![David George - Building a16z Growth, Investing Across the AI Stack, and Why Markets Misprice Growth - [Invest Like the Best, EP.450]](https://megaphone.imgix.net/podcasts/8da7dbd8-ceeb-11f0-941c-ef83bcdd4c9f/image/d44107bc94719f78fbe91befb141073e.jpg?ixlib=rails-4.3.1&max-w=3000&max-h=3000&fit=crop&auto=format,compress)
The ideal founder archetype starts with deep technical expertise and product sense. They then develop exceptional business and commercial acumen over time, a rarer and more powerful combination than a non-technical founder learning the product.
During major platform shifts like AI, it's tempting to project that companies will capture all the value they create. However, competitive forces ensure the vast majority of productivity gains (the "surplus") flows to end-users, not the technology creators.
To win highly sought-after deals, growth investors must build relationships years in advance. This involves providing tangible help with hiring, customer introductions, and strategic advice, effectively acting as an investor long before deploying capital.
Financial models struggle to project sustained high growth rates (>30% YoY). Analysts naturally revert to the mean, causing them to undervalue companies that defy this and maintain high growth for years, creating an opportunity for investors who spot this persistence.
Venture-backed private companies represent a massive, $5 trillion market cap, exceeding half the value of the 'Magnificent Seven' public tech stocks. This scale signifies that private markets are now a mature, institutional asset class, not a small corner of finance.
A16z's growth fund avoids traditional investment committees, which can lead to politicization and slow decisions. Instead, it uses a venture-style "single trigger" model where one partner can champion a deal, encouraging intellectual honesty and speed.
When investing in high-risk, long-development categories like autonomous vehicles, the key signal is undeniable consumer pull. Once Waymo became the preferred choice in San Francisco, it validated the investment thesis despite a decade of development and high costs.
Contrary to the belief that number two players can be viable, most tech markets are winner-take-all. The market leader captures the vast majority of economic value, making investments in second or third-place companies extremely risky.
Unlike SaaS, where high gross margins are key, an AI company with very high margins likely isn't seeing significant use of its core AI features. Low margins signal that customers are actively using compute-intensive products, a positive early indicator.