Summer Bonus Session: Amber and Rachel on AI's Reckoning, Women's Health, and America's Industrial Moment

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Welcome to First Builders, everyone.
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As you can see, today it's just Amber and me here, and we're gonna be chatting through without our typical guests that's on here.
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Um, but we're gonna be chatting through a little bit more about some broad trends that we've been seeing in the past three to six months.
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And yeah, excited to kind of dive into a little bit of a different episode for you guys today.
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Yeah, absolutely.
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And if you're not familiar, we're the Council Capital.
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So we invest all day long in early stage companies, usually their first round of capital right after formation.
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Sometimes it's just two co-founders and a product.
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And so we have a sort of unique vantage point talking with all these guests on First Builders, but also investing in all these companies and seeing how they're growing, especially in this moment with AI, you know, hitting every single industry that we invest in.
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So really excited to dive in.
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And it was fun for me to even like stand back and see like what has been happening over the three past three to six months and what observations do we have.
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So excited to dive in.
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Yeah, absolutely.
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So the first one that I actually have on here is just like what I've been hearing like evolve around agents versus what's been promised.
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So I feel like when agents first came out, which is kind of wild, like just the beginning of this year, everyone was like, oh my gosh, they're gonna take over everything.
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We're gonna have this cop, like the SaaS apocalypse, all the software, you know, stocks came down.
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But I think like in the last probably like a couple months or so, we've been hearing a lot of like enterprise companies just saying, like, this is not what we were promised, you know, in terms of what we're building in-house, because the cost of tokens and running these agents ends up being just even more than an FTE would be.
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I was talking to someone who said that they were working with an enterprise company that was replacing an FTE for a particular task and they were running this agent and in one week spent, I think, 100K on the agent, which is way more than what that FTE would have cost anyway.
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So yeah, yeah, that's crazy.
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And I think there's been a lot of talk about token maxing.
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Like that was the thing probably, you know, three months ago.
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And we even hear like private conversations happening that maybe aren't seeing the light of day on the news or on X.
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You know, I sat around a table with a bunch of CFOs of like mid-size to enterprise level companies, and they were all just saying, like, it's right around the corner.
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Like people have been saying, CEOs have been driving, like, let's use as many tokens as possible to show that we're using AI and explore what's possible with AI.
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And it's gonna become like headcount planning, where all of a sudden we had, you know, could hire whoever you want.
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And now it's like, actually, no, we did a little bit too much.
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So we're gonna have to pair back.
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Um, so I think it's gonna be the same with tokens now, where it's like they're no longer to have these leaderboards where it's like whoever you spends the most tokens wins this quarter and gets some award, because that can drive really weird, perverse behaviors and it's super expensive.
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And Rachel and I have even had like a private conversation with uh one of our angel members who's, you know, VP level at a like mid-size, interesting company uh in tech, and they actually had to fire somebody because they used so many tokens that it was like detrimental to the entire company.
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And you're not hearing about those stories in the news.
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You're hearing people brag about how many tokens they're using, but it can actually be like that detrimental.
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So we still don't know what this person was doing with all those tokens and what happened, but it was just interesting to hear that actually happening in practice.
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Totally.
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And I think that that just like changes, I think, the outlook for companies and startups in the ecosystem too.
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Like I know you and I have discussed that we're super bullish still on that application layer, just because in especially in the legacy industries and these like large enterprises, you're you're talking to people who have specific outcomes that they're trying to achieve and specific types of workflows.
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And, you know, they're not going to be building their own agent for every single thing, especially for something that's like not quarter their business as well.
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I mean, SAS is not dead.
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Like we're continuing to see our top vertical AI companies selling into mid-sized companies, enterprise level, Fortune 500 level companies.
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And it's not just for paid pilots or the first year of service.
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They are renewing, they are growing contracts.
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These companies are like exceeding every single quarter's targets in terms of new ARR coming in, existing ARR increasing.
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And these are targets being set by their boards like very, very aggressively.
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So to me, like there's a disconnect between what we're hearing, you know, out there that SaaS is dead or vertical AI is dead versus reality of how these companies are still growing when they're doing a good job and solving a real need.
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And I think to your point, Rachel, not everybody is a builder and tinker.
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And not everybody, even though it's easier to code products now, you still have to maintain those products after you build them.
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And, you know, companies want customer support.
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They want to know that the workflow is designed for them.
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Um, they don't want to have to be getting into the nitty-gritty detail every day or recoding something just because it's not working the way that they want it or they have an evolving need.
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So I think just being able to like, you know, pick up the phone or log into a website and say, hey, I can get the help that I need and they're gonna know what they're talking about because they're in it deeper than I am, it goes a really, really long way.
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So we're still investing in application layer vertical AI right now, especially in those critical functions like compliance and legal.
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Yeah, absolutely.
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And the other thing that I was thinking about this with the token maxing is that there's probably something that startups can do to make their pricing a little bit more transparent, like either outcomes-based or something.
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I'm not sure what the answer is here, but I do think that there's gonna be some startups that are able to win because they're also garnering that trust from a pricing perspective, especially since enterprises want a predictable just price and budget as well.
