Some Will Be “Punched in the Face” by Tariffs, says Ben Lerer

Key Concepts:

• Early-stage investing
• Hype cycles
• LP (Limited Partner) support
• Operational cash flow
• SVB (Silicon Valley Bank) crisis
• Sustainable long-term businesses
• AI (Artificial Intelligence) unlock
• Large language models
• Consumer-focused tech
• Tariffs
• New York tech scene

Fund Performance and Investment Strategy

• The firm prides itself on consistent and disciplined early-stage investing, focusing on "one thing well."
• They avoid getting "sucked into hype cycles," which has been reflected in their returns, leading to continued LP support.
• The firm is happy to have fundraising behind them in the current market environment.

Impact of SVB Crisis and Market Conditions

• The SVB crisis served as a "wake-up call" for some funds, highlighting the importance of operational cash flow.
• The crisis prompted introspection, ensuring portfolio companies are responsible and not chasing growth "at all costs."
• Portfolio companies are now focused on burning less cash and building sustainable businesses, avoiding the "late-stage VC hamster wheel."

AI and the Changing Landscape of Software Development

• AI is seen as a significant "unlock" across all industries.
• Companies not heavily leveraging AI are missing opportunities for efficiency and faster development.
• Some portfolio companies are writing less than 5% of code by hand, using AI tools to create leverage with smaller teams.
• There's uncertainty about the long-term value distribution between large language models and application layer companies.
• The firm focuses on backing "incredible people" who can navigate the challenging AI landscape.
• The rise of AI means that you don't need to learn how to code anymore. Previously, not having a computer scientist or engineer on your team would be a dealbreaker for Y Combinator, but that has changed.

Consumer Tech and Tariffs

• Scaled consumer companies are discussing and planning for the implications of tariffs.
• Mature businesses have mitigation strategies in place, but some companies will be negatively impacted.
• The situation is unclear, with the "floor moving by the hour," making it difficult to overreact or make permanent decisions.
• Founders are expected to manage through the challenges, similar to how they handled COVID-19.

New York Tech Scene

• The firm is a strong believer in the New York tech scene.
• New York has always had talent, but it's now gravitating towards tech instead of Wall Street.
• The growth of the New York tech scene is seen as a competitive edge for the firm.
• The firm will continue to invest in early-stage New York companies.

Notable Quotes:

• "We do one thing, we do one thing well, which is true early stage investing."
• "AI is going to be an unlock in every single industry."
• "The best founders find a way."

Synthesis/Conclusion:

The firm's success is attributed to its consistent focus on early-stage investing and avoiding hype cycles. The SVB crisis served as a reminder of the importance of operational cash flow and sustainable business practices. AI is seen as a major opportunity, but also presents challenges in terms of value distribution. Consumer companies are facing uncertainty due to tariffs, but strong founders are expected to adapt. The firm remains committed to investing in the growing New York tech scene.