Startups, AI, and Success: James Currier's Perspective at NFX

Aqeel: Hey James, thanks for doing this today. 

James: Oh, thanks for having me. 

Aqeel: Yeah. Awesome. So, I mean, we're just starting to get into a little bit, but I don't wanna butcher your entire story. You've lived many lives and you continue to, it seems like, reinvent yourself with all those past learnings to create amazing ventures as you move forward from the previous one.

Aqeel: So I'm curious about the high level of James before we get into like a lot we want to chat about today. 

James: Oh, well I'm just the luckiest person who ever lived, right? I was the right age when the internet came along in 94 and I was in my early twenties and was able to jump on that and start using that open creative canvas.

James: Yeah.   and then 14 years later comes along the mobile phone and creates this other giant canvas. And now we've got our third one, which is the AI revolution. And it's now this, this third giant canvas. And, and each phase, the, typically the low hanging fruit sort of sits there for three to four years.

James: This one might sit there for five years cuz it's just that much more com. Complex. Right.   but there's this wonderful open period of creativity. We're in it right now. 

Aqeel: That's amazing. What was your headspace? As everyone was interpreting what was going on with, you know, the internet coming out? 

James: Yeah, so that one was pretty interesting because so many people didn't believe in the internet.

James: It's hard to imagine now, but there was one famous guy, Bob Metcalfe, who said it was gonna be like the CB radio, where it would come and go. It was just a fad. And a lot of people felt that way about it. And I think there might have been 150 million people on the internet by 2000. There weren't that many people there.

James: It was pretty slow to adopt. And so just watching people invent e-commerce, being part of the security things, with browsers, the search engines, the basic building blocks were being built. And you could kind of see 'em coming, you know, you could actually develop a thesis even at that time about what fundamental technologies would be, need to be a part of the internet for it to actually work. And so you could watch it roll out. And we did. And then of course, the crash came, and that gave everybody breathing for about three years. I mean, people forget, but really almost nothing went on for three and a half years, particularly around consumers. And then it regained its speed.

James: 2004 was when what I call the startup industrial complex began where startups became a thing where people started publishing blog posts about them. Where, you know, prior to that, the only entrepreneurs were crazy people, people who couldn't get a job anywhere else. Now it has become a reasonable thing to do.

James: Harvard started having entrepreneurial classes. They didn't have any in the nineties. You know, you gotta understand like this was, this was not a thing. And since 2004 with blogs and then video came, and then of course, 2010 or 11, we got the social network movie, which aggrandized the whole thing.

James: Now we have this flowering of VCs, flowering of startups. It's a whole new world. And so this is now the soup into which we find ourselves and plus we've got the AI. So now it's all dynamite. 

Aqeel: That's amazing. What do you think was going on in the heads of existing folks at sort of like industry leader levels as they were watching what's going on with new technologies?

Aqeel: Yeah. We might have been looking at folks who, perhaps it was like brick and mortar, giant types. Who they have in particular, maybe some IP on phone communications to make sure shipping's going on and that's fine. And then they begin to start hearing about, oh, people can put a credit card online and buy a t-shirt from someone's store.

Aqeel: Like, I don't need to worry about that to a point where they start to have to worry about it. Yeah. I'm curious if you have any commentary. 

James: It's really different. I mean, 94, nobody believed, and it came out, it came very slowly and the incumbent hole got killed. Sears and Roebuck everybody.

James: But Walmart basically got eviscerated on the retail side. You had giant companies doing hardware, they got killed if they didn't have an operating system that was part of their suite. You had all new sorts of companies emerge from that period, because the incumbents were asleep at the wheel.

James: That didn't happen in 2008 when the smartphone came up. Most of the billions that were created during the smartphone revolution between 2008 and 2018 really accreted to Apple and to Google, because they were the ones that got the operating systems. But they were incumbents. They had been around for a while.

James: They had been public for a long time. I think Apple's market capital is 40 billion and now it's 2 trillion. So it made a big difference for them. I think the same thing is happening here, but maybe even more in spades, is that the incumbents are not at all asleep in the wheel. They understand that they need to evolve and change and adapt with AI.

James: They need to incorporate it into their existing products. They need to flower out new products. So this is really a battle of the haves and the have nots and the hope to haves. Everybody's going after the same thing this time. So it's fast, fascinating, super fast moving. More fast moving than the other two waves for sure.

Aqeel: What are observations you're making about what incumbents are doing now versus what they weren't doing? And this is sort of, you're kinda alluding to some things, which is maybe just general open mindedness, adaptability, um, information gathering kind of things, and also the willingness to start changing up and experimenting and then pushing to production, some of these things.

James: I mean, it starts with taking things seriously. It starts with having some fear. And the incumbents didn't have fear. They were very sanguine, they were very comfortable in their leadership positions and dismissive of startups. But now we've seen enough startups do really well that I think most smart leaders, even in the biggest companies, have enough fear that they can get their VPs and SVPs and directors and senior directors, and actually take action with the new technology.

James: I think that's the real difference, is that the heads are scared and they've been able to convince the people down in the organization to be scared. And so I think the rate of experimentation you're seeing among the Microsofts and the Googles and whatnot is very fast.

Aqeel: This is amazing. Yeah. So NFX has been observing some things with AI for years.

Aqeel: Curious where you all have been thinking about, and hopefully there's an A and B here between up until the end of 2022 and now at the beginning of 2023. With investment thesis across some of the things you're looking at, and preferably, earlier stage companies and investments.

James: I think we've known about the coming of AI for 30 years, right? I mean, Hans Mok and Roger Penrose wrote the books in the early nineties about its coming and this is what it might look like. So we've all known, we've been waiting in the 2000s and tens, most of our investments were in what we call deterministic AI, where it would say, "This widget is broken" or "It's not broken."

James: "It's not broken. Let it pass through. It's broken, put it into the junk bin." And most of the revenues came from products that were doing that. When we saw GPT-2 and we could download it to our own laptops and play with it, we realized, okay, game's up, the LLMs are working and it's gonna start accelerating.

James: That was about two and a half years ago. That was sort of December 2019, I think, when we saw that in November-December 2019. And so then we were kind of on notice that this is now a time to look at... we didn't call it generative AI at that time. Yeah. But we could see that, you know, it was coming.

James: And so we started making investments at that point and gaming companies that were doing stuff or legal tech companies. And there are sectors that have been difficult sectors to invest in. Legal tech, govtech, EdTech—they don't compare to general enterprise SaaS, payments, and insurance.

James: And they don't return, those areas don't return as well.   and so we haven't made that many investments in those sectors. However, with the arrival of gender AI, those sectors now become fertile soil because the difference between what was before and what can be is so vast that even those sectors that are slow to react Yeah.

