YouSaid · the spoken record

Michael Eisenberg

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2024-06-19
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2024-06-19
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  1. “Whatever it is, I think it's slowing down. So, is that a trend? I don't know. I think we've squeezed a lot of efficiency out of businesses using kind of basic software already. And so to get to another level of efficiency or revenue generation is a big deal. I think also corporate buyers in whatever business they're in. What they're interested in is not the software to squeeze the incremental dollar of efficiency out of my business. Where's my new revenue opportunity from this? And that's going to require kind of a big leap. And you don't get that in traditional SaaS software.”

    2024-06-19 · The Twenty Minute VC · 20VC: Foundation Models are the Fastest Depreciating Asset in History, Lina Kahn is a Threat to American Capitalism, PE is Not Coming to Save the M&A Market & How China Could Overtake the US in the AI Race with Michael Eisenberg · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “Right, it's not a software business consulting business. So you have unique knowledge. By the way, McKinsey is also doing extremely well today in these at-risk fee businesses, right? They're not taking a lot of their fees today in kind of consulting fees, but they're saying we can improve your bottom line. We can improve your top line. And they go in there and they use a ton of software and a ton of data that they've bought and created themselves, right? The fastest growing business inside of McKinsey is software. And they go in and say, I can bring like a lot of really, really smart people and a lot of technological capabilities and upgrade your business into the next era. That either does or doesn't include off-the-shelf software. I don't know, but I think there's a lot less of it. Going forward. Again, you have to ask a very simple question. I'm more of a big picture guy than a micro guy, but why are so few of these companies going better than 15-20%? The public markets, you can barely find any. I think the market for purchasing software is slowing down.”

    2024-06-19 · The Twenty Minute VC · 20VC: Foundation Models are the Fastest Depreciating Asset in History, Lina Kahn is a Threat to American Capitalism, PE is Not Coming to Save the M&A Market & How China Could Overtake the US in the AI Race with Michael Eisenberg · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “I think you'll see a lot of companies build their own software, or you have tools that create kind of unique business processes software for a lot of these companies. I don't know if it's tomorrow or in five years, but I think there'll be more of that”

    2024-06-19 · The Twenty Minute VC · 20VC: Foundation Models are the Fastest Depreciating Asset in History, Lina Kahn is a Threat to American Capitalism, PE is Not Coming to Save the M&A Market & How China Could Overtake the US in the AI Race with Michael Eisenberg · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “I heard a rumor. I don't know if it's true, but I've heard it from three people now, which either means I'm in an echo chamber, or it might be true, is that Amazon has said, don't buy any more software. AI can take care of all the kind of business process needs we need in software. I think that's going to be a trend.”

    2024-06-19 · The Twenty Minute VC · 20VC: Foundation Models are the Fastest Depreciating Asset in History, Lina Kahn is a Threat to American Capitalism, PE is Not Coming to Save the M&A Market & How China Could Overtake the US in the AI Race with Michael Eisenberg · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “But I would assume that if you want to play kind of developer growth, which I think is a real trend, that's why you want to own Atlassian. There are more developers in the world today. It'll be interesting to see what happens with AI. But I think in general, horizontal SAS processes are going to be disrupted by AI. We just actually did a portfolio review. We looked at, we categorized our investments. Of the last 17 investments we made at Olaf One was a SaaS company.”

    2024-06-19 · The Twenty Minute VC · 20VC: Foundation Models are the Fastest Depreciating Asset in History, Lina Kahn is a Threat to American Capitalism, PE is Not Coming to Save the M&A Market & How China Could Overtake the US in the AI Race with Michael Eisenberg · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “Quite remarkable because most public companies today in the software space are going to tend to 20%, which is part of my peak SAS theory”

    2024-06-19 · The Twenty Minute VC · 20VC: Foundation Models are the Fastest Depreciating Asset in History, Lina Kahn is a Threat to American Capitalism, PE is Not Coming to Save the M&A Market & How China Could Overtake the US in the AI Race with Michael Eisenberg · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “I think this is big time NVIDIA being unique actually has real value. Again, provided that you have the growth and the gross profits, et cetera, you can't ignore that stuff. But all things being equal, if I have multiple ways to play a market, you'll get a lower multiple. If I have a single way to play a market evolution, I'll get a premium multiple.”

