Invest Like the Best with Patrick O'Shaughnessy
00:57:50 · Patrick O'Shaughnessy, Martin Casado
[00:57:50] S0: Yeah. Interesting. [00:57:51] S1: Didn't get leaked because we didn't tell anybody. Was like me and Jose, there's a few people. OpenRouter was leaking constantly, right? And I think a number of VCs think, this is how you drive up the price or this is how you get it done. You see these things leak all the time. That destabilizes deals. Again, I think the most important thing is a structural thing like your intuition as an investor in particular that this is like some commodity asset and it's about playing poker. It's just wrong. If it's strategic deal for a lot of money, I think you need to view it very professionally. I think you need to develop a trust relationship. I think you need to do it in good faith. You should not leak these deals and realize that the people that are counter parties to this are the most sophisticated people in the industry. The founders in every one of these cases treated it that way. Michael Truell treated it that way and the team Alex and Chris treated it that way for OpenRouter and for sure Fei Fei treated it. [00:58:39] S0: How are you seeing the role of investors evolve? Both literally how it's evolving across these many many boards that you're on, but also some commentary on if you think investors generally of your type are doing a good job or actually helping companies. It seems like because the stakes are so high, growth is so big, the capital dollar amounts are so big that all these investors are overseeing, it's kind of crazy. Some commentary on like the role of the investor.
00:59:03 · Martin Casado
[00:59:03] S1: One thing I will say is venture is not what it used to be. The startup ecosystem is not what it used to be. I mean, you look at the largest private companies right now, they would rival any public companies twenty years ago. I think like Stripe or Databricks or like SpaceX before an IPO or Andreessen. These companies are massive. And so one of the problems is is what it means to be a startup has shifted so much that now you have this undefined quagmire of who should probably be public investors investing in early stage startups and I just don't think those intuitions are right and so I think that's kind of the root of the confusion. I think maybe it just actually makes sense to start delineating a bit more on the private side Or if you have later stage people investing in earlier stage companies, maybe a little bit more self awareness. Like for example, you wouldn't put me on a mining company board. So remember 2021 and we'd have these PE investors and they would invest in these series p companies. I would sit on the board with these people and it's like, it's literally like putting me on the board of a mining company. Yeah. Have no idea, like they're like trying to like reason about the company through like burn. Like dude, you're gonna be miserable here because all we do is burn cash for a long time. It's more kind of the blending of the lines because private companies are a real asset class for late stage investors. A lot of this is just growing pains. Like how much larger do you think the market is now than it was thirty years ago? Thousand times? So of course of course the industry is gonna have to mature around that and of course you're gonna have to view it like a kind of later stage investor, of course. But I just think that there's this funny identity crisis with a lot of later stage investors who view the world that way just because they're in private markets and their VCs think that... For example, I would never invest in a late stage company. Like I don't think it goes here like I'm gonna... I'm like, what would I do? I'd go there and tell you how to like run a finance operator, it's just not me. So I think that's it. It's basically the encourage of traditional banking and traditional finance and venture which absolutely belongs there.
01:01:05 · Martin Casado, Patrick O'Shaughnessy
I just think sometimes it kind of reaches a little bit too low and then you would have these issues. You have these issues in m and a where they're like, whatever. Let's run an auction and let's do all this other stuff. You have it in the operations of a company where, like, you're 20 people and they're ready to up burn or they're over rotating on metrics for disruptive technology. I just feel like we need to kind of bring back traditional productive VC for some subset of this and there's enough market for everyone. [01:01:33] S0: Has anything changed about how when you meet somebody for the first time? Like if I came and watched 10 meetings in a week with you ten years ago when you started. Yeah. And then I came today and watched 10 meetings with you. Have you changed how you conduct your early interactions with founders?
01:01:49 · Martin Casado
[01:01:49] S1: Yeah, a lot. Mean, I think most investors go through this, especially when you come from the operating world, you have to learn how to listen as an investor. And then you also have to learn how to ask the questions that you really care about so that you can answer the questions to yourself. It's a very delicate balance. I do feel like a lot of meetings with founders tend to be pretty performative on both sides. Like you don't know what to ask and so you'll be like, who's your competition? And then a lot of it is just asking questions for asking questions' sake but like it doesn't actually inform your decision. And then especially if you're an operator, you'll hear something you disagree with and you kind of want to fix that problem but that's kind of not your job. I have learned, and I'm not perfect, but the primary job is just to listen. A founder will tell you what they believe. If you disagree, you disagree, but that's what they believe. So often they'll say something like, well, but I would do it better and therefore like it's a good investment. It's truly an art. You have to make a decision based on that meeting. There's a lot of silly questions you could ask that are not really gonna inform that decision. What if Amazon does that? What does OpenAI? Like, whatever. You can answer that yourself. Maybe you can figure out how they think. But there are key questions that you really wanna know and kind of knowing which ones those are during the time of the meeting and getting those in is a hard thing to do. And I think I've really refined my ability to do that.
01:03:10 · Patrick O'Shaughnessy
[01:03:10] S0: Maybe a fun place to close is just to ask what has you most excited? We've talked about lots of the magic of this new era of technology and things that weren't possible before, bottlenecks that are now gone. I know all of that excites you but if you had to just step all the way back and describe why this job is so incredibly fun right now and why you're most excited.
01:03:32 · Martin Casado, Patrick O'Shaughnessy
[01:03:32] S1: I'm more and more of the belief that this is an industrial revolution level shift and for me the industrial revolution went from basically a zero sum world to like a non zero sum where value is being created, net new value is being created and I think this is a very similar shift where before to solve problems, you had to solve very complex engineering problems which basically didn't scale and were very tough and then you'd have to maintain them and that's why all software has always sucked to basically being a capital problem. I don't know about the real world yet. I think we'll get there but I think we've turned this into a capital resourcing problem and we're capital allocators. And so I just feel like we're just in this very, very strategic position to help drive the future in a much, much more direct way than we ever have been before because I think this is a scale up capital game that causes that to happen. I don't believe private markets have limited TAM. I think they have unlimited TAM and the more money that goes into them, the more value that would be created. So I just feel like we're in this very privileged position, very key to the innovation chain, and we're both very lucky to be here. [01:04:34] S0: I love the every two year schedule that we're on. I hope we get to do it again in another two years. I can only imagine what the world's gonna look like two years from now. [01:04:41] S1: We'll have our Grokbots talk. [01:04:42] S0: Thank you so much for your time. [01:04:44] S1: Thank you.