The plot that AI is gonna create massive economic disruption, thumbs up. Is there some change? Is there some rip in the universe, right, that's gonna disrupt how the economics flow that I can be a part of? No brainer with AI that you're gonna see that happen. I'm a generalist. Generalist. I don't have a single thematic plan. My point of view is to have a framework to evaluate any novel thesis and figure out if it fits for venture capital. Anything that allows you to get farther on your equity than you should otherwise should be thought of as leverage. I don't care if that's debt or valuation. The awesome thing about leverage is if you nail it, it's amazing, but it cuts against you just as hard. Fast forward twenty thirty, not that far away. What do you see for venture space? I would hope that more classic venture capital firms rise into Alright. We got Will Quist here, partner at Slow Ventures. Welcome, Will. Hey. How's it going? How are I'm all good, dude. Good. Man, we just had a whole conversation off camera. I feel like we just need to repeat the whole thing now. I've got two talk tracks, so we'll hit on one of them soon. I'm sure I'll repeat myself when we Alright. Cool. First, wanna know I know you guys invested in a lot of big companies, Airtable, Slack, Robinhood, a while back. Right? The thesis has changed since then. What would you say the core change of your investment thesis is? Yeah. I mean, I think we started Red is guys with an incredible network and incredible taste, and actually, it predates me. It was a bunch of friends of mine who've been founders, early employees, or execs of Facebook, and and I think kind of did the hard part of not only getting introduced to the really great founders, but also those founders said great things. So that's kind of act one. I think act two was a small fundraiser from high net worth individuals where we kind of, I don't know, all argued a little bit about what what to do. That's kind of when we got into business for real. And then I think act three is kind of where we are now, which is we started realizing more and more we were putting our flag down first thing. We like this. This is what we think. Why don't we start leading things? I think the core shift over the years, though, has begun to be more focused on non consensus. We think there's an entire world of venture, and it's performed great, we have great friends doing well in it that are like, hey, this is what a good start up looks like. This is what a great founder looks like, and I'm optimized to win access to those deals. I think we looked at it and said, I think the point might be to find things in not contrarian, because contrarian is like being short. It's like the market's wrong and I'm right, which is very low odds and asymmetric payouts Yeah. In the wrong way. Two, you're just not quite thinking about that yet, or you won't have an incentive to think about that yet. So I think the core framework for the venture side has become find theses that are novel, truly novel, that you can get a real true false to. They're objective enough, you can get a true false on not that much money because like in the scheme of money, we don't manage that much. And they're objectively wildly valuable if correct, and then there's more lines of thinking. So I think that's how our thesis has changed, less probably taste driven, momentum driven, and much more looking for that chain, logic chain that we can push over with some money. You guys have about a billion of capital deployed at this point? I think so. I'm not I'm not the one who keeps count, but Got it. That seems like the right direction. Any advice to like, obviously, you got a lot of founders today. AI is popping up everywhere. It's in every company name. It's core of every product. I think you have an interesting point of view on it. I'd love to hear, like, you know, for the founder that's out there that's like, oh, I can't wait to spin up this AI SaaS company or whatever they're gonna do. I just don't think it's that different than any other building principle. Here's the issue, and then you've, like, find the solution within the issues. The the plot that AI is gonna create massive economic disruption, thumbs up. Like and I think that's the first place all of us start when you're building a business. Like, is there some change? Is there some rip in the universe, right, that's gonna disrupt how the economics flow that I can be a part of? No brainer with AI that you're gonna see that happen. Then the next step is like, okay, how much of that do I get it right to capture? Like, what's my angle on having a disproportionate bucket, right, to capture that? And then how much does it cost me to build the bucket? Yeah. Right? And so I think anyone getting into it needs to have either understand their yellowing, right, and like, there's really no reason to be durable and whatnot, and that you're gonna ride the yellow train, and sometimes that leads to great places, sometimes it doesn't, and you go in super eyes open into that investment of your opportunity cost, or