James: We have to react. And so we've been investing in those sectors in ways we haven't for the last two and a half years, which has proven to be a good idea. Our thesis on investing has several aspects to consider. You don't want to be in front of the Microsoft and Google trains because they will be effective and use their distribution to push you out later.

James: An example people can relate to is what Microsoft Teams did with Slack. They cloned Slack and within 18 months they had twice as many subscribers. They could bundle it for free, and distribution wins. So you have to understand that the areas those companies want to own, they will eventually own.

James: Meaning you might have a good run for a year and a half, two years, but eventually they'll come and start taking over those sectors, and it'll be hard for you and heartbreaking. Therefore, we have generally been avoiding those areas. Another thing we've been avoiding is LLMs, which were very expensive to build four or five years ago.

James: However, now you can build them for almost nothing by passing data through existing LLMs. They are indeed going to shrink down and live on your smartphone. You won't need to go back to the server and pay anybody anything. You'll have open-source tools that are maybe 12 months behind the closed-source tools.

James: Yeah. You just have to wait a year, and then it'll be free. So we've seen that coming for a long time. We've known about these LLMs, and that's why we haven't invested in any of those. Could OpenAI take their current position and build an application layer?

James: Could they build an API layer? Could possibly, yeah. You know, could Jasper, would their distribution using their wrapper where they've wrapped around some, some, basically, could they use their distribution to, to again, own the application layer and then really embed it as you would a, a SaaS product and, and build a long term business?

James: Yes, they could, but it's gonna be, it's gonna be hard. They're gonna have to really execute at a very, very high level. Um, and so we've stayed away largely from the wrapper companies as well. Um, we've been looking more at what we call. All AI hidden inside where people are buying your product because it's awesome, not because there's AI involved.

James: And it's awesome because it's got AI. Yeah. But there's something hidden in there that I believe has more longevity. Another thing we've been looking at is identifying areas that the big players won't prioritize but are significant niches that others haven't noticed. For example, we invested in a company called Even Up two years ago. My partner, Morgan Beller, led the seed round for a company that develops software for the personal injury lawyer industry.

James: This is probably not an area that Microsoft and Google will prioritize. You know, the personal injury lawyers with the billboards. Yeah. "Have you been injured at work?" That kind of thing. Well, it turns out that using AI can significantly speed up the process of decision-making for these lawyers, helping them determine which cases to take, which cases to drop, and even executing on those cases using AI.

James: The company is experiencing rapid growth. It was probably one of the hottest deals in Silicon Valley last year, receiving seven term sheets. They will soon announce who won that competition. The Information had an article about it a few weeks ago. So this is a sector outside the central part of what we typically think of as the core of the world, like Slack, Teams, or Excel.

James: In that middle ground, as a startup, you'll have a tough time carving out your own niche. But in these hinterlands like personal injury law, these are massive industries that no one has touched. But with AI, suddenly they become touchable, and they become sellable. So we're heavily focusing on that.

Aqeel: Is this about creating value that they are willing to pay for at a profitable price? Because now they can do some of these tasks, such as processing, right? There was AI underwriting, fraud detection, and other things for credit card processing things, insurance claims, but it was kind of useless because you couldn't really keep the human in the loop on some of that, or you just having a lot of loss of quality.

James: or the only people who could use it were very technical IT people. And the number of organizations with that level of sophistication was just a small number.

James: Small market. Yeah. Yeah. So you, that was, you know, $400 million companies, billion dollar companies, but you end up with real killers. In that space. But now because of the English language interface, these things can, you know, apply to everyone in your organization and therefore gonna be worth a lot more.

James: Plus, they do things you could have never done before, no matter how good your software was in 2020. Yeah. So these types of services are going to create entirely new businesses and industries. That's the third area we're closely examining: breakthrough applications. Remember when we first saw the mobile phone? It didn't immediately occur to us that it would transform the taxi industry.

James: But after three years, the folks at Sidecar realized that if they combined GPS, payments, and maps, and applied them to transportation, it would be a great idea. Eventually, enough entrepreneurs experimented with various ideas, and Sidecar figured it out. Then Lyft copied Sidecar, and Uber copied Lyft. That's when we got the big app everyone associates with smartphones.

James: The same thing is going to happen with AI. There will be entirely new industries and applications, hopefully on the consumer side. Consumer products have been rather boring since DoorDash. What have we had? Discord and TikTok, which is maybe 12 or 10 years ago. We've had like two interesting consumer products. Consumer technology used to be fascinating between 1994 and 2013, with Snapchat appearing in 2011 and Uber in 2009 or so.

James: Consumer technology used to be hot, but it has become so dull. Everything has been B2B for the past 10 years. Now, hopefully, with AI, we'll be able to do things that nobody had even conceived before. These new experiences and products will create a fresh world again.

Aqeel: Yeah, it's interesting because you explained it very well. You don't want to be in front of the Google and Microsoft trains and similar tech giants. They have distribution, access to information you don't have, and teams that can execute when activated.

Aqeel: This is quite interesting because the reason why tech giants became successful is that they provided all the consumer products people actually need, right? They packed everything, like your calendar and other functions, into one place. All your basic human needs were taken care of.

Aqeel: Yeah, everything else became somewhat marginal. You had to adopt their native apps or try to buy through Instagram. It turned into a B2B-to-C play, advertising on Instagram or Facebook, or trying to sell your e-commerce brand in physical stores.

Aqeel: However, this becomes an uphill battle for solo entrepreneurs or underdogs. In legal tech and potentially health tech, as you mentioned, there's friction to adoption from a regulatory perspective and concerns over liabilities that the chief of staff of a hospital may never sign off on.

Aqeel: Maybe they feel they can handle their natural language processing tasks better as practitioners or doctors because they have their own IP. But then it raises the question of what happens with ed tech, gov tech, legal tech, and other areas that have been challenging to invest in.

James: It's because these people feel the need to protect the end user. They prioritize protection over innovation. They weigh the benefit of implementing a certain piece of software, say 20, against the risk, which they perceive as five, and decide it's not worth it. The hassle for them as administrators would be 10, so they use the risk of five as an excuse not to provide the benefit of 20.

James: They have stifled innovation under the guise of protecting the end user, even though they are mostly protecting their jobs and liabilities. They don't put in the effort to implement these solutions. However, now we are in a situation where the value to the end user is not 20, but it's a hundred.

James: And the math is just gonna be too obvious and they are going to have to implement this stuff because the end consumer, the end user, the end customer is gonna get their hands on a video. They're gonna get their hands on a demo, and they're gonna demand that they have access to this technology. And the, and the people who have been blocking innovation today will not be in a position to block it anymore. It'll just be overwhelmingly positive for the interview. 

Aqeel: It is indeed exciting to think about the potential for capturing untapped territories in every vertical. There's definitely something to consider there. Regarding your question about core technology companies fighting for the best tech at the infrastructure and platform level, it's possible that they would want to distribute their APIs or charge for access to their technology, similar to a "selling the shovels" kind of position in a market.