    2024-06-19 · The Twenty Minute VC · 20VC: Foundation Models are the Fastest Depreciating Asset in History, Lina Kahn is a Threat to American Capitalism, PE is Not Coming to Save the M&A Market & How China Could Overtake the US in the AI Race with Michael Eisenberg · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “Software has like a bond. Yeah, tons of growth funds and even PE funds seeking that they can predict the future revenue software. In some cases you can. It's not that you can't, but doing that is a strategy I think is both inherently risky and non-remunerative because it's really, really, really tough to be unique. When I first joined Benchmark in 2005, I had some time on my hands and have a portfolio. So I did this little piece of research to try to figure out why do companies get premium multiples. The obvious answer is high growth, but it wasn't always the case. And the thing I discovered, I kind of called and interviewed at the time sell side analysts on Wall Street who had a more prominent place in the world in those days. And in all my research, I can't wait with the following insight, which is companies get premium multiples when it's the only way to play a future trend in the public markets. If I think the world is going towards X, AR, whatever it is, and I'm the first AI company, the only AI in a given market, I'm going to get a premium multiple because it's the only way public investors can play that train.”

    2024-06-19 · The Twenty Minute VC · 20VC: Foundation Models are the Fastest Depreciating Asset in History, Lina Kahn is a Threat to American Capitalism, PE is Not Coming to Save the M&A Market & How China Could Overtake the US in the AI Race with Michael Eisenberg · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “Oh, so I don't think it's a more risky play than assassin. I'll argue that SAS is way more risky. One, because of the competition and price erosion. We had a false sense of security from models.”

    2024-06-19 · The Twenty Minute VC · 20VC: Foundation Models are the Fastest Depreciating Asset in History, Lina Kahn is a Threat to American Capitalism, PE is Not Coming to Save the M&A Market & How China Could Overtake the US in the AI Race with Michael Eisenberg · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “On the one hand, I never think about competition because I don't think that's what undoes companies, bad execution undoes companies. At the same token, I prefer actually market education. I prefer these completely uncharted spaces. A few examples. We just backed AI to synthetic biology and chemistry rocket fuel company. And you go, rocket fuel. So I went to very competitive. A lot of people provide rocket fuel, but there's nobody who provides synthetically engineered rocket fuel from the bottom up that's at one twelfth of the cost. And we may succeed. We may fail. I don't know. There's a lot of market education that will come to saying, hey, we're not going to take oil and refine it. Instead, we're going to build it for the bottom up. It's going to take a lot of market education to do that. But I think that's okay. I much prefer that.”

    2024-06-19 · The Twenty Minute VC · 20VC: Foundation Models are the Fastest Depreciating Asset in History, Lina Kahn is a Threat to American Capitalism, PE is Not Coming to Save the M&A Market & How China Could Overtake the US in the AI Race with Michael Eisenberg · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “That's not a specific niche, by the way. Those are classic areas where software has done work. There was Siebel, there was Salesforce.com, there was Zendesk, those are classic areas where people run to first. The more interesting places to invest, not to overuse Howard Marx's four quadrants of non-consensus right, is to look for kind of out there things that it's hard for people to compete in because you have specific domain knowledge that other people don't have.”

    2024-06-19 · The Twenty Minute VC · 20VC: Foundation Models are the Fastest Depreciating Asset in History, Lina Kahn is a Threat to American Capitalism, PE is Not Coming to Save the M&A Market & How China Could Overtake the US in the AI Race with Michael Eisenberg · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “Say about his insurance businesses that they thought they had 60 different databases, they found out, I can't remember if the number was, they had 600 or 6,000 different databases, they didn't talk to each other. It's like good luck. When I heard that, you know, I said, we should hold our eliminate for a long time.”

    2024-06-19 · The Twenty Minute VC · 20VC: Foundation Models are the Fastest Depreciating Asset in History, Lina Kahn is a Threat to American Capitalism, PE is Not Coming to Save the M&A Market & How China Could Overtake the US in the AI Race with Michael Eisenberg · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “So, what's an area that I think there can be efficiencies in? Places where there's a huge amount of paper processes, where people are overburdened, but it's compressible into a bunch of short workflows that you can kind of use AI to do right now. But I think kind of more broadly, there used to be nuclear countries and non-nuclear countries. Now they're going to be AI countries and non-AI countries. And the same way there's going to be AI companies and non-AI companies. And I think what's going to be shocking about this that's not like the internet is it's going to be harder for legacy companies to catch up to AI companies, which is different from the internet. You could kind of keep your retail business and still do e-commerce. You could kind of, in the early days and the 90s, we had this thing called the intranet, which is how Fortune 500 or Fortune 5,000 companies embrace the internet into their companies. They use the internet and they got better at customer service and they digitized. AI is different. If your data is not set up right, you're just not going to get there. I listened to Warren Buffett.”

    2024-06-19 · The Twenty Minute VC · 20VC: Foundation Models are the Fastest Depreciating Asset in History, Lina Kahn is a Threat to American Capitalism, PE is Not Coming to Save the M&A Market & How China Could Overtake the US in the AI Race with Michael Eisenberg · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “Because of academia. What we said was what we want to do is apply to AI. And what we want to do is kind of full stack string through the system of AI.”

