Inside General Catalyst’s $1B+ Bet on Fixing Healthcare (Hemant Taneja, CEO & Managing Partner)

[00:00] If you think about the last seven years, COVID happened, wars have happened, all kinds of crises in the geopolitics. Anybody that say they had a strategy that there was seven years ago and they're marching down that, it's really not true. I think it's very much being nimble, being agile, having a true north in terms of our core values and then just seeing where the opportunity is going. I think that is one of the great things about tech is that you can have that attitude of learning from everyone. And people are surprisingly open, I think, even with their competitors talking about, here's how we run our culture. [00:30] of the time. Who do you take inspiration from? I try to learn from everybody. My mindset is we're so fortunate in the centricity of people around us. For me, it's just sort of be curious and learn from everyone as much as possible. Hey, I'm Mario, and this is The Generalist Podcast. As the saying goes, the future is already here. [00:53] It's just not evenly distributed. [00:55] Each week, I sit down with the founders, investors, and visionaries. [00:59] We're already living in that future. [01:01] to help you see it coming, understand it clearer. [01:04] and potentially capitalize on it. [01:06] Today I'm speaking with Hamant Taneja, the CEO of General Catalyst. If you follow venture capital, you'll know that Hamant is taking one of the most unorthodox approaches in the industry, transforming his firm from a traditional investment vehicle to a traditional investment vehicle. [01:20] into what he calls a strategic conglomerate. [01:22] with venture capital at its core. [01:24] In our conversation, we explore why General Catalysts bought an entire hospital system to transform healthcare from the inside,

[01:31] how some of today's worst valued companies might become the best IPOs of the next decade thanks to AI transformation, [01:39] Why the best entrepreneurs have fundamentally changed from hackers to iterative builders, [01:44] And why every region? [01:45] faces an existential choice between developing AI sovereignty [01:49] or watching their economies get hollowed out. [01:51] I walked away from this conversation with a fresh understanding of what the future of venture capital might look like, [01:57] and practical insights about how AI is reshaping traditional industries [02:01] and geopolitical power structures. [02:04] This is a new podcast, so if you like it, [02:06] I hope you'll consider subscribing and joining us. [02:08] for some of the incredible episodes we have coming up. [02:11] Now, [02:12] Here's my conversation with Hamad. [02:15] It is such a pleasure to have you here today. And maybe to get started, we can talk a little bit about how General Catalyst thinks of itself. One of the ways that the firm talks about itself these days is as an investment and transformation company. And I know you guys have been... [02:30] super intentional about thinking about GC's mission and its purpose in the ecosystem. How did you land on that framing for what you're doing and why was it the right one? [02:40] It, to me, all started with just seeing... [02:44] the increasing importance of the role of technology in society. You know, when I moved to the Bay Area in 2011, I saw we've gone from building these software companies for efficiency to really reimagining core pillars of society. Huge problems. And so, you know, as you think about the scope, so it just led us down the path for, well, what's the maximum impact we can create?

[03:06] and, you know, by creating the maximum impact, by creating the businesses that can be good for the world, we'll also create the most compounding investments and therefore maximum return. So when you take a step back, you know, where that journey has led us to, has been to think of our business in really sort of three parts. We sort of [03:27] say at the core of it is our familia. [03:30] which is our core relationships. And really it comes down to activating the world's most ambitious people, people that are starting new companies and people that have been building companies as entrepreneurs or executives as well. [03:42] and use that sort of relationship capital to build enduring companies. [03:50] And that's the investment business. The investment business is how do we create enduring companies which are maximizing for profit and purpose. And those are effectively the building blocks for transforming society. [04:02] and so if we can build the enduring companies, if we can get them to operate as ecosystems, then we can transform industries. We sort of say activate the world's most ambitious people as our co-relationships are familiar, build enduring companies, and transform industries, and that's [04:19] where the investment and transformation pillars of our work come from. [04:23] Well, I really want to get into all of those different pieces. But just as we're on the subject, what does it mean to activate a hyper ambitious person? In some ways, I would imagine these are people who are pre activated. They've been activated their whole lives. What is GC's role in saying, you know, actually, we can accelerate you or raise your your your ambition even more?

[04:45] Yeah, it's actually a great question. And one of our core values is expand possibilities. And it's always about, you know, pushing ourselves to think bigger and also pushing our founders. I think there's this cultural dynamic in our industry where we're often sort of saying, [05:02] Founders are... [05:04] doing all the work and we're really in service of them. We are, but we also want to help them think bigger to the extent that we can. So if we're thinking about transformations, the reality is that transforming an industry is bigger than any one company. And so for us, a lot of what we think about is, can we [05:19] inspire the founders to think about a broader industry transformation versus just building an enduring business. That requires you to think about partnerships in a different way. That requires you to think about your goals and the duration of what you're solving problems for in a different way as well. And that is a core insight I've had as we started working on transforming healthcare. [05:44] And it was very clear that if we could sort of plug eight to 10 amazing founders into a collective vision, [05:51] around what we call health insurance. So we maybe have a shot at transforming this industry that badly needs change. And so that's a lot of where this originally came from. Amazing. Well, I definitely want to talk more about some of General Catalyst's healthcare efforts. But just to get a lay of the land a little bit more, what is sort of the composition of the organization today? You talked about these three pillars, certainly. But when you think about it, you know, maybe the business lines almost, what are those? Yeah.

[06:19] Yeah. So the business looks like a strategic conglomerate. We actually often say GC is a strategic conglomerate with venture capital at its core. [06:30] So the way the business lines shape up, I'll tell you about three and we have two others in step that I can't talk about. So bear with me on that. So our capital solutions business, we think of that as a business line. That's where we have venture capital. We have creation. We have customer value fund, which is an asset class that we invented. And all the capital solutions are in service of these ambitious founders to help them build enduring companies. And we've done a lot of innovation there. Obviously, we can go into that. We acquired some seed firms. We have. [07:00] As I said, invented some new capital asset classes and so on. And then we have these industry sort of businesses, and these are sort of the other businesses on the strategic conglomerate. So example being HATCO, that's really focused on transforming the health care system in partnership with the companies we're supporting, as well as the health assurance sort of system partners, health system partners that we're partnered with. So it's like a real collaboration. [07:30] our GC Wealth business, which is really in service of our familia, helping our founders and our broader ecosystem from their business. [07:39] you know, wealth management and legacy needs. Then we have a couple other things we're doing, which is, but each of these is around how do we think about transforming industries? And so the way that GC runs is under me, there are these businesses that are sort of run with a shared set of values and a fair amount of autonomy as well. The capital solutions business, I sort of run myself. And then we have, you know, leaders running these other businesses.

[08:09] we using the capital solutions to build enduring companies? And then are we working with [08:14] industries to transform them via our transformation companies. And without, you know, [08:19] Giving away any sort of proprietary details about those last two pieces, when you sort of think about the longer term arc of how the business is built out, you know, do you think about it more of, hey, we want to own more of these transformation moments in different industries. And so we go from health care to defense or whatever you might want to pick. Or is it a little bit different than that sort of? [08:40] Curious, yeah, how you sort of see things five plus years from now. Okay, so I have to start by saying, you know, Ken always says, Ken's my chairman, Ken Chenault, that great strategies are built in hindsight. [08:51] The reality is, if you think about the last seven years that we've been doing, you know, disowned transformation of our own business, you know, COVID happened, wars have happened, you know, all kinds of crises in the geopolitics. So anybody that said they had a strategy that there was seven years ago and they're marching down that, it's really not true. I think it's very much being nimble, being agile. [09:14] Having a sort of true north in terms of our core values and then just seeing where the opportunity is going. So first of all, I'm led by that. Going back to the values, one thing that I am very focused on is, you know, how do you really think about capitalism, which is an amazing tool to work better for society? [09:32] how do we make it so that we drive inclusive prosperity and, [09:36] And how do we drive sustainability? So like all the transformation work that we think about doing is in the context of sort of those pillars of what we call responsible innovation. And so can we transform some of these very critical industries, you know, towards that kind of an outcome?

