you know folks with large data sets and uh unique in

particular unique and proprietary data probably stand to gain or be able to do some really interesting things with ai given the importance of data in this technology at the same time You know, I've been investing and or building SaaS for a long time, and I think the same things that have always been true are still true today in that you need something that's differentiated. You need a wedge. You need to deliver a unique value proposition. And I think there will still be opportunity for startups to find wedges, to find points of differentiation that are not being addressed by incumbents, to find new approaches of doing things. And actually, the part I'm even most excited about is net new like AI native experiences that I don't think we've really seen like great, like canonical examples of this yet. But with every platform shift, you have companies that are built that just weren't possible before that platform arrived.

Right. Uber, unquestionably, would not have been possible at the scale and level of success without mobile phones. right and the internet um i mean they were giving out they're literally giving every driver a a cell phone an iphone um to seed the market right and that would never have been possible prior to that and so i think we're going to see similar types of companies be built that are like ai native um that we haven't by definition haven't been invented yet um but to your back to your question i think there are opportunities for both ends right like clearly enterprises are leaning into this, but they want to know what's real. I think startups, there's definitely going to be wedges and plenty of opportunity on the startup side, which is why I'm very excited to invest.

Now, AI has a software component and a hardware component. Hardware seems to be getting more and more attention. Microsoft got a pretty big cloud business, seems to have these, I'll call them free compute in a variety of different ways that is being handed out some of the times it's just handed out to accelerators other types of startups uh sometimes it is being handed out in exchange for capital as an investment from let's say microsoft for the open ai's case how do you all think about the compute resources of microsoft and your ability to leverage that to win deals maybe from an investment standpoint or anything else yeah i mean every gpus is the thing that's everyone's fine, right? Everyone wants more of it. More compute, please. Look, I think this

bottleneck is probably somewhat of a short-term problem for the overall landscape. That's my hunch. I think the level of demand and adoption probably surprised a lot of people going back, I think, about a year ago when ChatGPT was first unleashed to the world. And so I think the hardware manufacturers were catching up there, you know, there were obviously a lot of innovation happening in that, in that space. Micro M 12 is actually invested in a company D matrix, which is really interesting, doing interesting things on the hardware side, improving efficiency. Obviously Microsoft talked,

has talked about its own work in that space. And then on the GPU side, we're actually for M 12 and Microsoft for startups. In particular, we're trying to make access. We're we actually announced access to some GPUs for really high, high potential and promising AI companies to help train workloads. And so we're initially rolling that out for M12 portfolio companies, as well as Y Combinator. The hope is to expand that to a much broader audience and make that available for really high potential AI companies, because we really want to support the market as best we can. And builders who are building

transformative things using AI want to help seed that and accelerate it. How do you think about portfolio construction, and specifically when you have a single LP who has the proverbial unlimited money? How do you guys think about not maybe following in the same footsteps as other very large players in the market who have thrown hundreds of millions or billions of dollars at companies that maybe weren't ready for it? what is kind of the the discipline or like how do you kind of think through okay if we have unlimited money to give to people you know kind of theoretically how much do we actually give to a seed or series a type business i wish uh i wish that we had unlimited money i loved when you knew you were going to say that i'm going to take that back to my cfo and see how well that goes over uh yeah no we definitely do not have unlimited capital uh it would be nice if we did but um

I think this is what I was alluding to at the beginning, right? Like the financial and strategic impact. It's very clear. We are evaluated on financial metrics as well as the strategic piece. And so, you know, we're here to make money at the end of the day. And so we have to be disciplined. And I actually think, you know, not to pat ourselves on the back, but I think we've actually been pretty disciplined in our deployment of capital. um there are a lot of deals getting done there done out there in at some of which are prices

that i don't quite understand uh i i can't quite make the deal math work for in my head um but uh we've been trying to be very disciplined and really invest in companies that we believe in that we think have commercial viability and have an opportunity you know i think there's a lot of money chasing chasing a bunch of deals it's it's a very challenging time uh to be an investor frankly i mean it's not not easy right now uh being a vc and figuring out where to deploy capital intelligently and so i think in some cases you might see a lot of money chasing shiny objects and potentially you know bidding up those prices um for our purposes we are trying to be very responsible um you know we we get measured on this and so it matters a great deal right so i i wish

we had unlimited capital and just like the blank check uh not the case so we're we think about a lot um in terms of also you know the macro like sas multiples in particular right like ai aside um it's just gotten a beating in the in the public markets and i think that's translated to the private markets as well right i mean we're the median right like forward arr multiple uh for sas i think is somewhere around like 6x um which is like where it was like 10 years ago you know we're gone are the free money days so uh including uh including our own fund not that we ever thankfully we ever we never really got wrapped up in that which is actually really nice because that we don't have the hangover from that as a fund but um we've been