you have some kind of measured thesis on all of those layers, right, that make you feel good that if you're correct, right, you end up with a nice bucket of money that didn't cost you more than the bucket's worth. Well, the moat around SaaS today is shrinking. Right? I mean, we've you got it is so easy to spin up a competitive SaaS product. I think we're personally, I believe that we're gonna be at a point in a year or two where you search for a tool, and there's gonna be so many out there that you're not gonna know if this is a true like, you're gonna have to do your research to find out, is this a real company, or is this a twelve year old that spun this thing up? It's gonna be a marketing play, I think, in a lot of worlds, and because you don't necessarily need the funding to create you don't need the engineers. You don't Yeah. But you didn't really need this is the whole reason SaaS moves ****** free cash flow businesses. It's like, I think this is like incremental disruption and not transformational disruption. The code, like, the ability to code so fast. Yeah. The cost of code, I would say, you followed the curve in a client server world of what it costs to develop and distribute applications, I would say the transition from that world to SaaS was more disruptive than from SaaS to AI. And that was the whole problem though with SaaS. Right? It's always been a sales and marketing battle because it's not that hard to reverse reverse spin up the logistics of it. It's the reason the businesses had a hard time early getting structurally profitable. Right? It's because they were spending a **** ton in sales and marketing because if I spun up CRM always gets picked on. Wish I didn't know. Pick on CRM. But if I spun up a tool, like, was and it was working. It wasn't that hard for another team to do a version of it where the value propositions are really similar. And the issue is when value propositions are similar, gross margins can be fine, but it all comes out of sales and marketing because it takes me you and I really have to argue with someone for a long time, they're like, buy me, buy me. And so I think that would be my first case is I think mechanically, this is incremental, not transformative. And so, okay, you have businesses today that you know are getting productivity gains by, you know, they're cutting out certain teams. But you like, we talked we're off air here. We talked about the different areas that you guys have invested in over time, whether that moved from SaaS to franchise to private owned health care Right, roll ups, and then growth. Right? Where have you landed? Where are you most bullish today? I'm a generalist. Like, I don't I don't have a single thematic lane. My point of view is to have a framework to evaluate any novel thesis and figure out if it fits for venture capital. So like, I'm looking at AI stuff. I think there's a way in which to do it or to play on the trends that's interesting. I just don't think it is right down the fairway with where the bulk of the activity is. Are you using AI to evaluate your application? Using sim analyzers, that type of thing? Yeah. I mean, I I I spend a ton of time on cloud and chattypathy all day every day. Doesn't mean they're good businesses. Right. Right? I mean, I think there's lots of things that, like, I use all day every day that are not the world's most amazing businesses, but Are you seeing certain businesses or sectors that are slower to adopt AI that you feel like there might be more, you know, margin arbitrage, wherever you want to, like, to be able to go in and say, alright. If we if these are the slow adopters, we can plug this in and get a better result. No. Not in that capacity. I think that, like, that's spotting an arbitrage, not creating it. And the problem with spotting an arbitrage is the way you make a **** ton of money is you run money through the trade till it closes. What you wanna find are, like, arbitrages that are structural that you create and control, and that's how you build enterprise value. Right? It's like all of Google's enterprise value is between what it takes to generate intent and how well they can resell it. That's been a proprietary mechanism for years, so like enterprise value happens there. And that's, I think, my issue with a lot of, hey. I'm gonna go buy a CPA firm and, you know, sit with Claude for a day and get a bunch of efficiencies out of it. Like, you're not wrong. I just think that's, like, as good as it ever gets. Been with a couple private equity firms, and it's always interesting to see the M and A strategy. You know, I think it's different a lot of times with private equity than venture capital. Private equity is typically going in at a little bit of a later stage, and, you know, while there's gonna be organic growth there, obviously, doing it for the tack on of the m and a and the arbitrage there of the, you know, EBITDA value they could do through synergies of tacking on other companies. The health care spec space where it was services base was was massive for this. Right? And so when