    2024-06-19 · The Twenty Minute VC · 20VC: Foundation Models are the Fastest Depreciating Asset in History, Lina Kahn is a Threat to American Capitalism, PE is Not Coming to Save the M&A Market & How China Could Overtake the US in the AI Race with Michael Eisenberg · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “You know, we should back up one step, which is AI, AI, AI. The real moment is the LLM moment, which is AI has been around for a while. Like in 2013, we invested in a company called Windward, which is now traded in London, which does maritime AI. That's true since 2013. 2015, I invested in lemonade, which was AI for insurance. We said bots, not brokers before bots were fancy. What's happened the last two years or so is the emergence of the LLM, which is yet another leg up, a different way to kind of prosecute AI. AI itself is not new. When you think about that for a second, the bucket we look at, we invest only in Israel. We ask, can Israel do foundation models? We said no, and we've said that for a very long time. Why? Because a lot of this comes out of academia. It comes out of a lot of these very large companies. We didn't think there was the talent density in Israel specifically for foundation models because a lot of these technology comes out of the military and not academia. Why is France so good all of a sudden at AI?”

    2024-06-19 · The Twenty Minute VC · 20VC: Foundation Models are the Fastest Depreciating Asset in History, Lina Kahn is a Threat to American Capitalism, PE is Not Coming to Save the M&A Market & How China Could Overtake the US in the AI Race with Michael Eisenberg · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “Yes, I don't think we should think about anything the venture or startup business is an asset class. There are asset classes out there like commercial real estate. You can make money in a class. The venture business is completely sui generis. It's not a class. There is a small number of people in this craft who make money. And there's a small number of startups. The S&P 500 has kept going up on the back of four companies who are venture-backed. And these are incredible generational companies that have pushed forward. The rest of them are kind of trailing behind. And we just need to focus on the question of are all of these just incredible companies that will land themselves into some index and some S&P 500 that works. I think the answer is no. And so this is not a class of companies foundation models. There are one or two companies in there that will make their venture investors a lot of money and the rest of them will cost their LPs and GPs a lot of money.”

    2024-06-19 · The Twenty Minute VC · 20VC: Foundation Models are the Fastest Depreciating Asset in History, Lina Kahn is a Threat to American Capitalism, PE is Not Coming to Save the M&A Market & How China Could Overtake the US in the AI Race with Michael Eisenberg · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “I think about it a little differently, which is where do people who use AI start their day? It's a little bit like the Google question. Because I think as you kind of play this forward, you're going to see a whole series of agents. Like, I'm not going to go to the New YorkTimes.com to read it. I'm going to go to my AI screen and say, fetch me the articles that interest me from the New York Times today and something that entertains me or is different or something I got to know. I think where people start their day is what's important. And then there'll be kind of an underlying layer that gets accessed via APIs, which feels like anthropic is a head-on right now, which will service a lot of these companies. And a lot of this will be built into what you talked about, the hyperscaler.”

    2024-06-19 · The Twenty Minute VC · 20VC: Foundation Models are the Fastest Depreciating Asset in History, Lina Kahn is a Threat to American Capitalism, PE is Not Coming to Save the M&A Market & How China Could Overtake the US in the AI Race with Michael Eisenberg · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “Perplexity is my favorite appetite on the home screen of my phone, and still last I checked indentured servitude, was outlawed in the United States. It's like what Bill Gates' father said to him that everyone's forgotten why invest in a business where the assets walk out at night?”

    2024-06-19 · The Twenty Minute VC · 20VC: Foundation Models are the Fastest Depreciating Asset in History, Lina Kahn is a Threat to American Capitalism, PE is Not Coming to Save the M&A Market & How China Could Overtake the US in the AI Race with Michael Eisenberg · IDENTIFIED FROM THE TRANSCRIPT · source

  19. “A minute to minute update, business or set of data doesn't do well with a lot of these training models. So you can predict like a lot of things that even write an analyst report, but it doesn't matter because the numbers are off because they changed two minutes ago. And I think how we deal with also the refreshing of information, which is getting to a higher velocity, specifically in areas like financial and stocks, but that's going to be another area.”