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Yeah.
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Yeah, exactly.
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And then there's also been this uh doom and gloom picture that's being painted.
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Like not only are we hearing SaaS is dead, which is not true, but we're also hearing AI is gonna take over the world and it's just gonna be a few companies running the world.
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Number one, anthropic.
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I this is a little crude, but I even saw that Naval on a recent podcast said, like, the only according to the AI labs, um, you know, the future is only for anthropic employees and sex workers of anthropic employees.
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And I think there are like he was joking, but also we are hearing that kind of stuff from people, and it's indicative of the moment that we're in and the fear that's out there.
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And I think it's wrong for several different reasons.
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Number one, that doesn't even take into account all the physical industries like construction, agriculture, manufacturing, healthcare, where AI is a support tool.
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It's not going to be taking over everything.
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And then second of all, the average consumer, sh I wish people would realize, like when we're they're reading these headlines, that companies like Anthropic and OpenAI are planning to go public in the next six to 12 months.
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And so they need to have the most grandiose vision possible for investors out there to be able to, you know, raise and go through the IPO on the terms that they want.
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And so just know that everybody talks their own book to an extent.
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And some of it's true.
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So like be prepared and use AI tools and think about what new things you can do with those tools, because that will lead to promotion.
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It will lead to you being able to run businesses in the way that you haven't before.
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But at the same time, take it as a grain of salt and try to, you know, flip your perspective to be optimistically like, what am I going to do with this new tool?
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Versus like my life is over because this new tool is out there.
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So I just think there's like a wide disconnect between like the messaging that's out there, the reality that we're seeing, and then like the fear that's in the marketplace because, you know, these companies are incentivized to make statements like that.
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Totally, totally agreed.
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I mean, I think that, you know, I think that we might have talked about it even on the podcast in previous episodes before, but even going into other cities, I think I was in Atlanta and taking Waymo's there.
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And people there were like, wow, like, you know, I'm not sure about taking this.
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Like, what was it like?
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They wanted to just like hear about the experience of taking it, like once I got out of there.
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And I think that just speaks to like think about like what's happening kind of beyond even like the silicon bubble or what you're seeing on Twitter with regards to what AI is or what people are saying about AI.
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So I think it's really important for like startups to just like take that step back and take that bigger picture as well.
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Absolutely.
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Do you think we're in an AI bubble?
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And is it gonna pop and how bad is it gonna be?
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Okay.
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I think that there is going to be an AI reckoning of some sort.
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I don't think it's like a complete bubble, but I do think that companies are going to really rethink like how they're leveraging AI.
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And it's not gonna be this like end all be all for everyone, just against given the trends that we're seeing and just given the realities, I think, of like, you know, how things are going to operate.
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I agree with you.
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I I don't necessarily think that we're in a bubble, but I do think, like you said, there's gonna be a correction.
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And I feel like I see that most intensely in the valuations that we're seeing companies raise at right now.
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Um, I mean, valuations have been crazy, even at pre-seed.
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We're seeing a lot of companies try to raise with, you know, only pilot revenue or no revenue at all, and trying to raise at 20 million to 30 million post money.
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And this is another thing where like the headlines don't match reality.
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We're seeing a lot of those companies struggle to find a lead because they're trying to aim so high.
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And the lead, whether or not that founder's calling it a seed round or a pre-seed round, the lead investors are viewing it as a pre-seed round.
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And I think the bar is even higher right now for pre-seed round or seed round to get done because it is so easy to build an MVP product, put it in front of customers, see if it generates revenue, see if you have any product market fit whatsoever before you go out and raise capital.
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So then when founders come in without those things and they're trying to raise at a valuation that is like two or more times higher than it has been in the past for a company at that stage.
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What we're seeing is like deals just kind of stall at that stage while they're looking for a lead.
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They may get a lot of interest from angels and smaller firms to participate.
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But everybody's like, you know, I'm a little nervous to participate until there's a lead that's willing to set those terms.
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And then leads are not really wanting to set those terms.
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And I think it does happen for a few companies, like you can be anointed by Sequoia or, you know, one of these other kingmaker firms because they have to write bigger checks.
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They have to invest in larger funding rounds in order for their fund to be able to invest because their funds are so big.
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But for the average VC firm that founders are pitching, that's not an enticing deal for their portfolio construction and doesn't make sense with some of the other deals we're seeing.
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So that's been also, you know, interesting to think for the ones that are raising as those at those really high valuations with very little traction, you know, what's going to happen in one or two fundraising rounds where they have to show the data and it's not there.
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Totally.
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I I I've been thinking about that too, and even chatting with like different founders about this is like, can you actually grow into that valuation?
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Like if you realistically think about, you know, your ICP and your ability to catch that market and whatever your distribution edge might look like, you know, making sure like hitting those milestones is is actually achievable because, like you said, once they go to that next like one or two funding rounds, they may not be able to live up to that valuation and have to raise either a down round or something else, which which wouldn't be great.
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Absolutely awesome.