[09:54] So in that, then we think about, okay, well, health was the obvious one to take on because of COVID. [10:00] and the whole system was imploding and that's a great time to go in and be good partners to the industry. [10:06] And as you said, there are others that are now evolving. Defense is massively changing and, you know, energy is massively changing because of AI. AI is changing just the nature of workforce. All those are areas we think a lot about to say, can we expand possibilities with our entrepreneurs? [10:26] and go tackle them in a much more systemic way than just building a collection of portfolio companies to create a good return. [10:33] And again, I always have to say, this is not a do-gooder comment. This is purely out of ambition that if we can take the mantle to drive that kind of transformation, we'll actually maximize returns for our investors. Yeah, that was actually exactly where I was wanting to go next was how you think about balancing the – [10:52] the challenges of maybe being framed more as impact style investing versus this very financial, you know, return profile that you're looking for. Is that something that, you know, you find the need to really emphasize in the team or as part of the hiring or with LPs in such a way that, you know, you could imagine some amount of confusion where there's such mission driven focus behind your work that folks might, you know, mistake, you know, one set of priorities for another when really you're saying, no, no, no, we have to have both. [11:20] is [11:21] I and we do our job right, what we will prove is that it's not an either-or.

[11:27] it actually is a reinforcing function between profit and purpose. And no one's going to really fully embrace that on the profit side until you actually demonstrate that you build the most valuable companies with that approach. So that's the journey we're on. That's what we believe. I think a lot of where I've been very happy to, [11:46] see this take effect is that people that want to come work here [11:50] really do want to be part of that. And so many great folks have joined in the last few years, they're drawn to it. And so I think our job is to demonstrate that by aligning [12:02] stakeholder interests. We can actually build companies that are far more durable, far more compounding, going back to the returns perspective. And in the end, [12:16] in the end, something that works well for our entrepreneurs, for our investors, and for ourselves. Well, I'd love to get into a little bit of the... [12:22] the tactical nitty gritty of your work, because it is unusual for a VC firm to have a CEO. You see it, you know, a little bit on the private equity side, but even that's sort of the more complex publicly traded, [12:34] companies. But in venture, it's very, very unusual. And so I'm curious, [12:39] you know, what your day to day looks like as a CEO, maybe the parts of the job that, you know, feel extremely different than when you were sort of a pure investor at GC and what that transition has been like. [12:50] Yeah. Look, we're navigating a lot of ambiguity into what, what we become, you know, it's, as I said, it's, it's probably some sort of a strategic conglomerate that's, uh,

[13:00] driving these industry transformations has venture capital at its core. So first thing is, [13:06] Um, [13:07] For our venture capital business, which is our [13:10] early roots, me behaving as a CEO there does not work. [13:13] And we don't work that way. Yeah. You can't tell your other managing partners what to do. Exactly. We're partners. And I've sort of very much said this, that we're in the business of backing conviction. [13:25] It takes a lot of courage to have conviction in the midst of ambiguity. And so one of our partners has conviction. My job is that we challenge it, but then we get behind it. [13:35] And that's how we run. And so in that context, I don't ever... [13:40] sort of overrule investment decisions because of my view of the world. We just don't do that. And I actually think the day we start doing that, our performance will degrade. So we have really tried to protect the artisanal nature of how venture capital investing should really be done. But then we have these other businesses, [13:57] And so when you have a set of businesses where the role then shifts to is, [14:02] capital allocation, how do you make sure you have a common set of values? How do you make sure, you know, we're living those values towards the maximum economic opportunity? How do we make sure there's the right flywheel effect between our transformation companies and our investment business? And that is a new muscle. And in fact, one of the reasons we brought on [14:25] Ken Chenault in 2018 to be a chairman was, if we're going to scale, I was like, I don't

[14:32] I started a company out of college, but that was a pretty small business. I didn't really know how to scale. So it's like somebody needs to teach me. And so that has been a really amazing partnership where he's mentored me through this phase. And so I'm very clear about am I in my CEO role or am I in my I'm a person around the table role. I think it takes the right. [14:54] humility to get that right. [14:56] And I feel so much in venture that I've been humbled. There's so few things that go right. You're mostly wrong in our business. And so that does humble you. And I do think we have a pretty functioning process. [15:10] culture that's developing. One of the things that I could imagine being tricky is, this is maybe an overly simplistic... [15:18] Heuristic. But in some ways, venture is like really built on a lot of slow thinking, right? You have to be really deliberate, really careful. And in many ways, it feels like, you know, operating a business is all of the fast thinking. It's, you know, a lot more, you know, decisions, much quicker, trying to produce information from action a lot more. Do you find yourself toggling between those two modes? Does that sort of resonate with you as a difference? Or is it actually, you know, a little more complex than that? Or do you see it differently? [15:48] get to be slowly thinking adventure. Things move really fast. So they're actually very fast decisions and so you have to lean in your intuition a lot. [15:59] And the way we're building our business, there's so much ambiguity on the other side. It's also leaning into intuition a lot. So I actually don't think there is that much...

[16:08] of a difference in these decisions. I would say [16:12] Um... [16:13] you need to make sure you're way more first principled on the investment size. [16:18] I think on the operating side, you can actually lean on, hey, [16:21] those problems are much more deterministic and you can say, I can do pattern recognition. I do not like pattern recognition on the investment side. So that's probably the one difference, which is you have to reconstruct logic from first principles every single time on the investment size, uh, where on the operations, you know, there's lots of stuff you can lean on. That's, that's, [16:40] that you know will parallel well to what you're about to go do. [16:43] That's really interesting. You talked about Ken sort of mentoring you over these past few years. What have been the dividends of that mentorship? Like what are the pieces that you've taken from him in how you have to be as a CEO in this kind of an organization versus, you know, the startup that you ran out of college? [17:01] Look, the big, big transition for me that he's taught me a lot about is this whole idea of servant leadership. [17:07] and you know [17:09] Ken had asked me once, he's like, well, who do you want to model after? I was like, Ken, I'm a first principles guy. I don't like to model. So I can tell you some traits I like from different people. And that with him, I sort of said, I want the ambition of what Elon does in how we think about building businesses. He's amazing and we should all. [17:27] learn from the good parts of Elon. And then I would say, from the investment side, there's so many amazing investors. I want to learn from how they've all created these new asset classes and [17:37] you know, be our own little category as well. And then when it comes to being a CEO, I want to be like you. I want to learn how to be a good servant leader where people follow you. And, uh,

[17:46] You know, that was probably the one big transition [17:49] I had to do in inside the venture business where before I was just, I went to the Valley and it was like, [17:57] We're kind of a no-name firm. We need to learn how to be in good companies. And I was sort of a [18:02] In some ways, a solo operator is just like, go get us and do things that matter. Now I think about it and I look at my partners around the table and I always think about how can I weaponize them? [18:11] You know, where do they spike and can we lean into that and where can I offer to help them, you know, just become amazing at the thing they're doing? Because the good thing about the GC partnership now is everybody is very entrepreneurial and they all have a sense of purpose of where they want to leave their mark on the world. [18:26] What can I bring to just inject creativity or... [18:29] ambition in the way they're approaching their work and not have it be transactional. And that is an additional cognitive load that I did not have probably five years ago that, you know, it does, it energizes me. I think it's like a leverage [18:43] is a multiplier in the organization if that happens. [18:47] Are there any other sort of principles of that servant leadership that you've had to sort of really ingrain in yourself a little bit more? You know, if someone was trying to sort of as much as possible distill some of the other pieces of that, what would what would be most important? [19:01] It probably to me comes down to one thing, which is when you... [19:04] Spend time with people, always do what's in their best interest. [19:08] And if you can get good at aligning those interests, you have a growing movement behind you. [19:14] people that want to do stuff with you because you're bringing everybody along

[19:17] And that to me... [19:21] is really important. And that, by the way, is not a [19:24] oh, the CEO should be a sovereign leader. We want everybody in the company to think that way. [19:28] just pull everybody along with you. And that's what creates a cultural movement in an organization that's enduring and can produce great results. Now, I don't mean [19:39] by that being a soft organization. I mean, part of being a servant leader is pushing each other as well. [19:45] and so can you get those ingredients right? Can you have a [19:51] sermon leadership culture, which also embraces heavy constructive confrontation? Yes. [19:57] How do you really do that? [19:58] Yeah, how do you really do that? That's honestly what I wonder. [20:01] I'll tell you in a few years, we've worked or not, but we're trying really hard. It's just you need to really focus on the collective wind, in my opinion, as opposed to my deal and your deal. That happens a lot in a lot of organizations. I've always said the irony of wrench capital is that we're the worst run businesses culturally compared to the way we preach our founders. And we can't have that. And so can you actually handle that? I think ego has a lot to do with it. [20:28] And can you put your ego aside and really focus on the mission that you're on? And then, you know, [20:37] alignment has a lot to do with it. I spend a lot of time making sure everybody feels like they'll get the most purpose here and they'll make the most money here. [20:45] And if I can give that to everybody, including myself, we'll just be happy. We're going to do great work. And those soft attributes really matter.

