Invest Like the Best with Patrick O'Shaughnessy
00:04:41 · Patrick O'Shaughnessy, Christina Cacioppo
[00:04:41] S0: Good billboards.... [00:04:42] S1: Pushing good billboards. Shockingly good. Compliance that doesn't suck too much. Which got really popular on raccounting, which none of us knew was a bucket list item in our lives. When raccounting likes your things, you're like, okay, something worked. And then the lived experience is just, you can feel like you are going as fast as you can and you should in fact lean in further and push harder. [00:05:01] S0: What was the scariest moment? [00:05:02] S1: The last twelve months, sasspocalypse, you're like, okay, great job building a system of record. You're now screwed. [00:05:08] S0: You're now worthless. [00:05:09] S1: Yeah, exactly. You're worth like, good job playing the game. Here's some steak knives. Parts of that are true and parts of that are not true. In the vein of you're only as good as the last thing you shift, you're like, great. What is the agent? You have all this data and a system of record. Fine. What the heck are you doing with it? [00:05:22] S0: Similar about what that's felt like. Roughly, Vanta is a business that is growing very fast by historical standards with very high margins. Yes. Which four years ago is considered like the best business model ever. Nothing changed about that. I think you're probably growing faster. Yes. And the margins still really high. And yet the market has decided that the multiple for a business like yours is a third of what it used to be or a quarter of what it used to be. What has it been like to live through that as one of those entrepreneurs?
00:05:46 · Christina Cacioppo
[00:05:46] S1: Cognitive dissidents. You've got to hold two things in your head, right? One is, I think of the fullness of time. A 80% growth business with 80% margins will actually be better than over the same time period, run it out long enough. A 160% growth business with 30% margins. One of these will like return more cash in the fullness of time. But today, the latter is valued at three x, four x the multiple of the former. It's a 10 x multiple of the former, right? And so there's a part where you're like, hey guys, everyone's being irrational here. This is a good business and you have to keep doing things that make business sense and doing the things that customers want, which may or may not be token pricing models that put you more in the latter category than the former profile. And then there's like a very clear like game on the field piece. Well, if you need to be financed, again, you're looking at investors today, many of whom are kind of AI maximalists. Talk to firms that are like, yeah, we'll invest in the labs and we'll basically invest in tractors in Iowa. Nothing in between. Robotractors in Iowa at a lab. And like everything else. You're like, interesting point of view. And from a like talent perspective, you hire ambitious people who want to do things. And if it feels like they're not in the right boat, they're going to change both. The talent war part is very real too. So you've just got to live with the fullness of time. I think this will all sort itself out and you have to live for the
00:07:11 · Patrick O'Shaughnessy, Christina Cacioppo
[00:07:11] S0: fullness of So there's this funny fear that now like bending spoons is the grim reaper in the hallway, you know, meme or whatever. No one wants to be a bedspoon. Love bedding spoons, by the way. I think it's an interesting question of the siren song right now is sell tokens via agents for security and compliance, I'm sure, or something like this. [00:07:28] S1: Lots of thoughts on this. [00:07:29] S0: I'm just so interested by companies like yours that were sort of winners of this last era that now have to make a set of decisions. Look at the ten year rate, the cost of capital is going up because you can put lots of money at really high return in AI stuff for the time being. Someone looking at your business is like, well, I want higher returns or the same returns. And I get that through agents or something. Talk me through what it's been like to make the decisions. What are you thinking today? Do you think of yourself as an AI business? What's that
00:07:29 · Patrick O'Shaughnessy, Christina Cacioppo
[00:07:29] S0: I'm just so interested by companies like yours that were sort of winners of this last era that now have to make a set of decisions. Look at the ten year rate, the cost of capital is going up because you can put lots of money at really high return in AI stuff for the time being. Someone looking at your business is like, well, I want higher returns or the same returns. And I get that through agents or something. Talk me through what it's been like to make the decisions. What are you thinking today? Do you think of yourself as an AI business? What's that [00:07:53] S1: look So we do. When we go benchmark where we are from a agent in our product perspective against quote unquote AI applications, we have yet to find someone who is further along. You could be like, we're doing a bad job looking is the obvious critique there. We are like constantly going to the set of names you imagine when you think AI applications. And generally finding they're not yet where we are, where an agent is doing most of the work. It's chat based, but there's like long running agents. Our agent is auto generating UI on the fly. Because sometimes you want chat, right? And sometimes you want UI, but we just have an agent that is building UI, user can do something, comes back in the flow, keeps it going, very much optimized around the like, keep the user going in the flow loops. [00:08:44] S0: So I make sure I understand. Meaning you are like a watchdog that's always on watching the security...
00:08:44 · Patrick O'Shaughnessy, Christina Cacioppo
[00:08:44] S0: So I make sure I understand. Meaning you are like a watchdog that's always on watching the security... [00:08:49] S1: So you definitely that. But in some ways you're like, you could do that in the past with just like monitoring and alerting. Uh-huh. This is more like the Vanta product experience is now oriented around an agent that is bringing you as a user things and often saying, hey, I went and did this for you. Are you good with it? Then I will go do it. Okay, great. The next thing I think I should go do... [00:09:08] S0: What's an example? Just like ground that an example. [00:09:10] S1: Someone just left your company and you didn't get them out all of their accounts. I just wrote a custom agent for you that will go do that. Do you want me to go turn this on? Great. Do you also want me to go remove accounts, access from these three people? Great. [00:09:22] S0: So it's not just here's a red alert that someone didn't meet the It's monitoring like too many It's like
00:09:22 · Patrick O'Shaughnessy, Christina Cacioppo
[00:09:22] S0: So it's not just here's a red alert that someone didn't meet the It's monitoring like too many It's like [00:09:28] S1: do you like to do this? We're taking a lot from the AI labs and their UI, it's like, you want me to this one? You want me to this always? Great. The idea is like the agent will just be doing more of this work with the user's permission. But it's like, they tell us to go do it, we're just going to go. In the course of that, we end up using a lot of tokens. We have talked to our customers a lot about token based pricing. And I think what we've generally heard is like people are real smart. So if you try to charge them based on tokens, they are very quick to say, oh, you've just marked up a CLOUD token forex. Are you forex as good as CLOUD? I don't know. Let me go try it out. You actually put yourselves in a competitive position against the models that probably no application really wants to. Like we can talk about what Harmit is. You don't want to get there. What we've seen on token pricing is if you're trying to markup at all, users are very smart and you will lose on that comparison. You can like not markup. And this gets to the margin question. But anyone who is marking up Cloud Token Forex and trying to pass that off to their users, I think, is saying that we're eating the token cost right now. [00:10:33] S0: We're just taking lower margin.