we'd get in with a, you know, physical therapy company, a gastroenterology, whatever it is, and be able to go swallow up all the other ones, you get that synergies of of you don't need the same c you know, see another CEO, CFO, etcetera. But then what you they always just say, okay. Well, this is a one and a half to two times business. We're gonna get some arbitrage from bringing the EBITDA together. But if we can make this a tech enabled services business, damn, we could go up to five to seven x. So I guess my question to you is, like, do you because in my point of view, when I look at this, I'm like, I don't think that tech enabled services as an increase is going to be that increase in valuation that it was in the past because it's so easy to create tech these days. Like, tech that you actually that actually it's not getting a CRM. That's not tech enabled. It's truly using technology as a core to how you operate so it makes you more efficient. That was what was giving the the higher multiples on services based businesses. My point of view is I think that's going away. I don't see because it's so easy to create that technology today. Have you seen anything like that in the world you operate in? No. But that makes sense. I mean, I I I like, that's definitely what's gonna happen. I think the question is, like, is the leverage proprietary or commodity? Right? Are you are you are you grabbing an off the shelf product? Right? Like, what happens to private equity when all of a sudden a new financial product is unlocked? Like, the first movers capture the spread, right, when there's a new way to lever a company, but then, I don't know, four quarters, six quarters, like, some short temporal period later, it's all baked into the price. Yeah. And we've moved on. And so I think that's, like, my core take on it is, like, I I'm sure it'll take longer than I think because everything always does. But I thought we'd, like I don't know. I thought there's bunch of stuff that would all be default that takes longer, so maybe there's more to be done in the interim. But I I do think that's, like, a one time bump that you can ride before it's priced into right? Everything you buy, you're gonna look at it and go, well, I'll pay five out of the gate because, like, I can throw AI in a week. Have you seen any optimizations at your own firm in terms like, obviously, using Claude and all that, but, like, have you seen the ability to say, hey, we're not gonna hire another associate? We're not gonna hire We're the wrong guys because we don't have a big infrastructure. How big is the team? There's four partners, and we all have someone who works for us. Nice. I'm being there. And we have some back office in a row that's short. But on the investment team, we're the wrong people. I just think that's all very theoretical. I I think workflow chain like, think it's one thing to have the tool. Like, the the DNA to change your workflow and processes in organizations is gonna take longer. That change management is brilliant. Yeah. I mean, this is kind of where I go. I don't know that SaaS is dead, back to that, because it's one thing to build the value creation lever, or to build the product that creates value prop, but like, getting it adopted, getting it used, and getting real world ROI out of it at scale, it's pretty ******* tricky. It is. And, so, I I I don't know that. I I guess I'm more in the camp of I think there's a lot of SaaS companies that were overvalued that aren't doing differentiated things, but I think there's a bunch that actually have complex customer relationships, complex data sets that can't be recreated. Right? And that I think may actually thrive in this period because navigating through change management, understanding the organizations is like gonna be the thing. What size checks do you guys typically like to write? What's the area? Any a million to three million bucks is kind of our early stage first plush. Are you typically coming in in seed a? No series a. No series a. All pre seed and seed. All pre seed and seed. Leading pre seed and seed rounds. Nice. Are you getting out? Are you typically doing a full exit from it when they go to No. Future? You wanna stick in? Don't know. We're capitalists. Like, I don't know. Is it a fair price? Like, how's this compounding? Is it a fair price? Oh, crap. They paid they pulled forward ten years of expectations. Maybe we'll think about it if Yeah. They've underrated the business. I don't I I I don't think it's that dogmatic versus kind of being able to read tea leaves. For, let's just say, younger founders figuring out what they're gonna do, they gotta they got an idea. They're gonna go out there deciding whether they're gonna take on money early or bootstrap. Do have any advice? I don't think it's up to them. I think it's the idea, like, you need to navigate the idea maze, and understand if what you're doing calls for what kind of capital. So I I I think that's like a total fairest false paradigm where it's like, hey, should I bootstrap or not? It's like, we should obviously