Mathias Schilling of Headline joins Nick to discuss Why Culture is King, The Role of “Founder Mode” in Building Iconic Companies, Lessons From 25 Years in the Business, and How to Make Tech a Force Multiplier Within a VC Firm. In this episode we cover:
- Evolution of the Venture Capital Industry
- Headline’s Winning Strategy
- Global Presence and Investment Approach
- Navigating Market Cycles and Founder Mode
- Capital Efficiencies and AI’s Impact
- Succession Planning and Leadership
- Future of AI and Regulation
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0:18
Mathias Schilling joins us today from San Francisco. He is Co-Founder and Managing Partner at Headline, a global venture capital firm investing in early and growth-stage startups. He has invested in companies including The RealReal, Sonos, Pismo, Farfetch, Groupon, Angi, Nivoda, Fetch, Creditas, and GoPuff amongst others. Prior to Headline, he played a pivotal role in growing several technology companies, with a focus on scaling and international expansion. Mathias, welcome to the show!
0:48
Thank you for having me in this wonderful introduction.
0:52
It’s such a pleasure to have you, sir. So you’re out in San Francisco on a hot day. I’m in Chicago. Okay, it’s it’s fun to chat and connect. I know you were recently here, you know, dropping off your daughter to you Chicago. So
1:06
more time. So, you know, be careful. Very good,
1:10
very good. Hopefully
1:11
we can read the best entrepreneurs. Crazy.
1:15
So you’ve been in this industry since 1998
1:19
I mean, it’s marked, I cannot believe it.
1:23
You know, how does a German tech guy like yourself get into venture capital?
1:27
Yeah, I mean, very good question. I mean, to be honest, serendipity, you know, it’s like I’ve always, you know, I think to me, it’s a personal philosophy. You have to let allow serendipity to lead your life, and then you have to have very strong core intuition to follow. You know that the opportunity that arrived from serendipity. So, you know, at the time, I mean, there was really in Europe, there was no venture capital. It was kind of the first wave of tech. And, you know, long story short, I was 25 years old, and I partnered up with, you know, my co founder, Tom Gillman, and another co founder was a little bit older than us, had more experience. And, you know, we said, you know, we wanted to, we had startup experience, you know, where we couldn’t find venture capital, which was, you know, difficult. And you know, we said, we have to bring venture capital to Germany, you know, to do it also the German way. And so, you know, I think what we did, in hindsight, which I think was was really the right thing, is that we packed our little bags. We didn’t think really a lot, you know, we took, we took a flight to San Francisco and set up shop, right? And said, we want to compete with the best. We want to learn from the best we want to win, you know. And we also, you know, we kind of appreciated the ability to have an outside look, you know. And we, we didn’t take anything granted for right? We still don’t today, in the sense how venture capital is being done or should be done, right? I mean, I think we always try to stay very open minded, you know, improve, you know, and adapt. And also, you know, look ahead a little bit, where, where the puck is going, and kind of build infrastructure against that. So that’s been, you know, that’s been in 1998 you know, today I still live in San Francisco. Three kids. They call me dude, you know,
3:19
I’ve Americanized very California Matthias exactly
3:24
25 years. So
3:26
what would you say is the biggest change that you’ve observed in the industry over the past quarter century?
3:33
I mean, I think the biggest change, to be honest, is kind of a democratization of of starting a company, right? I mean, it’s, it’s, it’s been, when I, when I arrived here was, you know, the the one hour rule was, you know, very much enforced in the sense, you know, I can only fund the company whose headquarters is maximum one hour for my office. And so, you know, you have everybody centered around Sandy road here, you know, down the street in Menlo Park. And you know that had a reason, right? Because, you know, you had to have, you know, it was very tech heavy at the time still, you know, there was a lot of infrastructure cost to build a company. You know, it took time to be able to kind of go to market and see the fruit of your labor, and if that makes any sense, and to be test, testing your idea in the market. And you know, that has changed significantly. I mean, you know, capital costs have come down massively around the world. I mean, there’s the democratization in terms of access to infrastructure. You know, it’s very much focused on investment or variable cost, as opposed to, you know, fixed cost infrastructure is commoditized in many ways, you know. And then we’ve seen also development, where you have, you know, democratization, in terms of access to the best people in the world, or, typically, you know, you had to come the same way we did, or we came out here because we wanted to be among the best people. And it’s there was a class. Around Silicon Valley. And, you know, with propagation of, you know, remote work and etc, etc, I think you can have access to the best people in the world. If you start a company in Sao Paulo, you start a company in Berlin. And these factor coming together, you know, mean that, you know, which always has been our vision, and still is my vision. I mean, is that, you know, I think the best companies can be built anywhere in the world. Can be in Chicago, can be in Sao Paulo, can be in Switzerland. We just talked about Switzerland, small domestic market, and I think that’s what you have to adapt to, right? I think the traditional model, you know, where you say, hey, you know, being a venture capital is really about, you know, I have a big brand, you know, I’m very proud of that, and I have a big network. I don’t think it’s going to be enough anymore, and it’s very probably not enough anymore today. But it’s funny how, you know, in, I would say, in, you know, decades, I mean, that fundamental kind of value proposition of different change of venture capital hasn’t really fundamentally changed it.