[20:55] Hmm. [20:55] Are there organizations, you know, modern organizations that you think really embody some of those principles of, you know, really hyper ambitious servant leadership? Because, you know, we talk about Elon Musk. [21:07] Spikes on ambition, no question. But I wouldn't think of, you know, Tesla and SpaceX are not servant leadership places. That's more autocratic in many ways, I would think. Who do you take inspiration from? Look, I try to learn from everybody. It's just like my mindset is, you know, we're so fortunate in the centricity of people around us. [21:25] There's so many amazing people around us. They all spike. So for me, it's just sort of be curious and learn from everyone as much as possible. [21:33] And, you know, people always like often, you know, [21:37] say we're competitors with other friends. When I spend time with them, I'm like... [21:41] Teach me. We're all learning some cool things. How do I learn from you? But I would say... [21:47] In terms of organizations, it's hard for me to say because you're not really in them. But I really like... [21:55] attributes to certain other businesses. Amazon's been an amazing company. I spent a lot of time with Andy and Jesse and the way they do things. What I like about them is they can preserve this entrepreneurial culture where so many things can come out of a single company. Many companies that are multi-product, but they buy their way into it, but they have organically done that in a few things and done it really well. That to me... [22:18] is a measure of entrepreneurship and creativity, and I want that here. How do we really create that? I think McKinsey is an interesting 100-year-old organization. They have a sense of partnership that they do preserve. They sort of hang out with their partners. I'm sure there's

[22:33] politics and whatnot, but they're a very functional organization in how they collaborate with each other as much as I have seen. And so... [22:42] There are these traits that I really sort of resonate with. [22:48] NVIDIA is interesting. [22:50] Jensen is interesting. He's building the company with a really interesting culture. It sort of breaks all bounds. [22:57] There's something to learn from there. I'm just constantly figuring out [23:02] what works for these folks, but always go back to, let's have our own race. [23:06] Let's do, you know, at the end of the day, what first principles where that takes us, doing matters to culture or creativity and sort of, you know, do things that we believe in. I think that is one of the great things about tech is that you can have that attitude of learning from everyone. And, you know, people are surprisingly open, I think, even with their competitors talking about, you know, here's how we run our culture. And, you know, there's all of this sort of positive sum thinking a lot of the time that maybe is a historical artifact that still remains today. And so that's really powerful. [23:36] Um, [23:37] You mentioned that [23:39] you know, when you were sort of doing some of this thinking with Ken, you had folks in mind on the [23:44] financial investor side that you were inspired from who had created new assets. Because what you're doing is so unusual, so novel, I'm curious who you took inspiration from there or lessons that you found particularly interesting when you looked at these different asset classes and industries. Look, I think Berkshire is a super interesting conglomerate. Ken's actually a lead

[24:06] uh, you know, exposure to, you know, what Warren and them were doing. And, uh, [24:10] I would say that's interesting. I think the way they... [24:14] create the insurance flywheel to [24:16] you know, scale, the way [24:18] their rigor around buying good businesses. And like what they probably didn't do, and I think they have good reasons for it, is activating synergies across those businesses. And that's the place where we'll probably, when I say a strategic conglomerate, that's maybe where if we can do our job right, we'll be different. [24:33] like to create some flywheel synergies. But I really do think that's a [24:37] the all-time great [24:39] businesses and what I admire is [24:43] the courage with which they invest every time the market is scared. [24:46] They're so good at it. Now, if you take out the impact of the insurance flywheel, maybe their returns aren't any more spectacular than others, but the whole system has built an amazing, enduring business, right? And so that to me is about consistency and a belief system, and that's really admirable. And then I think if you look at other asset classes, there are companies that have emerged and become real platforms that I think are interesting. So I'm [25:14] I'm just constantly figuring out, you know, what works for them and what if that is, you know, what should we learn from that? [25:20] Well, in that respect, we have very similar interests and jobs because that's definitely what I like doing, too. You know, when you talk about this transformation for GC, I think you've mentioned on some other talks that, you know, maybe it was in the sort of middle of the last decade that you started to talk to your partners about like, hey, I really think there's something bigger to be done here. And they had the confidence in you and also, you know, the belief and the vision that you painted to undertake that.

[25:50] curious what it was in you at that moment that gave you the confidence to say, hey, I see something [25:57] much bigger here at a time when that was really [26:00] Not much of a discussion point in venture as far as I've ever heard. Look, this happened in 2014. And there was a confluence of things, but I would still say it was probably mostly intuition. [26:12] I would say, you know, [26:15] watching what was happening with Stripe and Snap and Gusto when I'd invested in them and then building Livongo and just saying, wow, these are... [26:23] These are... [26:24] important responsibilities, [26:27] for these different parts of, you know, small businesses or consumers with chronic conditions or entrepreneurs in the case of Stripe, like in that, that we had to take seriously. And there were [26:35] in some ways endless markets, [26:38] Our business wasn't really equipped to support those. [26:41] The capital bases aren't there. The governance... [26:45] mindset isn't there, the experience isn't there, the responsibility question wasn't there. So I was like, well, how is this all going to shake out? [26:52] So it sort of felt like this is an inflection point of like this industry has to change because the ideas just became so much bigger. [26:58] because we're really building a digital society, and we're going to build it with Moore's Law and Metcalfe's Law behind us. [27:03] which is a lot faster than the last industrial revolution, which was, you know, a hundred years. And so that was one thing. I think the second thing was, [27:12] you always look at the founder market fit, right? And I was like, well, why me? And I started to feel like, okay, you know, I was kind of a...

[27:20] not that great in my investing when I was in Boston. I was learning. I came here at the right time. We got exposed to these amazing people. And I was like, I think I'm going to be good at this. I sort of had internal conviction. I didn't want to come across as arrogant. So I was very timid in the way I said that to my partners. But I was like, I think I'm going to be good at this. And I want to really maximize my own potential in this. And the third was, that's around when [27:43] I had started writing my book on AI. [27:49] which I published in 2018. So I'd written this paper in HBR around economies of unscale. Yeah. What was happening with data. And it just led me down the path of, look, how is the world really going to, [28:01] unfold from there and like, what does it all mean? And so it just so much was going on. It just pulled me towards think from first principles and be unconstrained. I didn't want to be constrained with the accordion of state sector and geography that venture capital innovation is, that bubbles happen and all those things, your funds get bigger and all those dimensions and the bubbles contract and people stop that and then do that again. I was like, I got to break out of this and think about what these companies need. [28:30] Wow, super interesting. From those maybe early conversations in 2014, were there any things that have happened today that you would have been able to sort of predict? You were like, you know, these are the areas that even back then we were very crisp on. And, you know, sort of the other side, I'd be curious which parts maybe have surprised you the most over the years. You know, Unscaled, when I wrote it in 2018, I think we published it, like,

[28:55] January, February of 18, the whole idea was mass personalization, right? So last century was mass production, economies of scale, and this is mass personalization. And that... [29:05] you could see [29:07] big data go to machine learning [29:10] And then all this sort of premise of, hey, that's going to invoke AI. So it's a continuum, right? I mean, it's sort of all happening. I had said at that time, it's a 30-year cycle. [29:19] Started in 07, you know, when we started really building this digital society with Facebook, Connect, AWS, iPhone. And all that kind of came around within 12 months. And that it's going to accelerate when AI actually happens as well. But it's just going to sort of push. There was AI, but then all these other technologies. Think about all the innovations in biology, CRISPR and stuff happening. You had, you know... [29:43] this whole idea of blockchain was starting to take hold. I was like, wow, you put all these things together, there's just so many technology forces that are going to push this. [29:54] that are sort of economy-wide, that are not specific to any industry, that this will hyper-accelerate. But I had no idea what that meant. [30:01] You couldn't [30:02] Obviously, just like you couldn't envision Uber in 06, [30:07] I couldn't envision, you know, chat GPT at that time. And so the acceleration is just stunning to me because every time I think about an idea over the last couple of years when I think, oh, these pieces are getting built and they're going to [30:22] do this someday. It happens [30:24] In a matter of months, I'd be years. So that acceleration has surprised me.