Aqeel: As things become more efficient and these companies continue to skyrocket in value, we might enter a world where we have more of an oligopoly in society. At that point, they might start going a little more horizontal, leveraging their brilliant engineers to explore new areas. We have seen dormant activity erupting, like the Microsoft volcano, and it feels like startup culture again. It's what excites many people when they join big tech – they want to be around innovation and disruption. But sometimes, they get caught up in red tape, spending years going from version 2000 to 2001.

Aqeel: So, I'm curious if you think these companies would want to latch onto R&D or venture operations teams, or perhaps have in-house venture studios. They could expand horizontally because they have the infrastructure to support it, such as servers, computing resources, and governing relationships. They can ensure favorable policies and terms. I'm just wondering where your thoughts are regarding that layer. For example, at NFX, are you considering ventures in legal tech and health tech again?

James: Yeah. I mean they definitely have to go horizontal and they are gonna go to their core business. Which is just general operating businesses and their use of their software, cuz that's who their bread and butter is. And as you get further out, those customers are harder for them to sell into.

James: They have a whole team selling into health, you know, hospitals and doctor's offices, but that's a smaller part of the team. The bigger part of the team is selling into manufacturing and energy companies, automobiles, and oil companies. That adopts technology somewhat more easily. You saw Oracle do this back in the nineties where they got big, they got their databases installed over, then they started buying PeopleSoft, and they started buying big vertical companies to sort of grow out their suite of products that they can own, that they can bundle.

James: The same with Microsoft as bundling. So you, you start out with one thing and then you figure out where you can bundle in order to grow the business. So absolutely they're gonna want to grab, you know, different big pieces. Like they'll want to grab an AI enabled workday or, you know, there, there's no doubt there'll be consolidation there.

James: I think that, you know, startups could end up doing that. Like I think you're gonna see. We believe that you're gonna see billion dollar three person companies. Because you're not gonna need to provision AWS anywhere. You're not gonna need to provision.

James: It's literally just gonna be sales and virality and network effects and getting your stuff embedded. And three people can move faster than 30 in many cases. You won't need that many engineers because you're gonna have a co-pilot on steroids in a few years. And so you won't need that many engineers.

James: You won't need that many customer service people. You won't need that many salespeople. And so three people will be able to grow if they find the right niche at the right moment with the right marketing, they'll be able to grow unicorns. We're gonna be publishing about that soon. But we see that future coming on.

James: And those companies probably will get bought by, um, people with distribution who can then run that stuff through their distribution at no additional, no, no marginal cost. So we start, we should start to see an activity pick up in another two years, but it's gonna be pretty. Low for right now. While these organizations figure out what they want to own what they can, it might take 'em 2, 3, 4 years to decide, oh, we tried that but it didn't work. This other company did better. Now we'll buy them, but they're gonna try almost a lot of things. Plus, if you got Google and Microsoft and say, “Hey, come work with me. I'll pay a lot of money. I'll give you some great RSUs and I'll let you work in this small team doing this really cool entrepreneurial thing.”

James: You get to have your cake. You eat too. 

Aqeel: Yeah. The acquihires. I also think we'll see more acquihires.

James: But there won't be acquihires because the three people are actually generating 50 or hundred million of revenue, I guess is my point. They'll be real acquisitions because three people will be able to build real businesses, not just acquihires.

James: An acquihire in my mind is when they get acquired for 25k for the assets and then they each get salaries. That's an acquihire. What I'm talking about is three people with 50 million of revenue, a hundred million of revenue. 

Aqeel: Wow. And then they're sitting on their leverage right there. Do you think they'll out develop IP possibilities in these two years?

Aqeel: Is it more like if you can move fast, penetrate some part of the market, and capture a huge share of it. And now you are friendly, and this is because you're getting the first set of, you've gone through and sort of picked up your battle scars being the trenches for a couple of years to get those customers who are willing to adopt AI and get to a point where, and this takes time.

Aqeel: Yeah. There's necessary things to do, mistakes to make along the way and discoveries along the way. Folks are always willing to adopt AI in the beginning. Right. Who just say, I'm willing to demand that this is like in the product, and you're saying now that if it's just a great thing and AI is just under the hood, you don't have to say things like AI enabled service.

Aqeel: You just say, we do this, this is done better. 

James: Yeah. And if you're a three person unicorn, you could just be cooler like Beats. Yeah. Card them for billions because they were cool. You could just be cooler in the market. Like Slack was pretty cool, right? So they got bought. Yeah, because everyone loved working on that product, even though it's entirely replicable.

James: You've got a network effect you could build around things. You've got distribution that you could have that into a particular market of geography that the big guys are gonna end up wanting.  It's possible that you get one of these niches that is actually much bigger than everyone thinks.

James: And you can go public and just do a standalone business. You never get acquired by Microsoft or Google, which would be the most ideal because then you can develop your own culture and your own way of doing things. 

Aqeel: Did your team follow a lot of the Midjourney story as it was happening?  That's like a case in point.

James: Yeah. Right. Exactly. Yeah. They used Discord to distribute, Discord did their whole infrastructure network effect stuff. They kept the data loop back into the system and they just kept pushing. And they were the smartest guys who were the most focused on that one thing while everyone else is distracted by multimodal and everything else. They just stayed focused. 

Aqeel: Small team, seven figures in revenue weekly are at a point there. Now they're able to do the white label stuff. And it's been pretty interesting to see that evolve. And I think that in itself is the thing that tells you like, okay, there's just, there's no tight turning. Like the tides have turned.

Aqeel: Yeah. Like money in the ecosystem is going out to this other, this other node in the network of capital in the economy. So what's going on and why? Yeah. That's exciting. What can the everyday builder start building? How should they start thinking about their ideas from the get-go? Yeah. The two things: know your customers or talk to your customers and build products, right? You have all this language. 

James: That's really insightful and wise. Talk to your customers and build stuff. That's the advice. 

Aqeel: Well, it's more like the simplicity of that is because if you look at it, we're very grateful to be here in SF. Yeah. But the case and point is you see a person who came with an idea and somehow the two, the two things on your to-do list are on your calendar.

Aqeel: There seem to be a lot of other things there now. Right. I see. It's like, how are you gonna network events?  Do you need to or can you like cold DM the hundred customers that you might have? Right. Or go to that industry conference as a networking event where you’re just talking to your customers there.

James: If you're building legal tech, well, go to a lot of departments and universities rather than going to the AI wine tasting and Sonoma. Right. Conference for fun. Go to your customer's conference in Topeka, Kansas. See what they're doing. 

James: This being said, so if that's what people need to be reminded of, then okay.

James: We're starting at a very, very low level, but, okay.