6:03
So you asked me, before we hit the record button, why we win right deals that we pitch when is headline win?
6:10
I mean, I think most importantly, I mean, it’s, it’s a matter of culture, you know, a little bit what I alluded to in the sense. I mean, you know, we want to earn our right to win. You know, we hustle and you know, we take nothing for granted the way we look at the industry. And we’re, you know, we want to innovate ourselves. And so what we’ve done, I would say, in the last 20 years, and you know, we’re not done. I mean, we kind of continuously want to progress is but, you know, we’ve built core infrastructure with, kind of under the notion we want to create repeatability in this business, right? I mean, we, we actually, traditionally, before we enter this business, we were in media. And, you know, it’s media is a complete hit business, right? And so it was always, kind of had 10 artists and then one would make it, or 10 movies one would make it. It’s always been similar in in venture capital, right? And, you’re it’s very hard to really assess which one will win. And you know, you kind of have to the odds. And so we looked at that and felt, you know, it’s important to create repeatability process, to actually force our luck and and, you know, force the serendipity as much as we could. And so I think we’ve innovated across three main vectors. One is technology. And you know, I think if you go to secondary today, I mean, a lot of people would tell you, you know, I use technology to leverage my process. In reality, I think it’s only 3% you know, that really do it in in hedge funds, it’s 50% today, right? The corn Fund, in venture capital. And for many reasons, because, you know, it’s such an stay with such an opaque and intransparent model. I think it’s very hard to create that mental shift, particularly for general partners that have been in this business for a long time, to really, truly leverage technology. And we’ve done that, you know, we’ve applied since more than 50 years. We have 20 engineers in the firm, and, you know, we have significant data coming out of that. So in the simplest way, you know, we do apply massive signal processing to, you know, database of 8 million companies that continuously we build out. And, you know, we look for signals of hyper growth in very small companies. And you know, we apply that to sourcing. But then there’s a whole process, you know, it’s the combination of organizational design within the firm and with technology, I think that’s critical. And, you know, the philosophy around us has to be found a lead, in my view, and that allows us to, you know, we look at about 100,000 companies every year, and we actually talk to over 1000 companies every month, right? And these companies opt in. There’s a whole AI process around it very much relate to these founders. And very often in the second call, we actually get live transaction data, live usage data. And that’s the kind of the second philosophy of the firm is that, you know, our entry point is when a company has product market fit, because we think the risk reward shifts significantly. And you know, we have a second tool, which is called Deep Dive, that allows us, in a completely quantitative way, determine whether, as a product, a company has product market fit, and we defined it as asymptotic behavior. So in other words, you know, if it can be a SaaS company, can be a consumer company, but at some point a cohort of users has to asymptote, and the retention, you know, as or hasn’t told and you don’t have a leaky bucket anymore, it can be in a very low level. You know, consumer companies sometimes use 80% of the customer. If you have 20% customers, let’s say in E commerce that hasn’t bought. You know, there can be a very big business. And
9:36
how long? How long must the cohorts be in order to affect
9:39
that’s a very good question. I mean, you know, the longer is better, but, you know, we are comfortable to predict that after six months, because we have predictive abilities. You know, from looking at the data set that we’re getting, to predict it out into the future. And you know, we’re not always right, but it’s a objective, quantitative way to do that. And so the. That. Yeah,
10:00
and as you think about profiling, clustering, like dendograms, you know, different groups of target customers, do you have to try and assess whether the customers that have been sold to are representative of a much larger potential customer base? And if so, how do you how do you do that
10:21
little bit? I mean, I do think, you know, we constantly think about whether, you know, there’s the early adopter kind of adverse selection. But typically, you know, we’re not worried about it. I mean, typically, what we’ve seen in the successful companies is that, you know, if you get on a market fit in your early customer group, that it’s very predictive of future customer group. So that’s, that’s essentially, that’s a bet we’re very comfortable in making. Because, you know, we add, you know, the extrapolation of our own experiences, you know, our gut feeling to products and customers, and it’s kind of something we’ve always been comfortable with. You know, when we started, we had a very small universe of companies to choose from. And, you know, with tech, you know now, you know, if any serious any, you know, if you look at series A comes in any month that get funding. I mean, it’s, we have probably seen 70% now of those companies in the month before. So, you know, we with this approach. You know how quote, unquote market share has, increased very significantly. It’s remarkable
11:23
the volume of companies that you can review and meet with in in a short period of time. So you mentioned earlier that the democratization, you know, of tech, has been one of the biggest changes over the past 25 years. You, of course, are based in the Presidio, right in San Francisco now. So,
11:42
I mean, it’s become a little bit the new silicon the new standard Road, actually, is that? Right?