[30:29] And so I just keep telling our team, we have to completely rethink what excellence means. [30:35] in terms of company building in this next phase. [30:37] from what we're used to. We've got to unlearn all that. All that's out of the window. All these old benchmarks and thresholds and things like that. We're going to produce terrible returns if that's how we think. The world's changed. So, you know, so anyway, so that acceleration curve is a lot faster. And so it puts a lot more pressure from a responsibility perspective as well. [30:57] And so just understanding what that means, it changes. Understanding what an excellent entrepreneur is changes from what it was seven years ago. So it's all changing. We have to like rethink our business in a lot of ways, how we invest. That's really interesting. You think that the composition of great entrepreneurs look different today than 10 years ago? What are the differences there? [31:17] I do. I think the... [31:20] previous cycle [31:21] version of the cycle with the cloud, and mobile is all about creating great customer experiences. So the hacker, the product market fit, the simplest thing possible to go do and take hold was the mindset. That's what we're looking for. [31:36] right? You're looking for these hackers. If you look at [31:40] What's happening now... [31:42] Technologies are changing fast. Geopolitics changes fast. AI is a transformation opportunity, not really. I mean, it's innovation, but the value accrues to companies that have customers and data. [31:53] and the courage to change, I would say. [31:57] So... [31:57] So that's going to be bespoke. I don't think...

[32:01] you're going to have as much of the bottom-up PLG product market fit. It's going to be the iterative founders that just know [32:10] you know, how to move, keep moving forward in the middle of the hurricane. [32:14] Everything is shifting around you. How do you keep moving forward and keep making progress? It's a very different mindset. I actually am a very iterative human being myself. I don't get anything right the first time. But I love it right now because it's like complete ambiguity and stuff just changing. And I'm like, well, let's just keep iterating towards our true north and tolerate the ambiguity. So you need founders to have a lot more grit. [32:39] in the context of how to handle ambiguity. [32:41] right now. Interesting. Yeah, that's... I was talking to an AI entrepreneur and they talked about the fog of AI and how it's very, very hard to see even a few months ahead. Yeah, [32:57] You know, healthcare has been one of these areas that you've spent a lot of time on. You talked about sort of COVID as this catalyzing influence. [33:04] How did you decide, like, Hatco... [33:07] health assurance transformation company, this initiative was the right way to start to play this. And then maybe we can actually dig in a little bit deeper from there. But let's start there. [33:16] Look, healthcare, I'm 20 years into it. I mean, the first company I incubated in healthcare was in 2005, 2006, when... [33:25] Some folks from Boston Hospital, I was in Boston at that time, the health system called me and said, hey, we have all this data, electronic medical record data. We're trying to figure out what to do with it. Do you want to meet us? And I was like, my first question was, what's electronic medical record data? So I had to go learn about it. And it just took me down a rabbit hole. We built a company.

[33:45] We sold it successfully, but it was small, a couple hundred million. Then I learned from that around a lot of the [33:52] in a nutshell, I just feel like [33:54] we didn't really build the right technology for this industry for a variety of reasons we can go into. The intentions were great, the outcomes weren't. And then I built this company called [34:04] sensibility for how do you actually build true culture at the intersection of technology and industry, healthcare in this case. And so that led me to starting Commure in 2016, 2017 to say, I'm just going to go work with some systems and solve this technology problem for them, build a software company that is doing it the right way for this industry. Now I started three companies. So by 2019, I was actually finishing a book on healthcare saying, hey, [34:34] We figured it out because Livongo had a big outcome and, wow, I think we can build great consumer experiences in this industry. So I gave a presentation of the partnership saying... [34:45] 2020 is a decade of healthcare. This is in fall of 19. And we should put 20% of our capital into that and [34:53] That's now in hindsight, an over-rematured less than what I was thinking. But then COVID happened. [34:58] So I launched a book right when COVID was starting. [35:02] actually edited the book a little bit to show the [35:05] impact of COVID and how the system was breaking. It was called unhealthcare. And then it was just incredible because you could see all problems. Insurance companies were minting money because no one's getting procedures. Hospitals were looking for bailouts. Workforce was

[35:21] exhausted. There was no public health system to actually take care of a population at a societal level. Nothing existed, right? So we sort of leaned in and said, [35:32] If we're not going to do it now, when are we going to do it? Like, we have a prepared mind. We've been building companies. We started doing partnerships with health systems. I was like, let's go... [35:41] make them successful in their communities, [35:44] as like the country in sight as opposed to [35:47] Following the money? Yeah. [35:49] Uh, and, uh, I sort of followed the need and, uh, [35:52] That's the journey we went on. It became clear... [35:56] that we could come up with a model [35:59] to drive their transformation, and that's what led to creating Harko. [36:03] Before we go deeper into Hack Co., you said, you know, some of these early efforts showed you what was needed from a cultural perspective. You know, when you think about health care and sort of innovation, what were sort of the deep lessons there that maybe were not obvious from the outside? So at that time, Slyvango was the largest digital health outcome when it went public and sold. And before that, I was just seeing a very clear pattern. [36:32] somebody out of the healthcare, a physician or administrator who's just like tired of [36:37] technology not working and coming up with some incremental solution. Or it was some really smart technologists in the valley. [36:43] Thank you. [36:44] saying they want to start a healthcare company because they want to not have impact on the world. They made some money and they want to do something bigger. Who goes and then hires, you know, but goes with the belief that their technology will solve all problems.

[36:57] And so the technology people underestimated that this is not a market, it's got complexity, [37:01] and the people from inside the industry never understood what technology is actually capable of. What we learned was we bridged the world. [37:10] When I convinced Glenn to jump in and do this with me full time, move to the Valley and build the Vongos, [37:18] I'll build a tech team. Do you know how to navigate this? And the reason it happened, by the way, it was really interesting. I forgot about this. I invited him to the Valley and I had him meet eight founders, 30 minutes each. [37:30] Then we had dinner. [37:32] And Glenn's is really polite Midwestern, one of the all-time greats in healthcare. And we're sitting down and he's like, "Hey, I don't know how to tell you this, but these companies are not going to work. They don't understand the market." I was like, "Exactly. What'd you do?" [37:46] But I can put a team like this together, so let's team up. [37:48] And so, you know, he bought into that, him and his longtime partner, Lee Shapiro. So we kind of built the business. [37:54] And that became a playbook of can you actually culturally respect [37:58] the importance of technology and the importance of having empathy for what's in health at the same time. [38:04] versus one being subservient to the other. And that was the unlock for us to get it done. [38:08] Fascinating. This episode is brought to you by Brex. Fred Adler, the influential venture capitalist of the 1970s, was known for displaying decorative pillows in his office that featured a signature business philosophy. [38:22] Corporate happiness is positive cash flow. [38:25] In today's post-SERP environment, Adler's wisdom feels particularly relevant.

