This Week in Startups - VC experts on why Physical AI funding is heating up | E2333

Starting point is 00:00:00 Physical AI companies now have raised almost 50 billion in venture funding. Wait for it in the first half of 2026, up 80% from 2025. Six months of this year outraised 2022, 2022, 2023, and 2024, combined. Jensen very famously predicted that every industrial company will become a robotics company. Ten years ago, the smartest engineer I met, they wanted to work on ads. Today, that engineer, she wants to build rocket engines in Moses Lake Washington. They just told us, don't do hardware.

Starting point is 00:00:32 They'll run out of money. There's no margin. The Chinese will just copy it. 450 deals and $45 billion in physical AI in the first half, 26. Back in 23, it was not even five. This week in startups is brought to you by Odu, the all-in-one business platform. Your first app is free. Get started today at ODO.com slash twist.

Starting point is 00:00:55 Lightfield, name one person who's ever enjoyed updating a CRM. Exactly. Lightfield's AI agent does it for you. It even prospects and books your meetings, used by thousands of startups. Free at lightfield.app. Sentry. Your team should be focused on shipping features, not chasing down bugs. New users can get $240 in free credits when they go to Sentry.

Starting point is 00:01:13 Dot i.O. slash twist and use the code twist. All right, everybody. Welcome back to this week in startups. It's our VC roundtable. We call it this week in VC. I'm getting very creative with the names around here. We've got this week in Startups in Year 17 this week in Venture Capital, this week in AI.

Starting point is 00:01:28 New offerings. trying to tighten those up with round tables, with great guests, who are actually doing those jobs. Something happened in media. I started my career in zines and magazines, and then I did weblogs, Inc. And then I did podcasting. And along that journey, it was 100% journalists. Then in blogging, it became like half journalists were blogging and half actually domain expertise. And now, in this latest third era of media, there's no dig to journalists. They don't want to hear from journalists. They want to hear from people in the field actually doing the job, and they want to hear for them directly. So, hey, that's where we are today, and we are super lucky to have two great

Starting point is 00:02:09 practitioners of venture capital. Page Dardy is back on the program. She's the founding partner of Behind Genius Ventures, BGV, started her fund at 22 years old. I think she's 26 now. She's getting very old. You are Gen Z. You are a Gen Z investor. You're still in your first one or you're on your second, right? We're currently investing out of our third fund. Third fund. Look at you. By the way, making it to fourth fund means like that's when it gets real. You know why? Yeah, three, four more years. It's going to be real. You know why it gets very real? Why? You have a track record. Oh, boy. Now you've got to explain. the first three funds. This one did great. This one was during peak Zerp. And this new one is very promising.

Starting point is 00:03:01 And here's our latest offering, but you've got a lot of track record. You're in year six or seven of investing? What were you in? Five, yeah. Year five. Wow. So moving along nicely. Any particular investments that the audience might know or that you would want to share with them that are particularly doing well? Yeah, I would say Knox Metals is one of the companies. in our portfolio that's growing the fastest. They are a next day metal servicing platform. The founder is Zane, Hanksberger. It's great Twitter follow. Knox metals. Yes. Knox metals. Spell that for me? Oh, there it is. Yeah, that's it. That's it. Knox metals, NOX metals, metal at the speed of software. So explain to us how that works. I don't have my

Starting point is 00:03:48 aluminum block on the desk I usually do. So basically, Knox is an intermediary between, between the steel mills and then downstream manufacturers in aerospace, defense, and other manufacturing companies. And it's a $200 billion market. And there's less than 40 software engineers currently employed in the industry. So they are modernizing this incredible sector. So, yeah, if I need a brick of some super strong aluminum, I can go grab it. and have a brick and put it on my desk.

Starting point is 00:04:26 Yes, you can. Incredible. So this is like real world. This is Adams. And it's not interesting. Adams now taking over for bits in our industry. Also with us today, Caitlin Holloway. She is a founding partner at 776.

Starting point is 00:04:44 Now, this is interesting. I have a friend Alexis O'Hanian, who's come on this show, no less than six or seven times. His fund is also called 776. Well, fancy that. Alexis and I happen to be partners there. There it is. We started this firm six years ago together, but this is our 12th year working together. This is our third rodeo.

Starting point is 00:05:04 I love it. I love it. And 776 stands for something very specific. Maybe you could share with that with the audience. Of course. So 776 BCE is actually the year of the very first Olympics. And Alexis, and when we were trying to think, think of how we would name the firm. Naming a firm is as hard as naming a child. You belabor it

Starting point is 00:05:28 literally, figuratively. And then it happens. And then suddenly it just always has been. And it's not a big deal. But the short version of the story is Alexis's oldest daughter's name is Olympia. And the first Olympics were held in Olympia, Greece. And so it's a nod to his family without being two on the nose in the event that he had a second child. And he did. And he did. Yes. And his new late stage growth Fund will be inspired by the second daughter. We both girl dads. We both spoke as something recently. Where was it?

Starting point is 00:05:59 Oh, PayPal. PayPal had their big annual conference, and I got to interview Alexis, just really great human being, a girl dad, and inspired by the Greeks. I'm not saying inspired by this Greek, but inspired by the Greeks, I like it. I can get behind it. And so interesting, notable investments from the firm, 776 that you'd like to share or that people might know or you're particularly excited about? Sure. So we are generalists by trade and by practice.

Starting point is 00:06:30 And so you'll see everything in our portfolio ranging from things like Beast Industries. So Mr. Beast companies, including Feastables. That was a check out of Fund One. Fund One also housed Stoke Space for usable rockets and Angel City, the NWSL's very first expansion team out in L.A. So that was kind of the early, earlier vintages. And then if you fast forward to today, you know, I think we're going pretty hard at several of those things still. So you talk about atoms over bits. That happens to be my area of interest and expertise these days, all things deep tech.

Starting point is 00:07:08 We recently had a very lovely markup in a company called StarCloud, Orbital Data Centers. So I was very, very lucky to come in and co-lead that seed in. in the earlier days. And then they just got a beautiful new round, markup at $2.3 billion, which... Yes, on the docket. Yes. Yeah.

Starting point is 00:07:31 So we've got StarClawn. We've got a great number of companies that are really doing things, taking things offline. Like I said, I really care deeply about deep tech and space tech. My joke is that now everyone's rushing to space tech. But the reason I'm qualified is because I worked at Pixar once upon a time on the film, for many, many years.

Starting point is 00:07:52 That would make you overqualified. That's so cool. Wally. Just talking about how there was a, I guess, Claude or Anthropic was, there was this rumor they were talking about them being the last company. And I believe the premise of Wally was there was like a final company that was a

Starting point is 00:08:13 Buy and large, baby. Buy a large, which was like, supposed to be like a send up, I guess, to Walmart and overconsumption. What a great movie that was. Man, I got to watch that again. And, hey, before we get started here, always a good idea for me to turn on my plot.

Starting point is 00:08:29 See this? This little pin I got here, I wear this. And then I record when I'm doing stuff. And then it feeds into my AI. I get a nice summary. I can get it at the end of the day and get it, you know, after a meeting. A nice little signal here, a little light telling people that I am recording. I have it on my watch.

Starting point is 00:08:45 Or I can put it here on my lapel. And if you basically talk for a living, conversations, interviews, meetings, calls, or you're just taking notes, hey, to-do list, remind me of this, remind me of that. I have an idea for a guest on the podcast. I got an idea for a topic. I can just talk. And then they go for a walk on the ranch. Boom, I take my plod with me. Go to plod.

Starting point is 00:09:07 A-I-S-T-T-T-E-I-S-T-T-T-E-I-S-T-T-E-S-T-T-E. And use the code twist for 10% off, thanks to Plodd for supporting independent media. like this week in startups and this week in venture capital. All right, let's get to our first story. First story, Pentagon has rolled out its own chat GPT and grok for the military. This is interesting. Yesterday, Department of War, I prefer when we call it Defense Department of War. It's a little too aggressive for me.

