The Distribution by Juniper Square
00:37:21 · Nick Shalek
[00:37:21] S0: Yeah. Yeah. I'll I'll I'll give an example to try to make it tangible rather than just, you know, buzzwording. We made an investment over the past couple of years in a company called Base Power. For people who who haven't heard of the company, the founder, Zach Dell, and his team, they're building a a retail energy network by deploying residential batteries in... First, in in Texas, which is a a deregulated energy market. So, you know, you can go and and sell to the consumer directly and and have the the direct relationship with them as their utility. So you you could think of them as offering a much more affordable, accessible version of, like, a Tesla Powerwall, going to retail customers and offering a battery at a a very low cost so that people have backup, you know, power in their home, and then actually lowering their utility bills. How they do that, They do that because they're really building a virtual power plant or a distributed energy grid where they have batteries in a lot of different places. They build not only the hardware so that they can offer, you know, a really high quality product at a at a low price, but also they build the integrated software system so they can build the intelligence around how to charge and discharge a bunch of different batteries based on what's happening on the grid more broadly. So it's it's a company that gets better because, you know, because the the rate of software development and the cost of software development is is going down. And the asset that they have is a data asset that is hard for other people to get. Now this isn't a new insight. This was like Steve Jobs' insight or Bill Gates or others. You know, if you you control a hardware ecosystem or a software ecosystem and you encourage people to build software, you know, these compute... Computers, you know, Macs, and and iPhones become more valuable the more software gets built. Think I there's an opportunity to do that for many companies in a more integrated way. So that's an example, Brandon. The the more, you know, one layer up abstraction of that is people who... You know, it may not be enough right now just to build software, and that's what the market is responding to.
00:39:23 · Nick Shalek
You know, if you've built a horizontal SaaS app, you know, that's a productivity app, that's a thing that you can replicate or get pretty damn close to replicating now using Claude Code. And and I'm sure you've done it. You've done this inside Juniper for your own use cases. We've been doing it at Ribbit. It's actually really just amazing what, you know, what what you can do. And there's a reason why Anthropic is, you know, growing, revenue by, like, billions of dollars a month. So, you know, you have to look one one click deeper to who's got some other moat outside of software, but, again, where software kind of accelerates the the value of that moat. And physical world companies in in energy or defense or quantum or or robotics are are really, you know, logical place where that's gonna happen. So a lot of us and and a bunch of other, you know, venture firms are are spending time there.
00:40:13 · Brandon Sedloff
[00:40:13] S1: I'm curious. You know, there... There's, you know, two types of companies. There's companies that started kinda pre current AI revolution, and then there's the the AI natives. As you look at the founders of those companies, whether they're in your portfolio or just that you're familiar with in the ecosystem, are there kind of different characteristics in terms of how leaders of these organizations think about, you know, either evolving a non AI native company to to lean into to this kind of AI revolution, if you want. I'm not sure that that's the right term, so you can you can edit it and call it whatever you want versus those who are starting companies today, you know, as as AI native. I I just... From a, like, a DNA perspective, is it is it a same... You know, a similar version of the same person, or are they radically different kind of people and ways of thinking and and thinking about the future of their businesses?
00:40:59 · Nick Shalek
[00:40:59] S0: I think, you know, great entrepreneurs are great entrepreneurs no matter what space. The entrepreneur who builds an amazing real estate business or amazing insurance brokerage twenty years ago is not that different constitutionally than the amazing entrepreneur, you know, who builds a technology company. I think the the the the ones who build the biggest technology companies, the iconic entrepreneurs, you know, are a rare and special breed just like in any domain. You know, we could be talking about baseball. The point o o 1% of people, you know, at the very top of the distribution are really different than the point 1% in terms of, like, you know, how how they think and act, how extreme they are in their in their views and behaviors. And and so, you know, I I I think we're always we're always trying to find as close to the top of the distribution as we can, but we were doing the same thing 12 ago when it was mobile first, not AI first. I think what... Yeah. That said, it's a really different way of... You... If you start with a different set of assumptions, you think really differently. And it's really hard to embed a different set of assumptions when your brain is a certain way. For you or me or anybody listening who's over the age of, you know, 30 who didn't grow up with ChatGPT or didn't spend... You know, we're seeing with a lot of founders, they spent, especially young ones, they spent like a couple years at home during COVID doing nothing but experimenting and and building stuff. So they have this superpower, which is, you know, they're really native to these technologies. So for anybody who's in our position, you gotta work really hard to rewire your mind. I think we're still learning what the AI first... You know, you know, it'll be easier to describe in four or five years. But if I look back, you know, let's say, you know, 2013, if you and I were talking about what's a, you know, modal... Mobile first bank, it'd be hard to describe why Robinhood or Nubank or Revolut, why they were gonna be successful in the face of competing against incumbents that had enormous balance sheets, really deep regulatory relationships, and a lot of money.
00:42:52 · Nick Shalek, Brandon Sedloff
But the truth was when you had a big business with hundreds of thousands, tens or hundreds of thousands of branches and a lot of people in a certain way, like, it's hard to bake in a new set of assumptions, which is, you know, that over the next, several years, we'll have hundreds of millions and then billions of people who actually start to interact with financial services on their phone and not in person. And so everything, you know, around the business model and paradigm has to be built that way. And that's definitely... That's happening with AI in real time right now. It's very... You know, it's cool to watch. It's exhilarating to see how fast some of these founders are able to, like, build things and how they think and how they're structuring their organizations, and they're just starting with a different set of assumptions. [00:43:37] S1: Yeah. I I think it's fascinating. It's also fascinating to watch how the incumbent or kind of legacy, and I don't mean that in a diminutive way, but, like, how these businesses are evolving and really this this imperative to reimagine the way that you think about your business, your customer, your employees, the way that work gets done. It's it's quite fascinating from a from a leadership perspective.
00:43:55 · Nick Shalek
[00:43:55] S0: I I would venture to say you can't be extreme enough. And the fighting the inertia of how an organization was set up ten years ago. You know, there's all these great examples in technology history, but what I think about is, like, the emergence of electric motors in factories. And, you know, at first, you had electric motors, and they were a little cleaner and a little quieter. And, yeah, you basically... You got them to a cost where you could put them, and they'd they would power the main drivetrain through the factory. And it was just a replacement. And it was like, you know, a meaningful innovation, but not a a profound innovation in how factories organized. So you had some productivity gain. But it was really over the next, like, ten, fifteen, maybe twenty years, I don't know the exact history, that it turns out, you know, you could make a lot of electric motors, you could make a lot smaller, and you could put them all throughout the factory, and you could completely reconfigure the way that the factory worked. And that metaphor, you know, thinking about the physical world is kinda helpful for... You know, every organization needs to figure out now how to centralize and organize all their context and data, how to give access to agents to do it, how to permission those agents, which people should oversee them, and what that means for the way they organize functions. You might have, you know, you might have 50 people in a department where you need one, but you need those 50 people doing something totally different that customers are gonna be wanting and asking for. Or, you know, be engaged and involved in the process of building context for agents. You know, it's... I I think people need to really radically rethink the way they're operating and create structures to do that. Rules, separate organizations, empower their leaders. I mean, you know, even in our portfolio of of of young tech native companies, it's it's a hard challenge. So for bigger, more complex businesses, I think it's really the challenge of our time.