[38:30] as founders need to make every dollar work harder. [38:33] That's exactly what Brex delivers. [38:35] Their modern finance platform was built specifically [38:38] for startups like yours. [38:40] and designed to help extend your runway when capital efficiency matters most. [38:45] With Brex, you get global corporate cards with up to 20x higher credit limits [38:49] and no personal guarantee required. [38:52] Their banking solution has no minimums and no transaction fees. [38:56] while letting you earn high yield from day one. [38:58] with same-day liquidity. [39:00] Best of all, Brex knows you were born to build. [39:03] not juggle spreadsheets and finance tools. [39:06] Their AI-powered platform brings cards, banking, [39:09] expense management, and travel all in one place. [39:13] It's simple, scalable, [39:15] and designed to get you back to what you do best. [39:18] building. [39:19] More than 30,000 companies, including one in three U.S. venture-backed startups, trust Brex to help make every dollar count toward their mission. Join them at brex.com slash Mario. [39:33] Okay, and so with Hack Co., you ended up buying Suma. How did that come about? Like, why was that the right target? How did you think about, like, even that type of purchase? You know, we have been working with about... [39:46] 15% of the healthcare system in the U.S. now, working with their C-suite, on their transformation, helping them out, [39:53] bringing our companies in and we're making progress. [39:56] And they're happy to some extent [39:59] Our companies are happy because it gets them...

[40:02] you know, access to the market a lot more efficiently. [40:05] But it was not going to change the game. So for us, it was like, well, we should just go... [40:11] purchase one and really do this end to end and buying a health system is a terrible investment to our funds that's actually because we don't want to maximize the profits there's like a community we're taking care of so that's what we actually decided we'll buy from balance sheet we'll buy it ourselves [40:26] We'll hold it for a long term and do this. So then the question is, what do you go by? You wanted it to be a representation of the country, not the elite coast, because the problems are different. You don't want to be an academic medical center. You wanted it to have an insurance company as well as a health system. You wanted it to be. It's got the challenges of addressing issues like Medicare, Medicaid, so safety net environment. You wanted like the hardest problem and the greatest representation of the microcosm. [40:56] Others will follow. [40:57] We have a lot of interest. You'll see some announcements where others want to work with us on this and be along for the journey, even though they're not systems that we own. And so, you know, it's a... [41:11] It's going to be a really interesting few years where hopefully we can create the playbook that needs to get replicated everywhere. [41:16] Well, fascinating. So I hadn't understood that, actually. HACCO started more in this advisory sort of connection capacity of connecting these different health systems with the tech world more directly. And then sort of became, hey, we actually need to do something much bigger and we need to buy this. We need to buy a hospital for, you know, to put it simply. Yes. And, you know, it's a complicated process because it was a nonprofit, which is most of the hospital systems are to convince people.

[41:43] The community leaders, our intentions are right. Obviously, the team and the board, we have a great relationship with the leadership of the system and the community leaders. They spent a lot of time on the ground there. And the attorney general, you know, it's a little bit of converting it to for-profit. Like the process, it's a little bit of what OpenAI is going through. So we went through that at a much smaller scale. Elon's not trying to thwart you. Well, this has been done before. [42:13] precedent is everything. Yes, indeed. Hopefully that'll sort out. So it was complicated, but recently we got a [42:19] approval from the Attorney General and we're now in the middle of [42:23] taking over the system. It's very exciting. Our team's very excited. Our founders are very excited. The team at Sumo is very excited to get going. We have a [42:34] lot of work mapped out that we want to do. And I'm [42:38] pretty deeply engaged in it myself as well. It's been, you know, I think about a year since the announcement. Have you gotten to start on any of the sort of like [42:46] you know, big projects or has it really been sort of getting these foundations right and making sure this transformation [42:52] from nonprofit to for-profit happens first before you can sort of [42:56] I don't know, start to take the steps you're most excited about. So we have done all the pre-work. [43:01] on what to do over the next couple of years, but we didn't want to start if the AG wasn't getting its approval. It's not [43:07] Didn't want to start creating this location that they have to then deal with. But that pre-work is very detailed. We have 120 projects mapped out of things we want to do. So it'll be, you know, we're getting everybody together, actually, in a couple weeks. And a lot of the health systems that are partners and a lot of our founders, we do this once a year.

[43:28] It's a gathering and we're going to do some demos and stuff there too. It's very cool. Wow. So it's like Camero and Epicratic and Sword and AI Doc and these companies are doing it. These are remarkable founders. [43:40] If you can unleash sort of a common creativity and a common objective, I do believe that's what it's going to take to take on a gnarly problem like health care. What are a few of the things on that 120 project list that you're particularly excited about? [43:55] You know, you'll be surprised how arcane these systems are. It starts with actually just giving people visibility so they can make smart decisions. There's a lot about using AI. These workforces are eviscerated. So a slight digression. When ChatGPT happened, I thought healthcare would be the slowest industry to adopt AI. [44:16] people's lives, regulations, what not. [44:20] But it has, in hindsight, ended up being... [44:23] one of the fastest. [44:26] We're actually doing [44:27] the largest implementation of Scribe technology [44:30] with Commure at HCA right now, for example, the largest in the world. And the reason for that is because this workforce is so... [44:38] depleted because of COVID. [44:40] They're so short-staffed. They're like, give us any help you can. [44:43] And that's what happened. And so one of the things with AI is, [44:48] you know, our team... [44:51] can barely do 80% of the work that they need to at SUMA. [44:54] And so can we give them the leverage so they can actually treat more patients, which makes the business better, right? You can take care of more people, better for business and better for the community. So just give them these sort of superhuman capabilities. That's where a lot of the initial projects are. Fascinating. How do you think of what success hopefully looks like here? Obviously, there's sort of the experience angle of it. But from an investment perspective, do you have sort of benchmarks in your head or is that really not how you even think about this initiative?

[45:23] Look, step one, what's really important is that we take care of the community because these businesses are a very important purpose. So can we expand our capabilities in the way we serve the community, not shrink, which is what happens when these are maximized for profit? That's one. Second is can we take care of the workforce? [45:41] we'll be the largest employer in Akron. And so how do we take care of that? How do we help, you know, prepare this workforce for the AI world? What does that really look like? Yeah. And then the third is, if you run, if you do all that, [45:55] and you say, while doing all this, the profit and purpose comment, while doing all that, can you run with best in class metrics? The best sell systems are not 20% EBITDA. [46:05] The community hospitals and the nonprofits run at low single digits. Can we meet somewhere in the middle because we ran more effectively and could serve more and whatnot as well? So I think this is a 10-year process. [46:20] project for me. We have to take it slow, we have to be deliberate, we take care of the [46:27] And we have to create this model, then we can give it to others to go do it. We're talking a little bit about, you know, AI's obviously transformative effect in healthcare. And you've been, I think, pretty... [46:37] vocal about the need for us to develop this technology responsibly. You sort of founded Responsible Innovation Labs in 2023, and [46:45] As you look at where we are two years later, how do you feel about the way that AI is being developed today? Do we need new safeguards that aren't there yet? Are we getting more safe, less safe?

[46:57] Yeah, so I think first of all, we did this... [47:01] response innovation protocol, self-governance protocol. And it was like widely misunderstood because I feel like people don't really read on Twitter. They just want to say provocative things. The ambition was not to slow down progress. The ambition was, hey, if we can be thoughtful about how we use this technology, how we accelerate the use of this technology, it'll give our regulators time to regulate. [47:26] If we start being irresponsible with it, they'll be forced to regulate, which will slow us down. [47:31] That's sort of the point. So I think to me, it's about building trust between policy and technology. [47:36] And, you know, everything is, to me, in transition. I actually like a lot of... [47:41] the things that, you know, the folks are doing in D.C., you know, Shriram and others, the way they're thinking about it. And, um... [47:49] my view is... [47:52] every region needs to work as fast as possible to become leaders in AI infrastructure. [47:58] because that's going to be important to capturing. Labor is going to melt into productivity. And if you don't have your own infrastructure and the best, your productivity is going to hollow out the economy and go to... [48:09] somebody else. That's the challenge for every part of the world today with AI. And so we have to take care of that, particularly in America, Europe has to do it, India, everybody has to do it. So that to me is like, move fast. [48:21] But then there is the how does that infrastructure get applied? [48:25] into healthcare or financial services, education, all these places. There, I think we need to be moving intentionally.