Starting point is 00:09:35 We should be seeking out more, but okay. Finished an eight-month rollout of a special version of GROC and chat GPT designed for military personnel. New tools include chat GPT, MIL, which handles paperwork, logistics, and policy work, rock for government, which handles supply chain analysis, neither vendor trains models on Pentagon or DOW, Department of War, data. Claude is missing entirely from the platform. You remember there was a big beef between Anthropic and D'Neil Michaels and the Department of War because they wouldn't reduce their rules against using,

Starting point is 00:10:15 Claude's technology to do certain things around war. So Anthropic is left out of the party. But Page, we're starting to see the military industrial complex, defense tech, and AI come together in a major way. Your thoughts on the space, especially from an investment category. Here we are. The Pentagon is talking about deploying AI for their service members. and they're being quite vocal about it and they're engaged deeply with the AI industry here in America.

Starting point is 00:10:50 It's the worst nightmare of every founder. You've built a product. Everything's working great. Then real users start flooding in and suddenly it all breaks. What a disaster. You need to get it back up and running and you've got to do that fast. You're looking like an amateur. That's why you need a partner like Century.

Starting point is 00:11:06 Applications can break in many different ways. But Century sees everything. You'll get all the relevant details like stack traces, commits, releases, and even the developers who push that problem code in the first place. With Sentry, you're not going to be jumping around between different tools, trying to figure out what happened. And Sear, Century's AI debugging agent, uses all this data and context to identify the root cause of the problem

Starting point is 00:11:28 and suggest a fix. It can even take a look at your code before it ships and warn you if any problems are likely. Try Sear and Sentry for free. If you're a This Week in Startups listener at sentry.com. dot i.o slash twist use the code twist for $240 in century credits make sure you use that code make sure you use that URL century dot ios slash twist so they know your uncle jkow sent you yeah absolutely this hasn't been an area of our deep investment but i will say i spent three years at north of brumman

Starting point is 00:12:02 when i was in college and i do think one of the one of the opportunities is deploying this technology within a wall because there are certain constraints that you need to, yeah, basically take into consideration when deploying civilian tools within the defense and prime areas, I'd say. You got to definitely, Caitlin, keep this sovereign, contained, and be careful with it. what are your thoughts on just broadly deep tech and AI Adams and this new military approach, hey, we're going to be AI first, we're going to be drone first, we're going to lean into this technology because we spent the last 20 or 30 years with the technology industry,

Starting point is 00:12:55 essentially not engaged, not engaged at all with the military. Totally. I mean, I remember back when I was a young angel investor trying to earn my stripes and I cut my teeth in this in this wild world adventure. And, you know, it was, it was a known fact. It was like, if you were selling into the government, like, run, this is not an early stage, you know, bet that you should be making. And so it used to be all about the time of the contract, right? Like selling enterprise software to the government, for example, was like just absolutely like a death trap. And so we were told, you know, don't touch it with a 10 foot pole. And so I think what's really changed for the better is that now it's not about getting the contract,

Starting point is 00:13:40 right? It's, we have new challenges with that. I think now you have to deliver against that contract when you're a 30-person company instead of, you know, an agency who is used to working with, you know, 100-plus person vendor. So, yeah, I think that the bottleneck used to be winning the contract, but now it's really just surviving one, which is interesting. And so as these companies have signed these contracts, within the federal government, I think they're very optimistic about delivering against them.

Starting point is 00:14:09 But I think that the challenge is they kind of surprise themselves by getting in. And now they're like, okay, whoa, this is a lot of capital now that's coming in. And oftentimes it's either non-delutive or revenue. And so they're trying to sort out very quickly what their seat is. And then also, like, is it going to last, right? And so I think that's the next challenge that a lot of these founders and these portfolio companies really have to struggle through here is can they last and will these contracts be renewed? Is this revenue we can count on? Yeah.

Starting point is 00:14:39 And the interesting thing about this approach is they're being very vocal about it. And they are incorporating multiple members. People may not remember, but at this portal, which is for the 3 million folks who work in the military, that's what this portal is for. They already had Gemini. They had some sort of a deal with Gemini. Now they're adding two more, ChatGBTGPT and GROC for government. ChatGPT is for administration,

Starting point is 00:15:06 document management, logistics, policy work on unclassified data, chats, files, projects, custom GPs, et cetera. GROC for government via Star Shield is from, obviously, GROC and SpaceX AI, FasterOps analysis, supply chain, and acquisition work,

Starting point is 00:15:26 quote-unquote, playbooks, and adaptive reasoning models. Obviously, that might be for maybe some more forward-looking. And then all of this technology is being incorporated into weapons. And that's where it's going to get super interesting, I think. We could have much less collateral damage. And you could also have a page a lot of other issues when you trust the computer to do certain things, yeah? Yeah, absolutely. Period. Period. Yes. Period. Period. Period. I like how you're defending about. Yes, J-Cal. Be careful. I think that's really where this is going to get interesting. I was talking to

Starting point is 00:16:03 the head of Boston robotics when I was in Paris for this conference. It was a robotics conference. And she said she was the interim CEO. Under no circumstances, should we trust any robotics out of China, should not be allowed in the U.S. It's an important national security issue. And then I kind of press her. I was like, do you think the Chinese are weaponizing robots? And Caitlin, she said to me, Yes, of course. And then I said, but you're not weaponizing robots. You said, of course not. And I said, wait a second.

Starting point is 00:16:34 This is incongruous to me. Our biggest adversary is putting guns literally onto that dog-style robot, you know, the four-legged robots. They're really putting guns onto it. It's pretty obvious that these are, and obviously drones are robots, and they're being sent in with payloads, sometimes human control, but I think often AI or increasingly AI. The U.S. should be thinking about this possibility. They must be doing some basic research on creating autonomous soldiers.

Starting point is 00:17:09 Yeah, Caitlin? I would find it very hard to imagine that they are not. Yeah. It's going to be a very interesting moment in time when instead of a war being fought with the drones, fixed wing or quadcopters, I think the next war we're going to just see a hundred robots show up on a beach somewhere to try to secure some area. This is going to be,

Starting point is 00:17:31 yeah, different, I'll just say, super different, yeah? I think there have been a lot of movies about this. And I would say 99.9% of them don't end well for humanity at large. So there's the techno-optimist perspective, which is, I have to believe and I want to trust that we have very smart, people that are, you know, not just thoughtful about the products that they're building and they have the capacity to build it, right? You can build, if you can do it, you should, but should you? And so I think that the conversation around like, just because you can, do you really take that into your own consideration? And so, like, where does morality play into this? Where does the thoughtfulness and empathy and compassion come in? What are, you know, I think that there's probably

Starting point is 00:18:21 a much bigger conversation to be had around, you know, does humanity, strike in accords around this. You know, we have the Artemis Accords for Space where we're talking about, you know, we need to start thinking about humanity as one versus these individual, you know, dots on a map. And there are no borders when it comes to space. And if we really sincerely believe we're going to become interstellar beings, we have to start thinking about this from perspective of survival as a collective. And there's a really, really, really big gap between that logic and that line of thinking and that philosophy and what's actually happening today on the ground in real life. And so, you know, our back flipping, you know, robot dogs shooting laser beams and

Starting point is 00:19:02 fireballs, like the in-between, we just have to learn the lesson the hard way. I hope not. Hey, everybody. I'm here with Keith Paris. He is the founder of Lightfield. They are an AI native CRM. And it builds and it updates itself in real time based on whatever's in your email, your calendar, your slack, your meeting notes, you know, all the most important stuff. That keeps getting lost. Great to be here. Keith, let me ask you one question about Lightfield. I have a list of customers, but I also want to know based on those customers, hey, am I doing a good job? Am I not doing a good job? And hey, if somebody churned or they might churn, how can I not lose them? Because, you know,

Starting point is 00:19:38 the best customer that you can get next is not losing one of your existing customers. Tell me about saves. Yeah. So we've built an elaborate skill and automation playbook into Lightfields using some folks we have hired from gong and snowflake and uh you know even sales force and uh you can use any of those playbooks to do an account health check account health score go look at uh their product usage their customer tickets the way they respond to emails the way that they spoke to you in your last call and it'll try to help you triangulate hey do i need to save this and if i need to save this what do i do all right everybody go check out lifefell that app it's perfect for you if you hate

Starting point is 00:20:21 your CRM system. And I know you do. Everybody hates their CRM system, right, Keith? I haven't met anyone that hasn't. Yeah, exactly. You know, the UN is actually working on this. It's called laws, lethal autonomous weapon systems. So there are going to be broad treaties around this. And I guess we're going to try to get people to some consensus around, yeah, just maybe we can all agree to not create killer robots. I mean, it's a really interesting moral question. And one of the things, just do a little pause for the cause here as we shift, when we're doing research for our venture capital firm and for the show, we use harmonic. Here's harmonic. And producer Jacob asked it, hey, and Harmonic's the database of every deal ever done and all these venture deals.