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Well, speaking of distribution, one of the other trends that I feel like we hear a lot just across kind of our community and across founders is being able to leverage actually community itself as a distribution channel and a unique distribution edge.
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And maybe we're biased in this because we also leverage that here at the council as well.
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But we're just hearing this across big companies, small companies, in our portfolio, outside our portfolio, that has really become like a unique thing that founders are able to drive for their companies.
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So funny.
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Rachel and I did not talk about our topics before this episode.
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And that was top of my list too, in terms of what we're seeing across our portfolio, in terms of how companies are winning and the type of companies we want to be investing in for tomorrow.
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When I hear a founder say, when I ask them how you're gonna grow your company, and they say, I'm just gonna go to conferences where my customers are at and have a booth there.
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To me, I'm like, that is that is yes, table spable stakes, yes, but that is not a creative go-to-market strategy.
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And all of your competitors already do that.
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And so what I like to see is, you know, we're interested, we're gonna be, you know, hosting this series, pulling together our champion users and champion buyers, be able to provide value for them in some way before taking something from them, give them something first, building that community and building brands too around the community and creating a lot of, you know, just brand ambassadors out there from your own customers and the people that you bring into that community.
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So I know recently we went to GCAI's summit, and it was interesting because you see this user like general counsels, um, and they just felt so proud to come into a room together and be like, we are leaders in AI, we're coming together around AI.
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Um, this is our moment to own.
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And so just like giving a neglected user a space and a community and a brand to rally around goes a really, really long way, not just in terms of getting into one door, but in terms of them recommending you to others and everybody feeling like that is a product we need to use because it's built for us.
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And so we've seen that also in Joyful Health, you know, just bringing together community around medical practices and the people that own them and run them so that they can run their back office for those find for those medical practices.
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So yeah.
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That's what's interesting to me is like the community-led growth.
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Totally.
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Joyful Health is also tapping into just like well-known health care networks and health tech networks.
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Like they're running education courses with a partner at a Pocket Health for just medical billing.
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And this is such like an antiquated course.
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I remember Eliana talking about this, how you know the certifications that you get, like they're like these like 90s style, you know, courses that you're like taking, rarely updated.
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A lot of what you learn as a medical biller is actually on the job and going through it and the trials and tribulations of actually billing.
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And they're now delivering it in a way that is much more digestible, you know, much more modern as well, and and you know, actually entertaining and people like taking it.
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And I think that is also creating an area of trust as well with them.
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And I think that's that's huge, especially if you are an early stage startup.
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Like, why should these bigger companies or users actually trust you and and creating this community, creating this kind of like a unique go-to-market edge through some sort of education can be that value that you were talking about before they're actually asking for taking something.
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Yeah.
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Absolutely.
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Yeah, cool.
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That's what I have right now.
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Oh, I do have another one actually on here.
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So I've been thinking a lot about like the obviously the the healthcare space and um some of the things that have been really, really just like resonating and popular this year.
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I think like there's probably like three main things that I'm seeing.
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I think there's a lot more interest in anything that has like consumerization or better consumer decisions within healthcare, whether that's on the health care delivery side or on like the payer decision side, but just like companies that are able to enable better consumer decisions.
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So that's one.
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Another one is there's way more interest um in clinical decision support.
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So actually augmenting doctors with AI.
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We saw it like earlier in this year, there was a company, um, Doctronic, that was prescribing, you know, low-risk kind of prescription refills in Utah through an AI doctor, essentially.
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And so just seeing like more and more of these things like come out.
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And then the third one is just uh really strong, just I think, increase in women's health this year.
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I think starting from even JPM at the very beginning of the year, there were a lot more designated sessions on women's health that were probably some of the most well-attended sessions and things like that, and a lot more discussion around it as well, even on the main stage, not just the different side events.
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Um, so I'm super excited about all these different trends, and we're seeing that at the early stages with the types of companies that are that are pitching the council as well.
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Yeah, I had the women's health one on my list too.
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This is something we've always cared about.
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Obviously, you know, we invest in founders of all backgrounds, but Rachel and I both being women and running a community of female angel investors as one of our deal channels, there's a lot of passion around women's health.
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And so it's always been interesting.
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But now what we're seeing is like verified data showing that women are top consumers of healthcare, and healthcare is a huge area, huge market for these consumers.
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And so um, I had the pleasure of going to the Women in Venture conference hosted by Citizens Bank recently.
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And there were panelists there in a small room of people, you know, contributing to the conversation.
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Um, but we had folks in VP level or above at companies like MIDI Health, Function Health, Aura.
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And it was fascinating to hear how even some of these companies that are, you know, positioned brand wise for the general population, like function health and aura, they are very, very seriously looking at women's health as a way to grow their business to the point where Aura really kind of internally has pivoted toward that as a main focus area.
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I think, you know, I'm gonna quote my memory, but and the exec that I heard in in person saying this, but I think women are now 70% of their user base and have a 90% um retention rate.
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And so that's incredible for any product out there.
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And that's a user base that you need to take really seriously.
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And I think publicly they've said like two two-ish years ago, they said it was like 59%.
