Sam Lessin on Venture Capital & Investing

Essays

From the Podcast

Ah, so you own a luxury venture firm. But the basic point is, like, that is the status symbol is I don't need to be online all the time.

— Sam Lessin, More or Less Ep 169

The thing that I think is just interesting is you look at these businesses, and you're like, generally speaking, these public companies, especially at this scale, there's like two things. You're investing in a core business- That has some properties that you believe in, and then you're buying option value on top, right? Which is there's six things that might happen to make them super valuable. I think the, the core anthropic business, which is can you sell premium tokens to people effectively? Like, can you sell it at a higher price than the open models because, like, what you're doing is so valuable? Like, the... And it- people will sink infinite amounts of money into marginally better tokens. That's the core business. It's been totally true for the last bunch of months. It's flat lining. Are there certain people that will pay infinitely forever for slightly marginally better tokens? Maybe. But, like, that's, like, the weakness of the core business is that whole conversation. And I think things like Muse, which again, can argue are not as advanced as Feeble, but are clearly sufficient for, like, what normal people need, right? Kind of put a dent in that story.

— Sam Lessin, More or Less Ep 169

Love the information. Great publication. Totally right. I just think that's, like, the big thing is, like, these things can keep raising private capital is my sense for now. It's not like they can IPO and then they're done. Like, there are lots of IPOs where, like, I don't... Like, you do, you IPO, you don't, you're not incinerating cash. These things have to think about, "I have to raise money for the IPO, and then be willing to raise tons more money continuously." And the question I think they have to ask and you have to ask yourself is, like, who's gonna be more gracious on that when you go and find out? It, it turns out right now, I actually think it might just be that the public markets are not going to give them what they need versus the private markets. It's better to stay private and just, like, run up private capital and, like, there's lots of people who wanna own these things privately for all sorts of reasons, but the second you have to deal with, like, actual liquidity and, like, what the public markets will pay, I just am not sure it's the same.

— Sam Lessin, More or Less Ep 169

Here's a fun fact. So the reason I look so good today, thank you all for commenting on it, is I've been at the Information's AI event in San Francisco going back and forth, having interviewed the head of Google DeepMind, Cory Kawu- Chuolu- Yet. But I just came from a panel with Blackstone. And because Information subscribers are so smart, they're excellent audience questions. So Blackstone has all these-- They're investing a ton in data centers. They're doing their own projects with NVIDIA. And a subscriber said, "Who's gonna pay for the debt?" And the executive at Blackstone said, "We don't know."

— Sam Lessin, More or Less Ep 168

I just think incentives also really matter, and you're talking about two of the most outspoken venture capitalists in the world starting an institute in their name. That is going to shape the ideology and curriculum of it.

— Sam Lessin, More or Less Ep 168

Well, and what's really interesting, right, is you have this thing where, like, take Bending Spoons. Bending Spoons is making really good business deals offering, like, a tenth of the private price because there's no liquidity. They're the liquidity provider and, right, and for this type of business. And then you have a lot of people who are like, "There's so much money with asymmetry on the minds." And if it... Drying up is more of a macro event than it is a tech event, right, is the interesting thing from my perspective. I don't know. I don't know how the ballgame ends. I mean, I know that we're so disconnected from any semblance of normal capitalism or reality, and I know it's gonna drive an unbelievable amount of, like, fear, loathing, anger, and, like, resentment in all sorts of ways. Like, this makes the dot com bubble look quaint. But who knows? Like, I'm open to the fact that this could go on for years. Or it just could be we've hit a too big to point fail, and this is the greatest stories ever told, right? The greatest stories ever sold.

— Sam Lessin, More or Less Ep 167

I'm, like, finding things at zero and giving them money, and then want them to create businesses and number go up, and then every once in a while someone pays a lot for the business or whatever. But I, I, like, I haven't changed our investing that much. And you know what? In the Silicon Valley ecosystem, financially, that's, like, insanely wrong right now. This is all, like, secure your bag, get liquid. There's a deep market to buy this shit on the other side, especially as a seed investor. I am currently wrong, right? I'm betting I become right But I could stay along for a long time. I just don't like the trading game, and maybe that makes me bad. I don't know.

— Sam Lessin, More or Less Ep 167

I'm investing, but you know what, Dave? You and I have not made gajillions of dollars because we're not trading on AI. Like, we're doing fine.

— Sam Lessin, More or Less Ep 167

What do you think? I think the really interesting thing is just everyone's trading and no one's investing.