Aqeel: You said it very well earlier as well. I think we are approaching the cost of production going towards zero. Right. Like you said, cost generation, code media files. You can automate your social media activity just for daily posts and get in the algorithms, and we've kind of been able to do that for a while now, but now folks have that suite of tools where, what, what is a hundred bucks a month in subscriptions from like just product hunt features and watches.

Aqeel: You got a CMO, a CFO, a COO, and then you can be the CTO. Yeah. And then there's your C Suite team of at least three person teams, like you're seeing a double digit dollar figure a month replaces some full-time functions in the organization. Job functions, and individual tasks to take care of.

Aqeel: Yeah. So if you know that, hey, to get 10,000 customers, this list needs to be grown and this activity needs to keep hammering in and there, and we have to continue to work on a product in the meanwhile very quickly. I mean, you can do that for the first month. Yeah. And you get that goal. And you crush that milestone. 

James: So, yeah. So when, that's when we got cloud computers, right? Yeah. The cost of the hosting and the sending out of, of all of your software data dropped, you know, a hundred x, but all the other business costs, salaries, office space, PR agencies, CFOs, like bookkeeping services, all that stuff stayed the same.

James: Yeah. Which is why even in the age of AWS and Azure whatnot, we have companies raising 1500 million. And now what's happened is all the other functions are gonna start dropping a hundred x because of AI. Yeah. That's gonna really make a bigger difference than even the hosting day because the hosting was one, you know, maybe 20% of it.

Aqeel: Yeah. So does the Boost trimer today, they agency be optimizing for revenue as opposed to having something proven get runway and then try to generate some sort of return based on whatever you're putting? You can do it either way. 

James: Okay. Either way. I mean, look, if you found something that's super viral. Yeah.

James: If you don't charge for it, it will become more viral. However, consider the long-term end game. If you have a real network effect or a defensible position, go for it. Raise the money, pay for your bandwidth, and seize the market.

James: On the other hand, if you find something small that people are willing to pay a lot for immediately, whether it's a large number of people paying a small amount or a small number of people paying a large amount, that can also work really well. All options are available. There is no one certain way to do it.

James: I caution against thinking that the LLM is what will differentiate you. Some people still believe that, but I believe it will mostly be free. LLMs will be free and varied. Some claim they will build an LLM for medicine, but let's see how fast others can catch up with open source. Good luck with that.

James: Another trap to avoid is thinking that having a proprietary data source will make a significant difference. Data can be syndicated, stolen, federated, or even faked by competitors. They can have a fraction of the data you have but still achieve similar efficacy by running their data through your system. The customer won't be able to tell the difference, and the price will drop.

James: So, in most cases, having access to your own data sets won't guarantee success. It might be the exception rather than the rule. Therefore, don't assume that having a proprietary data set, even with a substantial number of cases, will protect you. If I can gather 2,400 cases and buy a license to your LLM without your knowledge, I can run the data through it to create something that appears identical to what hospitals need. They won't know whether to buy mine or yours, and I'll simply lower the price, making it difficult for you.

James: So what is defensible is probably not the LMS or the data sets. It's more likely the application layers and the workflows. We refer to it as embedding. The main strategy is to embed these pieces of software in either an individual's life or a company's operations. Once embedded, they become reluctant to remove it because it works perfectly fine.

Aqeel: Is the embedding sort of how acute, how much the person begins to ultimately become reliant on how much you're providing them? 

James: That's right. So an example again would be Oracle once they've got their database inside the deepest parts of your organization, then ripping it out. Forget it. Right. You know, I'm gonna retire before, you know, I'm only retiring in 20 years. Like I'd rather not without Oracle. It'll still be there 20 years from now. Yeah. This is brilliant. They charge me 25% more. I'm gonna pay it every year. What am I gonna do? The amount of disruption that it would cause my organization to rip Oracle out is just too much workday.

James: Same thing, like these are embedding businesses that can be really good. They don't necessarily have network effects, but they have embedding. And so we think this is gonna be helpful for AI. And then, of course, the killer of all defensibilities is network effects.

James: That's why we're called NFX, which stands for network effects. Building up those network effects with your users or with other companies and getting that all working together is the other thing you should be looking for as you build these out.

James: The other thing that I really want to caution people about is that almost every idea you're having, everyone else has as well. I had some guys in my office this morning and they were so excited about their big vision, and I just had to tell them, "Guys, you're the fourth one in the last 10 days with this same idea." And their faces dropped. They said, "But I've been working on this for three years." And I said, "I know, but you know, the storm has blown through and now everyone can see that this is there to be done."

James: And you might have thought of it first, but now everyone sees it because it's so obvious. I've had that conversation with people since September when this whole upward swing started. That's why we published our market map on nfx.com. So if you type in "AI market map" on Google, the first link you get, I think, is ours. Maybe PitchBook is buying a sponsored ad above it or whatever. But you'll get to the NFX market map. We published it simply because we'd been building it for two and a half years.

James: The founders I was talking to on the phone didn't believe me that there were literally 80 other companies with the same idea. They were like, "I don't see them in the market, and I've got $20,000 a month in revenue. I had nothing three months ago. It's amazing growth." And I said, "It is amazing growth, and your customers do want it, but what does it look like 18 months from now or two years from now? Because there are 80 other people." And they're like, "I don't believe you. You're being mean to me. I'm pissed at you for telling me that." And I said, "Okay, don't be mad at me. Just click on this link and then tell me, 'Look, look, look at all the other people doing this.' Go to their websites. Find a new idea. Find a new space. Find a new open space. Nobody's in."

James: That's what I've been encouraging people to do since September: just realize that, I know it's exciting. It's so fun. It's every 14 years we get one of these new storms blow through and you're in the middle of one, and you're capable and you're knowledgeable and you're ready to do a startup and you're convinced. But if you have 20 other people doing the same thing and 12 of them get venture-backed, none of you are gonna have a good time 18 months from now.

Aqeel: And in that real-time reactivity, as we'll call it for the sake of the conversation, it's something investors can immediately pick up on in the room.

Aqeel: Right. And you can quickly determine whether this will work because, as you mentioned, you have to be adaptable and willing to pivot. It requires entrepreneurial stoicism, where even if you don't have an answer to the defensibility question, but you have $20,000 in revenue, you know you can keep moving forward and adjust with the circumstances because you know how to navigate.

James: Yes, and you can decide to keep going and build from there. However, when it comes to raising money, it's going to be challenging. So you need to figure out your path without relying on raising funds. If you want to continue down that path, investors typically look for the breakout companies among the 20 or 40 competitors. Series B investors might be willing to invest $40 million if you become that breakout company. But to secure seed investment and Series A funding will be difficult due to the competitive environment, upcoming announcements from companies like Google, Microsoft, and OpenAI, which can cause hesitation among investors. You might raise $3 million in seed funding, but you'll probably have to pivot, and that's perfectly fine. If you find the right seed investor, they will support your pivot into more open space or cleaner AI.