[48:31] move responsibly because it's people's lives. And, uh, [48:34] can you build the right set of governing principles and how you build those companies? So I think to me, [48:40] nuanced answer. The world's not black or white, which is how we do these debates. The world's always gray. [48:46] And so we have to sort of think about where to move fast and where to be more intentional. When you think about, you know, the need for every region to move fast, because otherwise, you know, you're sort of losing the battle of the century, let's say, for your own [49:00] sovereign power and so on. [49:02] Is that a realistic goal for some of these regions? You know, you talk about Europe, for example, obviously a lot of talent in Europe. I'm based in London now, have had a chance to see some more of this ecosystem happening [49:15] You know, in many ways, Europe is just like at least an order of magnitude behind in terms of the capital and talent from the U.S. Like, is it realistic for Europe to say, hey, we really think we can be an A.I. leader on par with the U.S. Or, you know, are there sort of comparative advantages you have to develop that are a little bit different? [49:34] So let's just focus on Europe in particular because we do have a heavy focus there. Jeanette, who runs Europe for us, is focused on this problem pretty deeply. You know, I would say think about what happened to Europe. [49:47] in its manufacturing process, [49:49] industry the last 20 years. I mean, they outsourced to China. And now the auto industry, for example, is in a very precarious position because the Chinese cars are better and they're cheaper. And the market for European companies is in China. So you can't really tariff you out of that problem. So like, what are you going to do? It gets sort of hollowed out.

[50:07] Same thing is going to happen on AI now to the services sector. [50:11] So if your lawyer... [50:14] salary turns into a cloud workload for a company in the US, you can follow that out. So, [50:24] They have to have a great sense of urgency on solving it. [50:29] One of the reasons they are in this position is because they missed the boat on cloud. It's the U.S. clouds there. And so do they need to build sovereign clouds? Do they need to get behind sovereign AI? It's actually one of the reasons we built a – we believe Europe will. [50:42] I mean, they have to. And so it doesn't mean their company's going to be [50:47] you know, larger than the ones getting built in the U.S., but you're up to the big market. And with AI, you can actually serve across the entire region because languages and regulations can all be handled by AI seamlessly. That market, from an entrepreneur perspective, can actually operate as a single market much more now than before. If you believe that, then there is a good local market, and if the right founders... [51:08] some of them might be the folks that should move from here to go back and solve these problems for Europe, can build enduring companies that can do this in Europe. [51:14] Our job is to back the best founders everywhere and let them build enduring companies. Our thesis is that, and I wrote about this with Fareed Zakaria in my articulation of global resilience, that you're seeing re-globalization. And in critical industries like AI or defense or others like that, healthcare, you're going to create local supply chains. [51:37] on the strategic parts and then have global supply chains on the commodity parts.

[51:41] That's the re-globalization happening. So that actually gives you a bit of a moat to build in these regions for those founders. So naturally, I think, [51:49] The right founder is going to step in and take advantage of that opportunity. And we're trying to support them all. And then long term, as you see these market leaders emerge in these different regions, then at some point the pendulum will spink, will be globalized again. And they can all compete for, you know, let capitalism do its thing. Let them compete for who can build the best global companies. That to me is the cycle we're in right now. [52:13] And Europe has that opportunity. Capital needs to mobilize. And then I think talent needs to [52:20] be inspired to go take on that problem. Like Helsing's a good example. Then Mistral is a good example of that. Harlow is a good example. I mean, they're like, there's a bunch of companies now, you know, Lagora is another one that are like, [52:31] Europe native that are like scaling fast and have a good chance, you know, to be [52:37] valuable technology companies. Definitely. I think the [52:41] The concern is that a lot of those companies end up either in whole or in part. [52:47] sort of moving back to the US because of that, those access to capital and talent. And so, you know, I couldn't say from which of those, I think maybe Laura. I think they, a lot of them move back because of access to market. So what happens is, [53:00] When a company started in Europe, it starts in some country, not Europe. [53:03] It creates some success there and it says, okay, where do I go next? [53:07] And US is always the answer because it's like, you know, [53:10] 50x bigger than any other country. So that's why it was happening. What I'm saying is with AI, that can actually change.

[53:18] because you can support all the languages and the nuances in many of these industries now. So I'm not talking about core data infrastructure. Yes, maybe... [53:28] you want to come this way because this is where the biggest customers are. But like if you're doing stuff in legal or health or energy, like those local markets can operate a certain way. And so, [53:37] I do think there's going to be more important companies getting built there [53:43] than there was. That's why we made this bet over two years ago when we brought on the La Familia team because we knew this [53:51] this pendulum is going to swing. And then we've invested in some incredible companies like Helsing, Lagora, Mistral, Parloa. I mean, they're like [53:58] incredible business. They're doing really well. [54:02] Yeah, I'm definitely optimistic about that in general. I think, I don't know, I would like to see another wave come up behind some of these companies like Mistral and Helsing. And, you know, I think there's still... [54:13] very much too few of them still, and we need another 30. But... [54:20] But yeah, hopefully we'll see that in the next few years. On the AI theme a little bit more, one of the sort of areas that you've been spending time on is with this sort of like AI roll-up idea and how to, you know, [54:31] renovate more traditional industries. How has that sort of come together a little bit? And what are sort of the guiding theses there? With AI, if you want to change an enterprise with AI, you have to do three things at the same time. That's why most enterprises are stuck with pilots and not real deployments. You need to change the data infrastructure.

[54:50] You need models for that industry. [54:52] You need to change the workforce because you have humans doing work differently and you have agents doing work that are AI. And so all that has to come together. So. [54:58] Unless all three of those things happen, it doesn't work. So the question is, how do you reduce the dimensionality of that? [55:03] to lead to success. [55:05] So the insight we had back to what I was saying was that, uh, find, uh, [55:11] parts of the enterprise where those businesses already decided to outsource those. [55:15] for labor arbitrage. Ah, interesting. So like everywhere there was labor arbitrage, why don't we go and say, hey, we will turn those into AI agents versus... [55:26] Indian agents or, you know, Philippines agents. And so that's where this was born out of. We said, so for every department in the enterprise, [55:32] Let's go figure out how to go do that. And the fastest way to do that was... [55:36] incubate a great team and then just go buy these companies that are declining assets, because everybody knows these labor arbitrage companies are going to go away. So to me, the roll-up is just customer acquisition. We buy them and then we transform them into an ad. My contrarian comment in that meeting was, [55:53] Some of the best... [55:56] IPOs 10 years from now are going to be [55:59] transformation of the companies that are the worst value today. [56:03] these labor art businesses will become [56:05] high margin AI clients, [56:07] services companies. So if you believe that transition, there's a huge amount of transformation that's going to happen there. So that's a lot of, and I give Mark Bargwell a lot of credit, and he has really executed incredibly out of creation to go do that for us. And I think we have

[56:24] amazing teams. We just hosted them last week, all these companies together, so they can learn from each other. And I was blown away. It's a [56:32] I have a lot of confidence that this will yield [56:35] pretty important transformations. [56:38] Really interesting. The idea of it being sort of roll-up based versus like larger buyouts, why is that the right way to play it? Because I could, you know, I think I've seen people sort of talk about it from the other angle and I could sort of imagine... [56:51] I could argue almost either side of it. [56:53] First of all, I met a lot of senior folks from large directory firms that are trying to figure out how to do this. The problem is, I think there's a sweet spot of size. [57:03] After which, you know, injecting innovation, the physics of it kind of gets in the way. Because what are we doing? Our creation business is in some ways the antithesis of the private equity business. Private equity business is you buy a business and you optimize it for costs, you do financial arbitrage. [57:17] creation that what we do, we buy a business, we actually increase costs. We raise, you know, we invest technology into it. We, we, we improve them. And then over time, you know, you can create financial leverage as well, but it's very innovation first mindset, very different. [57:32] Injecting innovation in a company [57:35] That's, you know, a few thousand people is one thing. [57:38] Tens of thousands gets a lot harder. How do you really do that? Yeah. [57:41] And I think we eventually will be able to do it. We're kind of on this journey of let's start with really small ones, they get to midsize ones. So we're going to scale the capital to be able to do this. And over time, we will be we'll learn how to do bigger ones, maybe department where department or like opportunities will arise. But I think that's that's got ways to go, in my opinion.