pretty disciplined along the way trying to stay that way let's talk bitcoin and cryptocurrencies i know at visa uh you were very integral in a number of kind of crypto initiatives investments uh kind of strategic things um what about microsoft is that an area that you guys are looking at from m12 or uh are you just there's so much opportunity ai stuff right now that that's not really a focus a little bit of both i mean we obviously ai and you know b2b software are like first and foremost for us i mean they're really front and center um we've done a number of investments in the kind of web3 crypto space mostly again we only do really b2b investments and so we focused on primarily on infrastructure uh on the web3 side um space and time actually is

a portfolio company of ours i think you know entry i've long i've had a long-standing thesis personally that the way that bitcoin or cryptocurrency or any of these things really gets to scale and massive adoption is going to be some version of a mashup with tradfi and you know crypto now that may be you know antithetical to some people and like though all you know who are all in on crypto but really if you want mainstream to main street to adopt this it's going to have to be in some you know regulated way or in some way where like there's a there's an integration with tradfi and so i think you know on the infrastructure side space and times i think you're really interested doing some interesting stuff around blockchain and

helping connect uh more traditional databases with like blockchain enabled ones um and then just generally speaking i think you know we look at kind of infrastructure like plays that are moving the ball forward in a meaningful way but again it's really very b2b focused so not really on the consumer or coin end now when you look at um some of these b2b companies i i would say that Uh, there's been a rise of like hard tech, uh, you know, cutting edge innovation, et cetera, but there's still a massive market for just traditional B2B. Hey, I can make the calendar better. I can make Excel better.

I can make, you know, whatever the products are. Um, does it ever play in to the investment decisions when you talk about the strategic component, like Microsoft Excel is pretty popular. There are now companies who want to disrupt Microsoft Excel. Does that increase or decrease the odds that you all may want to invest where it is something that is actually coming after like a Microsoft product itself or a category where you guys are dominant. And so, you know, some people would argue like,

hey, you actually may not want to participate because you hope it doesn't disrupt, you know, the mothership. On the other hand, some people may say, no, it's every great, you know, company wants to disrupt themselves. And so let's go invest. How do you have you guys thought about that so far? Yeah, it's, so I actually love companies

that are like just either deep industry, like have a founder with like deep wonky industry expertise or like doing like, you know, nothing related to AI. I love AI, don't get me wrong, but I also love the more traditional, you know, SAS companies that you were alluding to in the beginning. I think those are some of the more interesting companies still. In fact, I'm talking to one right now in like the oil and gas space, right? And like they, nothing AI related, but it's very interesting in terms of what they're

doing. Like the alternative is, you know, humans moving physical buttons and doing physical things like, and like, there's no software involved, right? So there are industries that haven't even fully realized or even partially realized uh the advantages that software or the cloud can bring and so there's massive upside i mean if you look at like financial services believe it or not like about i think it's like 50 50 ish 55 percent of of financial institutions have even like a cloud presence and like something like less than three percent um are spending more than 25 percent of their it budget on the cloud like think about

that that's in financial services where you think like oh it's all in the cloud already like no no like it's still just tiny uh you know just making inroads still a huge upside potentially um back to your other question around like uh competitive dynamics i think actually the canonical example for me in like sas is like can you own a workflow or create software that displaces excel right excel is massively it's like a swiss army knife on steroids it's amazing um i'm a huge excel junkie uh but if you can replace it with something that's more specialized and like a software application for an industry or a particular use case where you can maybe co-opt or create the workflow,

that's a great indicator for me and where you can actually, and I've seen some of these companies recently and just historically, that's a great sign. On the competitive stuff, we try not to invest in obviously competitive things because back to what we were talking about earlier in the conversation,

we try to find ways to add value, right? And if you're doing something that is obviously competitive to something that we're doing first party, there's probably a limit to what I'm going to be able to do for you. And so, you know, I'm not trying to create, you know, I'm trying to create productive relationships with our startups. And so finding ways to like accelerate their outcomes or add value.

And so I think we look for more complimentary things. And actually you'd be surprised. There are a lot more complimentary opportunities than there are competitive ones. It might look at first blush to be competitive. It's like, oh, you're, you're threatening, whatever. But a lot of times they're really interesting ways to work together. And actually, I actually think Microsoft has done this better than most companies in its history. There are a lot of partners where, you know, we have this coopetition dynamic where they're selling something that is, you know, it looks or maybe even is somewhat competitive to our first party stuff.

