Where Are The AI Startups? — With Rick Heitzmann

Channel: Alex Kantrowitz

Published at: 2025-10-17

YouTube video id: _z1uC8S5-gA

Source: https://www.youtube.com/watch?v=_z1uC8S5-gA

Where are the AI startups? Are they
actually coming or will chat GPT gobble
it all? We'll talk about it with Rick
Heitzman of First Smart Capital right
after this. Welcome to Big Technology
Podcast, a show for coolheaded and
nuance conversation of the tech world
and beyond. Well, something we've been
wondering on the show is where are all
the individual AI startups? We know of
course about Chat GPT and Claude and the
big chat bots, but why hasn't there been
a wave of individual startups building
on top of generative AI that has emerged
alongside this wave? And we have the
perfect person to speak with us about
this today because Rick Heitzman is
here. He is the managing partner uh and
founder of Firstart Capital and he is
here with us in studio today to talk all
about it. Rick, welcome to the show.
>> Thank you. Thank you for having me. A
longtime listener, first time guest, so
it's always exciting. It's great to have
you here. I love running into you before
we're about to go on CNBC. Usually, uh,
one of us is right before right after.
So, today we actually have some time to
speak with each other oneonone.
>> I'm usually your opening act
>> or the other way around. So, uh, let's
let's go to the big question, right,
which we started with here. Um,
>> if you're if you believe that generative
AI is a transformative technology or at
least has the ability to make some waves
in the tech world, which I think is, you
know, basically consensus in in this
world. Um, where are all the AI
startups? Uh, of course you have some
point solutions like Harvey, which is
really good for lawyers. Um, but if you
took the functionality that's baked
within generative AI and you sort of
unleashed it to all these startup
developers without chat GPT,
>> my guess is we would see a swarm of AI
startups. Something that you could use
for fitness, something that you could
use to find the best surf break, which I
know is a application that you've played
with, but we haven't seen that wave. So
what's happening? So we we're starting
to see some things you know it generally
has to do with how specific and how big
your data is and I think there's a
couple things which create this dynamic
that we're seeing in the market. First
of all I think open AAI and chat GBT
have done a great job of making a very
good product that has both breath and
depth. So, you know, the leader not
being complacent is something, you know,
we hope as venture capitalists that
there's leaders and then they get lazy,
they get complacent, they get slow and
they get easy to disrupt. I think in
this case, OpenAI has done an excellent
job of not being any of those things.
Hiring great people, continue to develop
product very quickly. Um, the other
thing is a lot of the the data, so your
AI is only good as your underlying data
and your training data. So a lot of the
training data in general consumer is
general broad-based web and you know
obviously you're seeing litigation
around who's training on what on what
data and is it all the books in the
world is it all the crawlers on Google
or all the crawlers on the open web. Uh
and there's there's not been a
differenti differentiation based on data
which is slightly different than you
know you alluded to Harvey and some of
the uh enterprise AI companies. We had a
company Evolution IQ in insurance.
There's Harvey in legal. There's Henry
in commercial real estate. And they all
have a very discreet and sometimes
private data set that enables them to
build a better model enables them to
deliver a better end user application.
But for you know you and I who are
trying to find surf breaks or where to
go on vacation or the best place to have
a French dip in New York answer is for
Charles. But if you're trying to find
those things, and I'm not available on a
podcast, you know, those things have
generally been broad-based, chat, GPT or
Perplexity. Um, and we frankly have been
a bit frustrated by the lack of startups
we've seen in their ability to invest
along those lines.
>> Right. By the way, Harvey Henry, I'm
sensing a trend here.
>> There's a trend. Yeah.
>> Is it the newly? You just take a random
guy's first name.
>> I I think so. It's easy to say, easy to
pronounce. We'll see. And there was Blue
Nile and there was Amazon and there was
a bunch of things in the '9s. Maybe this
is the thing.
>> Let's go in waves. There are memes. All
right, but but let's drill down on this
because I think this is a really
important point, right? Um, just to give
an example, there was I about 10 years
ago when I was at BuzzFeed writing about
consumer tech,
>> there was this nutrition app that I
would use and you would upload your
meals and um your thoughts and stuff
like that and a real nutritionist would
take a look and give you a a rating and
and give you advice about how you were
how you were uh tracking on your goals.
>> Now, uh people laughed at me. I was
like, you can just program that app with
natural language, but you really can.
And it's something I know it's not just
me. Many people have been using Cha PT
as a diet coach where you give it a
goal. By the way, you could you don't
just say be my diet coach. You actually
give it a goal. You say I want to um
keep under 2,000 calories a day or I
want to eat whole foods and then you can
upload photos. I can re see the photos,
upload uh with text, talk about uh
morning weigh-ins, give it the data, and
it does a great job of keeping track of
this stuff.
>> Um now again without chat GPT is a going
back to it's a really good product.
>> Absolutely. It's a really good product
that has breath and you know so it's
it's solving your problem.
>> But this is my question then from your
perspective um are we about to see a
wave of consumer startups that never
happen because that was a real startup
that got millions of dollars of funding
got a nice exit I think to a health
insurance company. Um, and today you
can't, it's hard for me to even
conceptualize that that would get
funding because a a VC might just say,
why wouldn't I just do this in chat?
>> We we've seen a lot. We've seen
nutritionists, we've seen a bunch of
different things that have come out, you
know. So, I would say there's buckets of
do you need a discrete application or
you don't need a discrete application.
Certain things for a bunch of different
reasons, including regulatory and
compliance in in areas like health tech,
you need a discrete application. But
certain things including general things
like you know I'm eating this piece of
salmon. How many calories does it have?
Could you count it in your calories is
something chat GBT is great for. So
we've found um sadly that you know we
haven't seen this wave of startups that
we believe are sustainable. So there's
actually been a handful of startups that
are rappers on chat GPT that are maybe a
little bit better at at travel. They
might be a little bit better at being
your math tutor, but they're not that
step function different. Um, and even if
you go back to, you know, the areas of
search, if you remember, there was
search and then people said, "Oh, there
could be vertical search where we get
really good at something." So, obviously
Indeed is a very large company that was
vertical search for jobs. Kayak was a
very big multi-billion dollar outcome.