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So almost 60% of their users at that time were women.
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And I think since focusing more on women, they've seen that even go up dramatically.
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And now they're, you know, that's a huge contributor to uh them having grown into an$11 billion evaluation, and now there's a rumored IPO.
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So that's just been really, you know, fascinating to hear uh, you know, what's happening there and that this is now becoming something that everybody invests in and everybody should be thinking about, not just women.
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Totally agreed.
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And it's awesome to see that, and it makes a lot of sense too, when you actually take a step back to think about it, like why it would be such a strong retention driver, just given like how there's so many different phases of life that affect women's health specifically.
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And so it makes sense.
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Like you want to wear it, you know, before you get pregnant, when you're pregnant, when you go through like other um, you know, perimenopause or menopause as well, right?
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Like you can track all that differently versus I think like for for men, it's like they don't have the same kind of like cycle and phases as well.
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So yeah, exactly.
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There's just a lot of complexity.
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There are a lot of different like segments of the market to tackle and then grow from there.
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Um, and I've also loved seeing Brian Johnson, you know, the like top person in longevity, all of a sudden he's excited about women's health too.
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Um and for anybody that doesn't know Brian Johnson, I think everybody does at this point, but uh anybody who's not on Twitter might not.
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Um, you know, this is somebody who's put all their data out there in kind of a human guinea pig trying to live forever.
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He's got a Netflix special, et cetera.
00:18:47.359 --> 00:18:54.240
But recently, um, you know, he's fallen in love and he's very, very invested in his partner now living forever as well with him.
00:18:54.400 --> 00:18:59.440
And so that's been awesome to just get like a new voice in the ecosystem talking up for women's health.
00:18:59.519 --> 00:19:03.759
Cause I think people, women have been looking at Brian Johnson for a while, saying, hey, that's cool.
00:19:03.920 --> 00:19:05.519
Where's the female Brian Johnson?
00:19:05.599 --> 00:19:07.440
We want somebody that we can look up to like that.
00:19:07.599 --> 00:19:15.839
So I'm really excited to see not only women getting excited about this, but men taking a step and, you know, getting excited about solving some of these problems for us too.
00:19:16.160 --> 00:19:16.400
Yeah.
00:19:16.559 --> 00:19:21.279
No, I'm I'm super excited about like what we're gonna continue to see on the healthcare space.
00:19:21.359 --> 00:19:25.359
Like I feel like technology has always been a lot slower, like within that industry.
00:19:25.519 --> 00:19:34.799
And I think just like the last two years have really been an inflection point from like where AI is to like actually drive some of the changes that are super exciting to see now.
00:19:35.039 --> 00:19:35.279
Yeah.
00:19:35.519 --> 00:19:49.759
I was thinking about another thing that I've seen as we're investing in healthcare, especially with you leading the charge in that area, is that there's just this disconnect between established pharma and medicine and then like the emerging technology and the consumer demand for preventative health.
00:19:49.920 --> 00:19:52.559
So, I mean, in my hot take is I love big pharma.
00:19:52.720 --> 00:19:54.960
I actually spent my early career at Eli Lilly.
00:19:55.039 --> 00:19:57.359
It's still to date one of the best places I've ever worked.
00:19:57.519 --> 00:20:08.640
Um, and I saw a lot of excellence when it came to managing patient safety, employee safety, and then just like operational rigor in manufacturing, which I'm a huge nerd about, but vertical integration, et cetera.
00:20:08.720 --> 00:20:12.640
They do all of it, you know, better than any company I've ever been on the inside of since.
00:20:12.880 --> 00:20:19.039
That said, one other thing can be true, which is that I'm really excited to see more power in the hands of consumers.
00:20:19.200 --> 00:20:30.559
You know, people want to know, they don't want to just go to their annual physical and have a few biomarkers taken and hear their fine and then later discover they've got like stage four, stage five cancer or something.
00:20:30.720 --> 00:20:33.119
They want to know, they want more leading indicators up front.
00:20:33.200 --> 00:20:38.480
And they're saying with all the technology we have today, why can't I get more information, see more leading indicators?
00:20:38.720 --> 00:20:46.799
So I'm really excited about things like function health and some of these scans that, you know, we've been hearing about for years, but they're starting to get a little bit more affordable for people.
00:20:47.599 --> 00:20:53.759
And, you know, sadly, I still think that we're at the point where it's going to be the most wealthy that can take advantage of some of these things.
00:20:53.920 --> 00:21:08.960
But I think as we see more and more people adopt things like function health, paying$365 a year for extra blood tests and then pushing that on their doctor to get more testing done when they need it, or saying, hey, I'll pay out of pocket for an early mammogram or an early heart CT scan.
00:21:09.119 --> 00:21:28.799
And that data coming out of all of those, you know, users' experiences, I'm excited to see what happens with health insurance, you know, long-term, seeing some of the impacts of some of those things, because that's going to shift the entire system, hopefully, for as long as health insurance exists and as long as employers are still paying for health care, you know, they ultimately don't want to be paying so much for healthcare.