Starting point is 00:21:11 What's going on with this military Pentagon rollout? Gives a nice summary of it, tells you all the companies involved in it, how much they've read. And gives you an analysis, hey, here's the foundation model. model providers, and you can get links to every single one of these companies, a really rich, detailed profile. And we ask for examples of who's getting into defense, and it gives us all these breakout companies, series A, series B, et cetera, and we can then book meetings with them. And you can take all of this data, match it with your calendar phone book, and match it

Starting point is 00:21:45 with your LinkedIn, and figure out how you know people at these various companies. you too should take a look at harmonic, harmonic great product that we use here to do deep research both on our investment side and also with the show. The EU just decided that chat GPT is legally a search engine on Monday. The EU formally designated chat GPT as a search engine. This is part of the Digital Services Act,

Starting point is 00:22:15 which most people, I think, are not aware of, chat GPT is officially a VLOSE, a very large online search engine. This is a designation they give to Google, Bing, and it requires you be audited and that you are giving access to your data to the government in the EU so they can audit it. If you don't pass annual audits, publish risk assessments, and allow regulators to access your data, you can get fines. The fines are a little more than a speeding ticket.

Starting point is 00:22:50 If you don't do the audit, you can have up to 6% of your global revenue fined. That's a big number. That would be, gosh, like billions of dollars for Open AI and Anthropic. What are your thoughts on the EU regulations in the face of AI? They are going to be a much tougher filter, yeah, Caitlin? Yeah, I think so. You know, it's funny because, There's definitely a lot of talk about Europe right now.

Starting point is 00:23:18 And there's, I don't know if you've landed on that part of TikTok or Instagram reels yet, where the meme of VCs, USVC is just hating on Europe like super hard and European founders in particular because of all of this regulation. Yeah. And they often do that, by the way, when they're at their residences in Tuscany or in San Ramea in the South of France. The VCs are quite vocal when they're on vacation in the South of France. Oh, the irony. in all of it. But I think, you know, from my perspective as a seed investor, this doesn't,

Starting point is 00:23:50 this doesn't really impact our portfolio and our founders just yet. It's definitely something to be watched. And I do. I watch it very carefully. But I think for, you know, a seed company, the, the, this designation for chat GPT is almost zero because nobody at 15 people big is getting designated anything, right? And so like I said, I watched the precedent for sure. I think, you know, The EU is trying to figure out how it feels about a lot of things. But so is the rest of the world. And I think America in particular is also trying to figure out how it feels about a lot of these things. Right.

Starting point is 00:24:24 And so, you know, I think watching what the EU does because they're typically out far ahead of the pack in terms of regulation. And I don't mean that positively or negatively. It's just a fact. But I think the definitions like this really travel. And then they evolve from whoever, you know, through the first spear in the stand. And so I think, you know, you know, You know, the part for me right now that does reach my founders really isn't the law or the regulation, but it will show up in a few years in like a questionnaire, a compliance questionnaire around like an enterprise sales cycle or something like that.

Starting point is 00:24:54 And so, again, it's not this exactly right now thing for my particular portfolio, but I'll take a contrarian take on the EU in general, or actually Europe as buy it like a larger opportunity. Like I said, I think GPs love hating on Europe right now. But I think if you can really squint and see past that, like, upset about rules for half a second. And I should let you know, like, I was an HR lady. I was a senior exec running people and culture teams for a long time. So, like, I actually look at rules and regulation and probably through a much different lens than most. But I think that it's a real opportunity. And I don't want to give away a secret sauce here.

Starting point is 00:25:34 But, like, I really think it's an opportunity because what's happening in Europe is really incredible. I think Switzerland in particular, like Zurich is producing some of the best physics and quantum work that the world and humanity has ever seen. And I think it's just super dramatically undercapitalized because of these memes, right, because of all this narrative that we've created around regulation. We're so scared of rules that I think we're really missing a lot of upside and opportunity. And so, you know, I know, I know, I know, I really think that, you know, half this conversation doesn't apply to them. But I really do think that, you know, if I had $100, I would much rather back a brilliant quant team in Zurich at the same, you know, at like a normal rational price than like the 40th agent rapper, you know, Rippin here in Selma.

Starting point is 00:26:19 Yeah. And Reddit and Roblox also got added to some of this regulation page. Less people be super cynical about this. Some of the stuff is common sense regulations that also parallel what's happening in America. So if regulation in Europe, chance to dunk, to Caitlin, your point, but harm to minors, fundamental rights like privacy and free expression, the electoral process, and making sure that that's safe, illegal content being disseminated. Obviously, sometimes people share things they're not supposed to that are very harmful.

Starting point is 00:26:59 I won't mention those specific things because I don't want this video to get dinged by YouTube, but what are your thoughts on startups in Europe? Do you get many pitching you? Do you look to the country as a place to find founders? Whereas the typical scenario, when you do meet with a European founder, that they've moved to the U.S. because they want to move a little bit faster with a little less regulation and a lot more capital. Yeah, it's a great question. In terms of where we invest, we mainly focus on the United States and Canada, but we have backed a few entrepreneurs who have come over from Europe to build businesses. I think an organization that's doing an amazing job of bringing folks over from the EU is entrepreneur first. They opened up a huge hub in

Starting point is 00:27:46 San Francisco and the talent of the entrepreneurs that has been coming out of there has been really strong and exciting to see. I think to go back to your point on the regulation in the EU, some of the things that they're regulating, like you said, are common sense. I think that it will be it will present an opportunity for startups who are willing to go through that level of compliance and oversight to capture market share is what we've seen in one of our companies specifically company called intermezzo this was actually one of the opportunities that they saw within AI because it is software is so heavily regulated in the EU they're like okay let's the phrase they use is like eat the frog like let's do the hardest thing first

Starting point is 00:28:33 And if we can get our AI engine to work in this really complicated regulatory environment, then it'll be like amazing when we transition it over to a less heavily regulated space. So I do think there is an opportunity for companies who are willing to eat the frog like that. You do create some roadblocks and some expense. If you have to hire 10 lawyers and spend $2 million managing all this regulation, then the upstarts that are trying to compete there that only raise 10 million, now 20% of their capital has to go to, obviously, some lawyers, et cetera. I do think they have one thing right, which is they designate this kind of oversight to things that are very big, so that they don't make it oppressive for small ones. So it is incredibly funny to make fun of the name like, it's a very large search engine.

Starting point is 00:29:36 Wow, very creative. Yes. You know, they could have named it like at scale online services or something. That would be a little less easy to mock. But I kind of like it. It's like on the nose. You know, you're like, yeah, that makes sense. It's not like sheathed in some words where you're like, what does that mean?

Starting point is 00:29:51 And you get down to the bottom of it. And you're like, oh, a very large online search engine. In the AGI future, maybe you'll just be able to ask your person. personal agent, any question, and get immediate perfect answers. But today you still need simple time-saving tools to send invoices, run your website, and keep track of all the data you need to understand your business. That's why here at Twist, we recommend O-D-O-D-O-O-O, the all-in-one management software that's already being used by 16 million users across more than 170,000 companies. O-D-D-U is bringing everything you need into one platform. That's a lot of, you

Starting point is 00:30:29 means your CRM sales accounting, manufacturing, website, inventory, and point of sale all right where you need them. And these tools are all in constant communication with one another. So no more logging every change across three different apps and spreadsheets. Make a sale. An invoice gets created while your inventory gets the same update. So easy. So simple.