That was vertical search for travel. and
you know, you're able to break down that
landscape and then think about where
where that goes because with a a more
narrow focus, you should be better at
it. And I just think the the broad
landscape of of uh of chat GPT has made
that more difficult than ever.
>> Yeah. And it's very interesting because
OpenAI recently released data and of
course it's coming from OpenAI. Yes. But
data about how people use chat GPT,
we've talked about it here on the show
>> and the number one use that people go to
it is for practical guidance.
>> Yes. And let's just do a thought
exercise. Um, if if there was no chat
GPD and no broadly available, uh,
generative AI technology. So, uh, think
about it. You can't license an LLM.
Yeah. But a company came to you, let's
say 5 years ago, and they said, "We have
an app that with natural language will
advise you on your relationship and tell
you whether or not to uh, you know,
break up with your boyfriend or
girlfriend, for instance, or how to
improve the relationship." Uh, if they
came to you and said, "We have a natural
language fitness coach." If they came to
you and said, "We have uh you upload uh
photos or videos of your of your soccer
practice and we'll talk to you about
positioning and and form." Each one of
those ideas to me sounds like they would
be like billion-dollar ideas, right?
>> Yeah. Very financable. Very if maybe not
billion dollar ideas, we'll see where
that goes, but very financable. If you
think about life coaches, fitness
coaches, sports coaches, anything where
you have a tremendous amount of
knowledge and you could take that
knowledge and make it very specific to
somebody, which you know, again going
back to Harvey is not that different,
right? Law is a huge huge uh pool of
knowledge that you put a certain rules
around it. You know, historically they
just thought that was a thought exercise
in rules. today we could call it LLM and
then that produces better faster cheaper
results of how to how to be more
efficient in your life or job. I mean
and even Harvey uh you know we talk
about Harvey right which is again this
is this legal AI that you can that knows
your knows the laws knows the rules has
these big context windows so you can go
to it for like legal advice or a lawyer
would use it you know to help but even
Harvey to me doesn't even seem that
defensible because what we're starting
to see is uh bigger and bigger context
windows exactly
>> from these models. So like what Harvey's
great at is it has the it's figure out a
way to get the applicable law and then
find a way to measure that against the
questions you might have as a lawyer. We
are going to get to the point I think
without a doubt that a lawyer will be
able to say download the zip file of all
the law in the state.
>> Yes.
>> Upload it into the context window.
Download the specifics of the case.
Upload it into the context window and
maybe get close to as good as Harvey is.
>> Yeah. I mean, and that's a very specific
thing on a case where you might need a
specific attorney. If you think about
probably 80%, unfortunately not a
lawyer, but probably 80% of all legal
work is this is Rick, he needs a will.
This is, you know, here is a first mark
company that's going through a series A
financing. Could you just reproduce
documents given these are the founders,
these are the issues, and here's the
term sheet. So there's a lot of wrote
work that's done by the bottom of the
legal pyramid which should be done
better, faster, cheaper than a
overworked, overtired associate,
>> right? And so the question is where does
it get done? And the argument that I'm
making or trying to tease out here is
>> does all this stuff end up just
happening within uh the chat GPT
interface? You know, I think it's kind
of been this debate that's gone on uh
where people say that any AI application
is just a wrapper. Like Perplexity is
just an AI wrapper that you do search
in. Um and so then how do you invest?
And so I I'm trying to like think
through the beginning of our
conversation here where we're talking
about all these distinct and discreet
different applications legal but you
know even even more applicable uh
coaching fitness search it's all going
to happen within these broad multi-
general purpose bots. And so then I like
throw my hands up and say well what's
gonna happen like what's gonna happen to
start startup founders and investors
lawyers
>> what's gonna happen
>> podcasters
>> but no but but really in terms of the
the economic activity but we can get to
we are going to get to jobs but the
economic activity
>> probably uh
>> probably two pieces and some one is
slightly red teaming is
>> all right so can Chad GBT be better at
everything than everybody probably not
there's going to be limitations
>> you ask Sam Alman he'll say yes
Uh and then there's there's an asimtope
where you know are the latest models the
best models and are you still seeing
even a step function improvement in chat
GBT conventional wisdom is probably not
you're seeing like oh it gets most of
the things and that's good and what does
that mean for the broad-based ecosystem
to get maybe that last 10% do you need a
specific model to travel or to law the
second piece is all right well how these
models will get better is through better
data and then is there specific data
which people might not trust in open AI
or chat GPT and you know we're investors
in a couple companies that does do data
security what data are you sharing with
what models are they staying inside your
environment are we making sure that all
our pieces of that data are not leaking
out into a model or or into another part
of that ecosystem so if you have a
private uh walled garden of your data,
your model, and your security. You know,
will that be better because it's more
specific to you even on a personal basis
if you're talking about your
relationship or where you're going on
vacation or your finances or your will
or on an enterprise basis. So, you know,
here are all my legal documents on all
my deals. I probably don't want that out
in the world, but I want to have u some
parameters around it or here are all my
returns for my funds. I want to make
sure that that's confidential. So, you
know, are people going to get scared no
differently than they they than they
become suspicious of other large
companies? Are they going to become
overly suspicious of OpenAI, Chat, GBT,
the larger models? And is that data
privacy going to be a key limiter to how
the next generation of companies evolve?
>> I mean, I would imagine security is like
a highly investable place here. We're
we're spending a lot of time around that
on every level of the data security,
model security, you know, every uh
around the enterprise environment, all
of those pieces. Uh I think we're maybe
not even in the first inning.
>> Yeah. We just did a podcast with Enon
Costa, the co-founder of Whiz.
>> Yes.
>> And which just sold to Google for 32
billion.
>> Biggest venture outcome ever.
>> Ever.
>> Yes.
>> For now.
>> For now.
>> Um and we we uh we had comments coming
in being like, "You need to speak about
this more often."
>> Yes. And it was just like here's a
general lay of the land but clearly
there's there's real concern there. So
okay so security security is one place.