00:21:28.880 --> 00:21:38.240
And so if we can show that preventative health actually moves the needle and is going to lower cost of healthcare overall for everyone, if we can just deal with things up front, I think that'll be amazing.
00:21:38.319 --> 00:21:41.680
So I think we're somewhere in the middle of that journey because we still have like butting heads.
00:21:41.759 --> 00:21:46.240
Like, you know, you hear doctors saying, Oh my God, I hate all this preventative health stuff.
00:21:46.400 --> 00:21:51.279
Patients are coming to me with paranoia about one little biomarker that they saw off and now they think they have cancer.
00:21:51.519 --> 00:21:55.599
But at the same time, it's like, well, we do want to see what's going on on the inside of our bodies.
00:21:55.759 --> 00:21:58.799
So yeah, curious what you're seeing and thinking about all this too.
00:21:58.960 --> 00:21:59.200
Yeah.
00:21:59.279 --> 00:22:11.920
I I Do you think that I've heard, like, you know, the doctors that are getting kind of the patients that are more informed, like at least anecdotally, like those doctors are actually happy that their patients are more informed.
00:22:12.079 --> 00:22:21.519
But it's interesting, I've seen a lot of articles pop up of how patients can actually go to their doctor about having this additional information and the way to word it.
00:22:21.599 --> 00:22:32.160
And like, you know, almost like a like say, you know, being like, hey, I still want you to like tell me what's kind of best here, but here's some information that I found.
00:22:32.240 --> 00:22:38.480
Um, and there's like just certain ways to word it to like help remove some of the friction in that as well, which is kind of interesting.
00:22:38.640 --> 00:22:51.519
Like that this is like, I think it was in either the New York Times or Wall Street Journal where there was advice to patients on how they can take their AI results or other like, you know, tech results to um to doctors to to advocate for themselves ultimately.
00:22:51.759 --> 00:22:56.720
But it's not, you know, it's it's not new, which is great, but I'm glad that we're seeing more of it.
00:22:56.880 --> 00:23:05.920
I think historically we're seeing more of these like kind of patient advocates when people were like much more chronically ill, had certain rare diseases, like they really had to take their health into their own hands.
00:23:06.079 --> 00:23:08.799
And now we're seeing kind of like more mass population around it.
00:23:08.960 --> 00:23:26.960
I think the biggest thing is now will the health education system be able to evolve to actually train their doctors to think about how they incorporate this kind of interaction as well as you know, in general to how they practice.
00:23:27.200 --> 00:23:27.359
Yeah.
00:23:27.599 --> 00:23:30.720
The investor in me hearing you say that is like, what a time to be alive.
00:23:30.799 --> 00:23:33.839
This is so exciting because there's so many problems to be solved.
00:23:33.920 --> 00:23:44.319
I mean, you have this new technology and you know, that longevity mixed with preventative care, mixed with AI, it's just it's gonna disrupt everything and that's gonna create all these ripple effects.
00:23:44.400 --> 00:23:46.720
Like you said, I wasn't even thinking about the education piece.
00:23:46.799 --> 00:23:47.920
So that's exciting.
00:23:48.240 --> 00:23:48.720
Yeah.
00:23:48.960 --> 00:23:51.200
Lots of lots of exciting things, I think.
00:23:51.519 --> 00:23:52.079
Yeah.
00:23:52.799 --> 00:24:02.319
And then on the industrial side of our investing, which I spend a lot of time in, this is the time for vertically integrated manufacturing and the industrial Titans of tomorrow.
00:24:02.480 --> 00:24:09.680
I really think that we're gonna see like the Vanderbilts of tomorrow, you know, building companies right now that are gonna be lasting for decades.
00:24:09.839 --> 00:24:14.640
So, you know, just for context, I spent the first half of my career in hardware and manufacturing.
00:24:14.720 --> 00:24:25.759
So I've seen, you know, operations like chrome plating, die casting, plastic injection molding, you know, circuit board, surface mount technology, final assembly test and packaging.
00:24:25.920 --> 00:24:38.799
So everything from like, you know, tiny little parts being made to huge assemblies coming together and being packaged and sent off to consumers, and been on the floor of manufacturers like Foxconn, Pegatron, San Mina, and Fluxtronics in Asia.
00:24:38.960 --> 00:24:44.799
And, you know, separately as a consumer, I've seen huge successes in companies like Aura Ring and iPhone.
00:24:45.039 --> 00:24:56.319
But often those eclipse all the failures that have happened within consumer electronics, consumer products, hardware, and not only that, but the manufacturers that support them and some of these physical industries that support them.
00:24:56.480 --> 00:25:01.440
And I think the takeaway for me, having spent so many years in hardware, was that hardware was too hard.
00:25:01.519 --> 00:25:05.440
Um, it was so expensive to get a hardware product off the ground and it still is today.
00:25:05.599 --> 00:25:15.279
But another takeaway for me was that running factories could be great for like a PE roll-up strategy, but terrible for early stage venture if you wanted top decile performance.
00:25:15.440 --> 00:25:21.200
And that was largely because, you know, you need so much capital to launch something like a manufacturing like factory.