Starting point is 00:30:50 So if you're still cobbling together at your back office across five different apps or more, get started today at odoo.com slash twist and your first. app is free. That's ODO.com slash twist. One of our guests is pretty excited about this next new story. StarCloud has raised $250 million at a $2.3 billion dollar valuation. For the crazy, insane vision of AI data centers, StarCloud puts GPUs on satellites, runs them on solar power, and sends the signal back down to Earth. Looks like a, the round was led by somebody called Manhattan West, unaware of that firm, but NVIDIA and Cisco are both coming

Starting point is 00:31:33 in as investors. Star Cloud put the first H-100 chip into orbit last year. And Nvidia is now using Star Cloud flight data to design its first chip built specifically for space. It's more than doubles.

Starting point is 00:31:48 Star Cloud's valuation from five months ago, Caitlin, this is your baby. Quite nice to get a markup of 2X in five months for living in interesting times. But how do you think about when you first invested, what was the ballpark valuation? What was the round? Yeah. So first credit to Morgan Bellar, who was at NFX at the time, who really got in very early. So StarClab was a YC company.

Starting point is 00:32:20 And truth be told, when I met Philip, the founder, it was not under a traditional like pitch setting. He and I were accidentally seated next to one another dinner. Both of us were like wildly and inappropriately overdressed and were also probably very socially disinterested or incapable. Maybe is the better word. And so I kind of looked at them as they were passing around appetizers and I was like, oh man, I have social anxiety disorder and I really don't want to be here. And he was like, yeah, same. So I started talking about everything, literally everything from life to his brother getting married that following weekend and some of the challenges there to extraterrestrial life and Carl Sagan and philosophy. And so we talked all night long and kind of by the time

Starting point is 00:33:09 dessert was delivered, I looked at him and I said, now what do you do again? And he was like, oh, it's this, you know, wild idea that we can have, you know, off planet data centers, orbital data centers. And I was like, data centers in space, interesting. And he goes, what do you do again? And I was like, I'm a space tech investor. He was like, oh my God, I should have given you a much better pitch. And the thing I love so much about StarCloud is not just the obvious success that they're having right now and the lovely markup, which is always great. I really, like, I truly fell in love with Philip and the whole StarCloud team. His co-founders are also phenomenal.

Starting point is 00:33:47 But what I was in love with was there was an incredible audacity to what it was they were doing and a fearlessness that came with that audacity. but having that dinner with Philip and then we proceeded to spend the weekend together at this event. Oh, just tell us the event already. Was this the lobby? Was this Ted? Where were you? It's okay, you can say. We were, it was actually Founders Forum out in the Cotswalt.

Starting point is 00:34:16 So we were out in like the countryside of. Yes, I know it well. I've been invited for 15 years and just haven't been able to make it. Yeah. So it's a pretty well-loved event. Yeah. It was. And I honestly, it was my first time attending. It was Phillips' first time attending, and both of us knew nobody. And there wasn't really, you know, set programming around like this is the activities. We both just were invited as speakers. And so as speakers, we were sitting next to one another. And it, it developed in such a level. Like 500 people or something. It's supposed to be somewhat, you know, intimate. Five hundred speakers in the, in the, what is it? Like in the late spring or summer? I can remember. I think that they have a few now throughout the world. But that primary one in Europe is usually in the summer kind of just before. all of the other summer conferences. And so shout-out to them.

Starting point is 00:35:00 I will forever credit that. So wait, is this going to be your best investment ever? And you just happen to randomly run into the person at a conference. Is that what you're saying? Well, I hope this is the low watermark, Jason. I really hope this starts. Well, I mean, you're up 10x. Give us an idea of where you're at right.

Starting point is 00:35:16 You have 10x right now? Yeah. So we got in at a buck 50. Okay. And so it's now at 2.3. And they're doing really well. And I will tell you, like, this was my very, very first non, like, highly non-consensus bet, because I really was betting on the people.

Starting point is 00:35:35 I was betting on the founders aggressively. And I really had to go to bat, even internally, to talk about, you know, suddenly I had to become a thermal engineer and try to understand how space dissipates heat and the fact that it doesn't. And, like, how, why it's better. What was Alexis's reaction? He's a large, I believe he's the largest LP in the fund. So that's his daughter's money. Exactly. And that's how he describes it every day.

Starting point is 00:36:00 Yes. So, okay. Yeah. We're going to put my kids money one more time, Caitlin, in space data centers because there's not enough room on Earth. And this is two or three years ago, I'm assuming, or two years ago. Yeah. How did you convince him?

Starting point is 00:36:15 What was his initial reaction? Was he just like, are you crazy to put data centers in space when that's likely, very expensive? Take us inside. the firm when it's non-consensus. Another way to say, people don't agree, and it's a crazy outlier idea. Tell us what that's like.

Starting point is 00:36:35 Luckily for me, Alexis is always a very good sparring partner. And in his career, he had to make several non-consensus bets within his own organizations. I think a good example of that is Coinbase. And that was long before there was a crypto thesis and it was a primary driver of some pretty, significant returns at that prior firm. And so luckily, he knows the feeling. And we actually have a term internally that we use called skin rippie, which is really gross. But like you want to rip your

Starting point is 00:37:08 skin off. You are so, like you could not be more passionate about this. You want to literally rip your skin off and then run around in a muscular skeletal suit apparently. And so there's a visual for us, Paige. There's an visual. I'm investing in Uber. It's now. I can't. Like you know. It's now a horror film. Correct. Correct. Now a slasher film. You want to go full Hannibal Lecter on this investment.

Starting point is 00:37:33 I get it, Katie. You're passionate about it, like a serial killer. Exactly. Deeply, deeply obsessed. Right. And so because of that, you know, we use the term iron sharpens iron all the time here. And, you know, having the conversation when I came, you know, it was that night. I put it in Slack and I was like, guys, I just, I have seen the future.

Starting point is 00:37:52 I have been invited buying the curtain. Philip and the team are going to do something phenomenal. And I really, like I said, he really made me work for it because that's how you get better. That's how you get smarter. That's how you get sharper. So I was able to make a good enough case. I visited their offices up in Seattle where we have a few other companies like Stoke space and even touring the facility, which was post-check writing. I was like, who like, thank goodness, because I really had to go all in, right? And after after being able to convince the court that it was the right decision to make, I did not expect to see the public and kind of big, big names in the space kind of do this really 180 on it.

Starting point is 00:38:36 You know, I mean, at the time of investment, there were people, there were very, very smart people that had actually created websites to like take it down, like to say like StarCloud is the dumbest thing, you know, Orbal of data centers are the dumbest thing ever known. Yeah. so stupid. And then literally within six months of the wire, it was like Elon and Bezos and Altman and everyone came out and it was like, this is it. This is how we're going to solve this. And so I didn't expect to get that feeling of, okay, so I wasn't totally crazy. So fast, usually it takes a longer time, especially when you're making a non-consensus bet like that.

Starting point is 00:39:10 But I feel very grateful to be a part of it. Yeah. And thank you for taking us inside the curtain there. I think it's like really interesting to hear how partnerships, get these non-consensus bets over the line. And Page, you know, sometimes there are data points that lead to opportunities. And one of the data points is, hey, the cost of putting a kilogram in space has gotten unbelievably cheap compared to historical costs. You know, here we're looking at, you know, almost 10K back in, let's say, 2014 to put a kilogram in space. And now, you know, it's come down this year, down to 4K. And, you know,

Starting point is 00:39:55 projection is in 2030 and then 2040 going down to $1,500 and maybe even $273. This is obviously because of space X. Oh, I was amazed by how large the market actually was when you dug into the details. So I think that was a big lesson is when there are questions. around like, what is the opportunity if this company is wildly successful in the next 10 or 20 years and focused on that rather than what other folks may be saying about the opportunity? Other folks who are not talking to the founder and who are not doing the primary research and are not having the blade sharpening blade research. Caitlin, have you ever looked at a trend and tried to find a startup based on a trend, i.e., hey, hey, hey, GP, everybody's going to have GPS in their pocket. What does this enable?