Yes.
>> Uh there's certain spec specific
enterprise use cases elsewhere. Is there
any would would a um is there anywhere
like on a consumer or uh I don't even
know if should I call it traditional
technology investment um place where you
you would see a generative AI startup
like a startup let me put it this way a
startup using generative AI at the heart
of it that you would invest
>> on the application layer I assume yeah
so on the application layer we do I
think we we like the enterprise space
we're investors in a couple things in
the enterprise AI they tend to have two
things. They tend to have uh uh a
defined set of customers which have a
therefore a defined set of data and they
have some rules around what is shared
data and which which own data and that
data is the competitive advantage not
necessarily the model that outputs to
the right application and the right
answers and sometimes they use it within
their own uh walled garden. So, if you
were a company that says, "I want to
have all my uh leases historically, and
therefore, I want to understand all my
leases across all of my uh, you know,
Starbucks franchises." All right. Well,
getting very specific lease data is
going to be very much different than
getting, you know, generic answers from,
you know, what downtown New York looks
like in the open AI models. So th that
having the specific data having specific
rules around your company and having
kind of a walled garden within a
particular industry that that model
could be tuned to that particular
industry and then there's some benefits
of maybe even collaboration or a co-op
database that makes that more
sustainable in the in the medium or long
term. So, you know, if data is kind of
the oxygen for a lot of these
applications and models, um, having some
kind of ownership on that.
>> So, I I think when people talk about
tech startups, what makes a good tech
startup? You I'm sure you have a
philosophy. I think one of the the
consistent philosophies I've heard is
that it solves a problem.
>> Yes.
>> Um, and I think that's kind of nice.
Like one of the nice parts like take the
fitness example that I or the diet
example is that you you get a company
with uh that gets together with fitness
experts or diet experts and says let's
try to see what the problem is and pay a
lot of attention uh to it and then try
to solve it for people. Yeah.
>> And now you have large language models
that are like doing just as good or or
not not just as good almost as good.
>> And and so that would make that category
less investable for you. Do we lose
something if people instead of you know
getting a chance to get this advice from
the specialists um are are instead of
going to these apps that we've seen you
know for the better part of 20 years
come up and serve use cases and
sometimes do a good job and sometimes
not. But do we lose something if instead
of seeing these apps come up uh and
these technology companies come up, all
this basically gets handed over to chat
bots that do like 75% as good of a job,
but just don't take the startup and
capital to to get there.
>> Well, you hope that there is a bit of
creative destruction, right? So, if you
say they're doing 75, I was going to
guess 80. You know, you pick a number in
between and only the expert is going to
sit on top of it and say, "Hey, I'm
going to be your dietician. I'm gonna
use the back end of chat GPT like you
would, but I'm gonna give you some more
advice because I know you're going to
this steakhouse tonight and you're
trying to watch your cholesterol,
whatever that may be.
>> So does Chat GPT though.
>> It probably made that reservation for
you.
>> It probably made and it knows what the
menu is and knows what your goals are
and how to do it. But there might maybe
there's an interface on top of it which
might even be a human.
>> So how do you know and understand your
discrete value ad? So your discrete
value ad as a human is not being able to
Google the restaurant menu and pick out
fish. That's really good. Like a lot of
money.
>> They they they currently do.
>> But it might be I know you better. I
know that salmon might be the right
answer for you, but you just but you
just don't like salmon or you you know,
you ate salmon the last two nights or
whatever it is. So I I'm gonna find
something specific to you that I know
you'd like. um or I talked to you today
and you said, you know what, I'm not in
the mood for fish or I I just wanna you
know what, I just want to steak tonight.
I I'm going to go down that path. So,
their ability and maybe this becomes
personalized over time, which your
chatbot knows that you're tired because
it's plugging in your Whoop data or it
knows that uh you had salmon the last
two nights because it also tracked your
food and your restaurant reservations
over the last two weeks. You know, it
could get an additional level of
personalization, but like every time
through history, the human's job is to
staying just ahead of that technology
and understand where they could create
unique and discreet value on top of
technology.
>> Yeah, I I think that's going to be
tough. Maybe I'm
>> I have confidence in the humans.
>> Okay. I I do too.
>> Yes.
>> Um and and it's interesting to be even
having this discussion because there's
clearly so many holes in the generative
AI technology today. like at all of
these tasks. It's not as good as a human
today. Yes. But it's getting close
enough to make the question much closer.
And if you look at where it was five
years ago and the progress it's made,
it's getting closer. I mean, we're
looking at a AI companionship and
whether that's dating or whether that's
for elderly people or whether that's for
kids or whether that's for tutoring.
>> Uh and as we looked at it even last year
or two years ago, we're like this this
isn't very good. like I'm like I'm not
sure, you know, uh my elderly
grandmother or my kid is really going to
engage with a chatbot that acts like
this. Now it's really good. Now it's
pretty clear. Um, and now you know
people are engaging in, I'm sure you
read about it all the time, more and
more meaningful relationships or
everyone could tell what was AI
generated advertising or AI generated
video or even AI generated actress and
you know there's this now famous AI
based actress who is is in a bidding war
to be represented by the major uh talent
agencies that you can't tell and that
person is almost as good as a human and
I think this is going to continue to
happen, but it's going to be very
disruptive for people who can't adjust
their mindset or think about creating
value to stay ahead of the curve.
>> Yeah, there are some fascinating
applications. I mean, of course, there's
concerns here as well. People becoming
overly dependent on these bots, the bots
being sick of fantic, encouraging them
to do self-destructive behavior. But on
the other side, there's some amazing
applications. we've talked about on the
show here. There's u in Korea there is a
like a stuffed animal with an LLM baked
in that's like hanging out with elderly
people who are lonely keeping them
company and then when they sense issues
or they check whether they're taking
their medication and the person who's
become friends with this LLM stuffed
animal says I'm done taking my meds then
they send a message to the nurse
>> or I don't know or you know it's like
the nth degree of I fallen I can't get
up that you know all these things and
you It started off very simplistically.
