Uncapped #52 | Mike Volpi from Hanabi Capital

**Mike Volpi** (0:00)
The kind of classical marketing efforts that have been done for brand building, particularly in venture, sound off key to your average 22-year-old entrepreneur. I think what does resonate is inside knowledge, tips, connections, network, all those things which are kind of indirect but organic ways of building brand. Yes, brand is important, but I think you want to build it organically.

**Jack Altman** (0:24)
All right, I am really excited to be here today with Mike Volpi, who is probably one of the most successful venture capitalists of the last couple of decades and now building your own new firm. I am really looking forward to learning from you, so thanks for doing this with me.

**Mike Volpi** (0:35)
Are you kidding? It's a pleasure and I have already fooled you.

**Jack Altman** (0:38)
Well, that's one. One of the things I want to start with talking to you about, which I thought would be kind of interesting, just because I also gave my shot at it, is just building a new venture firm. You obviously had had this incredible run at a great firm at Index for a long time, and now you are building your own firm, which you have been doing for the last year and a half.
Obviously, you have been really thoughtful about how you want to do it, and what the trade-offs you want to make are, and what the firm design is going to be, and what is the strategy. So I guess I want to start, when you were thinking about creating a new firm, what did you sort of start by thinking about? What were the key considerations that you got going?

**Mike Volpi** (1:14)
The first is somewhat obvious, but very important, which is it's very hard to disrupt a market, to break into a market, unless there is something macro that is happening that is an enormous change. Obviously, AI is that.
The first thing is to take a firm that's new and deadly focus it on whatever gigantic wave is hitting the industry right now. Because if you tend to do the spread the peanut butter thing, it's just never going to work. First, A, identify that there is a massive trend to absolutely focus on it. The third thing I would say is gather people who are not only fluent, but just have grown up and live whatever this new trend is. I do think that there is a big generational shift right now between sort of classic entrepreneurship, classic venture and this new generation of AI venture. And some people are more predisposed to it than others. The last thing I would say is you have to be very careful about your past success. This is, I would say, very true for individuals, for yourself. And it's also very true for firms. And the more success a firm has had, the more, to use an AI term, reinforcement learning there is of how things were done.
And if the world shifts to a place where things are done a little bit differently, that reinforcement could be applied very incorrectly.

**Jack Altman** (2:37)
I actually think this past success reinforcement loop thing explains why a lot of, for example, like execs from pre-AI SaaS are like, it's really difficult to adapt. Because you learned a whole set of things that don't make sense anymore.

**Mike Volpi** (2:49)
Yeah. The whole concept of software is changing. Basically, most venture capital firms are focused on making money on software companies. And that foundation is based on the idea that software is complicated, expensive and takes a long time to build.
And it costs very little to make lots of it, but it costs a lot to make the first edition of it. And so then, you're in this world of, I have a high fixed cost thing, which I need to sell to as many people as possible. Every business model starts looking like that. Then you move into an AI era, which takes the cost of making software way down. You're completely shifting the core assumptions on how a business is built. And that then extends into everything from go-to-market, engineering, fundraising, which customers you target first, how do you target your customers? Should it be a product-centric company or a service center? All these assumptions kind of blow up. So if you've had sort of a firm as an investor that's been structured to invest in a certain type of company with a certain type of people, and that base assumption changes, the cost of making software is now super low, you blow up everything. And so if you get stuck with the old way of doing it, you're probably going to invest in the wrong companies.