Starting point is 00:40:51 Or kilograms to space going down? What does that enable? Have you done that? Or can you give us an example of doing that? Yeah. No, this is actually, that's one of my favorite ways to sharpen my own thinking on something, is if you can develop a thesis, especially as a generalist, I think that we have a huge opportunity to really, you know, the world is our playground, right?

Starting point is 00:41:11 And so to be able to develop a thesis independently based on things that you read and thought and feel or just generally want to see in the world, then you can reverse engineer that back into, hey, you know, page, you said it, Twitter is still a very, or X, excuse me, is a very, very fertile place for a lot of folks building, you know, without political commentary. Like, it is a really great place to source deals and have dialogue. But what we've done in the past and something that I've done, there's a few feces that I've worked backwards from. One is infrastructure for the inevitable. And so if I believe, for example, launch cost is solved, if I believe, for example, that, you know, there's going to be this entirely new race within the stars and for humanity. Like, I can say, okay, great.

Starting point is 00:42:01 Or AI, for example, if we believe that AI is inevitable. How does the world work? Well, I know that I don't want to be downstream of a lab, for example. I know for a fact I don't want to be downstream of a lab. I want to be investing where the labs are reliant on me, right? I need to be their supplier for something. And so I think a lot about supply chain. I think a lot about being upstream so that there's reliance, not just from a revenue

Starting point is 00:42:27 standpoint, but also a learning standpoint, because that is how you get your best data is talking to customers. So there is this infrastructure for the inevitable where I've been able to reverse engineer into companies like H-Gen who are solving, you know, heavy industry. It's on-site hydrogen production for all heavy industry. They're building down in Southern California and just have a phenomenal opportunity to take out natural gas in a way that I think is just absolutely unheard of. And Paige, we should connect on Knox and H-Gen and if there's any amazing synergies there. But that's a good example of saying, like, oh, I do believe that industry and, you know, this whole trend around the reindustrialization of America and American dynamism is important.

Starting point is 00:43:08 And so what are some of the flaws in bottlenecks within our existing systems? I've been thinking about this specifically with unmetered tokens. I don't know if either of you have experienced unmetered tokens in your life, but somebody gave me like an API key to, they gave me an API key to a BitTensor subnet that had put like GLM-51 from Z.A.I. and I was like, okay, I'm not being metered. Great. Instead of doing this daily, this Kron job to do research on something,

Starting point is 00:43:45 I was like, give it to me every hour. And it starts giving it to me every hour. And then I'm out in Hawaii on my vacation with the family. And I'm like getting these like incredible nuggets of wisdom. And then I was like, okay, and every four hours, I want you to look at your last four and then, you know, drops to me and tell me what you could have done. better and then rewrite your skill every day to be better at finding this type of information. And I was like, oh, my lord, when you have unmetered, then this becomes like a free human. Like, I'm getting a free human that doesn't sleep that I can put on a task until I tell them to

Starting point is 00:44:24 stop doing the task. Whoa. And that is going to be possible, I believe, when everybody has a $20,000 desktop. a $10,000 to $20,000 desktop. I don't know if you saw the Perplexity Computer announcement page, but they now with Perplexity Computer are going to automatically load on your Apple Silicon a, and I'm going to predict right here,

Starting point is 00:44:48 perplexity is getting bought. The first thing the new CEO of Apple's going to do is by Perplexity. Because Perplexity now allows you to load, it allows you to load page, a open source model in their harness, and when you do a job, it'll go to the local model first, and if it gets you the response that thinks is good enough, fine,

Starting point is 00:45:12 and then it will go to the cloud and do through your open router, another cheap open source one, and then fall back to a, finally fall back to maybe a frontier model. That concept of everybody buying a 10 to 20K desktop to me page seems the future if you could become unmetered. So thoughts on either working backwards to a thesis. You heard a couple of different ways to do that. Working backwards from a thesis, mine is unmetered tokens. Do you have one of those that you've done recently? Or just your thoughts on my idea of Apple buying perplexity and having their own search engine

Starting point is 00:45:53 and having their own harness that they could put into iPhones and Mac studios and MacBooks with 120 gigs of RAM. I mean, that sounds pretty incredible. We should call up the new CEO of Apple and let him know. I guess one of the theses we developed in the early part of 2024 was around multimodal AI. So I had gone to a conference and I'd seen one of my LPs who helped build the wearables business at Qualcomm, basically discussing the incredible opportunity in application layer AI and specifically in multimodal AI, which if you're not familiar,

Starting point is 00:46:30 is when you, instead of having text input to text output with an AI model, you might have videos, machine level data, all of these like different complex inputs and outputs. And so we started thinking about that in 2024. And I would say my specialty has really become applied AI, especially multimodal. And actually that piece helped, I would say like help sharpen my thinking when we encountered incredible companies. So one example of this is a company called Miniva building. to your point on the hardness is like I believe edge AI is really the future especially if there's any

Starting point is 00:47:06 like sensitive data compute constraints is having those local models run on the edge on very specific tasks and so that's basically what maniva does on the factory floor in terms of quality assurance safety especially in high volume factories and so when I had written that piece the founder ray as we were going through diligence read a few of the pieces I had written about applied AI and was just like very impressed by my vision and let me write a 500K check, which was the largest investment I ever made. And they ended up raising, yeah, they ended up raising a series A from USVP less than a year later and have just continued to expand dramatically within factories, which has been very exciting.

Starting point is 00:47:52 So continuing to pursue opportunities in that thesis. Yeah. And let's take a pause here and talk about another issue that, forks off of StarCloud. Caitlin, it's about to become a fund returner. If it's at 15x now, typically 20 to 30x, there's usually 20, 30 bets in a fund. I'm assuming yours is probably more like 30. You know, you're one turn away from this returning the fund, and that means, you know, when you're at 15 to 50x, you've got to start thinking about the reasonable thing to do for your LPs. maybe Alexis is super long, is to trim that position in a hot market, in a breakout company, putting StarCloud on the side here for a second, so you're not tipping your cards that you're

Starting point is 00:48:40 selling your shares in it because that's right with, it would be rife with like, oh, my God, you don't believe in the founder kind of thing. We're also an RIA. So, like, there's a lot. Yeah, of course. So just broadly speaking, what's the philosophy at 776 for when do you pair positions? And do you tell founders ahead of time, hey, this is our position now as a series A fund? Right. It's a good question. And it's actually a really topical one for us because we're only six years old.

Starting point is 00:49:11 And so we've raised, you know, a significant amount of capital. I think we're at 1.3 billion AUM. We're on, you know, we're investing out of our fourth fund and a bevy of SPVs. And so we're getting to the point, to your point of maturity, right? Where we're starting to see some of these, these companies do really well. You know, we have one company out of Fund One that was acquired by X, and so goes XAI, so goes SpaceX, right? And so having that conversation has been really important to us and having it with our LPAC and our LP community has been really important as well. Yeah, you mentioned earlier, Jason, that Alexis is our largest LP.

Starting point is 00:49:49 And so he obviously has his own thoughts and feelings about this. And there's a deep, deep responsibility and a fiduciary duty to. making those decisions. And so right now, because we're young, we're doing it case by case. And so, you know, whether that's what happens when the space X lockup, you know, occurs, to, you know, even secondaries, which has suddenly become a thesis. Every, you know, GP has to consider. If we're, if IPOs are getting pushed out to year 12, 14, 20, or never in the case of Shrive, it screams, like, well, then secondary has to be a thing. Our approach has been we tell folks, as an early stage, like, pre-seed fund, we have an accelerator.

Starting point is 00:50:35 We're kind of like in the Ycombin airspace. We're investing, we're the first money in. We have an obligation to pair our position at $500 million, at $1 billion, at $2 billion, just, you know, along the way. And we're pari-parseu, obviously. So, you know, just up front, you should expect us if you're going to be selling or another investor selling, we will be doing that alongside you, has absolutely nothing to do with how we feel about it. If it was me just doing seed investing, I probably would run it forever. And I still have a very large position in Robin Hood, Uber, New Bank, DoorDash.