I'm going to send a text at 8:00 every
morning making sure that um this elderly
person took all five of their meds and
you know maybe had to ask them and now
it's become much more conversational
much more engaging. It could be via
chat, it could be via audio and voice
which is better than you know having you
know someone have to go into each line
of of a text thread. Uh so that's
becoming much more approachable. Um, but
I'm not Yeah, I'm not sure if we're
ready to to you know, there's always the
dark side, which you touched on the self
harm, the um, you know, the different
personalities actually that each of
these bots have. Um, and thinking about
that and what is the uh, and what's the
unintended consequence of of something
getting that good that quickly?
>> And as an investor, is that something
that you want to touch or you're
>> No, we're looking we're spending a lot
of time. I think, you know, AI
companionship, uh, is an incredible
thing. Um, and it's a broad-based
companionship. It could be your medical
buddy if you're an elderly person. It
could be your math buddy if you're a
student. It could be, uh, your friend
who, and it could be it could be your
surf buddy if you're trying to figure
out where to go on vacation. So, all
these buddies, some of which are going
to be chat GPT, um, you know, are going
to be out there. Uh, and then I think
you have to think about, you know, how
much is that self-directed? So how much
is it understanding your personality and
what you're inputting and are they
sophanic? Are you know do you have a
drill sergeant type nutritionist and is
that what you want or what you need?
You'll be able to tune it yourself
>> or it will adapt because you're going to
give it numbers and it will be like oh I
was too hard on them. They stop talking
to me. Now I'm a little more
sickopantic. Yeah,
>> they're losing weight.
>> Sorry about that. You could have had the
steak. You know French fries aren't the
end of the world and you earned a cheat
day.
>> Okay, I will sign up for that.
So now after spending our first bunch of
minutes together talking about how AI is
going to gobble things up uh maybe
everything I'm going to now ask you
whether we're in whether um the tech
industry or investors are putting too
much money into AI. It sounds
inconsistent but I think it could both
be true because
>> I think they both could be true. Uh it's
hard to say what too much money is. I
mean what's what's been very clear is
all the hyperscalers are investing as
much as they possibly can and maybe even
differently than probably prior times in
history and the two ones I've seen cited
the most are are the railroads uh and
then the infrastructure of the internet
um and I'm familiar with the last one
amazingly I was VC during that last time
in the late 90s the um they were those
markets were largely reliant on external
capital right you were if you were
building out a select or if you were
building out, you know, an internet
infrastructure, dark fiber, you were
relying on equity or debt from the
capital markets and therefore when that
shut off or that became more expensive
or the markets didn't buy in, it was
able to control that oxygen and that
buildout. The different thing this time
or one of the different things this time
is that the hyperscalers are actually
paying for this through their own
earnings. So effectively, obviously the
market gets to vote through your stock
price, but they don't have to go out and
say, "I'm investing, you know, hund00
million in energy for my data centers,
uh, and I'm just I'm just going to take,
you know, this quarter, half of this
quarter's ebida, and build that out
because I believe that's an important
part, an important use of my cash flow."
And maybe the market will frown on Mark
Zuckerberg if he chooses to do it, but
he he he's not going to be beholden to
anybody as you are when you go hatinand
asking for capital. So I think this is
not going to stop. And I also think the
hyperscalers all of their ambitions are
so big and so broad and they're all so
pot committed. I don't think anyone's
going to stop. So, you know, it's going
to take something incredibly material
where there's not an outside person
who's saying, "Hey, I'm stopping writing
the checks for, you know, for you to buy
dark fiber that you're not going to
light up or I'm not going to, you know,
build a railroad to nowhere because that
doesn't make sense anymore despite where
the hype was in the market." um you know
that has to be internal and that has to
be hey I'm I'm bowing out of this part
of the AI race which I think given the
egos market caps and dollars involved I
think that'd be too hard to do.
>> So just give us some context here. Um do
you know off the top of the head the
largest check that First Mark has put
into a company
>> or can give us a ballpark?
>> $200 million.
>> Okay. Jensen just committed or recently
committed a hundred billion dollars.
>> Yes. uh to open AI
>> one day one check I mean it's more than
you know more than what's been a couple
years certain certain in certain years
of venture c of all venture capital
>> so what so you obviously when you're
putting in these checks you have to
think about what am I going to get in
return
>> yes
>> what do what do you have to to get if
you invest a hundred billion in a
company do you need to get do you need
to get a trillion dollars at least back
in return
>> it depends on who you are and that kind
of goes So the the recycling or the
circularness of some of these things and
obviously the OpenAI
>> Microsoft or OpenAI Oracle goes back to
the Open AI Oracle deal
>> and you know I'm going to I'm going to
Rick give you money that you're going to
invest in our infrastructure or how how
does this cycle of capital work which
tends to be towards the end of these
cycles right where you can't generate
enough money yourself you might have
exhausted the capital pools externally
so now we're going all give each other
revenue and and cash flow to keep them
keep the train going. So that is
actually a little bit of a canary in the
coal mine of how this is working. But uh
and then also you know uh Nvidia is
worth so much money that you know Jens
can almost say hundred billion is is not
that big of a deal if we believe this is
a generational company and have somewhat
of a leg to stand on,
>> right? you know, and um you know, not
that long ago, hundred billion dollars
was greater than the market cap of all
but a few companies. So, you know, it's
it's the numbers are so mind-blowingly
disproportionate, it's hard to really
contextualize them,
>> right? And and we should say again with
with many OpenAI investments, it's kind
of funny math, at least to the
beginning, it's 10 billion to start with
plans to contribute another 90 billion
in increments. And you know the best
part of of one of the good parts of uh
you know OpenAI being private is they
could do a lot of these deals right
>> where they don't you know definitely
don't have to be disclosed obviously
because Nvidia is public they're going
to have to disclose that or Oracle or
whatever it is that um they're able to
put up you know great topline numbers no
different than maybe AOL did in the late
90s of hey here's the top line but it
was really a contribution in kind and
there's really some milestones to it and
there's really some other things which
also is very much a symbol of like a
very frothy market of hey we're not
talking about actual financial metrics
or actual gap revenue or actual cash on
the barrel head we're talking about a
theoretical milestonebased broader
incash inind dollar amount which might
not be real dollars
>> right I think Jensen has referred to it
as a partnership first and investment
second and that's interesting because it
would be by far the biggest investment
in history Yes. Yes. And but but not an
investment,
>> right? Exactly. Um you've you've spoken
sat across the table with lots of
founders that are trying to pitch you on
on fundraising. Uh I'm sure there's a
spectrum of really grounded founders to
uh founders who will try to sell you a
dream. And yes,
>> um I'm curious if you've ever
>> and a lot of them were both and we've
invested a lot that are both.