00:25:21.279 --> 00:25:27.440
And same thing if you're doing this in agriculture, it takes a lot of money to build a bunch of farms and a bunch of robotics to be generating plants.
00:25:27.519 --> 00:25:28.960
And same thing in construction.
00:25:29.119 --> 00:25:38.160
You can get these businesses off the ground and they can be great, but are they gonna grow by 200x um, you know, after your dilution or even 100x after all of your dilution of your initial investment?
00:25:38.400 --> 00:25:49.119
Because what happens with these companies is they would raise one round of capital and like six to 12 months later, they're like, we're growing, and so we're gonna need more capital to keep growing because we need more equipment, more space, more people.
00:25:49.359 --> 00:25:55.440
And so, like the operating expenses and the upfront like capital asset expenses are just so huge over time.
00:25:55.680 --> 00:26:04.000
And and I think some of that is still true today, but I really think this is the time where we're seeing the shift in operating expenses or opex going down.
00:26:04.160 --> 00:26:10.480
You know, we're still gonna need a lot of equipment and a lot of space to launch businesses like this, but you can do more with less.
00:26:10.720 --> 00:26:22.000
And that may mean less employees, but on a whole, across the United States, it's actually gonna be more employees in manufacturing and agriculture and construction because these are the industries we need and we need so much more capacity than we do today.
00:26:22.319 --> 00:26:31.680
We can bolster those things with AI and robotics so that it's not, we're not strapped down by so much expense to get these companies off the ground that it doesn't even make sense for our asset class.
00:26:31.839 --> 00:26:38.960
So I'm super excited because I get to be a geek in like my early career area and be investing in venture scale businesses in this space.
00:26:39.039 --> 00:26:41.200
Um, and that said, I'm going in eyes wide open.
00:26:41.279 --> 00:26:48.960
Not every company that is branding themselves as a venture scale company in like manufacturing and agriculture and construction is actually going to be venture scale.
00:26:49.200 --> 00:26:55.279
But I think the first one where we actually like, you know, took this risk at the council fund was Knox Metals.
00:26:55.359 --> 00:27:02.880
Uh, you know, we've been investing in software for industrial sectors for, you know, six years and four years with our first venture fund.
00:27:02.960 --> 00:27:14.400
And now that we're investing out of fund two, and all of this is happening with AI and robotics, it was like, hey, I maybe we should take a second look at not only the software that's adjacent to these industries and supporting them, but the industries themselves.
00:27:14.559 --> 00:27:18.240
And so Knox Metals was kind of the first deal where I felt like now is the time.
00:27:18.319 --> 00:27:22.160
This is the company and the point in the supply chain where something venture scale makes sense.
00:27:22.240 --> 00:27:23.839
And this is the founder to do it.
00:27:24.000 --> 00:27:25.680
We found a first builder founder.
00:27:25.839 --> 00:27:35.759
Sane had, you know, background in tool and dye industry growing up, background at Uber, just, you know, short stint there, but saw what it was like on the inside of a tech company, also spent some time in PE.
00:27:35.839 --> 00:27:39.599
So he definitely was thinking big and wanting to build something venture scale, which is very important.
00:27:39.759 --> 00:27:41.200
So that's something I'm really excited about.
00:27:41.279 --> 00:27:46.720
You know, you're seeing companies like Send Cut Send getting, you know, billion dollar valuations are above.
00:27:46.799 --> 00:27:50.480
And, you know, we've seen this with Hadrian as well, doing it for CNC.
00:27:50.640 --> 00:27:53.359
So I'm just excited for more of that and in our industry.
00:27:53.440 --> 00:28:09.279
And our job as venture capitalists is to look past the noise and everybody trying to do all the same thing and past the sort of like um, you know, bandwagon fans and try to find the real founders that want to build something venture scale in an area that makes sense and a port of point of the supply chain that makes sense.
00:28:09.440 --> 00:28:09.680
Yeah.
00:28:09.839 --> 00:28:11.200
And then how do you think about that?
00:28:11.279 --> 00:28:14.160
Like, especially when you went to reindustrialization.
00:28:14.319 --> 00:28:21.359
I'm sure I feel like this year it got like way more news and like even on Twitter, like more than it usually did.
00:28:21.440 --> 00:28:25.039
Um I'm curious like how it felt for you when you were there.
00:28:25.119 --> 00:28:30.799
I know you were mostly visiting like knocked metals, but yeah, I don't know if you saw anything like while you're walking around there too.
00:28:31.039 --> 00:28:31.279
Yeah.
00:28:31.359 --> 00:28:39.759
So I was actually, I didn't go to the conference, but I was in Detroit and I had a bunch of friends at the conference and that even, you know, were affiliated with running the conference.
00:28:40.000 --> 00:28:51.599
And what I saw just like leading up to it is, you know, so many folks that I know and venture that historically haven't invested in this space were like, I have to drop everything and go to reindustrialize in Detroit, which was really cool to see.
00:28:51.680 --> 00:29:02.079
And honestly, like we've seen VC firms that we've collaborated with on some of our vertical AI application layer deals now jump in and like get in this latest round on Knox Metals.
