Matt Kraning | Menlo Ventures - From DARPA to a $1.25B exit, why founders need to be right instead of popular, and the line every mediocre VC hides behind

Matt Kraning (0:00)

The decisions matter. There was a suicide attack at one point that was just like less than 200 meters away from me. And you're kind of understanding both, one, the very real sacrifices that people wear in the uniform are making, but also that taught me that when startup times got bad, there was one time in my career I actually couldn't get out of bed for about an hour. It's the only time that ever happened to me because of stress.

I compared it to my experiences in Afghanistan, and I very quickly got over my own self-pity.

Daniel Dart (0:29)

Today, we have a really exciting guest joining us, Matt Kraning, partner at Menlo Ventures.

Matt's path to venture is pretty unusual.

Although he started his PhD at Stanford, he took a big turn when he dropped out to join DARPA and spent almost two years as a data scientist on the first operational program the agency had run since Vietnam. He came home, finished his PhD, and started his company, Expanse, which would grow into a category of finding business and sell to Palo Alto for over a billion dollars. Now, he's at Menlo Ventures, one of the oldest firms in Silicon Valley and the largest institutional investor in Anthropic. In today's discussion, we talk about what he learned in the war zone and why, no matter how bad startup hell gets, it doesn't compare, why he thinks founders need to be right instead of popular, and what actually separates VCs worth taking money from, from those who you should steer clear of. It was a fantastic conversation and I am so excited to share it with you. So without further ado, Matt Kraning, welcome to The Dart Board.

Matt Kraning (1:39)

Thank you so much for having me, really excited to be here.

Daniel Dart (1:41)

Dude, I am super excited to have you. Before we get into things, can you give high-level just Menlo Ventures, and then we're going to dig into your past?

Matt Kraning (1:52)

Sure. So Menlo Ventures is one of the oldest ferns in Silicon Valley. It's actually our 50th anniversary this year, and in particular, most recently, we've done a number of transitions over those years, obviously starting from investing in semiconductors, investing in really early life sciences companies like actually Gilead, and other ones to now being on the leading edge of AI. We're the largest institutional investor in Anthropic, but a number of other leading companies including Lovable, Suno, Higgs Field, OpenRouter, Whisper Flow, and recently we raised our largest fund ever at $3 billion. So really excited to put a lot of that capital to work. Wow.

Daniel Dart (2:32)

It's super exciting.

I was talking to one of our colleagues recently. When you guys did the Anthropic deal too, it was very contrarian. At the time, it was almost like the also ran, so it's awesome to see where that's gone. And now they're just crushing OpenAI.

Matt Kraning (2:47)

I don't know if I'm allowed to say that out loud, but anyways, I won't comment on that, but I won't correct you either.

Daniel Dart (2:52)

Yeah. Yeah. Yeah.

But now I think I want to dig into, you have an incredible past. So I just want to kind of jump through a few things because after school, you ended up in Afghanistan. Can you give me a little thing before we talk about the company you built, I want to know how did that even happen? And give me a little backstory on that.

Matt Kraning (3:12)

Yeah, absolutely. So I'm originally from the East Coast outside of Boston. Winter being optional is really, really nice. I feel very spoiled in California for a number of reasons, but I originally came out to Silicon Valley a little over 20 years ago to undergrad at Stanford. And again, winter being optional was great. So stuck around for a PhD. In that time, I transitioned from physics initially to electrical engineering, but really applied math and machine learning along with a little bit of operations research. And partway through my PhD, I kind of joked that I did the very old school Silicon Valley thing. I actually joined the Defense Department. In the Defense Department, there is a division called DARPA, the Defense Advanced Research Project Agency. It is responsible for everything from stealth technology, GPS, drones, and the Internet itself all came out of originally DARPA funded research. And they're usually known for acting on kind of long technology development horizons, very ambitious projects. They also run both classified and operational programs in war zones. And I joined the first operational program that they had run since Vietnam. And the kind of high level unclassified version was to do data science in Afghanistan. So, partway through my PhD, I actually stopped out for two years and I joined this program two years overall, and then a number of months in Kabul in 2012 as the data scientist for DARPA. And was in Kabul, Bagram, Kandahar, and a couple other places as well.