Episode #87: Patience Pays In Venture, Why Humans Beat AI, Managing Your Agent Workforce

**Charles Hudson** (0:00)
If AI is so ready for primetime, why do we need so many forward deployed engineers? Wildly promising technology requires massive rethink of the way the companies work. This just to me reinforces the idea that this technology is gonna take longer to generate business value that people think, because to get the real value, you have to like rip up and redo your processes.

**Mia Farnham** (0:20)
It's the week of July 20th. 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 Hedson, where we will be talking through the articles and good reads that caught our team's attention over the past week. Our first good read this week is a blog post from Nick Chirls from Asylum called Patience and on Owners vs. Tenants. Chirls argues patience isn't just a virtue investors should aspire to. It's actually a strategy to make more money. He points to venture's growing obsession with speed, chasing revenue at all costs.
One to two-year fund deployment cycles making a comeback and metrics like time to 100 million in revenue that ignore whether that revenue is any good. He borrows Jeff Bezos' Owners vs. Tenants framing. Tenants churn through what they hold quickly while owners make decisions built to compound over years. And Nick backs this up with examples like Clay taking seven years to nail its product before scaling past 100 million in ARR and OpenAI, needing a full decade before Chachapi-T became a hit. And his closing point is that patience doesn't mean moving slowly. It means being willing to look worse in the short term in exchange for building something that actually lasts. And Charles, I have a bunch of questions here and want your broader reaction, of course. But I think the largest point of tension in this piece here is how to align on what patience means between fund managers and their LPs. I think the original version of Early Stage Venture inherently was tied to patience. And now the conversation has become, what is a reasonable level of patience that LPs and then therefore GPs should have as it pertains to liquidity. But I'll pause for your broader thoughts first.

**Charles Hudson** (2:14)
I emailed Nick right after I read this. I'm glad he wrote it. It's funny. I went on when I was on the Peel, I talked to Turner about this. There's this whole meme about the game on the field. In Venture, we talked about this. Oh, there's the game on the field. Can you play the game on the field? Should you play the game on the field? And my general view is, it doesn't matter whether you want to play it, but you must be aware of it. And I think about our model, which is to get in super early, usually pre-product market fit.
And I would say there have been times in the last 15 years, I've been doing some form of precursor, where being super early pre-product market fit and taking time to build things has been very much in fashion. And there have been other moments where everyone's just like, I want just to add water, instant growth.
And I've been on the same journey that Nick explains in this post.
You know, I went to a lot of LPs and said, guys, some of these things that are getting to $100 million in revenue will come right back down. This revenue may or may not be durable, we don't really understand. And I think in a time of great uncertainty around what, you know, what Moats are, what's going to work in AI, things just out of people who said, I'm just going to chase the things that are the fastest rabbits, the things that get out of the gates quickly, because to some extent, revenue is a signal of something. Whatever I ask people like, hey, bubble or some of the stuff, they go, but look at the revenues. I go, look at them. Actually, look at them. Look at like what underlies them, whether they're going to persist, whether there's any margin potential there. And there's almost no appetite for that conversation. And I think we live in this feedback loop where a lot of LPs, Venture is a part of their portfolio. It's not the whole thing.
And in many cases, I meet limited partners whose primary interest is, are you in the hot companies? And I think in some ways, it's because the hot companies are easy to understand if Venture is one of 10 things on your plate. You've heard of OpenAI, you've heard of Anthropic, you've heard of SpaceX, you've heard of Andrel. Maybe there's 20 companies, you've heard of Databricks, but maybe there's a great slow growth company that on your statement, it's still flat. And the investor is like, tell me why I should be excited about this company, it's been flat for five years. Replet, like there are a bunch of these companies. And I think there's very little appetite for that narrative right now, which means if you're gonna pursue that strategy, you need patience yourself, you need fortitude, and you need people who will help keep you in business for that good news to turn out to be true. And I think this also has trickled down impacts for founders because VCs are responding to the institutional incentives, which I think right now are to be in the hot, visible, high growth things. Some of them will work out, some of them won't, but they're all, it's funny. We talked about what's legible to capital, that whole legibility thing. And I think we're now in the same era for VC managers, which is like, well, what's legible to LPs? And I think legibility is just a huge shortcut to stop you from asking hard questions and thinking, oh, this person went to Stanford and worked at OpenAI, so like they're probably smart.