Starting point is 00:51:12 I still own those shares from when they were private companies in the seed round. I still have those shares. Same shares, haven't sold. So if it was me and my shares, I've never sold to Robin Hood shares, an example. great but I have LPs and I literally had to have this like hard discussion with the founder you know like you don't believe in us anymore I'm like no I just have LPs and you know I have to stay in business and if I just have markups that are paper page as I talked to you early in the show like Fund 4 which is what we're wrapping up now and I'm doing Fund 5 next year when you get to

Starting point is 00:51:49 Fun 4 you have to have DPI it's just there's no obvious. right. Caitlin, you're in the same position, I think. You have to start distributing capital. That's it. Paige, how do you think about it now as you're in year six? Well, we're in year five. So I'd say we're a couple years away from those discussions. I do see them forthcoming. We've been pretty proactive talking with our LPAC about liquidity opportunities. We actually did a great episode with Megan Reynolds from Altimida and Jason last year. And I learned a ton. We wrote like a whole guy. on secondaries because it was very interesting to see it rise from this like swept under the rug

Starting point is 00:52:30 taboo topic to now generating, I think it was like the majority of exits. Majority of exits. Yeah, we're coming from secondaries. Yeah. So it's definitely something that we're actively thinking about. And as Caitlin mentioned, like on a case by case basis. Yeah, it's definitely the talk of the town right now is, hmm. Caitlin, final question on this incredible investment of yours.

Starting point is 00:52:58 And I talked to Philip about it on this week in AI, which he came on, and his great guest. You have a pretty significant competitor. Probably the one competitor, no entrepreneur ever wants to go up against. No, I'm not saying Travis, but that's one you don't want to go up against. Elon Musk. So how do you look at the investment? and when your LP say, wait, is this the same business as the one Elon's been talking about now? And our way of getting to space is with the same guy we're competing against.

Starting point is 00:53:32 So we have to pay him to get to space. And then he's going to be meeting us up there with his data centers. How do you think about having that level of competitor and being partners with him to get to space? This is a challenging thing. Yeah. You know, it's funny. People ask this a lot. And they ask it of several of our space tech companies.

Starting point is 00:53:51 including Stoke. But I really think, again, you have to, the conviction that I have around what is next for humanity and more importantly, how going off planet can actually help us retain and maintain life on Earth in a sustainable way where humanity can truly thrive is like I fundamentally believe that nobody has to catch SpaceX for another company to win.

Starting point is 00:54:18 So right now, the entire American space economy, runs on one company's launch manifest, right? Like, that is a known fact, and that's what you're asking about. And I think that that's, you know, you can look at it from one perspective, which is like, it's the single point of failure for StarCloud for Stoke, but it's also the single point of failure for the Pentagon, right? It's a single point of failure for everybody. And so, you know, when I think about Stoke, like, they're building the first rocket where both stages actually come back successfully and fly again. And the reality is, is our country, humanity needs more than one airline, right? And doing it differently and having things that make you

Starting point is 00:54:58 different and the things that you are spectacularly good at, that helps. But it's also, it's we're to the point, again, thinking about humanity as one and as a whole, it's okay to have more. And in fact, it's better to have more. And so when I look across the entire space and specifically launch sector, I want everyone to win, regardless of where my money is. And I really sincerely think that, you know, this is a case of rising tide's bullial ships. And in the meantime, you see a ton of collaboration, Elon and Philip, you know, at StarCloud. Like they, they sincerely are incredible partners. You know, the mini lasers that are going up on, on the satellites for StarCloud, they were hand delivered, right? And named very cutely. I was there for the unboxing of

Starting point is 00:55:46 one of the mini lasers named Cheddar. Like there is a real true camaraderie, just like building a startup. I've used space tech as like the world's startup. And so when you're building a really hard thing under incredible stress with insane potential, I think across this industry, what you're seeing is that camaraderie

Starting point is 00:56:07 and that linking of arms between people because they have such clarity of long-term vision that, frankly, the rest of the world can't see. And so, yes, if, you know, starship is a cargo ship and then Stokes, Nova is the delivery van, right? But like, and frankly, I think most of the space economy needs a delivery van. And so I just think, I really think that if we can think about it, not as there's a winner and a loser, but it's really, you know, ultimately humanity will win because of this collaboration.

Starting point is 00:56:36 I think that that's the better approach to take, especially as a early stage investor thinking. And to be clear, Elon, I think is acutely aware of. this issue that he doesn't have yet a competing airline. He's just like there's United Airlines. And if you'd like to get to space, you could also take United Airlines. Yes. We also could recommend United. But that will not always be that way. There will be other options for people and it may take a little bit of time. And he might have the best price to get to space. But he has never denied any customer going to space, specifically not a competitor. So, you know, if you look at other people, putting data and Starlink competitors in space.

Starting point is 00:57:19 My understanding is many of them have used, you know, SpaceX's rockets to get to space. And then the same thing with StarCloud. StarCloud put their first H-100 up with SpaceX and they have multiple launches in 2027. I see here in my notes. And so I don't think it's an issue. I think you're exactly right that this will be something that will just make its way through. All right, physical AI. Let's talk about it. Physical AI companies now have raised almost 50 billion in venture funding. Wait for it in the first half of 2026, up 80% from 2025. Six months of this year outraised 2022, 2022, 2023, and 2024, and 2024, combined. And aerospace, defense are the top two categories, obviously. And this is the, the top two categories, obviously. And this is, the, not cheap, and we're all early stage. So I guess the question I have for the panel here,

Starting point is 00:58:22 and maybe we'll start with you, Paige, and then go to Caitlin, how does one get these companies early and then get the conviction that your tiny investment and tiny ownership stake is going to actually result in some meaningful ownership in the future? Because I think these companies have a lot of dilution, yes, Paige? Because they have to raise such enormous amounts of money. Obviously, we're in a hot market. Valuations are pretty hot, but still, dilution is dilution. So how do you think about that issue of, hey, I'm going to be the seed, pre-seed investor in this, or I'm going to squeak into a competitive Series A and get a 250K check-in? But what is that worth after they massively raise, you know, billions of dollars,

Starting point is 00:59:07 potentially? Yeah. It's a good question. So I would say the approach to we've taken in the space is that, we focus mainly on verticalized applications of physical AI. And I think there you see less of the issues around massive dilution. You see companies getting to revenue faster, to commercialization faster. So I'd say that's mainly where we focused our investing efforts at Behind Genius. And I think there are incredible opportunities and more general purpose physical AI. And that's not to say that we wouldn't invest in one of those companies in the future. But I would say the verticalized opportunity is very, very interesting. Do you require pro rata in order to page participate in deals? Or will you participate in a deal without pro rata? If you do have pro rata, but you have a small fund in an early

Starting point is 01:00:00 stage fund, what do you do with that prorata? Have you figured out how to leverage it, maybe with partnerships, maybe with SPVs? Like we do it on. Yeah. Yeah. So we mainly focused on making initial We'll make 25 to 30 investments per vintage, roughly the same size at pre-seed and seed. And we'll very rarely double down in companies. We've done it in a handful of companies where we wanted to increase our ownership. And you do that from the fund. You'll double down from the same fund that we're in. Obviously, much higher valuation, much less ownership.

Starting point is 01:00:34 But you think you have a winner. I would say usually it's like pre-seed to seed. We have asymmetric information advantage. and the valuation is not so astronomical that that check isn't meaningful. And then from a pirata perspective, Parada is interesting because sometimes it's written into the docs and then sometimes it's earned as an output of building a relationship with the founder. So we've been able to drive 10 million an additional investor capital

Starting point is 01:01:03 from mainly from our LP base directly onto cap tables. So that has been my focus. Do you do that with an SPV and take carry, or have you just done that as like a favor? Like, hey, you should talk to this company, LPA. I mean, I would say it's like very much a win-win for us, for our LPs, for the companies that we back. And I think it's one of the joys of building a collaborative-sized fund where we're not leading rounds. And we can afford to bring some of our favorite people into. Well, and it's the reason why some people do back early-stage funds is to get that information.