>> So I'm curious if you ever heard
anything like this. We've talked about
this on the show. Uh this is from Sam
Alman when he was talking about uh the
Nvidia investment. He says the stuff
that will come out of the superbrain
will be remarkable in a way I think we
don't really know how to think about
yet.
>> Um
>> is that if someone came and told that to
you that what what what is coming what
you're investing in will be so amazing
we you don't even know how to wrap your
head around it. What what's your
reaction? Uh, you know,
>> I'm asking this, by the way, earnestly
because like
>> I I did have I did have a founder a
couple years ago, several years ago, who
basically said I asked them a question.
They said, "I can explain it to you, but
it's probably not worth my time because
you probably couldn't understand it."
>> Okay.
>> Um, and I said, "Try me." And they said,
"No, I don't think I don't think you
could get it." Uh, amazingly, we
invested and I think we made you
invested after that.
>> We made money. Uh,
>> so this is a good strategy then.
>> It's Yeah, maybe it is. Maybe it is. Uh
no I I think the that is hey my
ambitions are so broad and my
expectations I'm setting I'm setting
expectations so high words cannot do the
expectations justice which also is
another little canary in the coal mine
of I actually maybe it's my personality
I like concrete things of like hey we're
going to do this we're going to be a big
company and we're going to be a big
company because we think we could sell a
billion dollars of this product given
how this world works. works out and
you'd be like, "Oh, that's big, hairy,
audacious goal, but I could track that
because that makes sense to me." But
when people say, "We're going to be the
biggest company ever because we're going
to do things that your brain can't even
track."
That's, you know, that it feels a little
bit harder to track, but, you know,
given what Sam has done, if anybody has
earned the right to say things like
that, you know, maybe him, Elon, rare
air of folks who who could get away with
that type of comment.
>> Definitely. I mean there's there's a
balance here between like you can
appreciate and I certainly do what Sam
has done at the helm of OpenAI and
continues to do even though they've lost
a lot of talent. Yes,
>> the company continues to ship. But then
when you're asking this broader question
of is are things a little frothy and you
see a quote like that in a story about
this hundred billion dollar investment
um that is that's where I start
>> billion dollar non-investment and and
sub made substantive one of the key
pillars of what's the the hundred
million dollar partnership is they're
going to do things that I couldn't
explain to you because you wouldn't
understand you're like you know that
might be that might be on the cover of a
book of what I saw uh what I saw at the
top of the market by uh you know writer
to be unnamed in five years.
>> Yeah, I better get pitching that one.
But but but then we should talk about
then then what it means for the market
right because you follow of course the
the private markets the public markets
and if you think about how much uh the
public market is relying on Sam to do
well Sam to deliver on that promise that
he's made
>> well Sam has to do that because the
>> you have Microsoft Oracle Cororeweave
Nvidia they are now all relying on
OpenAI to deliver and I don't even know
what more I mean to deliver what exactly
>> and then you think about all those
ecosystems So you know the energy
companies are relying on coreweave to
build out the infrastructure. You think
about you know all the things that
Microsoft's doing that are relying on
some of the things that OpenAI is doing.
um you know if just nothing else the
pure valuation that people are baking in
given all the contracts or forward
contracts or promises or partnerships or
handshakes that are done that it's just
escalating the expectation and
commitment which again you know starts
to starts to make you feel a bit
uncomfortable at times
>> right and I think the answer for open
AAI has to be that in order to meet
these enormous expectations I just set
it up I don't I don't know what they're
building towards that wasn't quite
right. What they need to do is to
automate a tremendous amount of white
collar labor. So,
>> yes,
>> I want to talk about that and what's
happening with Gen Z, who's at the seems
like the spear's edge of this and not uh
not able to find jobs right now. Um, I
want to talk about that right after
this.
>> And we're back here with Rick Heitzman,
managing director of First Mark Capital.
Uh, Rick, we talked before the break
about how OpenAI is going to need to
automate a lot of jobs. in order to
justify this valuation. So let's just
start broad as we begin the second half
here. Um, are we marching towards
technology companies like OpenAI, uh,
like Anthropic, uh, basically trying to
automate all work, all white collar
work, and if they're successful, what
happens?
>> Well, I mean, I would say automating all
work, right? Because if you think about
some of the robotics things that are
happening now, some factory automation
things that are happening now, it's both
blue collar and white collar. I think
maybe differently than any kind of
automation going back to you know
farming where you know there's
bulldozers and there's um steam engines
that are automating blue collar work it
you know this has been very different uh
and so I I do think and in talking to
the bankers and the lawyers who usually
hire a whole lot of folks or you know
entry-level consulting firms BO firms
they are pausing or taking a slower
approach or a more thoughtful and
cautious approach approach to how they
fill in the bottom of the pyramid. Uh,
and that makes them, you know, rethink
their their business. Um, you know, I do
believe that they're going to rethink
their business. I think you're going to
lose some people, but those people are
going to be repurposed, right? So, if
you go back to uh the beginning of the
20th century, so beginning of the 20th
century, about 93 people, 93% of
Americans were in the agrarian economy,
farmers basically. uh at the end of the
20th century it was about 3% of the
American workforce as farmers and if you
looked at just those two stats you like
oh my god something horrible must have
happened all these people must have lost
their jobs what happened it was terri
what happened oh it was the greatest
century of an economy of any
civilization's economy in the history of
civilization
you know the American 20th century and
everything that happened So there is a a
creative destruction that I think
capitalism is really good at. And I
think that you're you're see you saw
that repurposement in the industrial
revolution. You saw a repurposement
several times uh in the automation, the
ability to have factories and all the
techn technological advances during that
century. I think you're going to see a
rethinking about some of those things
especially around white collar work. And
you know there's a bunch of different
things um that are analogous to it. you
know, word processors came out and they
said, uh, I forget what it is. We call
it 35 years ago, so I'll be imprecise.