bootstrap if you can. Like, why the **** would you give away a bunch of equity and upside to somebody if you don't have to? It's like, that's my advice. It's like, you're asking that question, you probably haven't spent enough time staring at your own idea to understand what needs to be true, what the payouts are, and and how you finance the early experimentation of the business. What percentage of the, whether it's sims or whatever, the businesses that you evaluate for investment fall into that category? Zero. You think so of the I mean, but I'm like old, and have done this long enough that I can screen for Yeah. I think people know that I'm pretty curmudgeonly about that, and too, I think you can get better over time at screening from afar, like what may call for venture capital in your own opinion, and spend your time on those opportunities. What are the big things that you're looking for in that screen? I said at the top, like, it's do you have a novel hypothesis? Is there a true false? Can you get that true false? Can we run the core experiment on the three to five million bucks that the round is putting together in some time frame? And is being right about that objective. I I always like, can I go take that to a hedge fund buddy? He's like, I'm not gonna invest, but, like, I understand why that business is now ten times because you got data point x that says y is true, it is z valuable. And I really think it's that, like, I I think the point of venture capital, and I'm curmudgeonly about this too, but, like, because venture capital has a lot of formats and definitions. For me, it's money, right, to go after kind of a reasonably unreasonable take on the world that you can get to a yes answer on, and and it's money for that experiment. Right? I I think we wanna do, and we wanna fund, is it true? Not will it be true at more scale. I think the the valuation of a business is, especially out here in San Francisco, like, this is like, that's the world people live in. Like, what's our valuation of our business? For these seed and early round, do you ever get founders where you have to coach them on to say, you do not want an unrealistic valuation because you will have to you will have to achieve an unnatural growth rate? Because that's what we I think we've seen that with with Simmons, especially with early, you know, twenty twenty, twenty twenty one where valuations were off the chart, and everyone's having down rounds. Like, is there any coaching that you ever have to do to just say, like, let's level set here? We have a lot of conversations about it. I mean, I there's two takes on it that I agree with that are in opposition. One is like, I don't know. So you do a down round. It's not the end of the world. I mean, I'm like, I'm a big go public after as soon as you can guy, so, like, that's a whole another can of worms to to jump down. And I understand all the negatives everybody thinking. I just think it it it it's like democracy of, like, it's the worst form of government other than all the other ones we've tried. So I think there's one who's like, don't You did a down round. It's not the end of the world. Like, go in open eyes. It's harder to do down rounds. It's harder to raise them, but, like, so I I think there's a con one conversation I have around how anything that allows you to get farther on your equity than you should otherwise should be thought of as leverage. I don't care if that's debt or valuation. Right? And so the awesome thing about leverage is if you nail it, it's amazing, but it cuts against you just as hard. So I I think that's one conversation we I have. I won't speak for my partners, but I have with founders is like, cool. Here's, like, here's the trade you're entering if you do that. I think the other framework that's probably more helpful, right, is like, listen. You should get credit for what is true that wasn't true. Right? Your your valuation at any given time becomes what is true and repeatable, right, with a low discount rate, then what call options exist in the And you wanna get credit with that. You should get credit for that. You want credit emotionally for that. But the reality is with how the downstream capital markets work in venture, like, nobody's thinking about fine tuning valuation. Right? Nobody wants to come in after you're gonna have it go like, oh, I think you deserve a thirty percent markup. That's just not how the ecosystem works. Like, they wanna justify paying two to three x times the last round price. And so I think the good exercise for founders is like, what is that what's the gravity? Right? There are physics to businesses. So, like, what's the gravity of that? If in you're raising it up that you get twenty four months out and you raise again, like, what will it take, right, to back up a two to three x valuation? Right? And it there's some metrics you can work towards, and then marry that with what you're able what what you think you can like, within some nice margin of error, do with the money you've raised, and price it accordingly so that, like, your