00:29:02.160 --> 00:29:04.960
And I just felt so happy and inspired to see that.
00:29:05.039 --> 00:29:11.039
You know, you can debate all day like, is this gonna be a trend that's gonna last forever, or are they just kind of jumping on on board for now?
00:29:11.200 --> 00:29:19.440
But I think it's great for the industry and and hard tech that you're getting interest from generalist investors because they have the the capital connections to scale.
00:29:19.519 --> 00:29:22.400
And so I think it's it's only net positive for everyone.
00:29:22.640 --> 00:29:30.559
The other thing I saw was just like a confluence of really exciting events, not only within our portfolio, but within the broader ecosystem as that event was happening.
00:29:30.720 --> 00:29:34.720
So I know Atomic Industries was like opening up their first factory in Detroit.
00:29:34.960 --> 00:29:37.119
That week, I think they were doing like the ribbon cutting.
00:29:37.279 --> 00:29:48.319
Knox metals, you know, they uh they shared the news of their latest like wildly oversubscribed seed round the day before Industrialized was starting, and their factory is literally in Detroit.
00:29:48.400 --> 00:29:50.160
So a lot of people were kind of coming by.
00:29:50.319 --> 00:29:53.440
I joked with Zayn, the founder of Knox.
00:29:53.519 --> 00:30:00.160
He said this is like the most distracted his employees have ever been, just because so many people wanted to come and see Knox Metals, myself included.
00:30:00.319 --> 00:30:01.440
And so that was really cool.
00:30:01.519 --> 00:30:11.200
And then you had the send cut send news about Sequoia's recent investment and just, you know, the fact that you can have multi-billion dollar companies, you know, growing and exiting in this space.
00:30:11.440 --> 00:30:20.079
And so just a lot of support support from, you know, emerging and established founders and showing that we can actually have these huge successes in this industry.
00:30:20.240 --> 00:30:21.839
So I think that was the excitement.
00:30:22.000 --> 00:30:25.599
And everybody was just excited to be there together, feel the moment together.
00:30:25.839 --> 00:30:34.240
Um, and like I said, I wasn't in the room because I was just nearby and I had to, I had a lot that I wanted to do at Knox while I was there and then get back to San Francisco.
00:30:34.400 --> 00:30:36.559
But it was just a really cool moment for the industry.
00:30:36.799 --> 00:30:37.680
Yeah, that's really cool.
00:30:37.759 --> 00:30:55.440
And what you said about like even just having the generalists getting interested in the sector, it reminds me of just like, I feel like in healthcare, oftentimes people will, you know, recommend for startups to have like that mix of the generalist investors as well as like the healthcare specialist investors as well.
00:30:55.599 --> 00:31:03.519
Because then you get like really great advice from kind of like all sorts or all types into your, you know, into your board and just on your cap table.
00:31:03.680 --> 00:31:09.359
And so I can imagine the same can be really true here as well for like some of these industrial type of companies.
00:31:09.599 --> 00:31:09.920
Yeah.
00:31:10.079 --> 00:31:16.319
I should also mention while I was out there, you know, I had no intention of like recording content for social media while I was out there.
00:31:16.559 --> 00:31:22.079
But, you know, I went to Knox's factory and I took a few videos while Zayn was giving us a tour.
00:31:22.160 --> 00:31:26.000
And then later I was like, hey, I should just like create a little reel and see what happens.
00:31:26.240 --> 00:31:27.359
Maybe people will like this.
00:31:27.440 --> 00:31:42.799
And I have never seen such excitement just from, and I look at that, like if you post something on TikTok and Instagram, you're really seeing what do like general Americans think of this company and this product and this industry versus what do VCs and like tech people and founders think, which you would see on Twitter.
00:31:42.960 --> 00:31:44.000
So that was fascinating.
00:31:44.160 --> 00:31:49.039
Like when I posted on Twitter, I got like, you know, hundreds of likes and a lot of comments and support.
00:31:49.279 --> 00:31:58.400
But when I posted on Instagram, it was like, I think now it's like 110,000 views, thousands of comments, ton of people DMing me, and most of it positive.
00:31:58.480 --> 00:32:01.519
There were like a couple of naysayers, but like 99.9%.
00:32:02.160 --> 00:32:06.160
People were so excited about a company that could be venture scale.
00:32:06.240 --> 00:32:13.039
It's creating jobs in America, it's solving for our like, you know, capacity issues that we have in this country.
00:32:13.279 --> 00:32:13.519
Yeah.
00:32:13.680 --> 00:32:16.640
You know, we don't have to outsource so much if we can do it ourselves.
00:32:16.720 --> 00:32:22.559
We can create a new whole class of jobs for young people coming out of university or choosing not to go to university.
00:32:22.720 --> 00:32:28.240
So it's just really like cool to see that support from people outside of our VC industry as well.
00:32:28.559 --> 00:32:29.039
Totally.
00:32:29.200 --> 00:32:34.400
And, you know, I know you mentioned like there was like some daysayers, but anything that goes viral, you don't like that's like the best.