Starting point is 01:01:37 But Caitlin, please explain to Paige that she deserves. on those pro rata. Please explain as an elder millennial and as a Gen Xer, we're going to give you a different framing here. Go ahead, Caitlin. First, I want to say that I think that the the appetite for and co-investment has definitely changed and being able to capitalize that in any capacity pages is phenomenal. And so like the fact that you're to your point, it's all about your relationship with the founder. And you know, even if it is written into the docs, your ability to get that pro rata, super pro rata, I mean, demonstrate your access. big time. And so sometimes you get what you get. You don't have a fit. And as someone who's

Starting point is 01:02:16 built something from nothing myself, you do that. And then to Jason's absolutely sublime point, like, please do not undersell yourself. And your partners will understand, especially when they are the right partners. And being able to ask for something, you know, based on market value and what's going on in the ecosystem, you should never undersell yourself just because you think you need to be constantly building. Yes. And so your auntie, Caitlin, and unc Jason, or your big brother and big sister, as the case may be, are saying, let's spin up an FPV here.

Starting point is 01:02:55 You can just take 10% and one percent. Just a little one. Just a little. You can, you know what? The next time it happens page, talk to my team. I'll put you in touch with Kathy and Heidi and John and Jackie. and they'll just show you like exactly how to do it. Easy, peasy, lemon squeezy, and boom.

Starting point is 01:03:13 Just got a little cat. It's a little tasty poo. Just so you're, you know, you're in the game. Like a little sweet tree. It's like, what, I say. It's a little, I mean, I can't wet her beak here. I mean, Paige can't wet her beak. Just to wrap up this one segment.

Starting point is 01:03:27 You guys are great, by the way, together. Let's look at this chart one more time. Just one more time on this chart. this is unbelievable. I mean, we were sitting here 10 years ago, and I passed on Zipline because I was like, Keller, I love you. I love this technology, but you're delivering blood in Africa on a slingshotted fixed wing drone. I don't know if this is a donation or this is an investment.

Starting point is 01:03:55 I don't think I can get my LPs to do this because hardware is so hard. And now, first half of 2026 is like, you know, you. Yeah, hardware is the greatest thing ever. It's a mode. It's fantastic. If anybody can build any app and vibe coded in the weekend, I mean, Caitlin, just looking at that, what does that tell you? We're in a bubble or that entrepreneurs are taking on harder problems, a little bit of both. What's your read on a chart that's so absolutely stunning with 400.

Starting point is 01:04:34 and $150 deals and $45 billion in physical AI in the first half of 26. Back in 23, it was not even five. I'm going to give you a yes and, Jason. Yes, please. Thank you. Improv here. Are you ready? I'm ready. I'll catch the ball. Thank you. We think about this and talk about this a lot at 7762. You know, Jensen very famously predicted, excuse me, that every end company will become a robotics company at some point. And, you know, I think that's very advantageous for Genton to say, but I also think it's a bit prophetic, right? You know, I think, so remember, I, you know, prior to getting into venture, I spent over a decade as a, as an executive leading people teams. And so I actually, when I'm assessing, is this a bubble, is this not? Is

Starting point is 01:05:25 this something we should be investigating? I really do it through the lens of talent and understanding where the best humans on earth want to apply their potential. And so, So when I look through our portfolio, you know, I think 10 years ago, the smartest engineer I met, they wanted to work on ads, right? Not because they wanted to work on ads, but because that's where the money was. And that was, that was what was ad tech. It was ad tech. Hey, I worked at Reddit for a long time.

Starting point is 01:05:52 That was our bread and butter. And, you know, I, but I think today, and this is the difference that I'm feeling, is today, that engineer, she wants to build rocket engines in Moses Lake Washington, right? Why? Because she wants to feel connected to humanity, to a badass mission, to something that is meaningful. And if you can do something that is meaningful and make money, now you've got something really, really interesting. I think, you know, I've lived in San Francisco for nearly 25 years and this idea that, you know, San Francisco is back and everyone's coming and everyone's signing leases again. It's a beautiful thing, you know, from a city perspective. but really the conversations that are happening in this town and in the ecosystem at large are really about like,

Starting point is 01:06:37 how do I do something meaningful in my life and capitalize on this moment in time? And so I think there's this convergence that's occurring in general. And I think, you know, there's the hardware taken, yes, I hear you. I also, you know, at the same time they were saying don't sell into governments. Don't invest in companies that are selling into governments. They also were saying hardware is hard. I mean, those two things. Well, what was pounded into your head, page?

Starting point is 01:07:00 They just told us, don't do hardware. They'll run out of money. There's no margin. The Chinese will just copy it. And then whatever you do, do not sell into education, the government, health care, anything the government touches, you will die on the vine. It's crazy. Listen to your unk and auntie.

Starting point is 01:07:18 That's what my boys. I have Gen Alpha boys. And they call me Auntie when I'm, what I... People start calling me unc. I said, what does that mean? What does that even mean? They're like, okay, boomer. I'm like, I'm Gen X.

Starting point is 01:07:29 My dad's a boomer. What? Unk can actually be a compliment just so you know. I think it is. Like you say, yeah, I think it means like. Wait, when this? Guys, I don't think Unk is. No, it is usually.

Starting point is 01:07:41 It can be. Jen Alpha says it very much can be. So. I know. See, Jen is like, it might be like a love. Like, you know, this is like a, oh, it's so sweet. Is it, is there even a chance that's saying Unk is a compliment page?

Starting point is 01:07:58 She says no. Caitlin? But you know. what, Jason, this is another learning lesson for patients. He did promise I'm not talking to Adieu this is a funny generation. No, no, not all. What I've discovered is Gen Z is actually learning how to not be the youngest generation and you actually don't know what's happening culturally as much as you used to. And it happens. This is why millennials hated Gen Xers. This is why Gen Zs hate millennials. Like, there's this whole thing. And so you are going through the transition.

Starting point is 01:08:25 You are in the chrysalis. You are going to become this butterfly of suddenly being an elder in the room because my boy's gen alpha they will come in every day and tell you that unk is a term of endearment and it's like you are the cool uncle who comes in and you like know what's up but you have zero Fs to give like so umks like back in a possible way so okay yeah it's like you have some there's a big debate going on amongst my producers in the slack room for the live tape wait i would love yeah i'm just going to say right now that uh yeah one one young producer saying never heard Unk to be good. And then another producer's like, hey, man, Unka's like Obi-Wan.

Starting point is 01:09:02 Everybody wants to be Obi-Wan. Yeah. Yeah. There's wisdom. And also like a... Boomer is bad. Blumer is definitely an insult. Yes.

Starting point is 01:09:10 I'm going with Unke's Obi-1. I'll go for Unke's Obi-1. That appeals to this Gen Xer. I'm going to... Okay. Post-a-Pole. One thing. That's super appealing to enterprises is AI sovereignty.

Starting point is 01:09:23 This has become the topic of the summer and Anthropic. has been forced to change their data retention policy because they've been getting major pushback from customers who fear that they are going to feed the last company in the world, as rumors were saying, they were describing themselves internally Anthropic,

Starting point is 01:09:43 acclaimed Dario denies. But if you give your data to Anthropic, the consensus in the entrepreneurial community is that they will do to you what they did to curses. which is launch clawed code, or do what they might have done to Figma, which is launch Clawed design, or do what they did to legal or biotech and launch a competing product. So if you are a customer giving them tens of millions of dollars a year in your token use to build a really great

Starting point is 01:10:17 vertical product, most people in venture and startups believe they will eventually take your data, take the lessons you've learned and use it for reinforcement learning and eventually create the vertical app based on 20 different people giving them information about venture capital or 2,000 people giving them and eventually they'll create a venture capital firm and put us all out of business. Anthropics says now they're reversing course. Data is going to live. There'll be a 30-day retention window and data will sit on customers cloud environment instead of Anthropics. What's your thought here, Caitlin?