And they said, "Oh my god, this is going
to be the end of the legal industry."
You know, now we're not going to need,
you know, now people are going to be
able to, you know, print these
documents, use word processors. Since
the I haven't word processors, there's
four times more lawyers in America than
there was at the time. You know, the
same thing if you think about
spreadsheets. Um, and you know, Lotus
123 comes out, there's going to be
spreadsheets. And they said, "Well,
we're not going to need all these
bankers. We're not going to need slide
rules. We're going to have spreadsheets.
We're going to automate this whole
finance thing. There's more bankers than
there were before spreadsheets by, you
know, huge, huge factor. So, you know,
what is it going to be now? We're able
to automate a lot of white collar tasks.
You're able to automate basic business
processes today, probably better in the
medium term. And do you believe that Gen
Z is going to be creative enough and
entrepreneurial enough to reinvent
themselves? I think so. I have
confidence in that. Uh I do feel for I
have friends who are going through uh
recent college graduates and it's the
worst I think it was the worst year last
year since the financial crisis for
recent college graduates. Uh I have a
son who's a junior in college. He feels
anxiety of you know what does this mean?
Is AI going to take my job? Uh so I I I
have empathy for that but I also push
him to say well what what what could you
do that AI can't do or what what are you
thinking about that's thinking about
something differently because the best
people are going to be the people who
understand it a little ahead of time and
you know we're beginning to see um
people spin out law firms that their you
know entire associate infrastructure is
AI so you know they're able to be the
partner um who's able to add that level
of judgment, client interface, all those
things, and their backend is AI, and
they're not beholdened to the pyramid
model of law firms to be able to make
their business work. So, um, you're
going to see entrepreneurship, you're
going to see creative destruction. I
think that on the whole, we should all
almost all of us will be better off for
it. You know, I really go back and forth
on it because on one hand, it it does
seem like AI is becoming more and more
capable. And again, you know, I just
start in so many times in business, it's
worth just starting at the money, right?
Yes. The money is betting that all this
all these jobs will be automated. Yes,
>> that's what that money from Nvidia into
OpenAI is is trying to do. Um, and then
the question is what happens afterwards?
And you could have it it seems like if
they get there right in the time that
Nvidia wants that investment to pay
back, there's going to be massive
disruption.
>> Yeah.
>> Um but then you also look at what
happens in the day-to-day of of many
companies. There's a great uh a
thought-provoking um Substack post in
this uh Substack called Still Wandering
and it was called The Death of the
Corporate Job. And the author was trying
to track what the what their friends uh
and counterparts did in their work. Uh
here's what the author said. keep
meeting people who describe their jobs
using words they'd never use in normal
conversations. They attend meetings
about meetings. They create powerpoints
that nobody reads, which get shared in
emails that no one opens, which generate
tasks that don't need doing.
>> This post was liked 11,000 close to
12,000 times on Substack, which on
Substack that's a lot lot of people,
which means like I I
Yeah, but it resonates with funny
because it's true,
>> right? like that the fact that that
resonated that way with so many people
who are in the knowledge economy it's
just so telling and maybe AI eliminates
that stuff and maybe this moment where
we've had hiring consolidate or or stop
in many ways is a realization by
companies there's a great New Yorker uh
political cartoon which is the same
thing of you know someone types out an
email and they say you know AI turn this
into a 100page PowerPoint presentation
and they turn it into a 100page
powerpoint and they email it to their
colleague and says AI take this 100page
PowerPoint presentation and turn into a
short email.
>> So exactly so there everybody is using
AI to automate different pieces.
>> Uh you know I I I just think that you
know to have the have those people who
are doing writing emails that no one
reads or creating decks that people only
weigh but not read. I think having them
not do that is better for everyone,
>> right? But the question is like what
business looks like afterward. So
there's like two possibilities. One is
that all those people end up on higher
value tasks.
>> Two is companies go, "Oh my goodness, we
need onethird of the people."
>> Yeah. And you're seeing some companies
already do that. You know, some
companies, you know, Shopify increased
revenue and took out a fair amount of
their employee base.
um you're not seeing engineers go away,
but you're seeing companies keep
engineering flat, but getting a lot more
productivity
doing due to all the coding tools. Um I
think you're seeing a lot of kind of
business process outsourcing or call
centers and customer service things that
are getting shrunk due to technology. Um
so I do think there's going to be
substantive job loss in certain fields.
um you hope that people will do some
more meaningful work than you know
having to go and we I think we're both
very fortunate that our job is not
writing pe not writing emails that
people don't read or producing uh
content that people don't listen to. I
hope uh
>> you're here for a good reason. We have
an audience. I hope everyone out there.
Yeah.
>> Yes. Uh so I think that um I I think
you're going to see more people doing
different stuff. I mean you you part of
that is the rise of the creator economy
>> and you're seeing more people um be
entrepreneurial in the c creator economy
and even as we've talked to folks out
there in the creator economy it's often
a side gig and sometimes either their
their day job is not very meaningful not
very lucrative or seems like it's a you
know it's a cartoonish type thing and
and they're they're finding meaning
creativity
um and dollars in doing this side hustle
and sometimes that side hustle terms
into their main job and that becomes a
more meaningful opportunity. Uh I think
it's going to happen more and more.
