How I Invest with David Weisburd
00:29:03 · David Weisburd, Joseph Coyne
[00:29:03] S0: we do...... Improvement. [00:29:04] S1: Yeah. And so when you when you hear that, you start to think about... And we see this just in practice. Right? It's like the founders that we're backing are being way more cash efficient to get to product maturity in a shorter period of time. And so that's part of the reason why we spend our time at seed. I think the delta, the alpha creation opportunity from seed to a is... That delta is greater than ever right now. And so when we think about risk allocation and investment portfolio decisions, we think in sort of sharp ratios. Right? We're allocators and buyers of risk. And for every unit of risk, we need to pay the appropriate price. As things go from non obvious pre product to post product and obvious, meaning some product market fit, customer references, revenue, during that curve, that curve is happening shorter and faster than it's ever happened. And as a result, you see series a's and series b's being priced where series d's and e's were prior. And so I wouldn't like to play that game as much as I'd like to capture the alpha going from non obvious seed to relatively mature product in a matter of year... Short short number of years. [00:30:09] S0: I don't think I've heard a single intelligent investor take the counter on AI. Disruptive AI has intrinsic value. I've... I haven't found anyone to say, oh, it's all BS. It's all hype. That being said, AI being valuable and all is reported that precede rounds today on average $100,000,000 valuation. How do you underwrite that?
00:30:09 · David Weisburd, Joseph Coyne
[00:30:09] S0: I don't think I've heard a single intelligent investor take the counter on AI. Disruptive AI has intrinsic value. I've... I haven't found anyone to say, oh, it's all BS. It's all hype. That being said, AI being valuable and all is reported that precede rounds today on average $100,000,000 valuation. How do you underwrite that? [00:30:32] S1: I think, again, you're buying risk. You're allocating dollars behind some level of risk. At early stage venture, these businesses are inherently risky. So if that's true, it's very hard for my team to pay that kind of price. Because even though if they're sophisticated, if they have the world's best team, you are still betting on an outcome that is extremely low probability.
00:30:54 · David Weisburd
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00:32:53 · David Weisburd
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00:33:43 · Joseph Coyne
[00:33:43] S1: And the numbers are sort of the numbers. Now those numbers have shifted. Right? Like, the the big outcomes are now tens of billions, not a billion. So there is a world where that that can happen, but it's still very low probability. And so when I think about portfolio construction, those are the nice to haves, not the need to haves in terms of how I underwrite. Like, if we're fortunate enough to get into a company that's a $20.50, $100,000,000,000 company, that's fantastic, obviously. But we are underwriting a more rational, high probability outcome, and that gives us some price discipline at entry. But I think that's why we also play in the intersection of what would be formerly enterprise software and AI core use cases, not in the sort of lab based world that requires billions of investment into the top talent, which has just become more expensive over time. We'd like to be the beneficiaries of that great work that's being done by those model companies without investing and owning that team. Right?
00:34:39 · David Weisburd
[00:34:39] S0: I have this come various conversation with Matt Harris from Capital Ventures, where I know you used to be. And the heuristic he used is in evaluating, for example, Anthropic's valuation, it's reported it's gonna be $2,000,000,000,000 valuation is... One way to think about it is just to take off three zeros. So imagine taking off three zeros from 2,000,000,000,000, you get 2,000,000,000. And imagine taking three zeros from a 100,000,000,000 reported kind of 2026 and and run rate, so a 100,000,000. And a 20 x revenue is not that unreasonable. It's just people get... I think rationally so or at least evolutionarily so, people get so hung up on the sticker shock that they can't imagine there's still being upside at 2,000,000,000,000. But then when you look at the revenue, it starts to make more sense.