11:50
Interesting? It’s shifting. So you have this global firm, but, but Matthias aren’t the best companies born in Silicon Valley. You
11:57
know. Again, as I said, you know, it’s part of our vision. I mean, I definitely argue no, right? I mean, I think there’s many, many great companies thankfully are born, and says in Silicon Valley and in San Francisco. And, you know, I’m a huge fan of the city. I’m a huge and I’m very glad that I think many of the best people are coming back, actually, particularly because of the a high platform. But fundamentally, I say no, I think, you know, the best company the world can be born anywhere in the world. And so that’s also back to the question of differentiation. Is essentially the second vector of how we compete, is that we’ve built a global platform. And so we have eight offices around the world. You know, we have four dedicated early stage funds in different geographies, or Latin America, Asia, Europe and the US. And so if you look at the model, you know, top we kind of have, you know, the technology that screens the entire market constantly looks for signals of 8 million companies that have signals of hyper growth. Then we filter it in our different sectors that we’re looking at, and then we push it to the edges, you know, into our offices. And then the handover between tech and the person happens, right? And the human and, you know, venture is still a significant, you know, it’s a human business at the end of the day, right? And so I think to be able to have presence, you know, have teams on the ground in eight office geographies. You know, from Taipei to Sao Paulo to Tokyo, Paris, London, Berlin. And then, you know, get the lead from the tech, but then be able to build the relationship very early on. And you know, do the stock picking right, determining the quality of the founder. Build the relationship, build trust, build respect, and then, you know, make early stage investments. I mean, I think it’s a huge differentiator. And then, you know, in the next step, the Growth Fund, the Global Growth Fund, comes in. You know, we just announced the closing of our latest one, the fund four. And essentially, can either support the best companies that we have in our portfolio around the world, although, I mean, realistically, you know, we think we’re pretty good investors, but I don’t think we can, you know, probably support more than 20 to 30% of our companies really make it at the growth fund, and we miss a lot, right? And that allows us to have a second bite at the at the episode, to speak for, for the best companies that we missed with the early stage funds, right? And then, and then the third, you know, component of secret sauce is culture and teams, which I think is incredibly important. And, you know, we’ve thought a lot about in the past, you know, how do we put teams together? How do we scale on one side without, you know, mitigating the secret sauce, the magic that happens when in teams make investment decisions, right? And you know how to preserve that magic as you grow, right? I think that’s as we kind of see the bifurcation of the venture capital industry. And, you know, funds becoming very large and becoming more asset managers, you see quite a bit of turnover, actually, in the investment teams. And then. Other funds that kind of lose relevance, relevance in the middle, right? Because it’s hard to compete with a scale. And then some funds that I think very targeted and address sub sectors of the market, which I think can be very successful. You know, I think to us, it’s very critical to keep that magic of the investment decision. And I think it depends on which people do you hire and which culture do you put together. And so that’s the third, you know, leg of the stool, so to speak, technology, global culture. So those kind of you know the different components of how we try to win. It’s perfect. So
15:35
you mentioned the Growth Fund, 865 million what percentage of the investments from the growth fund come from, you know, existing headline deals from the early stage versus, you know, new, yeah. I
15:47
mean, you know, I always, I mean, it’s hard to predict, to be honest, in the future. I mean, I think realistically, as I said, I think if it’s, you know, it’s hard to believe it’s more than 20 to 30% at that scale of a growth you know, this is our fourth Growth Fund, and it has varied over the years. You know, we have been a little bit more focused on existing portfolio as we you know, we always try to venture into a new product, start small, learn, understand organizational design and the best way to approach it. And you know, to be honest, in an ideal world, the percent is very high because the structural advantages that I have to invest with growth in a company that I’ve known for six, seven years. Being a very trust relationship with an entrepreneur is massive, right? And we’ve been able to drive kind of 15x returns with the Growth Fund, which is beautiful, but I’m not naive to say that that’s, you know, that should be his normality. So, you know, we, I think the fact that we have, you know, this global presence there, again, is important. I think a lot of people try to do the helicopter approach, right? They fly into different geographies and try to, you know, keep up like that. You know, for us to have their presence, you know, the relationships, the ecosystem. Know how and really live it. You know, live in it. We failed in it. We lived in it. We’re serious. We’re investing it. We’re committing. You know, we appreciate the different cultures we do, and we appreciate, you know, different market structures. We don’t think that, you know, the way it’s being done here is necessarily the best way everywhere. I think you want to have nuance there and empathy too. And so that’s how we set it up, right? I think realistically, with this fund, we expect, you know, a maximum, roughly 30% to be internal companies. Hopefully it’s going to be more
17:35
well, you know, congratulations on the continued success in raising this new fund. It’s, it’s 2024 and we’re seeing, you know, historically low dollars raised by VCs. I had Ian cigallow on a few months ago, and we were talking about 21 and they was 2021 22 vintages. And he said, Oh, they’re not gonna look good, you know. But I’m curious having you on the show. You’ve seen a lot of cycles. You’ve seen the.com bust, you’ve seen the Global
18:07
Foundation, hopefully,
18:11
some good ones. So you’ve seen some cycles, right? Are we? I mean, it’s favorable for a VC to make an argument that these are going to be great vintages, and we should be investing more. But with, with this dearth of VC dollars, what do you expect? You don’t have a crystal ball. But what would you predict, you know, the next couple vintages look like?