>> Yeah. I mean that happened to me. I was
started my career in marketing and sales
and writing freelance journalism on the
side and then flipped that to a
full-time career and then flipped that
into something that's now not just
writing but is video, audio,
>> some TV like we talked about which has
been nice. But I actually, you know, it
brings me back to my first job, uh,
which was I would put together media
plans that would go through those email
chains and the decks that no one would
read and eventually someone would
approve it or not approve it. And of
course, that's that that process has
been disrupted by programmatic
advertising where you just automate it
all today. So maybe that would be a new
job. But I'm just thinking like that
job, that entry- level job that I had
that got me into the workforce, you
could chat GPT that and be done with it
in 5 seconds. my uh my first job was a
you know entry level investment banker
that I was you know printing off
documents and then keying that into a
spreadsheet um you know that's done
that's been done for years I mean if you
if you look at you know some of the
basic capital IQ things and probably the
first you know couple years of my career
are now completely automated due to
technology uh but even people who you
know are now entering investment banking
are doing different stuff and that's
becoming more meaningful and there's
more investment bankers than So I think
although it's changing, it doesn't mean
it's ending.
>> And we talk about like there's a
thriving economy out there somewhere.
>> And then you think about what's
happening with all right two groups of
people. Gen Z Yep.
>> who's really struggling like you
mentioned to find jobs and also people
that lose their jobs or leave their jobs
are taking longer than usual to find new
work.
>> What is happening? It can't all be AI.
Jerome Powell recently came out and said
AI might contribute to it, but we're in
a slow to high or slow to fire economy.
And so what is the driving force behind
this economy that feels to a lot of
people to be, you know, doing well if
you look at the topline numbers, but if
you're an individual trying to, you
know, navigate your career path, feels
like everything is just stuck.
>> I agree with almost everything you just
said. I think that the economy is very
strong and the fundamentals are strong
and we see it in both our enterprise and
consumer companies. So we actually feel
good about the economy. Uh the second
piece of that is I do believe that um
you know companies are slow to hire and
I think that you know coming off of
which was a massively inefficient COVID
time spurred by low interest rates, low
cost of capital, work from home, it was
basically the perfect way to create
inefficiency that no accountability for
dollars and no accountability for
performance.
So coming off of that companies now even
five years later are saying okay I'm not
going to I'm not going to do the sin I
had yesterday I mean that's companies
like individuals are always reactionary
to the last phase. So you know companies
like individuals are always reactionary
to the last phase or their last mistake.
Um so I think companies are now thinking
about all right how are we more
efficient? How do we make sure that
we're spending that time and money
wisely and we're not hiring someone to
write emails that no one reads? So I
think that's been slower but at the same
time unemployment remains low and you
know there is a sense of you know when I
was coming out of school that there is
some time like they told us when we were
in school like if you quit your job or
you lose your job you need to have a
little bit of time because it takes
months to find a new job. um you know in
in in some of the boom times when human
capital has been tight over the last 20
years it's taken hours to find a new
job. So I I think that you're you're
moving more to historical norms as
people are uh maybe because the economy
is doing well maybe because the market's
doing well because the managers are
being more performance driven are moving
more towards historical norms around
performance.
>> Okay. I want to use our remaining time
to lightning round through a couple of
your investments. You've invested in
some fascinating companies, ones that I
use all the time, ones that we talk
about.
>> U so let's just go through four of them
if we can. We have about eight minutes.
Um
>> Discord.
>> Yes.
>> What do you think about the fact that so
much of the
uh the dynamism of social media has
moved uh private, right? Mark Zuckerberg
had this pivot to privacy and everyone's
like he's into encryption. It's like no,
he realizes social sharing is happening
in the group chat. Yes.
>> And that's where he wants things to
happen. So talk a little bit about that.
>> So I think and and moving to Discord
servers, right? You have
>> and is that good for us basically?
>> Uh well somewhat somewhat it is. I mean
I I don't think everybody you know the
old joke you know you don't have to
broadcast anyone everybody you ever met
you had for lunch.
>> That that's not pushing forward
anybody's uh life or economy and you
don't need to see a picture of the tuna
sandwich. So that's I think I'm somewhat
glad we're out of that phase of social
media. Um, at the same time, you know,
therefore having servers that are very
specific and whether you're in a Discord
server uh for the next world baseball
champion New York Yankees or whether
you're in it for, you know, a League of
Legends clan, you know, all of those
things you find they're there. You know,
the negative, as we've talked about, are
these are very some of them are very
intense echo chambers
>> around particular beliefs that can spin
people up. So I think there is I think
Discord does an excellent job of
moderation to make sure that you know
there's the right level of discourse in
those Discord servers and it makes sure
that works.
>> But that's on the administrator of the
Discord.
>> It's on the administrator. Yeah. This of
the
>> of the server.
>> So uh that is true. But I think you're
going to see um you're see more more
social media move to semi-private that
look more like group chats and and it
can be around you know sports or music
or technology or or relationships. Uh
just because I think that people uh
might might be a little bit over living
in public.
>> Yeah. Uh we love Discord over here big
technology. Uh we have a private Discord
server for our paying subscribers. So,
if you're interested, scroll down,
>> sign up, and we'll get you a link. And I
think it's uh the best thing that Big
Technology has done in in years. The the
conversation is high quality. It's
interesting, and um I love being in
there. I get a lot of value out of it.
>> Yeah. Cur, you know, and curation has
been, you know, for the last 10 years of
social media after the initial
explosion, curation has been the most
important thing to keeping a good
thriving community.
>> All right. DraftKings.
>> Yes. Did Otani actually bet on baseball
or was it his interpreter?
>> I do not know that. Uh do not know. I I
I'm not sure if I if they would tell me
if I asked. I think uh what do I think
or what does DraftKings think?
>> Let let me let me ask it in a in a
little bit less facitious way. U
obviously sports betting's been
popularized. Yes.
>> Uh the leagues all promote it. Yes. The
players are getting into it. Yes. Is
that a problem?
Uh well, you're seeing more and more
investigations and suspensions around
the use and misuse of of gambling. So, I
think, you know, like any new
technology, it explodes out of the
gates. It's a little bit of the wild
west. I think, you know, DraftKings
being a large public company who is a
leader probably has more guard rails
around it than maybe prediction markets
or some of these um you know sweep
stakes types gray area markets. I think
you know the government always struggles
to keep up with where technology is
going and it's oftent times focus on
yesterday's problem not tomorrow's
problem. So, I believe there's going to
be more clearer rules around especially
players, coaches, umpires, managers, and
what they're able to do on uh on either
gambling or prediction markets.
