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VC: "Software Is Basically Worth Zero Now" | Tyler Hogge, Ex-Pelion

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Tyler Hogge helped take Divvy from zero to a $2.5B acquisition by Bill.com. Now, as General Partner at Pelion Ventures, he argues that charging for software is dead, per-seat pricing is collapsing, and the next decade of venture-scale companies will be built on outcomes, not subscriptions.

In this episode of the GTMnow VC Podcast, Tyler sits down with Max to break down what comes after SaaS pricing, why founder intensity is the only trait that still matters in 2026, and how Pelion concentrates capital into its biggest winners (Cloudflare alone returned over $1B to the fund). He also shares why most startups won't survive going head-to-head with OpenAI and Anthropic, the "bent the odds" contract he signed with Redo's CEO, and the lesson from raising four kids that changed how he leads.

This is an honest, no-fluff conversation about where venture is going as AI commoditizes software.

Chapters:
00:00 Intro
01:14 Intro
18:48 Tyler joins
23:09 "Sell Jesus, sell anything"
27:42 The $2.5B Divvy exit
34:39 The "bent the odds" contract
38:11 Startups vs. OpenAI and Anthropic
39:05 "Software is worth zero"
40:55 The death of per-seat pricing
43:02 Lessons from raising 4 kids
46:44 "LinkedIn is the trailer park"

Connect with Tyler:
https://x.com/thogge
https://www.linkedin.com/in/thogge/

Connect with Max:
https://x.com/hackitmax
https://www.linkedin.com/in/maxaltschuler/

Connect with Paul:
https://x.com/PaulGTM
https://www.linkedin.com/in/paulsirving/

About Tyler Hogge:
Tyler Hogge is a General Partner at Pelion Ventures, Utah's oldest and largest venture fund with $500M AUM across eight funds. Before Pelion, Tyler was VP of Product at Divvy, which sold to Bill.com for $2.5B in 2021. Earlier in his career, he was a product leader at Wealthfront under Andy Rachleff and Adam Nash. He's based in Utah and one of the most active venture capitalists on X.

About GTMnow:
GTMnow is the media arm of GTMfund, a pre-seed and seed-stage B2B SaaS venture firm backed by an LP base of 300+ C-suite and VP-level operators from the best go-to-market organizations in tech. The GTMnow VC Podcast publishes every other week with the investors and operators shaping the next decade of B2B software.

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The GTMnow Podcast
The GTMnow Podcast is a weekly podcast featuring interviews with the top 1% GTM executives, VCs, and founders. Conversations reveal the unshared details behind how they have grown companies, and the go-to-market strategies responsible for shaping that growth.

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SPEAKER_03

When I got hired at 12 front, Andreas and Horwitz, then Divi, all of it can be tied to some part on Twitter. People find you, they read what you write, several hires that I've made have come from Twitter, several founders that I've invested in. Twitter is a definitely a big part of my addiction.

Max Altschuler

Tyler Oak. And then you've got OpenAI, Anthropic, some of these massive, massive companies. How are you thinking about the ecosystem?

SPEAKER_03

How quickly can Claude build this? It's certainly a component. And I'm building things now that would have taken our engineers at Divi months to build. I'm doing it in literally 27 minutes, you know? It's just wild. The joke is that if you can sell Jesus, you can sell anything and software falls into that bucket for sure. Redo, we let their speed round, then we let the A, then we co-let the B. So we have plowed a large amount of money into redo, and we try and do that with our best companies. Remy is another one, RemyHQ.com.

Max Altschuler

Are you trying to invest in categories where the markets are huge and there could be many winners? All right, we're back with another exciting episode of the VC Podcast on GTM Now. Today's guest is Tyler Hogue, general partner at Peleon Ventures. And I'm joined with my partner, Paul Irvin. How are you doing, Paul? Doing well.

SPEAKER_00

Yeah, we I think we've not travel.

SPEAKER_01

Uh I think you're you're uh you're currently on the road. I got home from the road uh on a red eye yesterday, but that's just the busy May is always one of the sneaky busiest months of the year. People getting deals done, closing on uh new launches, whatever it is before the summer months hit.