[58:01] How do you stage the process? Do these teams sort of [58:05] Do a bunch of fact finding, build the software and the sort of internal tooling first, and then, you know, sort of get the first target on board, next one and the next one? Or is it more sort of running those two things in parallel path where you're saying, actually, we're going to take. [58:20] We're going to make our first acquisition at the same time as we're figuring it out because it's valuable for us to see it from the inside and figure out what needs to be automated. [58:28] It's a great question. But when we start, [58:30] one of these companies, we immediately started saying, let's build a product and we can go get some organic customers to prove it out and start looking for targets. And then you somehow sort of converge those into, okay, now we have the technology validated. [58:44] And we can actually organically go build this as well, but we'll also go acquire these customers and move fast. And that's kind of Crescendo and, you know, a bunch of the Yuria. There are some amazing companies getting built right now. They're doing this out of our creation portfolio. [58:57] Yeah, and the creation portfolio is these incubations for more common parlance, let's say. Have you found that there are certain... [59:05] places where this works best? You know, you've tried now a few of these roll-ups. Are there sort of, you know, nuances within that sort of higher level thesis that you're discovering where there's really the biggest leverage? Yeah, so I think first thing is, [59:20] as technology [59:22] gets... [59:23] better on the AI model side, it unlocks how much more sophisticated work can you do. [59:28] The closer you get to reasoning working really well, you really take more and more complex tasks that are done this way, right? So that's one. So it's got its own continuum, and I feel like customer support got unlocked, and then legal got unlocked, and the insurance underwriting is getting unlocked from a risk perspective. So I think there's more – every time we make more progress with the models, I have this visual of –

[59:50] There's a certain... [59:51] additional number of applications in the world that just became ready to be transformed with AI, right? So like this curve. And so I think that's the thing that I would say [1:00:02] you know, is important. And then the other is it comes down to how technology aware is the company you're buying and then how courageous are the people that are leading it. Because if you don't have buy-in from those companies saying, we want to come be a part of it, we're not selling out and giving you something. We're going to come and help do this and do the cultural transformation and create a culture that can embrace a services team and a [1:00:22] you know, hardcore AI engineers. Like, go back to what I said with Livongo, can you actually infuse that kind of culture at the beginning? That has a lot to do with it. You know, one of the companies, Long Lake, that, you know, Zach Franklin and Alex Taubman are building. It's amazing. I mean, they are doing this at an incredibly rapid pace. And they're creating a blueprint for this whole industry for us. But it comes down to can you really embrace the cultural orientation of [1:00:52] Can you remind me what Long Lake is doing? I think it's maybe insurance. I will look at it as all the small businesses that need to be transformed with AI in the US are going out. They're going and putting them together and building these platforms. And it's like, is it Constantine Software? Is it Danaher? Like sort of, it's a, it's a. [1:01:08] sort of its own category-defining company. Like, really impressive what they're building. [1:01:11] Wow, how interesting. Have you found that the caliber of entrepreneur that you can get to do an incubation project is different than the ones that you find on the outside? Like, in some ways, I imagine it's harder to attract a true entrepreneur.

[1:01:27] N of one, you know, top one basis point outlier style person to come sort of in house into this structure and do things. Is that is that true? Or is it different sort of just different archetypes? [1:01:39] If I look at our last... [1:01:41] 15-20 years, we did kayak, we did demand wear, we did [1:01:45] Circle. We did Livongo. We've done a few companies that have been their own categories and have been multi-billionaire outcomes. So, um... [1:01:55] To me, it comes down to, is there this really elite person that already has an idea? [1:02:00] that they should just kind of go run with and let's get behind them. [1:02:03] where sometimes there's an elite person [1:02:06] Maybe you haven't done something before. Maybe you don't have an idea about how the ingredients. Maybe it isn't even a full package. [1:02:11] I don't want to be CEO, but we can train them, but they spike. They can be fast builders and are willing to co-create something with us. They kind of go this way. But if we do our job right... [1:02:24] I think we'll build, we haven't yet proven this, our largest... [1:02:29] internal incubation was 18 billion. Like, can we build a hundred billion dollar company this way? I think we have some things in our portfolio now that like, you know, Commure for example, or Hippocratic and others, right? I do think that kind of potential is there. And, um, [1:02:42] We want to keep honing in. How can we be good partners for these folks? They can be true outliers as well. That's part of the creation journey. And we have a few of these companies now that we're trying to prove. But if you already have an idea, we don't want to disrupt that. We don't want to tell you, come be part of this. This to me is much more creative figure so far from ground floor. It's earlier than seed. We've made a lot of investment in making sure General Catalyst can be the best platform.

[1:03:10] We're one of the best seed firms, that part of our business in the world. That's what, you know, Janad and Yuri, who joined us, who built Wayfinder and Neeraj from [1:03:21] Venture Highway, that's what they're working on. But creation is actually in some ways even earlier. It's a person trying to figure out what to do. We have ideas. They have ideas. This is like our studio, right? Yes. And we'll build something with first principles. Now that you've been doing this for long enough, have you ever sort of mapped... [1:03:37] how the hit rate changes for sort of creation inception, sort of incubation companies versus outside investments. Because in a way, I imagine you could tolerate a lower success rate on your incubations given, you know, usually there's a different ownership dynamic there. You know, you could calibrate a hit in different ways, but, you know, at some kind of [1:03:57] positive threshold. [1:03:58] I wonder, I'm curious, have you seen... It's actually the other way. It's actually our hit rate on creation is a lot higher. Because we all do like 20 to 25 companies in a fund, very concentrated because we've done the thinking. We're building together... [1:04:13] We'll get through the first... [1:04:15] in the venture would be sort of couple three rounds ourselves to make sure we have validated the business and they will invite others to participate as well. [1:04:23] Versus, um, [1:04:24] seed embraces a lot more ambiguity. [1:04:27] I think ideas in creation, some of it are more obvious. We're not doing accidental innovations in creation. We're looking at, like, here's a problem that needs to be solved. And so those are, in some ways, more execution-heavy,

[1:04:40] and can lean on our network and we can sort of build together. So it's actually the other way. And our performance in that business is over 20 years is incredible because we own a lot. [1:04:51] Ownership drives that. And so, we've invested in Stripe from the beginning and we're one of the largest shareholders there, but we don't own nearly as much as we would own a Long Lake or Camus or Hippocrat or these companies. [1:05:08] I think that's what ends up driving an even more elite return in the end. [1:05:13] Fascinating. Let's talk a little bit about the seed practice. And, you know, you mentioned Jeanette and Neeraj and, you know, some of the team members there. One of the ways that you've sort of bolstered that practice is through these sort of [1:05:27] firm acquisitions, La Familia, Venture Highway in India, [1:05:31] You almost never see acquisitions in VC. Super unusual. How did you guys think about that as a viable strategy? When is it the right time or the right circumstances for that to happen for GC? Yeah, I'd love to explore that. I have to say, I don't think... [1:05:50] we were intentionally going down that path. I just... [1:05:53] I just thought, [1:05:55] And every one of them has had its own journey, like Neeraj. [1:06:00] And I started talking about potentially doing this together maybe five years ago. [1:06:04] and it's because [1:06:07] We actually grew up in the next town or in Delhi. I'm a few years older, but like, so we're like, we both care a lot about building important companies in India, making a difference. But to me, five years for him to sort of be convinced to say, hey, it's better to be an entrepreneur here on the GC platform than doing this on his own. He can take tackle problems much bigger. India is really ready for prime time and he needs...