Aqeel: As the intervals of releases become shorter and shorter, and everyone builds on top of existing technologies, I'm intrigued by the concept of time horizons in concrete terms. For example, when do you hope to achieve a liquidity event? Perhaps, just for the sake of our conversation, can you envision five years ahead?

Aqeel: Like, it's always been vague. It's always been a car without anything in front of you, just rearview mirrors to make decisions like this. But is there something to decide for folks who can go through different investing models or expectation setting of, this might not be 10x or 100x, but it might get you 10x in a year.

Aqeel: You know, if you're moving fast enough, and you might just want to exit your positions, and I know that's not necessarily a thing an LP wants to hear.

James: Yeah. So, so I'm a GP, so I'm a venture capitalist. I used to be a founder. Four times over. We at NFX and probably most great seed firms and Series A firms don't think in terms of the question in the way you asked it, at least we think, how does this become 500x or a thousand x?

James: How does this become a public company? That is one of the pillars of society going forward because Gotcha. Anything less than that doesn't move the needle for us. If we make 10x or even 20x on our two and a half million, I'm. Yeah. 20x times two and a half, you know, it's, it's 50 million bucks. My fund is 450.

James: Like, it doesn't even, it's only one-ninth of a fund. I need to return that fund five times. Yeah. So I only care if it's a hundred x. I wanna go for the big one. Yeah. And I want founders who want to go for the big one. And if they don't, that's totally fine. They just shouldn't take my money. Right. They should go and sell their company for 25 million bucks and make their 6 million or 8 million, whatever it's gonna be.

James: Yeah. Pay their taxes and they'll end up with 5 million bucks. It's amazing. Life-changing. Yeah. What more do you need? And they should, they should go and do that. But that's not what we're trying to do. And so I think that there are gonna be, I think for a while, there's not gonna be too many acquisitions because everyone's gonna feel like they can do it themselves.

James: They won't have reached their limits on what they can do, and so there won't be a lot of motivation for the M&A people to go and cure a big hole in the organization. The organization will just build that hole ourselves. We'll just fill that hole in ourselves, and so I don't anticipate there's gonna be a ton of M&A in the near term because the whole cart's been overturned, if you will, but the whole table's been thrown over and nobody knows what to expect.

James: When we saw the internet come along in '94, you know, that was all prior to that. We were doing, you know, just on-premise software. The software would be on servers in your own closet. They'd be blinking lights in there and there'd be wires coming out of it. And when we got the internet, we didn't really get SaaS until starting '98, '99.

James: That's when it started to kind of bubble up. And then we got Salesforce in 2000. But for the first five, six years, you know, it was mostly consumer stuff that we were doing and security stuff to make the internet bulletproof, but it really took off, you know, sort of by 2003 and '04. That's when all the pieces were in place.

James: We had the fiber optics, we had the security, we had the SaaS concept, we had credit cards working, we had digital photography. It started working like once that was all in place in 2003, '04, that's when it finally took off in a real way. And the same thing's gonna happen for AI. We're gonna have a bunch of years where the pieces need to be in place, and then everyone will kind of understand and have a theory about where things are going.

James: And so the CEOs will be willing to let the M&A people go do their work at that point because they'll at least have some white papers, at least have some buy-in from the board. They'll have a thesis right into which they can invest. Yeah. Up until that thesis point, everyone's just gonna be chaotically building, which is the wonderful, chaotic, most opportune time in the world.

James: Which is where we are now. Right now.

Aqeel: Yeah, exactly. 

James: It's, but you're not gonna get a yearly acquisition for 10x. That's not gonna happen. That makes sense. You have to be committed. 

Aqeel: It seems really clear right now that an important thing to index on from what you were thinking about in your current thesis is this embedding portion, right?

Aqeel: As you're just talking about to go from Series C or Series A to IPO? It's fundamentally true. Like what was the difference with Uber? Whatever they did, they battle-tested it. They imitated, duplicated, whatever. They did everything they can to make sure this was the mode of transportation you relied on to function in your daily life.

Aqeel: They had the B2B relationships set up as quickly as possible. That was one thing that other companies forgot to do, like, who put most needs, who needs to get to the office and get some meetings every day? Who's in a busy metropolitan area who has disposable income or it's justified to expense this to the company because that person's time and energy so valuable to keep producing.

Aqeel: They were very smart about the target audience. At least for that stickiness in the beginning. Yeah, I would, and stickiness is the term I use for what you're talking about with it. Yeah. We call it defensibility.

James: Yeah, exactly. And if you type into Google "NFX Uber," you'll get an article describing exactly what you're talking about, the map, and a video sort of explaining where they started and then all the defensibility they added in.

James: Okay. On their road. And you're talking about one. Oh, this is brilliant. Okay. Same thing with Facebook. If you go "NFX Facebook," you'll get an article about that. One thing, one thing your listeners might do is type in "NFX defensibility," and there's a series of articles about defensibility. It's another one called "Reinforcement" where it talks about where defenses come from.

James: And in it, I described the fact that prior to the internet, prior to digitization, there were lots of different forms of defensibility in IP. Where your ports were, where your mines were, where the railroads were. Like all these things contributed to your scale effects and your defensibility. But once everything became digitized, we kind of eliminated space and time quite a lot, and we really boiled down to four defensibilities, which were network effects, embedding scale, and brand.

James: And those survived in the digital age. And now that we've got AI, it'll be interesting to see which of the four survived. 'Cause it might just be embedding, or it might just be embedding in network effects might be brand. I don't know if there's scale. I mean, everybody, I think pretty much instantly has scale.

James: So I think scale kind of falls away, but maybe distribution. You know, maybe distribution comes back more into it. Yeah. You know, that you, you, you own, your sensibility is based on the fact that you just own that real estate. So you can add in everything that comes next. Right. Which is what, what Google sort of did.

James: They had distribution through the browser, through the search. And so they could copy MapQuest and do maps. They could copy Yahoo Mail and do mail. They could copy Google copied everything. They copied Infoseek in their interface. Yeah. They copied the business model from go-to, you know, overture, fees because they violated their patents for copying their business model.

James: And then they copied everything. And I used to give a lecture where I said they copied everything except AdSense. And then the CEO who had founded AdSense raised their hand and said, no, I actually sold my company to them. I'm like, okay, well there you go. They've invented nothing. And so using their distribution through search, they were able to then grow into all these other spaces, including, you know, competing with WordPerfect and competing with Excel.

James: You know, just copying everything that had already worked, but having better distribution. So brilliant. 

Aqeel: How can an entrepreneur today think about and what are your mental models or maybe battle testing or strength testing an idea a person might have for achieving things like what these, what may not be the same for but embedding and distribution things of this nature.