18:29
Yeah. I mean, I think, you know, I mean, the funny thing about this industry is, you know, people go all in in the wrong time, and then they go all out in the wrong time. I mean, so funny in 21 I mean, everybody blindly invested. Well, somewhat, at least in hindsight, pretty obvious, you know, that it was a faulty environment that the music would stop at some point, right? But then people suddenly, you know, they lose any fear, and, you know, the greed takes completely over. I mean, our philosophy is, you know, from from basically extrapolating the experience that we had in the past, is that the most important thing is consistency, right? Is is, you know, some, you know, repeatedly model, actually having a very clear model, you know, we have with our product market fit approach, we have a constrained investment strategy, which I think is very important. It’s particular mentor, you know, in a constrained investment strategy will drive better returns. And, you know, our process, given that we process that much data every year, you know, looking at 100,000 companies, and the bar is quite, you know, similar you have to a company has to product market fit. That’s an objective measurement. We just try to be very consistent. We invest our funds in three years. You know, within the three years, we try to expose our investors to, you know, each year of the vintage. So I think we have invested the same amount in 21 as we did in 23 and, you know, I do look at the current time as an opportunity, you know, I cannot read the future. I think from a macro perspective, you know, we see, I think, signs of a soft landing, you know, it’s where it’s going to play out. I mean, I think Stuart. Only to call, you know, we still have a liquidity drought, but you know, I think that’s, you know, less of a function of the opportunities. I mean, I think, you know, ultimately, building value has no constraint. I mean, there’s no we’re building products and companies that provide value. There’s no exit constraint, right? Per se, it’s just, it’s about building that value. That’s where, ultimately, what we try to, what we try to focus on. But then, you know, I do see a firm like ours, a unique opportunity of time right now, where, you know, after, after moments of exuberance, which we clearly had. Now, there’s a huge opportunity for change of guard for, you know, increasing your mind share and increase your market share, right? And I think what I’ve been very excited about is the quality, the quality of talent that we’ve been able exactly the quality of the talent that we’ve been able to attract, you know, we’re looking for people that you know have kind of 1011, year experience, that have been trained very strong institutions and are right on the cusp right that may have partners that have made a lot of money prefer to spend time on the ski house than to the very hard work of trying to turn around the funds. And those are interesting. There’s succession issues, I think, with a lot of platforms. And, you know, that’s the opportunity to go on the on the offensive, right, and that’s, that’s what we did. We raised this fund in a size where we think it’s right sized. You know, that’s our personal assessment from, you know, looking at portfolio construction, everything makes sense. And then, you know, hiring the best people we can, both from an individual contributor perspective, but also from a team perspective, again, looking at the magic of make investment decisions, and then we have run growth funds, and so we’re here and helping the team to Make the right calls and hopefully mitigate any potential mistakes. But you know, I think I see a huge opportunity. Awesome. So
22:06
Matthias, while I’ve got you, let’s talk a bit about founder mode. It’s been a hot topic for the past few weeks here. Brian Chesky recently gave a talk at YC, and the theme of Brian’s talk was that conventional wisdom about how to run large companies is mistaken. As Airbnb grew, he was advised to, you know, hire good people and give them room to do their jobs if he wanted Airbnb to scale and scale well. And he followed the advice, and the results were disastrous. So he changed his approach, and he studied how Steve Steve Jobs ran apple, and that approach seems to be working for Brian. Airbnbs free cash flow and margins is now among the best in Silicon Valley. So there’s been a hot topic. I think a lot of people define founder mode in different ways. But what is your take on founder mode versus manager mode? Yeah.