Starting point is 01:10:56 Have you watched startups that you've invested in or that you're familiar with, look at the frontier model companies differently today than they did three years ago in terms of, am I training and funding my eventualal demise? Yeah, I mean, I think that that's the question, not just with data, but also with skill and talent, right? people are experiencing this on, I think, every side of their livelihood. And so these are really existential questions and they're really important questions. And I think I'm supposed to say at some point that like we're also investors in Anthropic. And so I need to tread lightly, but I need to

Starting point is 01:11:39 disclose here. But I think I think that the best thing we can do is evolve, right? To learn, evolve, have the right critical conversations. And I, you know, I think about my own, my own experience here, like this laptop that I'm on, you know, every single thing on my machine belongs to somebody else, right? I've got LP commitments, founder cap tables, financials from companies that haven't announced around, boardmen. It's like all of these things that are very, very precious and important, not just to me, but especially to my portfolio companies. And, you know, I pride myself like Paige on building real, authentic and deep relationships with my founders. And they trust me with that information. And they trust that I'm not going to scan it or uploaded or put it into something where somebody else can, can, you know, take them out and,

Starting point is 01:12:25 you know, with a sniper shot. I think that this is an important conversation. I think it's an important evolution. And so, you know, when like a lab tells me that my data sits on their servers for 30 days, you know, that's not really like a procurement question, right? Like, that's, that's me deciding if I can keep my promise and my commitment and maintain my integrity with a founder. And so I think generally, like what's happening is, is, I say this trepidiously is, like, the right shape. I think, I think it's important. important that we continue to have open dialogue and continue to invite people into the room that can share this perspective so that we can get to the best place. But I, you know, I think the better

Starting point is 01:13:01 signal here is that like enterprise buyers really now have enough leverage to sincerely change like a frontier labs policy. I think 18 months ago, that was completely out of the question. So I don't know. I'm still learning about it and I'm still trying to understand how I feel about it is the honest answer. Page your thoughts. I think it's been something I've been thinking about a lot is Paki McCormick had this amazing essay maybe a couple years ago of like everything is technology. And I think if you look across the past five, 10 years, technology has just become integrated in so many more things that are, yeah, like our day-to-day lives. And as technologists, as venture capitalists, we have a responsibility to think about

Starting point is 01:13:42 how to manage that responsibility. and I think that Anthropic taking that customer feedback and adjusting their policy as it relates to that. Yeah, it's amazing. Essay by Packy. Is it a step in the right direction? Really just listen to the customer feedback that's happening. You know, there was a famous blog post from Fred Wilson, Union Square Ventures, formerly Flatiron Ventures. be your own bitch

Starting point is 01:14:15 and not growth as a bitch maybe did he take it down because people didn't like the term bitch maybe I gotta look this up yeah we're gonna find this one because I can't find it right now I'm doing a quick search for it and the point of the be your own bitch

Starting point is 01:14:31 in the social media era the social media companies would look at the data of the API companies and they would open an API so Twitter Facebook Facebook very notably Google they would open up an API, they let you use it. Then they would look, what are the top uses of our API? And they would study those uses. And it could be everything as simple as Facebook connect.

Starting point is 01:14:52 You let people connect to Facebook. Then you add the social graph. And they'd say, wow, this thing is growing very quickly. I wonder if we should make that part of Facebook. And they did. And so at one point, Fred Wilson wrote a blog post on this and he made a very provocative statement, hey, be your own bitch. Don't be there, bitch. Be your own platform, build your own API, get out of it. This is the same parallel, but with higher stakes, because it's not just about the social graph, it's not just about a feature race. It's about the actual intelligence, the actual trade secrets. And I think this is what 11 labs, lovable, Figma are all starting to realize. And actually, I think Lagora, is that the legal one?

Starting point is 01:15:35 Ligora, I believe Ligora announced that they now have their own language model for their kingdom and that they've made small vertical language models for fiefdoms. So Sherman Sterling and Wilson Sincini and Oryk can all have different language models in on-prem, I believe, or on their own cloud. I was going to say we're going back to on-prem. Back to on-prem. And one of our big investments advocates, we'll throw that on the screen, is like literally providing on-prem LLMs, vertical LLMs, and they just raised that incredible valuation.

Starting point is 01:16:09 They went through our accelerator. That's going to be a big hit for us, or is a big hit. A great. Yeah. It's great when something works out in this industry. It's so lovely. It's like, wow, it worked. We incubated something and it's successful.

Starting point is 01:16:24 It's amazing. It's a very weird thing. You know, sometimes I feel like an absolute superhero. I'm like, I can fly. I can touch things in turn to go. I've got the lantern. I'm green lantern. I can do anything.

Starting point is 01:16:36 And then all of a sudden, like, I take the ring. I put the ring on and I'm like, boom, I can fly. And it's like, yeah, your ring's drained. Nothing's working. The last 10 start-ups all imploded. Nothing works. You'll never hit another winner. And then it's like, oh, there's another winner.

Starting point is 01:16:50 It's possible. Thank the Lord. Power law is a beautiful thing. It's a, I mean, it really is like a crazy thing. But I'm very excited about this possibility of people taking the open source stuff and then building their own verticalized language models. And I think 11 labs, lovable, are starting to realize, hey, backing up the Brinks truck and giving tens of millions of dollars, if not hundreds of millions of dollars to Frontier Labs, and then giving

Starting point is 01:17:19 those tokens to our users in a wrapper to provide a service is really dangerous. Like, we're living on the edge here. And any moment they could rug pull us all due respect to people building Frontier labs, but they're going to be under a lot of pressure to make money. And when they get under pressure, this whole, like, I'm going to be courteous and I'm not going to create an 11 lamps competitor. I'm not going to create, you know, a lovable competitor. It's like, that's out the window when your stock is in the, yeah, shitter. I said, it's literally what I mean, when you get taken to the woodshed, maybe that's a little less graphic. Yeah, when you're, when you get taken to the woodshed and your stocks, like on the floor, which could happen, you know, if they, if they don't

Starting point is 01:18:01 have profits. All right, listen, another amazing episode of this week in startup slash our venture capital roundtable, Paige Darnay, Caitlin. Thank you for coming on the program. If founders are watching this thing, I'm going to build the next great company, and I would like to have Paige, Caitlin, and J-Cal lead my seed round, my series A. How do they reach you? How do they pitch you, Paige? I can founders find you. Yeah, you can reach me on my Twitter, which is page Finn with three ends, or at our website, behind genius.com. Behind genius.

Starting point is 01:18:42 There it is. Such a good name. There it is. Thank you. Behind genius. I like it. That kind of, it's like a little bit humble, a little bit of a humble brag, but mostly humble, but a little bit of a humble brag because we're behind the genius is.

Starting point is 01:18:57 So, but it's not us, but it's good. It's a really good name. Thank you. Caitlin also a great name, 776. How can people reach you? Thanks. Yeah. So similar to page, you can find me either directly on the website here.

Starting point is 01:19:11 My email is the letter K at 776.com. You got to spell it out. We're still searching for the domain that I can't yet afford with the numbers. So spell it out, 776.com. Or on Twitter, Caitlin underscore Cruz, which is my middle name, people want to know. And CRUSE is the last there. So yeah, we'd love to hear from you. And Jason, thanks so much for having us on the show.

Starting point is 01:19:39 This was really fun. And advocates changed their name. So I got to give them a proper shout out here. They're now, go. There you go. This is incredible. Look at this. It's like the Chemical Brothers song.

Starting point is 01:19:51 Go one. In one box. You plug it in. There's the Ethernet cable going in, and AI happens. On prem! On prem. On prem. On prem.

Starting point is 01:20:03 You own it. Look at that gunmetal steel. Look at that. Looks like an Apple product. This is a weightless. Maybe J-Cal helps you get past the waitlist. Go.org. Y'all know how to reach me.

Starting point is 01:20:14 We'll see you next time. Bye-bye.

This Week in Startups - VC experts on why Physical AI funding is heating up | E2333

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.