— Sam Lessin, More or Less Ep 167

Well Look I Think it's interesting SUdSud has Built A Pretty Cool Portfolio AND THERE'S ALOT HERE'S I Have THIS Problem RIGHT NOW Right BECAUSE WE In Early Stage Investing Which Is WHICH I think You'RE Speaking To A Little Bit WHICH IS LOOK You Love Team You LOVE Theme Right YEAH LIKE IS this Person Freaking Awesome Right Do THEY REALLY Weirdly Care About THis Problem IN SOME Deep Passionate Way AND then thematically IS thIS Correct AND THe problem IS tHAT AI IS kind OF Washing IT ALL Y Combinator STARTED MAKING IT REALLY HARD TO KNOW wHat was Good AND Bad BeCAUSE IT KIND OF TAUGHT EVERYONE hOW TO Pitch NOw We'Re At ThE POINT WHERE Every Company SEEMS Reasonable BEcause it's All Passed Through Eighty Seven AIS AT ThiS Point BEFORE yOU SEE IT SO IT'S NOT ONLY The Deck It's ALL THIS STUFF Seems reasonable ANd then the FOUNDER Thing IS hard becaUSE SINCE Everyone AND their Mother nOW Wants TO Found Companies it's N O longer the Era Where it's Uncool YoU HAVE ALL THESE founders tHAT seem ReALLY GOOD AND S O I THINK WHat you Know you're Pinning TO IS YEah C I IS A Problem ThaT Gets Talked ABOUT A Bunch IN various CIRcles IT IS A PROBLEM W e Can ALL Agree thaT A Bajillion LiN EA LOT More CODE IS BEING Pushed NOW Than EVER Before AND A bunch OF Shit's BREAKING BuT tHEN YOU'RE WHO ARE yoU Betting ON AND ThemAtically WhAT Take On are you TAKing AND I don't kNOW I'M Kind OF INTO The LOok it's The RiGHT PERSON AND The RiGHtProblem I Don't EVEN KNOW the Details

— Sam Lessin, More or Less Ep 165

We're last of the ranked, which is, like- .... so funny 'cause it's like Sequoia, 200 unicorns. Slow Venture is, like, 35.

— Sam Lessin, More or Less Ep 165

By the way, Dave, did you notice this ridiculous ranking of venture firms by number of unicorns?

— Sam Lessin, More or Less Ep 165

So the question is, there has to be a shock. You need something. You need either a better narrative which sucks the wind out of the old narrative, which can happen, but is super hard when the narrative of AI is everything. Like, it, what's, what's more than everything, right? Like, or you need, like, something to go very badly that then people start having to rationalize, which is unclear how that plays out. So I'm with you. I, I think it's very difficult to defend stock prices that you'll never see financially make sense in numbers, in profit. So you either believe that, like, we're just ha- holding onto the chip 'cause there's a one in three chance it pays out, which is very venture capital, by the way. But you kind of still value the chip 'cause it still might pay out. It's, like, not impossible, right? That it pays out.

— Sam Lessin, More or Less Ep 163

I do think there is something with the devices, though, Brit, to your point, with OpenAI, 'cause again, they're great narrative capitalists, is like, it's a classic buy the narrative, sell the news, right? Which, again, makes these things hard to be public, which is, like, the argument that they will never release a device is because it will only hurt their stock price if they're public. It's hard to imagine a world, like... Which is very, very different than, like, I think Elon pulling off some rocket. Like, he has the downside of rocket blow up.

— Sam Lessin, More or Less Ep 163

You got a barbell. You're like, "Look, if this AI stuff works, we might as well have our hat in the ring here." Like, it doesn't mean they're not. And like, so I think they'll be able to raise capital and get out on a meme, but, like, these are gonna be stocks that, like, wildly hit and then wildly miss their quarters. You know, OpenAI, I think if you unwind the tr- the real story of OpenAI, which I give Sam Altman a lot of credit for, it's the greatest fundraising story in the history of the world, right? And to do that, right, the narrative was AI scary. It wasn't always consumer. It was enterprise, then it was consumer, then it was kind of, like, floating, figuring it out. It was get all the talent and tell the story there'll be one winner in AI, and it will be us 'cause we will compound and be so far ahead we're uncatchable. That's clearly not true. And Anthropic did a different strategy, which was just focus on the part that was working, which is, like, coding and business applications where people, like, there's a lot of spend, da, da, da, da. They're crushing it with that strategy. Will that last forever? Who know? I mean, like, technical people like Codex more now, right? But it doesn't actually matter. It doesn't matter who's in the lead right now. What matters is that no lead is secure, and projections don't mean anything, right? And so I think that's the real story is it's too easy to switch, leads don't matter, it's gonna be impossible to financially price any of this stuff, and I think OpenAI missing massively on quarter and getting so eclipsed is just... It's like if Uber got hit by a Lyft, right? That wasn't supposed to happen. It doesn't tell the story of, like, how growth is supposed to work in these things.

— Sam Lessin, More or Less Ep 163

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