life isn't operating on a knife edge. Yeah. So I listen. We don't have any control. This isn't private equity. We own twelve to fifteen percent of these things. Like Right. The founder's gonna deal with it. So all you can really do, in my opinion, is give them good intellectual frameworks and help your backing people that make the right decision. Okay. Fast forward twenty thirty, not that far away, but far enough that, like, world could be completely different. What do you see for where Venture is investing the dollars? I have no ******* clue. That that one, I'm not even able to touch, because who knows, dude? You're like, I'm investing in the semiconductor space right now. Didn't think I'd be doing that. So I I that one, I I don't get. I mean, I think, I guess, what I would hope is I think the platforms are here. They serve a product that founders like, that LPs like. I think it's a structural part of the ecosystem now. The same way Blackstone, right, is at scale, and, like, these are structural capital markets products that people begin portfolio planning around, and, like Yeah. Those things don't change in four to five years. So I I think I think if those things are winning, there's less room for others that copy the strategy. I mean, I I think this I think all these financial markets, right, when you move from a world which is, like, unclear playbook with volatility, you have a lot of positive sum behavior of, I don't know how to underwrite this. Let's all do it together, and and you end up with two hundred investment banking firms that underwrite muni bonds and two hundred that do M NA because they share deals and nobody knows. Like, hey, I know how we're probably gonna get rich, and I think it's gonna happen every year becomes a very zero sum game. So I had to forecast that side of the ledger. Like, I think it just less platform funds can subsist than than work today just because there's a zero sum nature to the equity there. I think and I would hope that more classic venture capital firms rise into into the vacuum. Right? I mean, I think even the folks of those platforms would admit they're not set up to do every kind of deal possible that makes a ton of sense. Right? We we we, with some friends, talk about fast boil or slow boil deals. Things that are gonna they'll know true or false in six months, and it's the one person to do it and the one company. Great. Platforms will do that. But there's a lot of things where it'll take eighteen to twenty four months, right, and you've kinda gotta have some patience and some work. I personally think disproportionately that's where early stage rent return returns come, and so I I hope that there's a vibrant ecosystem of those kinds of firms taking that risk in four to five years. How about all these companies popping up that are AI enabled, AI focused? How about that? Any hot take there? I mean, are you doing something defensible? But I I think it's just like a normal set of questions that, like, you should be able to take questions from Charlie Moniger and feel good about your answers. If you can, I think you're probably gonna have a You're gonna have to move quickly, pivot, find a bunch of things? I think if you can, you probably have a pretty straight road. Now, there may be some volatility on capital availability valuations, but Do you think that'll constrict? Yeah. I don't know how it doesn't. I I like, either this is the first wave like this that doesn't lead to boom and bust behavior? Or and if it's not, I haven't heard great arguments of, like, what is dramatically enough different this time that we will totally smooth out the curve of adoption and financing? And so, like, I think the default I mean, the million dollar question like, that's an easy take. The million dollar question is when and how does it happen? If I had the crystal ball, I wouldn't share it. I'd go make money from it, but I think that's gotta be the plan at some point, right, that there will be some small, large correction or otherwise. Cool. Alright. Did we get through everything? Well, I think we did. Cool. Got anything else you wanna say? Not all software companies need to be software companies. We didn't touch on this, but like, this is this is the one thing everybody misses, is just because your innovation and your product is software doesn't mean the most capitalist thing to do is be a software company selling products. What's the other option? You can do growth buyouts, vertical integration. I I think you need We obviously love the growth buyout angle. Metropolis is one of our landmark case studies, super fun, and, oh, actually very pure. I think there's vertical integration plays. We're doing one in three PL right now. But I think there's a series of questions you can ask yourself if you're building proprietary software products that really mess with the economics of the legacy industry, and there's better answers for getting a ton of free cash flow relative to the equity than just selling software. Alright. Cool. Thanks for coming in. Alright. Appreciate it. Yeah, man.