Episode #85: Venture's Cognitive Dissonance Moment, Cold Pitches Actually Work, Building Your Moat Later

**Charles Hudson** (0:00)
I think part of the problem in cold e-mail is a tragedy of the comments. Most of it is terrible. Even if you're a credible person and you have a good message, you're competing with all of the perception that it's junk, because a lot of it's junk. What I always think is, why is this person reaching out to me cold? I wouldn't tell most people to go cold as the first option, but if your choices are not reach out to the person at all, or write a really good cold e-mail, cold.

**Mia Farnham** (0:24)
It's the week of July 6th. Welcome to The Learning Corner, a Precursor Ventures podcast.
Welcome to The Learning Corner by Precursor. I'm Mia Farnham and I'm joined by our GP and managing partner Charles Hudson, where we will be talking through the articles and Goodreads that caught our team's attention over the past week. Our first piece this week comes from our friend Samir Kaji, who draws on his 27 years in private markets to argue that we are living in two truths about AI venture all at once. On one hand, the froth is unmistakable. Companies are repricing every five to six months, and Precursor, as everyone knows, went from roughly 2.5 billion to 60 billion dollar acquisition by SpaceX in about 18 months, and 100 billion dollar plus seed rounds are pricing in the option value of being early rather than the business itself. The access market has grown noticeably undisciplined too, with these multi-tiered SPVs piling fees on top of unauthorized secondary transfers. And on the other hand, every super cycle has produced bigger winners than the last, and this one really is no exception. SpaceX's roughly 1.7 trillion dollar IPO, we've got Anthropix raise close to a trillion dollars itself, and OpenAI at 852 billion dollars could together just exceed the total exit value of the last decade in venture. Samir's conclusion is that the percentage of real winners will be far smaller than the percentage of companies people believe are winners, which means a split between winners and losers this cycle will be more extreme than anything venture has produced before. His practical takeaway for allocators is really blunt. Portfolios without at least one top 5 to 10% asset of this cycle will significantly underperform. An average exposure to the AI theme will be worth close to nothing. So Charles wanted to pause here first. Curious if you feel like the broader sentiment beyond Samir's article is also headed in a similar direction to what he was saying.

**Charles Hudson** (2:10)
I feel like there's been this interesting vibe shift in venture where for the last years it's been like, just invest in AI. It's the only thing that matters. It's where all the alpha is gonna be. There's gonna be a lot of winners. To a market where that's not the case, where everyone's like, oh, okay, well, now that like the dust has settled a little bit, maybe it's only a really narrow set of companies that are gonna make the majority of the money. And the rest of the stuff is going to be less valuable. In my mind, that's a pretty big narrative shift from people, which is that maybe three or four years into the cycle, we have a better sense of the companies that are most likely to be valuable. And does that mean that everything else ends up being remnant? And I don't know if that's the answer. It goes back to this whole something we've talked about. If returns are really concentrated in a handful of companies, if you're not in those companies, there's almost no way to catch up on a comparative basis. The other question I have for some people, like how repeatable is some of this stuff? If you do catch lightning in a bottle, will you catch it again? And I think if I were a fund manager who had one of those companies and was in market, I would absolutely say yes, we can. And let me tell you why we, the process we have will help us find the next version of one of these. I do think if this narrative shift continues, there will be a moment where things change, and it becomes hard for AI companies to race. People express real skepticism about revenue, terminal debt, and that just hasn't, in my opinion, really been happening in the sector. So I think this could be a big shift. And in some ways, it sort of reminds me of the turn that happened in 2021 where everyone was like, well, I guess it's okay to pay a 100x revenue for a really amazing software company, but not just for any company.