22:56
I mean, I think that the exciting thing about founder mode is that it’s undefined. I think it’s undefined. Where I think it’s very hard to define that, right? And our, you know, the philosophy that headline everything, a lot of people have different philosophies, right? And, you know, particularly if you go to private equity, right, private equity investment company to actually control it, they see that the arbitrage of bringing new teams and doing things in different ways, you know, our bet is, you know, to find a very specific type of person that’s going to go through the wall, the founder, the founder that identifies a problem, you know, a problem that hopefully is completely crazy, that’s kind of feels like it’s unsolvable. And then the founder that, you know, goes out there and builds a product and finds customers, and, you know, build that builds their company into or even builds a market right behind it. I mean, often we’re most excited companies when we invested don’t have markets, they were like, Jesus. I mean, this market is tiny, and then it ends up you’ll be a massive market, and that just requires a certain personality, you know. And I think people, you know, there’s a lot of firms out there, I think that are pretty clear about their personality in many ways, whether you know they talk about it or not, is, you know, someone who has a chip on the shoulder, very poor, no really wants, you know, I personally, I mean, my, I have a, you know, it’s hard for me to really tell you what exactly is. It’s quite intuitive. You know, I try to spend a lot of time with founders before invest, kind of get to know them and and, you know, you know, determine that that they ultimately are. But you know, our very strong philosophy is, you know, back to founders, then go. Can go all the way. In fact, you know, our motto is, you know, we back founders that would be successful without us, and we’re just coming in to try to accelerate them faster, right? So, and that’s a philosophy, you know, we rarely, I mean, honestly, rarely, and very few times successfully, have switched founders out along the way. And you know, the whole premise of this business is the founder, find these people, you know, the crazy people. I. I’m kind of crazy myself. I mean, I’m running headline and founder more to help it. It seems
25:05
like there’s some absolutes, you know, that are immutable about founders. Like you want to find these people that are irrationally sort of obsessive and committed to incredible product and, you know, spending time with customers, etc. But yeah, I
25:21
think it’s really product, you know, that have an incredible intuition, intuition and obsession to build wonderful products, you know, to really understand the customer, then to, you know, with their product, to target to the right customer base. And then I think it’s culture, and I think it’s the beauty culture around the companies that you know drives that success and ultimately scale, you know, fast, decision making, empowerment, accountability, ownership, etc,
25:49
right, right. There are certain standards that seem to lend themselves to success with startups. But I think what people are maybe missing with this founder mode. Thing is, if there’s not one successful style, you know, Steve Jobs and Jeff Bezos, you know, both are rationally committed to winning, but they do it in different ways. 100%
26:12
each one of that, right, is doing it. And that’s the debut of it. And so, you know, it’s also you can’t copy it, yeah, you know, I tell you, Oh yeah. You have to find your own you have to find your own mode, right? That works for you, and be true to it and be genuine and believe in yourself. I think so much of it is believing in yourself, right? And so
26:30
So Matthias, you’ve talked about international investing a couple of times, and one of the things affecting your investment focus right now is increasing capital efficiencies around the world. What does that mean exactly, and how does that inform your investment thesis?
26:45
Yeah, I mean, I think alluded to it a little bit before, right? It’s really the fact that, you know, a lot of the infrastructure has been commoditized, right? If you look at software and, you know, AWS and others, you know, we, when we, I started in business, I mean, companies had to build that infrastructure themselves. So our data centers are incredibly expensive. And it’s interesting at the same time, you know, venture funding has not gone down. It actually has gone up. So it’s just, it’s a little bit a shift of the resources, right? It used to be that, you know, I had to hire a lot of engineers to be able to build the infrastructure. You know, many people now reallocate that to product, right, where, you know, now I can focus one person building product. I have 10 people, you know, putting together. And, you know, it’s more beautiful. It’s more you know, it solves that specific problem that market is looking for. And then in sales and marketing, right? It’s sales and marketing still becomes, you know, a big part of the business. And so we’ve seen companies, you know, that have part of market fit, being able to scale faster, right? And so, so that’s kind of the big shift that I’ve seen, you know, I think there’s a potential next shift which, you know, we’re thinking about. I don’t have an answer yet, but I’m quite curious about it is, you know, the kind of the silicon valley, the valley model. And, you know, the software is, the world model is that people have built these beautiful products that solve a specific problem, or, you know, solved problems that existed in a better way. And, you know, we were able to sell these problem solvers for 90% markets, right? And we were able to sell them with an internal annuity, right? Where, you know, in particular, in SARS, right, there’s an annuity attachment, and that’s the model, because then there’s a terminal value. And, you know, venture invests in the terminal value of these companies, you know, with AI, I think there is a question of of the mode and the defensibility of the annuity, and, you know, the potential pricing coming down. And so, you know that that’s, that’s the next shift of capital efficiencies that we’re watching. And, you know, I’m not, I personally do think there’s always going to be a role for venture capital, but it certainly and, you know, I’m not saying, you know, I’m afraid of my job always be totally negative, but it is a shift that we’re thinking about, and it’s something, you know, we’re conscious about, and so it is going to have an effect, I think, coming years.