>> Okay, let's talk about Shopify.
>> Yes,
>> you're an investor in Shopify.
>> I am.
>> Is all online commerce going to go from
applications and websites to into chat
bots? And if so, what happens? So, uh, I
think that that's I don't think all it's
never all or nothing. So, I think you're
going to move to more chat bots. I think
you're going to still need an ecosystem
of whether it's, you know, headless
stores or whether it's a back-end
infrastructure of you're still whether
you're buying a sweater because your AI
girlfriend tells you it looks good and
you're buying it in a chatbot based on
your AI girlfriend.
>> That's how I usually make most of my
purchases.
>> Yes. Yes. Your AI girlfriend is your
stylist. That's that'd be a good
t-shirt. Uh for
>> my AI girlfriend picked this out for me.
>> That'd be great. Uh so, you know, so but
you know, there still needs to be a
t-shirt which needs to be in a warehouse
which needs to go in an envelope which
needs to get shipped to you. There needs
to be a payment process. There needs to
be fraud around that payment. So, I
think the commerce infrastructure is not
going to go away regardless of who
initiates that transaction. Um, and you
know, whether you're, you know, getting
that t-shirt on Teespring versus your AI
girlfriend chatbot versus um, you know,
the gap, it's all going to it's all
going to happen. So, I I don't I think
it's it's somewhat disruptive on the
front end, more to customer acquisition
and and the front end of stores, but I
think the commerce infrastructure is
only going to continue to grow. Um, and
I I I I don't see any way that
e-commerce is is going to slow down any
any foreseeable time.
>> Right. So the interface might be a
chatbot, but everything could be
managed.
>> Everything managed. You're still going
to system. Yes, you're still again, you
know, every just all those little pieces
of flows of
>> transaction processing and fraud
prevention and you know where that goes
and is there a return? And if you say,
hey, you break up with your AI
girlfriend and you don't want that
t-shirt anymore, can you return it?
There's all there's a a lot of things
that have to happen besides just the
front-end store. I think Shopify since
we invested in the series A has built
out but whether individually or through
their ecosystem all kinds of things that
are very hard to replicate.
>> Okay. And then finally Airbnb.
>> Okay.
>> Is New York uh is New York's decision to
ban Airbnb the greatest own goal in
municipal history or something close to
it?
>> What do you mean the greatest own goal?
>> I thought just a terrible shoot
yourself. There was a great quote. So
let me let me uh
own it own goal. There was like when you
kick it into your own net in soccer. I
just heard a quote from a from a Jets
player yesterday. He's like, "Other
teams shoot themselves in the foot and
then we shoot ourselves in the head."
It's like Grace. So, so all right. I
just didn't catch it. So, I ask a
question again. I'll respond to that
again.
>> Was Okay. You invested in Airbnb.
>> Yes.
>> Was New York City's decision to ban
Airbnb one of the greatest disasters in
municipal government history?
>> Yeah. I mean it's definitely an own goal
if we want to go use that format that
you know you want to have a great
vibrant ecosystem that allows free trade
allows people to stay in places but and
you want very little regulatory capture
if you want a fervent place for you want
uh New York to be open for traveling
business people for tourism for
everything that happens uh and you don't
want the regulatory capture from the
hospitality and hotel industry so I
think that's it It it was silly. Uh I
think a lot of the large municipalities
have played with it, but uh I think in
in the you hope in the long run uh
cooler heads prevail and everybody winds
up doing the right thing. I understand
the concerns that the rents might be too
high and you don't want to have
residential properties being converted
into hotels, but there has to be a
balance. And the fact that it just got
banned, you know, effectively turned a
hotel uh stay in New York City from
something that was affordable. So, if
you had guests, for instance, into
something that's now $700 a night and
that drives me nuts.
>> And it's not like people are they should
fix the underlying problem there. You're
right. There's a housing issue in New
York City. There's also a hotel revar
issue. So you need to be able to do
both. You hope that by providing
incentive you could get people to do
that and whether it's incentive that hey
we're limiting the regulatory boundaries
to get housing permits to be able to
build more housing especially affordable
housing or you're doing things to open
up to make it easier for people to build
you know any any type of residential
properties here. That should have been
the goal and not trying to not trying to
do regulatory capture. All right, Rick,
you have uh First Mark has a podcast. Do
you want to talk a little bit about if
people are interested in our
conversation today where they can follow
you or the podcast?
>> Sure. Shout it out.
>> So, we do a bunch of different podcasts.
Uh you know, I you can follow me simple
uh X address of just Rick.
>> Rick.
>> Um if you want to
>> Where did you get that?
>> Uh it's a long long story. That's
probably for phase for chapter two of
our conversation.
>> So, I'm Rick on Twitter X. Uh you can
find me there. Uh I I actually you know
have a very a very clean and deliberate
Twitter uh largely about you know what I
think is going on in the markets uh and
what you know what we're seeing and
hopefully uh be more clear about that.
And then you know First Mark we have a a
full parade of podcasts you should
follow at first mark cap on Twitter and
Instagram but also my partner Matt has a
very large podcast called datadriven
which talks about what he calls the MAD
landscape machine learning artificial
intelligence and data and that's really
been on the forefront of AI with some of
the best thinkers in AI on over the last
actual decade. So I think we're we do
produce a lot of content around data
around financial technologies around a
lot of things we do even okay computer
uh that's part of the risk reversal
ecosystem about what the state of the
private markets are. So find me any of
those places as well as on on our friend
Scott Wapner's closing bell on CNBC
>> which you're about to go to. So we'll
get you to set. Rick, great to see you.
Thanks for coming on the show.
>> This was awesome. Thank you very much.
I'm happy to be back anytime.
>> Definitely. All right. We'll have to get
the story of at Rick. So we will have
you back for that and much more. All
right, everybody. Thank you so much for
watching and we'll see you next time on
Big Technology Podcast.