Max Altschuler

We're certainly getting deals done. Yeah, I feel like I've been on the road for most of the last two months, maybe even three. You have to. We're covering a lot of ground uh across the continental United States and Canada, maybe even more. Uh I know we have London coming up uh in June, so that'll be fun. And then yeah, hopefully a little bit more of a uh peaceful summer at home, but I don't know.

SPEAKER_00

It never is. It never is. We say that every single year, and it never is, which is I I think just how we like it anyway.

Max Altschuler

Yeah, it is. Uh it is a lot of fun. Today we have Tyler Hogue on the show from Peleon Ventures, and actually, as of airing, he's now kind of spun out uh and and doing his own thing, so that's exciting. But comes from the Utah ecosystem through and through. I've always been an admirer of the Utah tech ecosystem. They think they call it Silicon Slopes. Talk about a high hit rate per capita. I mean, they have some pretty incredible companies that have come out of Utah for such a small ecosystem. And just even the employees I've hired over the years and the you know, co-workers I've worked with, uh, Utah has produced some pretty incredible people. We know, you know, great example, Stephen Farnsworth, who's been at a couple of our companies, was working with me at Outreach. So cool to get his take on the Utah ecosystem. I think Peleon is uh, as he said on the show, pretty much focused on like it has to have a tentacle in Utah, right?

SPEAKER_01

Yeah, and then and and you mentioned it too. I mean, they're the oldest uh and they're not even that old, but I but I think the longest standing fund eight Utah-based venture capital company, our venture capital firm investing in, you know, growth and innovation in the area. I I I find with non you know SF Silicon Valley based uh talent hubs, tech hubs, startup hubs, the real transition point is when um because you hear it, you don't know just how deep it runs until it starts to aggregate back in the original source, if that makes sense. And so what you would have is your example where you know all of us have worked with incredible operators, have met entrepreneurs that are from Utah, but then they relocate to you know SF to build the company. And when you start to feel the gravity pulling back and companies are really being built in Utah in local ecosystems, there can raise capital there, can hire there, can grow there, and could have really meaningful outcomes, which which uh Tyler was part of one of them at Divi. That's I think where you start to cross the chasm and and Utah feels like it's done that over the last, you know, five, 10 years.

Max Altschuler

Definitely. And he's another, you know, person who's gone kind of operator VC, operator VC. Uh, I worked with him a little bit when we were both supporting Jason Lempkin with the Saster Annual. So he's kind of seen, you know, both sides of the coin. I think, you know, one of the things he talked about was founder intensity. You know, that was one of the things he looks for in a in a company. You know, what stuck out to you in in the conversation?

SPEAKER_01

Yeah, the founder intensity part was one of it. I mean, we've talked about it again here uh at a time when, you know, it's it's never been more exciting, companies are never growing faster, but it's probably never been harder than ever to build a defensible business. It's like, what are the few things you can come back to as constants of success? And founder intensity is one of them, and probably more necessary than ever to succeed in such a fast-moving competitive market. The other point that I thought was really interesting was um his about markets that are so big they can grow, support multiple meaningful outcomes in businesses. And so he was obviously at Divi. They sold for a couple billion, not long after founding two, um, which is always an incredible outcome for the people who are, you know, employees and investors that were part of that journey to date. Of course, you have Ramp, um, Brex exiting earlier this year uh for over 5 billion, Mercury, a really large business in its own right. And if you talk to people at Ramp, the joke that they have internally is they're still at less than 1% of their TAM, even as a 30 billion plus company. And why I thought that was an important point to highlight, I think this is where as a venture investor or as an operator joining a company or as a founder, you know, you you hear two common themes for decision-making paradigms, which is pattern matching and first principles. And I think this is one where they can be kind of at odds in the sense that it's really easy to say, like, oh, you know, ramp isn't going to be successful because Brex is already in that market, or, you know, Divi isn't gonna have an outcome because Ramp and Brex are already in that market, or, you know, Mercury's too late to the party because, you know, from a pattern matching perspective, you know, there tends to be the vast majority of value accrued by the winner, and there's a pretty huge leap between first and second place in a lot of markets. And it's probably why I think internally we talk more about first principles thinking. It's not that pattern matching doesn't work, but you have to underwrite the market as its own, you know, it needs to go through its own individual analysis process to say this is absolutely big enough. You know, there could be three, four companies, and it's not that everybody shouldn't be shooting for number one in each market, but you need to understand that when you're joining a company, investing in a company, that, you know, markets, you should you should be underwriting them from a first principle standpoint and not just say, I mean, Lagora is a good example of this as well. I think it would have been really easy for a lot of operators and investors and even the founding team to say, you know, Harvey's off to the races. There's there's not room for a number two here. And that hasn't been, you know, couldn't be farther from the truth.

