00:22:53 · Zeynep Yavuz-Willson
[00:22:53] S1: So, you want to partner with DATEV, which means that you needed to build an automation layer that's on top of effectively a system of record that already exists and used by everyone. By the way, those integrations that you have and the depth of those integrations, I believe will be another moat in this AI diffusion. Then the second thing is that in accounting, you've got so many edge cases, and this is not just text based workflows. So, there is quite a lot that you need to do from a quantitative side as well. So, the automating that is actually a lot trickier, and there is literally no room for error because you are doing something legal, you're doing a legal filing and there cannot be any room for error. So, and the other thing is that again, I'm coming back to this, the level of fragmentation in a market slows down adoption of AI. The more concentrated the market, the AI adoption happens faster. Why? Because the decisions are actually driven top down. If you think about how a lot of these customer support solutions or legal solutions that are bought, it's boardroom decisions. When people use it, obviously, they're happy with the tooling, but so much of that is happening. And I think this is why diffusion of AI has been super fast in some of the verticals is because the decisions are happening at the board level and it's being pushed down by the CEO and the chief. There's always an AI strategy that's being discussed in the boardroom. Yeah. And that makes sense. Therefore, particularly in house functions like customer support, legal has had such high adoption. If you think about SME accounting, like who's driving that change? We need to do that change bottom up, and that's much harder to do.
00:24:29 · Sebastian Johnson, Zeynep Yavuz-Willson
[00:24:29] S0: Yeah. That's really interesting. Okay. So let's... If we look at the European market more broadly and we look at this this idea that... Or this is varying degrees of diffusion or adoption across Europe, What do you think is unique about the European market where maybe we have an opportunity to adopt or diffuse AI faster than Americans? Maybe it's because we have... Faster. Yeah, maybe because we have particularly concentrated industries. We have different industries Or even, like, the the Dwelly example is interesting because because it's fragmented Yeah. The opportunity to go bottom up Yeah. Is present in a way that actually maybe if it was not really concentrated but not really sort of, like, fragmented, there wouldn't be the same opportunity. Are there other industries like that in Europe where we think, okay, that's a really interesting opportunity? [00:25:13] S1: Yeah. So, I mean, we think about this very actively, right? And therefore, in investing in driving this AI transformation in some industries need a bit more of a push, we had the roll up strategy. So, saying, let's go acquire... We're going to be a real estate agent anyway. We're going to be an accounting firm. So, what don't we think of... A payroll services company. So, let's think about capital in terms of acquiring our customers. So, think about CAC not as we spend and then we acquire customers organically, but let's think about CAC as acquisition spend for companies. So, that's one way of thinking about it. Then, for example, we've set up an initiative called EU AI Champions.
00:25:13 · Zeynep Yavuz-Willson, Sebastian Johnson
[00:25:13] S1: Yeah. So, I mean, we think about this very actively, right? And therefore, in investing in driving this AI transformation in some industries need a bit more of a push, we had the roll up strategy. So, saying, let's go acquire... We're going to be a real estate agent anyway. We're going to be an accounting firm. So, what don't we think of... A payroll services company. So, let's think about capital in terms of acquiring our customers. So, think about CAC not as we spend and then we acquire customers organically, but let's think about CAC as acquisition spend for companies. So, that's one way of thinking about it. Then, for example, we've set up an initiative called EU AI Champions. [00:25:54] S0: What [00:25:55] S1: we did there was we brought together the established European businesses who want to adopt AI and have that boardroom discussion, but they have no idea how to do it. So, we've established this initiative so that we are connecting these established businesses, the CIOs and the CTOs of these companies, like Heineken and Miele, and a few other companies are part of it, and then we will connect them with AI companies of Europe. So, we make them meet, for example, do workshops three, four times year. [00:26:30] S0: The capital model is changing, right? You've mentioned this, right? The way that GC is thinking about the role at play and capitalizing and giving capital to companies. [00:26:38] S1: Yeah. CVF is a strategy where we help companies scale their go to market spend with no dilution. [00:26:46] S0: Yep.
00:26:46 · Sebastian Johnson, Zeynep Yavuz-Willson
[00:26:46] S0: Yep. [00:26:47] S1: And I think this is so important, especially now at the age of AI, for all the reasons that I have explained kind of earlier in our conversation, where the go to market, the brand building, the customer relationship is ultimately the only mode. So, your capabilities to invest in go to market are becoming so important. And if you have predictable returns on your go to market, meaning if you know when you spend this much, this is how much you get paid, and you get paid in two years, Why would you use equity for that? Equity is for things where you have high risk. You it's when you don't know if it's going work or not. That's when you should be using equity for new product investments. [00:27:31] S0: Yeah, I was going to say it's more for like R and D and products. Exactly. Not so much go to market, right? Yeah.
00:27:36 · Zeynep Yavuz-Willson, Sebastian Johnson
[00:27:36] S1: So, the go to market, when you have something that's predictable, why would you use your equity for that? We should come up with another solution for that so that you can scale your business, raise equity, but also raise CVF. So, optimize your capital structure so that you are going to become the leader in this industry and you're going to transform it. It's almost like when you do M and A, you might have a lot of cash on your balance sheet, right? And you could use that cash to do the M and A, but why? Sometimes it's better to actually take on debt for a reason to do that M and A. So, it's really all about optimizing capital structure. So, in the case of CVF, for example, if you look at some of the biggest companies they work with, so many of them are highly profitable. So, they're using CVF because they know about optimizing their capital structure. And we did this recent investment in Factorial, for example. We've been very, you know, proud partners of Jordi for many years now. And what strikes me about Jordi is that he understands this. He understands the need for optimizing capital structure. And I think the importance of that is going to be like so much higher now because a lot of the winners are just becoming a lot more concentrated. Right? So, you need to be thinking smartly about how you raise capital, and you need to be able to tap into different capital sources and think creatively about how you optimize your capital structure. [00:28:56] S0: Would you say GC is still a venture firm? No. What would you call it? Just like a sort of private equity?
00:28:56 · Sebastian Johnson, Zeynep Yavuz-Willson
[00:28:56] S0: Would you say GC is still a venture firm? No. What would you call it? Just like a sort of private equity? [00:29:04] S1: No, no, no. [00:29:05] S0: How do you define or describe it then? You're doing so much more with so many tools available. [00:29:10] S1: As I said, our core is people. That's really what we all think about. Are we partnering with the most exceptional people? And are we the first people that they call? Because they also see us as a builder. They also see us as an entrepreneur. They see us as someone who would you know, be supporting them in building the company and help them think creatively. Yeah. And we are very focused on transformation. So, we are an investment company, but we're also an AI transformation firm. And that's why we've also incubated companies like Percepta, which is driving AI transformation in kind of Fortune 500 companies and larger enterprises. That's something that we found out of our balance sheet. You know, that's something that we created as General Catalyst. [00:29:50] S0: Yeah. [00:29:50] S1: Then we have Hatch, which is transforming the healthcare space. We have acquired a health system in The US because the idea was that if we want to transform healthcare, it's not going to happen through venture investing. You know, we've invested in a lot of these tools, but selling into health systems is so difficult. So, we kind of need to eat our own... What's the word? Food. Yeah, exactly. [00:30:10] S0: Need to do it yourself.