00:43:01 · Eric Newcomer, Aydin Senkut
[00:43:01] S1: the air read on the bubble moment? Or how much do you feel like this is a... We used to have to talk about .com, but 2021 was such a crazy period. Now I think we just look back at 2021. Does 2026 feel like 2021 to you? [00:43:17] S0: I spent like not even a second thinking about bubbles. Like all I care about is the underlying business value. Like a great example is we've invested Supabase. It was right after the COVID bubble, valuations crashed. For three years nothing happened to that company. And people are like, you guys are idiots. You pay too high of a price. What's going to happen to that company? And I think what happens is if you basically let the market affect your decisions, you're never going to have the bravery to find the right things. Underlying, Supabase had insane growth. They grew revenues 1000x since we invested. What really mattered to me is that the underlying business performance was growing 1000x. And more importantly, we had a thesis that that was going to follow hyper demand for a backend platform that takes advantage of like crypto needed backend and all the AI apps needed backend. And people look around and there was no like friendly backend and Supabase became that. [00:44:17] S1: It's become key to a lot of these like vibe coded
00:44:19 · Aydin Senkut
[00:44:19] S0: So where I'm going with this is you can now look at it and say like just make a generalist comment and say, Oh my God, there's a bubble. Like what does that even mean? Like the only thing that matters is we have a job and that is, are you picking the best companies as in not the best companies like whether there is a bubble or not, you just look at the underlying performance and all that's changed with the bubble is that you have performance. And I can tell you that's worth 1x the revenue or 10x the revenue or 100x the revenue. The multiple can change but the underlying value of the company doesn't change. And the way that I think about it is if you can find companies where the underlying value grows a 1000x, whether the market moves like 20% or 30%, we're to do okay. You know what I mean? Even if the market takes a 50% hit, which I don't want for anyone, our job is to say, You know what? There something in our book that has grown so much that even with that hit, at some point we're going to be able to monetize it. And even with the biggest setbacks and crashes in the market and bubble bursting, guess what happened a couple years later? The market comes back roaring even stronger. You know what I mean? So like we're not just going to say, Oh my God, it's a bubble. We're like slowing down. We're to stop. And that's by the way when people lose the biggest opportunities. Because in this business you cannot take pauses and you cannot stop. You cannot look at the market and say, Oh my God, this is just crazy. Our job is to find the very best companies even in that environment.
00:45:44 · Eric Newcomer, Aydin Senkut
[00:45:44] S1: How do you price with that philosophy? It's sort of like, what do I think sort of other investors are going to pay you? What tends to be your valuation philosophy? [00:45:53] S0: I don't really think as much as what the other investors are going to pay is that I basically think about what will be the terminal value of the company. More than the investors themselves, the question that we ask is how can this company be so important that it is an independent company? And today that lens is like you have to be at a billion to 10,000,000,000 revenues. And by the way, you can't wait eight to ten years to get there. You've got to get there in three to five years. But the other thing is if you find the right zip codes, like let me give you an example. If you find anything in like the overall like AI infrastructure and chip industry, like you have multiple trillion dollar companies. And we have this like interesting like theorem that any company will easily spend up to 1% to 2% of their market cap to acquire a company. The question is for a $5,000,000,000,000 company, that's $100,000,000,000 For a $5,000,000,000 company, that's like $100,000,000 So if you're in the right zip code and even when things don't go right, but you build something so critical, there is going to be an acquire for a very large amount.
00:45:53 · Aydin Senkut, Eric Newcomer
[00:45:53] S0: I don't really think as much as what the other investors are going to pay is that I basically think about what will be the terminal value of the company. More than the investors themselves, the question that we ask is how can this company be so important that it is an independent company? And today that lens is like you have to be at a billion to 10,000,000,000 revenues. And by the way, you can't wait eight to ten years to get there. You've got to get there in three to five years. But the other thing is if you find the right zip codes, like let me give you an example. If you find anything in like the overall like AI infrastructure and chip industry, like you have multiple trillion dollar companies. And we have this like interesting like theorem that any company will easily spend up to 1% to 2% of their market cap to acquire a company. The question is for a $5,000,000,000,000 company, that's $100,000,000,000 For a $5,000,000,000 company, that's like $100,000,000 So if you're in the right zip code and even when things don't go right, but you build something so critical, there is going to be an acquire for a very large amount. [00:46:56] S1: Well, that's been a theme in venture capital recently has been these acquisitions or deals where it's like poolside, hugging face companies where people didn't even necessarily think they were going to go the distance. And they've had these amazing acquisitions. So the acquisitions is a sort of defense of some of these companies.
00:46:56 · Eric Newcomer, Aydin Senkut
[00:46:56] S1: Well, that's been a theme in venture capital recently has been these acquisitions or deals where it's like poolside, hugging face companies where people didn't even necessarily think they were going to go the distance. And they've had these amazing acquisitions. So the acquisitions is a sort of defense of some of these companies. [00:47:14] S0: And I think this is a really good eye opener because we talk about business traction and you can argue like, hey, these companies maybe didn't have a significant of a business traction, but we were in poolside. But what they have done is they built a critical asset, strategic asset. It's like we're in New York. There are certain like areas of New York like even if you wanted office or home like you just can't get it. You know what I mean? Like something that is very rare strategic asset or you become a gatekeeper like Shopify was a gatekeeper in commerce, Adyen was a gatekeeper in payments, Supabase is the gatekeeper for infrastructure for all the AI apps. So if you have a strategic role and you become the home of a very important community, right? Like that was Hugging Face and for Poolside They took their model, open sourced it and have like some other really great assets and they found great talent. Even that has value. So even if the business performance has not ensued yet, there is still great value in the company. And I'm glad that it is being monetized. [00:48:11] S1: You said earlier in the conversation that a lot of your investments have this sort of democratization flavor. [00:48:18] S0: Yes.
00:48:18 · Aydin Senkut, Eric Newcomer
[00:48:18] S0: Yes. [00:48:18] S1: I'm curious what you're seeing now. I mean, there's this vibe coding moment. Mean, I'm asking partially self interested, oh, where's the creator economy going? I think there was a sub thread in some of our emerging companies where they were like creator adjacent. I don't know how bullish you were or weren't on sort of the creator economy. What's your read on where that stands and where do you see sort of like democratization of entrepreneurs