Bitter Lessons in Venture vs Growth: Anthropic vs OpenAI, Noam Shazeer, World Labs, Thinking Machines, Cursor, ASIC Economics — Martin Casado & Sarah Wang of a16z

**Alessio** (0:00)
Hey, everyone. Welcome to the Latent Space Podcast live from A16Z. This is Alessio from the O'Connell Labs, and I'm joined by Twix, editor of Latent Space.

**swyx** (0:08)
Hey, hey, hey. And we're so glad to be on with you guys. Also a top AI podcast, Martin Casado and Sarah Wang, welcome.

**Martin Casado** (0:16)
Very happy to be here, and welcome.

**swyx** (0:17)
Yes. We love this office. We love what you've done with the place. The new logo is everywhere now. It's still getting, it takes a while to get used to, but it reminds me of like sort of a callback to a more ambitious age, which I think is kind of...

**Martin Casado** (0:31)
Definitely makes a statement.

**swyx** (0:33)
Yeah.

**Martin Casado** (0:34)
Not quite sure what that statement is, but it makes a statement.

**swyx** (0:38)
Martin, I go back with you to Netlify, and you created software defined networking and all that stuff people can read up on your background. Sarah, newer to you, you sort of started working together on AI infrastructure stuff.

**Sarah Wang** (0:51)
That's right. Seven years ago now.

**Martin Casado** (0:53)
Best growth investor in the entire industry.

**swyx** (0:55)
Oh, say more.

**Martin Casado** (0:56)
Hands down. Sarah is. When it comes to AI companies, Sarah, I think has done the most aggressive investment thesis around AI models. So she worked with Noam Chazir, Mira, Ilya, Fei-Fei, and so just these frontier large AI models. I think Sarah has been the broadest investor. Is that fair?

**Sarah Wang** (1:20)
No. Well, I was going to say, I think it's been a really interesting tag team actually, just because a lot of these big C deals, not only are they raising a lot of money, it's still a tech founder bet, which obviously is inherently early stage. But the resources, one, they just grow really quickly, but then two, the resources that they need day one are growth scale. So the hybrid tag team that we have is quite effective, I think.

**swyx** (1:46)
What is growth these days?

**Martin Casado** (1:48)
You don't wake up if it's less than a billion or like, it's actually very, it's actually very, like, like, it's a very interesting time in investing because like, you know, take like the character around, right? These tend to be like pre-monetization, but the dollars are large enough that you need to have a larger fund and the analysis, you know, because you've got lots of users because this stuff has such high demand, requires more of a number sophistication. And so most of these deals, whether it's us or other firms on these large model companies, are like this hybrid between venture and growth.

**Sarah Wang** (2:18)
Yeah, totally. And I think, you know, stuff like BD, for example, you wouldn't usually need BD when you were seed stage trying to get product market. BizDev, exactly. But like now...

**swyx** (2:27)
I'm not familiar with what does BizDev mean for a venture fund? Because I know what BizDev means for a company.

**Sarah Wang** (2:31)
Yeah, you know, so a good example is, I mean, we talk about buying compute, but there's a huge negotiation involved there in terms of, okay, do you get equity for the compute? What sort of partner are you looking at? Is there a go to market arm to that?
And these are just things on this scale, hundreds of millions, maybe six months into the inception of a company, you just wouldn't have to negotiate these deals before.

**Martin Casado** (2:54)
Yeah, these large rounds are very complex now. Like in the past, if you did a Series A or a Series B, like whatever, you're writing a 20 to a $60 million check and you call it a day. Now, you normally have financial investors and strategic investors, and then the strategic portion always still goes with these kind of large compute contracts, which can take months to do. And so it's a very different ties. I've been doing this for 10 years. I've never seen anything like this.

**swyx** (3:19)
Yeah. Do you have worries about the circular funding from some of these strategic?

**Martin Casado** (3:24)
Listen, as long as the demand is there, like the demand is there. The problem here is the demand wasn't there.

**swyx** (3:29)
Exactly. This is like the whole pyramid scheme bubble thing where it's obviously mark-to-market on the notional value of these deals. Fine. But once it starts to chip away, it really...

**Martin Casado** (3:40)
Well, no. As long as there's demand.
A lot of these sound bites have already become clichés, but they're worth saying it. During the Internet days, we were raising money to put fiber in the ground that wasn't used. That's a problem because now you actually have a supply overhang. Even in the time of the Internet, the supply and bandwidth overhang, even as massive as it was and as massive as the crash was, only lasted about four years. We don't have a supply overhang. There's no dark GPUs. Circular or not, if someone invests in a company, they'll actually use the GPUs and on the other side of it is the customer. I think it's a different time.