[1:06:26] that capital and scale. And then, uh, with, uh, [1:06:30] With Jeanette, it was actually much faster. She had invited me to [1:06:34] come speak at her conference that she was called Why Now? And I saw, you know, her community that was there. It was like 100 people, large group and tech CEOs. So the most [1:06:46] important people from Silicon Valley, all brainstorming. [1:06:50] And I asked her, I was like, what are you trying to do? And she said, I want to transform Europe. I was like, well, you can't do that with a [1:06:55] a couple hundred million dollars of seed capital. You need a real platform. And what if we could accelerate you by a decade? [1:07:02] So I think these are folks that [1:07:04] I knew for years, so I knew it was a cultural fit. I'll come to Yuri in a second. And they had their own sense of purpose in the markets that we wanted to lean into. And they were doing this in a very creative way, and they were both... [1:07:19] Very successful. I actually think, you know, we'll see in a few years that, you know, they are two of the best investors in the ecosystem. If you look at their portfolios, it's really, really remarkable. And then same for Yuri. Yuri was introduced to me by Gary Tan. And, you know, I met him. I was like, oh, my God, like, how come I don't even know this person? And he's got one of the most interesting portfolios in the Valley. He just quietly does this and, you know, and is in all the right companies and, you know, and is in all the right companies and, you know, [1:07:47] we were lucky. I think he saw how happy [1:07:52] Jeanette and Neeraj were, and the fact that they didn't feel like they were getting

[1:07:56] consumed in this large vortex and they could actually have their platforms. And that had a lot to convincing him to come here. And the three of them are... I mean, they own our... [1:08:07] seed effort and they're the stewards of the early stage of our business now and I have a lot of confidence that we can protect that because if we don't protect that, then we'll become irrelevant after a few years. And [1:08:18] I feel like our core is secure and we can now have the license to do a lot of these other things that we're doing. So it's been all I can say is this is pure luck, man. Like this is not a strategy. It just happened. And then this team works really well together. And, you know, I just feel lucky that we ended up we all feel lucky that we ended up together and doing this. So that's amazing. It sounds like the acquisition was really like almost a talent acquisition. Like you could maybe, you know, GC could have said, hey, we're going to. [1:08:45] pull together an India team and we're going to pull together a Europe team. And, you know, this is how we're going to sort of take on these markets. But it would have been difficult maybe to get the, [1:08:54] style of person, the connectedness of that person, the sort of sophistication of that person with regard to those markets. Is that sort of like the way that you've thought about it? For me, it was important [1:09:04] that the people that come into the partnership are going to make the partnership stronger. So that's just a very important consideration. Now, you know, Neurage and Jeanette had built teams. So we got those teams as part of that as well. So that gave us an ecosystem and a workflow and, you know, their portfolios that we can invest further in where it makes sense. Yuri was a one-man band. He's like a...

[1:09:27] one-man show. But that gave us, but we already had a team here. So that gave us a leader that we were just missing to help us really drive that. So I think it all came together, but it was very much about the whole package. I mean, they are entrepreneurs that we're building, but they would have built large firms 10 years from now. So I think they had the infrastructure, they had the team, they had, [1:09:48] the goodwill and the relationships in the ecosystem and understanding of how to play those markets. So I think we got a lot. But if they weren't going to be a good fit as leaders in the business, then it wouldn't have worked. So I do not advise it. I think it was more of an intuitive step, but I feel very fortunate where we ended up. [1:10:11] And now that these sort of platforms are part of GC, do they sort of still operate as one team? [1:10:18] One team. So they'll talk between each other. [1:10:22] They talk every day. [1:10:23] We call the seed decisions together. Yeah. One team, one dream. I'm very focused on, you know, we can innovate on products, but. [1:10:31] alignment, as I mentioned earlier, that's really important. We need to all [1:10:35] have the same set of values, economic alignment, purpose, [1:10:39] Were there like cultural issues that you had to work through there? Or was it just sort of like, hey, actually, we found the right people. And it was relatively straightforward. I always think of, you know. [1:10:48] So many acquisitions end up being failures in a traditional corporate environment. And usually that's down to some cultural mismatch. Integrations are painful. [1:10:57] because I think...

[1:10:59] You have different ways of looking at businesses. You know, you have all these teams that are all coming together. And we already had a team in Europe. India was easier. We didn't have anybody there. And so integrations were... [1:11:11] a little difficult. India's got its own challenge because so far away, we want to make sure they feel part of the team as our other location. But we're working through it. I think it comes down to [1:11:21] If these leaders have the right mindset, it works. And that to me is where I'm saying we just got really lucky. I think it's almost like three of them had worked together for like 20 years, the way they behave. Amazing. That's really cool. [1:11:34] Well, I'd love to wrap up with sort of our traditional ending questions. These are on the more philosophical and abstract side. The first one is, if you had unlimited resources and no operational constraints, what experiment would you like to run? The experiment I would like to run is around funding proactive care with health. So the way our insurance system works is nobody invests in people's health. [1:11:59] because it all funds when people get sick. But if you could actually redirect some of the dollars towards funding longevity and health and insure it, [1:12:08] So it really becomes pervasive versus only those who can afford it. It'll have downstream effects. [1:12:15] But it's going to take a few years to prove that. So we need the courage and the capital and the time to be able to do that. I think that if I could do one thing that I don't think this is easy to do, that I know will just really ensure the success of our health care work, [1:12:29] That would be it. Are there any longevity efforts that you found particularly interesting in recent years?

[1:12:36] I think there's a lot of underlying innovation happening around longevity. We funded some science companies like Altos, but then there's consumer phenomenon like Roe Health, which is a company we seeded in like 16, I think. That has become an incredible business around GLPs and GLPs are a proxy for longevity as well. So there is a lot of that happening, I think. And so my belief is that somebody needs to come and pull this together into a platform for longevity. But there's like little experiments. [1:13:06] for it. Technology is showing promise. It's like all the technology before the iPhone came about, and then Steve Jobs comes and pulls it all together, and the industry takes off. I think that's going to happen to the longevity. Somebody's going to do that. [1:13:17] Hmm. Amazing. What's a tradition or practice from either another culture or era that you think should be more widely adopted? So one tradition that I think a lot about, which I think could... [1:13:30] Um... [1:13:31] be good for Western societies around this whole notion of, uh, [1:13:35] not fighting death. [1:13:37] I want to go back to healthcare. If you look at America, half of our healthcare costs go to [1:13:42] Thank you. [1:13:42] how do we sort of protect that last six months of life, which is a horrible experience for everybody in bankrupt society. Yeah. And, and, and it sort of comes down to, [1:13:51] this short-term mentality in some ways. In India, you learn about, okay, there's reincarnation. I don't know if it's real or not, but there's this idea of a soul and enduring mindset. And I think the [1:14:00] The Eastern philosophy around that, infusing that more in how we build businesses is something that's interesting.

[1:14:06] just announced that I'm releasing a new book. It's called The Transformation Principles. And I talk a little bit about that in there. I think that might be one thing that I'm [1:14:16] I'm thinking can [1:14:17] We better embrace the ethos of how we build companies here. [1:14:21] How does that apply to the company building in your view, knowing when a company is sort of not working and it's time to sort of let it go? [1:14:29] Well, or when you're building a company that you wanted to endure, it's going to outlast you. [1:14:34] And it needs multiple acts and it needs to have a culture that can persist. Like, how do you really think about those things with like that kind of an arc and not be rushed to? [1:14:43] How do I maximize in the short term? Fascinating. I'll look forward to reading that. Okay, final question. If you had the power to assign a book to everyone on Earth to read and understand, what would you like to assign? Look, we're in a really turbulent time because of all the geopolitics. So one book I'd mention, I think like a 2015 book is Prisoners of Geography. [1:15:05] Hey, Marshall. It helps you understand... [1:15:09] why different regions behave the way they do. [1:15:11] what their constraints are. [1:15:13] And I think having empathy for, and I think that sort of talks about like these 10 different regions, you know, empathy for that could then help you think about how to build, you know, businesses and economic value to take care of the people there as well. Because, you know, one of our core values is inclusive prosperity. And I think a lot about, and we're obviously doing this contrarian thing of going global, is equity.

[1:15:39] Can we have that empathy for what these different regions are concerned and build with that intention for what's best for them? [1:15:46] Amazing. That sounds like a great book. Thank you so much for taking the time. I really enjoyed this conversation and I learned so much. Thanks for having me. That was really fun. That's it. Thank you for listening to this episode of The Generalist Podcast. Please subscribe on Apple Podcasts, Spotify, or your preferred podcast app. [1:16:04] Ratings and reviews help others discover these discussions, so if you enjoyed the conversation, [1:16:09] I'd be grateful if you could take a moment to leave one. [1:16:11] For all past episodes and more, [1:16:13] Visit us at thegeneralist.substack.com. [1:16:16] dot com. [1:16:17] See you next time as we continue to explore. [1:16:20] the future. [1:16:22] .