But we're still partnering. Right. And we actually find ways to collaborate. So this has been a long standing dynamic within Microsoft. And I think we actually do it better than most companies I've seen. But from the M12 side, you know, we're always looking for ways to like to find the one plus one equals three. to the extent we can. What is the thing that you do on a daily or weekly basis that would surprise people the most, right? Like I think most people understand kind of startup founders and their day-to-day activities, venture capital as well. You do some of that, you talk to founders, you also kind of manage the mothership, right? Like what would surprise people about your daily or

weekly uh kind of habits or a schedule i love your i love this question um you know vc i think in vc you see the deals that get announced you see all the you know the the the stuff that makes the headlines i think we don't see is like the the discipline and the i don't want to call it a grind because i enjoy it but it is a little bit of a you know there's this like the repeatable like consistent like grind to a certain extent terms of like sourcing deals talking to founders like doing diligence like all this the work that goes into uh one deal that gets announced or it gets headlines and you know other vcs have talked about this but we talk to many many more companies than we ultimately invest in and so

that's all like a huge amount of effort that happens below the surface that is not particularly visible um but you know informs our thesis driven investing it informs you know us knowing what good looks like and then ultimately when we find a deal that we really have conviction on and really want to partner with the founder on that that all that then you know is worth it because you you were able to really uh have a meaningful relationship there with the company but i think that's something that would maybe surprise people is like the amount of work that goes in that is just invisible to the outside world uh in terms of the sourcing and constantly evaluating like the the deal funnel right it's actually not dissimilar from from the sales in terms of like top of funnel

and deals that make it through different stages, ultimately, to an investment. Before I let you go, let's talk Twitter slash X. You are like the fourth or fifth person who's come on the podcast that has a first name handle. So you just have at Peter, which means you've been around or you somehow finagled your way into it.

I won't ask which one. I'm just old. I've just been around that long, yeah. All right, that's good. That's better than the other answer. um but one of the things that was fascinating to me is you just tweet out you're like hey if anyone wants to talk to microsoft's venture arm dm me uh i can only imagine what happens after you do that tell us like like is it thousands of dms it's a good problem anthony

yeah i mean yeah but do you find deals from that like yeah absolutely so i look i uh i'm not i have derived so much personal and professional value from twitter slash x let i hope it continues on forever i mean there's a it's going through a rough patch right now i think but like i just love that network and i've actually made really strong like irl you know like in real life connections with people um and yeah i mean like when i when i tweeted that recently i was like yeah it was you know if you're building an ai it might be a good time to talk to us uh it's always a good time to talk to m12 i'll just add uh would love to any anyone my dms are open um rip my dms um but uh so feel free to reach out i mean look i think deals good deals can come from

everywhere um and you know back to your last question of like what what is the part that people don't see is like me responding to dms late at night uh you know looking through pitch decks like all that stuff it's a good problem to have it's a problem i love having uh so feel free to send us your your startups but um yeah no that's i i just loved it i when i saw you do it i was like man what a move right it was right after the open ai and you tweeted you're like yeah now might be a good time and uh and i could see from the comments i knew that people were dming you so i was like oh that guy's dms were gonna be destroyed i love it i'll take it i'll take it i would much rather that than the alternative no one no one caring that i exist

so if i'll give a follow at peter on twitter and send me a dm if you're if you're building an ai amazing uh well now that we know where to find you where can you find more about m12 and kind of understand really what you guys are looking to invest in? Yes. M12.vc is our website. We have a bunch of information there. You can reach out through the website. You can reach out through DM, LinkedIn, whatever your preferred medium. There's a lot of information online about us. We've got a great team as well. So you can read more about the other investors and also our kind of a thesis area. I don't want to say who it is because I don't want to embarrass them, but people have listened to the podcast for a long time will know who I'm talking

about. We had a gentleman come on, he's older, very successful entrepreneur, built a company that you would know. And at the end, I asked him, how can people find you? And before I could like stop him, he not only said his name, his social handles and stuff. He also said his email and his phone number. And so we cut out the phone number after post-production, but the email was like, you sure you want me to leave that? And he's like, yeah, don't worry about it. And then he literally literally was like i should not have given on my email he doesn't understand the power of the pump right yeah no no no it was just he he is somebody who a lot of people want to talk to and he's not like really on the internet so the only way to communicate with him was through this

email well i can give you my pl box but let's not go there all right peter thank you so much for doing this uh if anyone has not checked out m12 highly suggest doing it uh you guys have a great track record and obviously been deploying a lot of capital into uh artificial intelligence many other areas. So I highly suggest they come and check you guys out. And we'll definitely do this again in the future. Love it. Anthony, thank you so much for having me. It's really been a pleasure.