Aqeel: Is there something that the person needs to know that these are unlocked? before just to go all around building a product and getting it out there and, you know, my personal name and putting it out on the internet and building it in public and trying to be very vocal about what.

James: It's a great question, and the big picture on this is that entrepreneurs, particularly young ones, have all the advantages.

James: They have grit, they have time, they have energy, they have smarts. They are current. They're not encumbered by the stuff they learned 20 years ago. Mm. Okay. But they have one disadvantage, and that one disadvantage is that they don't know the answer to this question. Because they haven't seen tens of thousands of companies the way investors have or older people have.

James: And, and so I would encourage them to battle test their ideas against people who might not like your ideas, who might be able to explain to you why it's unlikely to work. There are so many different little elements about what has made different businesses work or the timing or how close they're to the payments or the money, you know, what distribution channel they took advantage of.

James: Like, there's so many little elements like that that very experienced investors or entrepreneurs who have done multiple, multiple companies and have had friends where they've angel invested and watched all those failures. Just, you have to watch a lot of game tape. Yeah. To know the answer to what is more likely than not to work.

Aqeel: This is exactly right. So let's see. Early career, you're in high school or just coming to undergrad university. You're in that seat right now. One thing you might lack to begin with just to activate and lock everything is network effects, right? And that some of that for you as an individual taps into maybe a unique distribution method.

Aqeel: You might not have, let's say you're a Harvard alumni, and you can tap into that channel anytime you want because there are circles for that digitally that you can tap into at any point in time, and the relationships you have just for living your life a little bit longer and doing your things and yeah. So being a participating member in society as a whole.

Aqeel: And maybe some of those folks are just wedded to their current workplace and things of that nature. So you're not thinking about, "Oh, why don't we do, why can't we do X using Y?" Or something. Just that question is the thing that starts the journey, right? Yeah. So how can one build network effects in today's age and sort of attention deficit economy where it's like, either, "Hey, I don't want to waste my time talking to this kid."

Aqeel: Yeah. Um, and is it, I guess, grit, I guess essentially.

James: So let me differentiate between three types of networks. Yeah. And the word, the word sometimes gets confused. So when we talk about network effects, what we mean is the more people use your product, the more valuable that product becomes to all the users. That concept, we've figured out that there are 16 different ways, at least we're discovering more all the time, of creating that defensibility.

James: Because no one wants to leave your product because your product is always gonna be more valuable because more people are there. Yeah. Okay. That network effects are about creating defensibility, about creating value for people so that they never want to leave and nobody can come in and compete with you. Viral effects are about getting your current users to get you more users for free.

James: That's a different playbook, a different concept. Those are viral effects that often confuse. In fact, if you go to Google and type in "nfx viral and network effects," you'll get an article explaining this, saying viral network effects are not viral effects because this is so often confused. And then the third type of network is the network of people.

James: You know? So if you're a young person, you're trying to build out, you're networking and you're meeting people and whatnot. And that's a whole different concept, which is who do you know, who you're gonna get information from? Who's gonna put information on your dashboard so you can make good decisions in your life?

James: Um, that's, that's a third concept. And so I want to differentiate between those three. 

Aqeel: Yeah, that's a great differentiation. I guess my question is how does m r three happen? At what point does, is there a threshold where you're over networking and you're forgetting the, the original question of trying to, with the build, create number one and two?

James: As we have moved into this startup industrial complex over the last 20 years, there is a lot of startup theater that goes on, where people pretend they want the lifestyle of a successful startup person. They jump right into the parties, drinking, trips, and all the flashy aspects, thinking they're living the life.

James: However, this is a fabrication, a distraction, and a shallowness that people indulge in. If you want to see a funny movie about this, watch "Almost Famous." It describes a similar scenario in 1974 when being in a rock band became a thing. People pretended to be part of a good rock band or groupies of a bad rock band, but it was all fake because everyone was trying to portray something they weren't.

James: We're experiencing a lot of that now in the startup world. People crave the status, money, and excitement of startups, but they want the end result without going through the necessary struggles to achieve it. They want to be famous rock stars without enduring the hardships that lead to success.

James: As a world, we are facing the challenge of many founders over-emphasizing personal networking, offsites, and glamorous activities, rather than focusing on essential factors like being in the right location such as San Francisco.

James: And then. Just putting your head down, you know, for, for 10 hours, 12 hours a day, and then networking for one or two hours a day. Um, and then, you know, going on hikes on the weekend to keep yourself healthy so you can actually do the work the next week. But when you go for those hikes, take one or two people and get to be friends with someone, um, who's also in your industry, who can also give you some tips or tricks like I can, um, like you can, um, ike.

James: So, um, I, I, I think, I think if your ratio is sort of, you know, 12 or 15 to one in terms of building versus networking for yourself, that's probably the right ratio. That's great. 

Aqeel: I think, um, we're not seeing that real time, but the folks who are, they're there. They're around. Yeah.This is great because I wanted to get into, if you, and you already shared a lot on this topic, but you're just very seasoned, um, investor with, with a ridiculous track record.

Aqeel: I'm curious about heuristics now that you have, and again, you've already. Started sharing some of them. Yeah. If anything is beginning already, since last September to now. Yeah. Beginning to become more salient for you,   and some that you're willing to discard. 

James: I feel like the phases that we had last September after setting this for the last two years prior to that, continue to be the case.

James: I don't feel bad that we didn't invest in the LMS yet. Maybe I will. I don't feel bad that we didn't jump on the rapper bandwagon. There's a hundred companies doing each of those rapper ideas. They're all growing quickly. You know, one of the things we've noticed is that if you can find, particularly in the business to business applications, an area where the AI can do a greater percentage of the job to be done, you're gonna have bigger success in creating a viable business.

James: Um, you know, um, if you look at legal tech, these LLMs can do a lot of the job to be done in legal. And that's why we have four investments in legal tech area that are all doing very well. Wow. Um, because the percentage is really high of what they can do. Um, I think in other areas like scientific research, it can't do much yet.

James: It doesn't have its own ideas. It can't create docs yet. It can't design experiments yet. Maybe it can in six months, but so you, you could draw a chart, which is amount of money being spent on something and then percentage of the job that the LLM can do and what you'll, if you map industries and ideas by that, the things in the upper right are more likely to be more fertile.

Aqeel: Yeah. Yeah. That's good. Two dimensional analysis there. I've been thinking, are we gonna have a higher aggregate economy, like globally or even GDP wise? Cause we're just seeing the two simple things we all want, like more efficiency or more output. Yeah. And the best case you get both at the same time.

James: I think we're absolutely gonna get a bigger economy. We're just going. To get more of everything. We're gonna get more and better music, more and better films. More and better writing. More and better images. Yeah. More and better software. More and better sales. Look, I mean, it might be that the AI will keep me from getting all these spam calls, so things that people wanna sell me.