00:32:36.000 --> 00:32:36.720
Exactly.
00:32:37.119 --> 00:32:37.920
You yeah.
00:32:38.079 --> 00:32:43.519
I mean, otherwise, if you're just like going on something that's like everyone loves and it's not that exciting, probably.
00:32:43.759 --> 00:32:53.440
But if you find something that like there is a little bit of like yeah, controversy around it, I think it's like a much more exciting type of deal and probably like hits a little bit more deeper as well.
00:32:53.680 --> 00:32:54.160
Yeah, yeah.
00:32:54.319 --> 00:33:00.319
I feel so lucky that I've had some friends, or I do have friends that have built huge like creator brands before.
00:33:00.559 --> 00:33:04.160
And all of them have historically said you need those haters to go viral.
00:33:04.319 --> 00:33:07.039
So when I see it happening, I'm just like, thank you, haters.
00:33:07.200 --> 00:33:08.480
You know, I was prepped for this.
00:33:08.640 --> 00:33:14.799
Whereas I'm sure the first, you know, a general person, if you went viral and had like one person say something negative, you're like thinking about it for three days straight.
00:33:15.039 --> 00:33:21.359
Like I actually had somebody text me and be like, we wanted like our team was wanting to check in with you to see if you were okay.
00:33:21.440 --> 00:33:22.720
And I'm like, I'm fine.
00:33:22.880 --> 00:33:24.880
Like I am happy.
00:33:25.039 --> 00:33:26.079
This is exciting.
00:33:26.240 --> 00:33:29.920
And like literally, it was probably 99.99% positive.
00:33:30.079 --> 00:33:32.079
Like if you look at the amount of engagement.
00:33:32.160 --> 00:33:35.759
And people were even like emailing me, like, oh my God, congrats, this is so exciting.
00:33:35.920 --> 00:33:38.240
So that was awesome to see.
00:33:38.400 --> 00:33:40.079
But no, that's that's really cool.
00:33:40.160 --> 00:33:48.960
Yeah, I'm excited about this, and it's like, you know, in an area that I don't know very well because I haven't worked in it, but it's been really great to like kind of learn alongside you and like with the council as well.
00:33:49.119 --> 00:33:50.240
So yeah, likewise.
00:33:50.319 --> 00:33:53.119
And it's been awesome just seeing you dive into healthcare.
00:33:53.279 --> 00:34:00.640
And, you know, for those that don't know, you know, the council has historically always invested in healthcare, but it's the area where I had the least expertise.
00:34:00.799 --> 00:34:21.519
So bringing Rachel on as a partner to really come in and bring, you know, her expert knowledge, having coming from Komodo Health and Science Exchange and early career in life sciences has just been huge in terms of our ability to, you know, talk to all the interesting founders that come our way in healthcare and whittle down to the ones where we really think that it makes sense for our portfolio.
00:34:21.760 --> 00:34:24.559
So and I'm learning a lot by working with you too in these areas.
00:34:24.719 --> 00:34:25.519
So thanks for that.
00:34:25.679 --> 00:34:25.920
Yeah.
00:34:26.079 --> 00:34:26.800
No, I'm excited.
00:34:26.880 --> 00:34:31.280
There's like a lot of exciting deals that we can't share yet, but they're in the pipeline.
00:34:31.360 --> 00:34:36.239
So hopefully at some point in the future we'll have them as guests on the on the podcast as well.
00:34:36.480 --> 00:34:37.280
Absolutely.
00:34:37.599 --> 00:34:38.079
Awesome.
00:34:38.239 --> 00:34:40.639
I think those are all the major topics that I had.
00:34:40.880 --> 00:34:43.920
Are there any additional ones that you wanted to chat through?
00:34:44.480 --> 00:34:45.760
I think I got all of mine.
00:34:46.239 --> 00:34:46.880
So that's it for me.
00:34:47.119 --> 00:34:47.360
Nice.
00:34:47.519 --> 00:34:48.559
Okay, this is great.
00:34:48.719 --> 00:34:52.079
This is our most unscripted episode that we've ever done.
00:34:52.320 --> 00:34:55.760
So I feel like, you know, it was a it was a good first take.
00:34:56.239 --> 00:34:56.480
Yeah.
00:34:56.800 --> 00:34:57.360
Love it.
00:34:57.920 --> 00:34:58.400
Awesome.
00:34:58.559 --> 00:34:58.800
All right.
00:34:58.880 --> 00:34:59.920
Well, thanks everyone.
00:35:00.079 --> 00:35:01.519
Appreciate you all listening.
00:35:01.679 --> 00:35:04.320
And please do subscribe and share with a friend.
00:35:04.639 --> 00:35:08.320
We are and we're always really happy to get any reviews that you have as well.
00:35:08.880 --> 00:35:10.239
Yep, absolutely.
00:35:10.639 --> 00:35:11.519
Thanks everyone.
00:35:11.840 --> 00:35:12.559
Thanks, everyone.
00:35:12.800 --> 00:35:13.280
Bye.