29:10
So, so let’s continue down the the AI path, and you know, the deflationary nature of AI. And I’m going to, I’m going to start you off with a softball here. Okay, so the note kosla has suggested that we need a universal basic income as AI takes over jobs and broadens wealth disparity. Do you agree? I
29:29
mean, do I agree? I tend I do agree. I mean, I think I probably, I probably disagree. I mean, the 80% I think we have no idea, right? I think 50% he paid 80% you know, is it jobs that are really being replaced, or is it tasks that are being relayed? I mean, I think I’m I think there’s nuance to it, you know, I do think I disagree with we know what’s despirable as an End call, you know, I we always are not a big friend of, you know, the kind of the software. Yeah, or the, you know, the tech entrepreneur creating utopia of what the world, the beautiful world for everybody, should look like. And you know, where an eye can quickly turn into a we how we should look at, and then it, you know, and then it really turns back into an eye. The tech editor sits on a big boat, or two big boats with two people, and it doesn’t engage really, in the reality, the reality of life anymore. So, I mean, to be honest, I do think, you know, and I’m, I mean, I do think that AI is a massive platform shift that, you know, it’s, I’m totally amazed what it has done, right? I mean, it’s like for all of us, I think interact with chat GPT initially was a completely wow effect, right? It’s, it’s where it has these moments that you have, you know, I’ve had now a couple of times in my career, where, where you kind of, you know, you use a product, and you kind of see the future. And, you know, I think with the more recent, you know, chat GPT four, right, where there’s initial forms of reasoning, and I think that’s another big effect, and you kind of, kind of can see what’s happening. No, I’m so I, you know, I’m not the utopia person. I’m also not the total negative person. But I do think this is a very nuanced approach, and I think the impact, you know, goes way beyond tech or efficiencies of necessarily prosperity. I mean, you know, prosperity needs to be redefined in many ways, I think, right? Because, you know, there’s philosophy. I mean, there’s lots of different aspects that I think we need to consider, right? So just to say, you know, people don’t need to do jobs anymore that are repetitive. I mean, there’s many people out there that have repetitive jobs and take great pride and and meaning in their jobs, right? And so, you know, is, is, you know, minimum wage. I mean, our basic income. Is that a potential? I mean, I we might have to deploy it. I think, I mean potentially. I mean, I think that’s a possibility. Obviously, it comes with its whole, you know, secondary effect, yes, yeah. And, you know, no one knows whether it finds them. They’ve been tests in the past, but I think it’s part of the equation. Because, you know, there’s certainly going to be a transition. There’s going to be a transition for people into, you know, as old jobs go away, and hopefully new jobs emerge, that is going to be
32:18
meaningful. Yes, I couldn’t agree more, and I also think that probably the majority of our listeners are more afraid of UBI than they are of AI while we’re talking about AI. So like you know, some have likened AI to illicit drugs that have not yet been tested for safety and efficacy, you know, possibly presenting widespread harm to an unsuspecting public. And there was this article in the Financial Times that stated the most glaring gap in our current approach to AI safety is the lack of mandatory independent and rigorous testing to prevent AI from doing harm. Such testing should only apply to the largest models and be required before it’s unleashed to the public. And I know you’re European, and the UK is kind of leading on some of these initiatives. You know, is the fear and potential regulation warranted? You know, what should be reviewed and regulated versus what should because you have all the answers. Matthias, you know?