James: Yeah. I mean, and so just like with targeted ads on Facebook, you know, I like a third of them, right? 15 years ago I liked one, one 50th of my ads. Now I'd like a third of 'em. Oh, that's interesting. I'm not gonna click, but I like it. Yep. Same thing might happen with AI. Your whole day, your whole workday might just become much more efficient because only the great things will find you and bug you.

James: Yeah. Yeah. So your attention will be much more productive and more enjoyable to you. 

Aqeel: Do you think? We're hitting our, we're going to hit our biomechanical limitations as humans soon. Where, okay, we have this much attention, we have room for this many people in our lives.   sort of hundred 50 number you've ever heard of that we have, yeah.

Aqeel: Number this much pleasure in my life. Yeah. At a certain point where it just becomes like I just cannot sustainably keep on taking in new things and new products. Do you think we'll be sort of bombarded at a level, um, as just people, or is just consumption increasing indefinitely?

James: I think, I think in our lifetime consumption, well it depends on how long, how soon we get longevity and, but, there's definitely a point about 40 years from now where biotech and AI merged and humanity became a really different thing.

James: Wow. So you're, we're gonna see that in our lifetimes. It's gonna be very interesting cuz you know, about 20, 25% of our fund goes into biotech  . Into synthetic biology or tech bio as we call it, software proof of biotech. And we see the trends there as well. We are gonna get to that point, but I, I do think over the next 10, 20, 30 years now, we're not gonna reach any limit where we are reaching.

James: And in terms of our consumption of. Of new things. I mean, I mean we are much less spiritual than we could be. We are much less satisfied in our relationships with other people than we could be. We're much less healthy in our bodies than we could be. And the percentage of people who have access to any of these things worldwide is a tiny fraction of the overall population, 8 billion, which will soon be 12 billion.

James: So I think we have a long way to go.

Aqeel: I think some of the last two decades have been like marketing and in the name, um, and I appreciate capitalism, but in the name sort of growth in that direction, you began to start embedding insecurity and urgency to get the consumer to convert. Not common gun as good and bad, it's just a thing that seems to be clearly true.

Aqeel: Um, and so we're at this state in terms of like a mental health condition across society and a lack of maybe some of this internal, internal wayfinding or groundedness. Yeah. So one of 'em is a brand. Yeah. And I think that the terms can be very important is trust. Yeah. Um, so trusting your providers for things, making sure this is just like it aligns with me.

Aqeel: I can build for myself. Maybe these things are important to you as an individual, as an entrepreneur. You brought that out. Yeah. You found your tribe. Yeah. And with things like Patreon and other things of this nature and sort of like the, the cost of distribution going towards zero at a consumer level of social media folks and full-time musicians have lived off like a thousand or two, 5,000 fans.

Aqeel: They get concert tickets, they get some donations, a couple bucks a month, everyone's happy. And that's just enough for them to be satiated and they can afford a department and produce and engage and there's a dialogue going and everyone seems to be happy in these sort of local ecosystems unlocked by, sorry, local economies unlocked by the internet.

Aqeel: Yeah. Um, and Patreon does a great job here and deserves those dollars. The kids are connecting the service and it's awesome.  . Um, so yeah, I think I'm pretty curious there where you're thinking with 

James: Yeah. You're gonna see 10 or a hundred heads of that. Yeah. This is exciting. You're gonna see more and more people making livings, servicing smaller and smaller groups, basically getting their own whales and getting a good living off of that.

James: No doubt about it. I mean, you see people doing new, you know, yoga retreats three times a year, they make $20,000 per retreat. That's 60 grand a year. They're living the life they want to live. They can do that until they're 80. Cuz you can do yoga until you're 80. Cool. Yeah. You know, I mean, you, you have hundreds of thousands, millions of people doing stuff like that.

James: Just providing these sort of experiences that other humans want. And we can now touch each other through the internet and through, and the AI enabled is gonna make us each better. So if you had a yoga instructor that wasn't particularly good before the AI can assist her or him in becoming much better and then providing that context for people and upleveling all of us in the middle of the bell, middle of the power law, right?

James: Yeah. So LeBron James was that good and everyone else is, you know, below him or whatever. And then, the same thing is true for covers and the same through musicians. And now this middle part, AI will lift us all up in terms of our design or musical. Usability, whatever, make our voices sound better, whatever.

James: Yep. We're all gonna become pretty good. Yeah. And a lot of things, 

Aqeel: Improvement on anything is more of a function of like the volume and that means like repetition and feedback, like you're lifting and then you have that resting time. Well, the growth is coming between that interval, that interval tightening, maybe it's coding or testing in any subject matter.

Aqeel: You have immediate feedback loops with sort of a never ending 1 0 1 situation with an AI tutor or something. Yeah. That's just the AI tutor for everything.

James: Exactly. Yeah. It's gonna give us superpowers. 

Aqeel: Is it more important, go back to this whole point earlier about cost to production or, or sort of asically approaching zero to produce things.

Aqeel: So with these four level legal tech investments, I'm curious, I know you, how much visibility you have on their day, their day to day or their operations, or even from a strategy perspective for what those companies are doing to hit those 500, two thousand x shots or something.

Aqeel: Is it more important for how they sell? Like do you have content to share on like how a person might be selling to these users that become their first customers, to then improve the output level capabilities of that product because they need that information for them to adopt. 

James: Yes, you're talking about is there anything different about marketing AI products, or selling AI products?

James: And those, those two things are different, but yeah, at this point, at this point, no. At this point, it's the same business of figuring out what the benefits are to the user. Focusing on the user. Yeah. And then finding different channels to get the message to them. Having your marketing be distinct from your sales, figuring out if your product needs to be sold or marketed, like, you know, all the, all the basic stuff still seems to hold.

Aqeel: This makes a lot of sense. You ran, I think the count was like four companies, at least publicly, like you're kinda sharing about some of your stories over there. So more like the breadth and depth of company operations experience, from the founder perspective and seeing various stages, stages,   in those seats.

Aqeel: What, it's one of those things where you experience. Teaches you these heuristics. Like you can't just like to share some words cuz it's clearly like reading a tweet and thinking you'll be a better entrepreneur. Like you, only the words apply cuz you have an experience to attribute that in your synapses and the registers.

Aqeel: But if you can, I'm curious to elaborate on the conversations you're having with your children. Cause it seems like the most pertinent thing ever because you're sort of encouraging that there's something better to do as an alternative to college to a 17 year old. Yeah. Right. 

James: Yeah, I mean I think, I think all my kids are gonna go to college, but only because they want to party for four years.

James: I mean, let's just be honest. I mean, college is sort of the pinnacle of life in terms of living in dorms and going on road trips and yeah, having people your age and having people who are studying things that you'll never study, but they can teach you about it in a half an hour and you have the time to, to learn.