    2024-06-19 · The Twenty Minute VC · 20VC: Foundation Models are the Fastest Depreciating Asset in History, Lina Kahn is a Threat to American Capitalism, PE is Not Coming to Save the M&A Market & How China Could Overtake the US in the AI Race with Michael Eisenberg · IDENTIFIED FROM THE TRANSCRIPT · source

  20. “I don't know. I think the best ones probably are, and others probably aren't. There's a second kind of category which I call logo chasing. This happens in every one of these cycles, where I got to be in the hot one. There could be five or six or seven hot ones, and I need to have that logo. Why? Because I want to tell people I'm an open AI, I'm in character AI, I'm in diffuse, I'm in all these things. Then I think there's a third category of people who think you can replicate a model that exists in one geography and make it in another geography, and it's going to work to the same scale. And they pay up a high price, but it doesn't work in those geographies to the same scale. I think that's kind of a third category of people. And then I think it's important to say, you know, our mutual friend Gavin Baker, of a trade, he says, has this line, which I completely agree with, that foundation models are the fastest appreciating asset in history. And I think that is absolutely true. I was talking to our founder of Seeking Alpha, which is a company, by the way, I did 19 years ago in Benchmark, and I'm still on the board of. He made a super interesting observation that financials or stock markets, which is”

    2024-06-19 · The Twenty Minute VC · 20VC: Foundation Models are the Fastest Depreciating Asset in History, Lina Kahn is a Threat to American Capitalism, PE is Not Coming to Save the M&A Market & How China Could Overtake the US in the AI Race with Michael Eisenberg · IDENTIFIED FROM THE TRANSCRIPT · source

  21. “Let's start with a non obvious point which is that there's a lot of LPs with a lot of exposure to a lot of the same kind of companies through multiple different funds. And they think they have portfolio diversification across a significant number of venture capital funds, but everybody's piled into the same trend and in many cases piled into the same company. Do you think...”

    2024-06-19 · The Twenty Minute VC · 20VC: Foundation Models are the Fastest Depreciating Asset in History, Lina Kahn is a Threat to American Capitalism, PE is Not Coming to Save the M&A Market & How China Could Overtake the US in the AI Race with Michael Eisenberg · IDENTIFIED FROM THE TRANSCRIPT · source

  22. “People have forgotten, but there was like a fiber optic craze. Everyone's forgotten it because it's called the dot com crash. But there was a fiber optic equipment and infrastructure craze. And we laid a ton of fiber optic cables and it was a bubble. And the stocks went crazy. But we live off that infrastructure today. And that's what made the current moment possible. Same thing happened. Cisco bought Blank on the name of the company for $6 billion in the fiber optic routing space in, I think, 2001. Then that bubble burst. And, you know, it took a bunch of years to kind of find our footing again. So yes, AI is the most transformational technology I think I'll ever see in my lifetime. True. It's also true that there's a massive financial gold rush going on and what turns into a bubble. True. What's also true is those bubbles create the infrastructure that we need going forward and that's also true. So a lot of people are going to lose a lot of money during this, like a lot of money. And some foundational companies and technologies will be built.”

    2024-06-19 · The Twenty Minute VC · 20VC: Foundation Models are the Fastest Depreciating Asset in History, Lina Kahn is a Threat to American Capitalism, PE is Not Coming to Save the M&A Market & How China Could Overtake the US in the AI Race with Michael Eisenberg · IDENTIFIED FROM THE TRANSCRIPT · source

  23. “I think one of the hardest things to do in the venture business is hold, and in life, by the way, is to hold two truths in your head at the same time. I think both of those things are true. This is the most transformational technology I think I will ever see in my lifetime. And at the same time, there is, like happens with many transformational technologies, it's an incredible gold rush that brings in a lot of people. Both these things are true. You know, when the internet came on and I was starting my venture career, this is in 1995. It was incredible. I mentioned to you before we came on air. The first deal I did was called Picture Vision. And it was an online photo sharing when there were still cameras with film and negatives. You had to actually scan the negatives in order to send the pictures. You upload them look like paint drying. Then there was pets.com and pets dot com.com and pets dot com because there's an incredible gold rush. But the internet, eBay, Amazon, et cetera, turned out to be incredible companies. And I think the same will be true about AI, which is, by the way, a giant bucket that we need to kind of break apart. You know, right after the...”

    2024-06-19 · The Twenty Minute VC · 20VC: Foundation Models are the Fastest Depreciating Asset in History, Lina Kahn is a Threat to American Capitalism, PE is Not Coming to Save the M&A Market & How China Could Overtake the US in the AI Race with Michael Eisenberg · IDENTIFIED FROM THE TRANSCRIPT · source

  24. “Foundation models are the fastest appreciating asset in history. Why invest in a business where the assets walk out at night? If I'm in Europe and I'm starting a company, I would get out. Lena Connos said openly as I think a threat to American capitalism. Whether Biden or Trump gets elected she needs to go. Don't buy that the IPO window is closed. The IPO window is wide open. The question is what's the price you're willing to take?”

    2024-06-19 · The Twenty Minute VC · 20VC: Foundation Models are the Fastest Depreciating Asset in History, Lina Kahn is a Threat to American Capitalism, PE is Not Coming to Save the M&A Market & How China Could Overtake the US in the AI Race with Michael Eisenberg · IDENTIFIED FROM THE TRANSCRIPT · source