33:15
Yeah, no, I do have all the answers. I mean, I will say, I mean, first I want to give a shout out to actually, this article was actually written by my friend Anya Manuel. Is a very talented foreign policy wonderful. She works with called Lisa Reiser. And, you know, I respect her opinion quite a bit. I mean, I think first, I mean to me, the first call to action. And I tell that to my kids, and I tell that to all our entrepreneurs, and I tell it to everybody here. We actually deploying an EI University. And headline, the first call to action is to actually, there’s a real responsibility, I think, for everybody to learn and to stay up to date and really think through the implications on a first principle basis, right? I don’t think there’s this is not black or white. This is going to be, to some extent, great. I think no one you know can claim I have the ultimate truth here. And so I think, you know, people need to have the fundamental basis to be able to be part of the discussion. I do think I feel that response. I feel very lucky that I’m in a job that allows me to do that work, you know, as part of what I have to do anyways. And you know, I have strong access to our entrepreneurs, which always, you learn the most of but, but I think that’s a real call to action, you know, as it relates to regulation, I do think we need to have some regulation. I think to attack this with, you know, pure, the complete Wild West. I think is, is, is is not the right thing, right? And, you know, I don’t think we have, you know, ultimately, the exact proposal or solution that makes work, and you know, different countries and different geographies, you know, Europe versus us was China, trying taking this in different ways. I think this particular suggestion was, you know, to kind of have an AI institute that’s independent, that you know does meant. Very mandatory testing, you know, and I think, for certain models, whether you know, they create the potential for national security and your kind of you know this, they allow, you know, cyber defense to to go down, or, you know, cyber attacks, and you know something that has happened, other people are now aware that in the past, you know, rogue states have meddled with our elections by doing that. And then you know, whether they’re, you know, his potential for any physical harm, right, biodefense, or, you know, you know, weapons in any way. And you know, I like that institute approach. It’s been something that has been actually implemented UK, you know, the benefit is that, you know, it’s not, you know, that it takes years so that it would really harm innovation, which is obviously host trade off. And people say, you know, it has to be competitive. These are the other geographies and states. You know, it’s something that can be, you know, kind of objective and can be done in a quick way, and I think it should be in the interest of the big providers there. So it’s one part of the solution. Interesting.
36:08
So while we’re on AI, Sam Altman predicts that we may have ASI in a few 1000 days. What’s your over under in years on achieving super intelligence? Yeah,
36:20
again. I mean, I, you know, it’s hard to read the future. And I do believe, I mean, I do, I do think the timing of it, you know, is it a few 1000 days? I mean, I think it’s possible to be honest, right? And I think, you know, it’s going to take a little bit of time until we have the third AHA effect. I think, you know, the launch of, you know, large language model, and then being able to interact with it, chat, GPT four. I think these were big reasoning. I think these were big steps. I think the next very big step may take some time, but my experience has always been with technology innovation that people talk about, you almost forget about it, because it takes a little bit longer actually to done, and then when it actually happens, it goes very, very fast. So I think we just need to think, you know, he calls it a prosperity for all. And, you know, he painted, you know, he published his this article, the intelligence age, I guess it’s called, yeah, it’s been called the age of intelligence before. Again, you know, I think this is one man’s vision, right? I think, you know, I think there need to be many visions, what, ultimately, you know, the how that intelligence should look like, for, for for people. And I think it’s, it’s, you know, it should be a very broad, interdisciplinary discussion. I think it’s, it’s, as I said, it’s a great response. Maybe we all have to make sure that, that it stays within, you know, a framework where it’s truly beneficial to all people, and that, in fact, it does kind of bridge the gap between rich and poor, and it doesn’t, you know, only favor the ones that have the exit resources. And, you know, we kind of look at the risks and opportunities at the same time and also look at how people really want to live, as opposed to say, you know, we should all have the visions of a few tech people that’s a different world, in many ways, in in many instance, than the real world.
38:19
Matthias, with all the recent defections from open AI, is there reason for concern?
38:25
Yeah, I mean, I don’t have actually personal insight into it. I mean, I think it’s certainly, I mean, it’s, it makes, it’s curious, right, to see that happening. You know, I do feel there’s a little bit of a cultural kind of change, right? As as you know, the company really was launched as a research company, and a lot of the talent was very much research driven, and, you know, long term vision, and the company has now become a for profit enterprise, or is in the process of becoming it. And that, you know, means there’s product roadmap, there’s competitive threats. You know, it puts a lot of stress on an organization that that has been started as a research organization. And so I think there’s stress on the system. And I think people kind of, you know, it doesn’t probably meet, you know, the culture that they already joined, you know, whether there is more and where there’s more kind of, you know, difference in opinion about strategy and outcome and regulation and safeguarding and boundaries. You know, we can, I can only spec it, but you know, I can only imagine. You know, that puts a lot of responsibility on the on an organization to deal with all of that, because the potential impact on human guide is significant. You know, while
39:45
we’re talking about organizations and changes, we spoke a lot early in the interview about headline, you have many offices. You now have large teams, significant. Aum, you know, how do you think through succession planning? At. Mind?