James: I mean, it's a pinnacle of life experience. I don't think people should, should miss. It's super fun.   but I am letting them know that they don't need to go to college if they don't want that. That there's plenty in the world to do right now. Out in the world, particularly for the next three years, is just completely wide open for all sorts of experiments.

James: Yeah.   where you could do something and just get lucky and, you know, suddenly be doing something that really, really touches the world in ways that you couldn't have 40 years ago. And, and, and, and in 2014 was really hard and now it's a lot easier during this open period of AI. So,   I'm, I'm encouraging them to think up their best thoughts and, and, you know, run 'em by me.

James:   And we'll see if any of them stick. And look, my, my thing is that I have about 81 ideas a day, and about every two weeks I have half a good of an idea, but it's really that ratio, so, you know, so you have to have hundreds of ideas before you stumble into a good look. Right. That makes sense. Again, you under, you have six ideas.

James: It doesn't mean that three or four are good. Yeah. It's, it's unlikely that any of them are good, 

Aqeel: 'Cause they're just functioning as humans. So you're sustaining yourself and enjoying life.  I guess there's something there right now where. I'm seeing, I guess like a dozen new incubators, not new, but just incubator things popping up or saying there's a new big brand, they've never done this before, but Geni is just too, too juicy.

Aqeel: Big to ignore. Yeah. Um, like AWS running a summer camp type thing for an accelerator. Like when were you doing an accelerator? You know? Right. No, they are. Okay, okay. Right, right. Great. Like, use cloud services or something like this. And it's, it's just fun, right? Like, oh, it's so fun, why not? Why not throw a few million bucks and just like, make something happy with your own little incubator cohort?

Aqeel: But the value add as an alternative to something like school is you get this lean small enough, but big enough intimate environment where you're living a new spot, new world, new environment, new social circle. Everyone's excited and giddy about what they're up to and they compassionately exchange some of these things over, over hikes or something like that.

Aqeel:   That's life experience. I'm curious if you think education's gonna move in a direction like that where I hope it does. And I think that these accelerators, I think that these incubators, I. Think all these programs you guys are running and doing and getting involved with are just delicious.

James: I think they are just incredible for the participants and, and even for the people running them.   and so I would encourage any young person, if you can get into one of these things, just do it. It's awesome. Just do it. Yeah. 

Aqeel: It's just something about not needing to be in San Francisco in your head. I know this right now.

Aqeel: There is, we're talking about this clearly like a sticky network effect thing here. Yes. That's just like the information efficiency is absurd. And, and the, the way to unlike get these little points of Okay, met the investor or met the, met the co-founder, met the so-and-so person. My first customer is like, it can just happen here.

Aqeel: If you're focused and you know what you want and you're communicative about it and you know what you're doing, they can do that in less than a month here. Like, I've seen it happen several times. So you're in a different country, um, whatever, like agnostic to whatever the country might be.  . Um, what, what would you do if you just kinda had.

Aqeel: How to start from scratch, knowing everything you know, in your, in your life right now. 

James: I, you know, we're sitting here in San Francisco and I feel like we're very lucky to be here. I also moved myself here Even though my family's all back east, I moved here, um, because of the network effect, because of the culture here.

James: Because the advice you get here is just better. You don't get that much bad advice and you get a lot of good advice. You get a lot of learnings, you get a lot of key performance indicators from people who are doing something slightly different for you. But when they tell you those numbers, you now can move boldly and clearly with your own product and your own business, and that changes the game.

James: The, the, the little mechanics of how the network effect of the tech industry in San Francisco, or, you know, how it works is magical to watch the little pieces of the mechanisms, but it's real, it's absolutely real. And so, you know, look, if I want to really play basketball, I move to the United States. If I.

James: Really wanna do tech. I moved to San Francisco, I really wanna do movies. I don't do it in San Francisco. I'm not gonna, I'm not gonna, you know, kid myself, you know, I could go down a list of all the great movies made in San Francisco, but that's not where they're made. Right. They're made in Los Angeles. Yeah.

James: The screenwriters are down there. The way you light it is down there. The agents are down there, everything's down there, you know, and if I'm gonna do finance, I don't do it in Los Angeles. Yeah. I do it in New York. Right. Because that's where all the great hedged funds are. And that's where the banks are.

James: And that's where the investment bankers are. And the merchant banks are there, and the ratings agencies are there. And the journalists are there. So if I wanna do finance, I go there. And if I wanna do tech, I come here. It's pretty simple. Nice. Cool. 

Aqeel: I'm feeling pretty satiated with the conversation, feeling like there's just a lot of value here.

Aqeel: I think the, the, the continuous reading, like the, the amount of stuff I think NFX provides for free is, um, is mind blowing to me. Um, how have you thought that in terms of. Being the GP there, have y'all, he's been very, very clearly community driven first. Yeah. And community. Like, you know, what we're doing here with Circle Valley, it takes a lot of sacrifice on the teams and to make things work cuz it's not, it's a labor of love and you enjoy and ensure there's like commercial opportunity directions.

Aqeel: You can take things but to sustain it and keep it there, it just takes a sort of this this free. Yeah. You don't do it for the money. You don't for the money. 

James: Exactly. I mean, look, I was very successful with my four startups. I don't take a salary from NFX. I'm doing it for the love of it. I think all the partners are too.

James: Um, we don't need to be working, but we love it and we love helping people,   you know, get better. And, you know, the selfish part of it is that if we can educate people to think about how to do companies better, design them better, then they'll just be more companies that we can invest in. And the pie just gets bigger for everyone.

James: And that's, I think one of the big things people underestimate about why you would move to San Francisco is there's a pie. Bigger mindset here. Yeah. As opposed to taking my piece of the pie, which is more east coast thinking and more European thinking and the small brain switch. It's not a small brain switch, but it's, it's a huge impact when people move from I'm here to grow the pie, I'm here to grow the pie.

James: Once you start growing the pie, then there's plenty of pie for everybody. And I've had plenty of pie handed my way during my career. Um, and for the next 20 years, we'll continue to flow my way simply because I have it flow out. You know, you pay it forward. And that mentality is what created Silicon Valley.

James: And what I think is, is maintaining us. And to the extent that we get lost in the pursuit of money and status, that's where we're gonna lose. That's where Silicon Valley, as we know will end, is we have to stay focused on the paying it forward. And we have to stay focused on the products and the metrics, products, metrics, and paying it forward.

James: If we do those three things, then we will stay who we are and we'll continue to be the center of the world for tech. And if we lose ourselves in money and status, then we're lost like everybody else. 

Aqeel: That was the best, I'm gonna call the closing remark. It was like beautiful. Man. James, I really appreciate your time.

James: Of course. Thank you. Yes.