40:00
Yeah, no, it’s a very good question. I mean, I think in venture, it’s a, it’s a critical part, because, you know how business, at the end of the day, is making investments, and then all of us to make investments, you know, we have to do lots. We have to get lots of different things right. And it’s, it’s a hard job. I mean, I often feel people think, you know, we’re kind of gamblers, right? Then we, you know, get lucky, you know. We have to find the right companies, you know. We have no idea. And probably right on seven, six, there’s five companies I have no idea, you know. And at some point I have to find that company. I have to find the company at the right time, you know, so that, you know, so that that’s a very small window, you know. Then I have to analyze it and come to the conclusion that it’s, I think it’s a great investment and and then I have to win it against no great competition. So there’s a lot of different things. So anyways, the point is that, you know, I do think that for venture capital business, being this business has to be fully in it. I mean, you have to be fully committed. You have to do the hard work. And, you know, so succession is important, because, you know, that keen, keen team and culture contract, if someone is slacking off, you know, then it’s demotivating for the rest of the team, right? So you have to really balance that. And it’s a very long term business, right? Because it takes 12 years for serious AK company on average, to become successful. So, so, you know, our way how to do is, you know, we are in the process right now, Tom and I, you know, now 52 so, so, you know, we’re kind of, you know, and we have to be very much focused on this, right? And so, because it takes a long time, we always say it takes about 50 million to educate the venture capitalists, you know, and losses. So we have a very kind of structured process, you know, player coach model, and we do it on a per part basis, where we bring up the next generation of world class investors, to be honest, we try to train, mentor them, you know, keep the magic of investment decisions and, you know, and then we try for them to displace us as quickly as we can. That’s really, you know, and then there’s a firm level, right, which is then a little bit of a different, essentially, you know, a different skill set. Go back to the founder mode and the manager mode. And then, you know, we have to see, you know, at that point, you know, we have to see what’s the scale of headline in the sense of, is it, in, you know, one of the investors that manages that part as well, or is there a different organizational design that’s required? You know, today we’re still run as a partnership, which, you know, is a model I find personally. You know, if you have the respect and the trust with your partners, incredibly rewarding. Model, perfect.
42:33
Matthias, if we could feature anyone here on the show, who do you think we should interview and what topic would you like to hear them speak about?
42:40
I mean, God, that’s a very broad question. You know, personally, my personal, I’d love, you know, if I can interview someone, you know, again, goes a little bit back to my roots. But I do believe it’s time for women to run the world. You know, the mothers need to run the world. We’ll have it better. We’re very happy that we have a female present in Mexico. But, you know, I would love to actually really sit down Angela Merkel and hear all the truth about 16 years as a world leader. I think it will be very interesting. Mathias,
43:11
what book, article or video would you recommend to listeners?
43:15
God, you’re asking, I mean, let me get one. I mean, I’m really
43:19
vibrating on the spots or,
43:22
I mean, you know, I do like soccer. So, you know, Alex Ferguson was a legendary coach for Manchester United, you know, he had incredible success over a period of, you know, decades. And, you know, the leadership principles, I think, very interesting psychologically. I think sometimes the hardest thing to do is to be able to let go at the right time. Okay, letting go. This book, letting go. I’m reading a book about, you know, a Swiss artist called Giovanni segantini, who, you know, I love his heart, and it’s in its incredible life science. I mean, these are just three that I have on my book. No, I do. I do try to become an amazing tech gammon player. So I do trying to force my luck there too. What was the
44:05
name of that first book about Alex Ferguson?
44:07
It is called leading. Leading. Yeah, leading.
44:12
Just a couple more here. Matthias. Do you have any habits, tactics or behaviors that are a force multiplier?
44:18
I mean, I would say, you know, I think the false multiply for us, business wise, has been, has been the tech. I mean, clearly, I mean it’s, it’s, it’s changed the world. You know, I think for me, personally, I think I will say meditation has been incredible. And then Personally, I believe having kids are total first multiplier, because it changes your perspective. For them, much better. Perfect.
44:37
And then finally, here, what is the best way for listeners to connect with you and follow along with headline. What?
44:42
Send me an email. That’s the easiest way. Matthias,
44:47
there you have it. He is Matthias. Schilling, the firm is headline. Mathias, thank you so much. I’ve been looking forward to this interview for many years, and I appreciate you joining us today.
44:55
This was great. It’s been a pleasure to be on Thank you very much for having me.
44:59
Thank you, sir. Music.
45:05
All right, that’ll wrap up today’s interview. If you enjoyed the episode or a previous one, let the guests know about it. Share your thoughts on social or shoot them an email. Let them know what particularly resonated with you. I can’t tell you how much I appreciate that some of the smartest folks in venture are willing to take the time and share their insights with us. If you feel the same, a compliment goes a long way. Okay, that’s a wrap for today. Until next time, remember to over prepare, choose carefully and invest confidently. Thanks so much for listening.