Max Altschuler

Yeah, and it's definitely, you know, a big part of our job to understand what markets are winner take all and what markets are there going to be, you know, a lot of winners, right? Especially when you're investing at the preceding seed stages, you don't need your company to be the winner, to be a winner for you. And, you know, that's pretty important. I think there are, especially you see it in the, you know, the 2021 era, where it's like we don't need to invest in the eighth sales enablement player in a space where it's like, okay, this the TAM is not does not support multiple winners here. And it's going to be very hard for the series A and Series B investors to see it the same way that the precede and the seed investors see it. In, you know, AI, Harvey, Lagora. I mean, look at OpenAI and Anthropic. I mean, you've got two companies that are going to be, you know, trillion dollar companies that didn't exist five years ago, right? And you know, at least in their current form. So it's all about markets, and that's part of our underwriting. That's part of our job is to figure out that out, right?

SPEAKER_01

I was at an AGM last week and I talked to a lot of people who passed on anthropic less than$10 billion valuations because they thought open AI had already won that market. And I mean, that's the most extreme example of this same principle. Um, but it gets back to hey, you gotta underwrite these things from a first principle standpoint. What are they building? How big could it be? And in a realistic world, like what's the opportunity set for there to be a winner, two winners, three winners, and maybe even more than that.

Max Altschuler

Well, we had some great learnings um from Tyler in the episode, but on general market topics, you know, hearing this, I'm an AGM now, and hearing, I'd say not even just here, but you know, everywhere we talk, that the bar for raising a series A, getting a series A done is is higher than ever before. And I think, you know, you and I both disagree with that. I think our our our take is that it's messier than ever before. Like there's no, there's almost no standard. Some companies do it very easily, and some companies don't, and those metrics are all over the place. And there's kind of like no rhyme or reason for them happening right now. What are your thoughts on kind of the state of the Series A?

SPEAKER_01

It's just never been harder to give founders really sound advice about whether they're ready. Not even ready is sometimes because in in a great business, I you know, I believe that there will be a point they will absolutely be ready. But then the question becomes is the time now? Is this the right time to do it? There's a cost to waiting when the ecosystem is moving this quickly, uh, you know, wanting to get that extra million of ARR just to be a hundred percent sure that you're ready and you're gonna hit the benchmarks, but it's gonna take eight, nine months. That there's a real cost to that. Uh, and so I think, you know, when we're talking, we're pre-ced and seed investors, as you as you referenced, and so that Series A hurdle is one of the most important inflection points for a business who's raising venture capital and wants to take that pathway to building their business. And so it's not that, and there's a lot of benchmarks out there, A16Z re you know, release some at the beginning of the year, but you see them all over the place of you know, what's the average ARR at certain rounds and it being higher than ever. But then, you know, behind the scenes, we get to talk to founders, talk to investors, and see some of these in series A, series B investments at high valuations and a lot of capital in the door get done all over the place. There's series A is getting done at 500K, 600K ARR. Some of them are getting done at eight or nine million. It's just such a wide continuum. And I I think harder than ever to give really sound advice and uh to say, hey, you're ready, the time is now, we can go out. And I think there's going to be a really healthy market for you.

Max Altschuler

Yeah, I mean, I think in general, you know, my advice has always been, you know, chop wood, carry water, focus on the business, and and these things will come. I think in in most of those conversations, we're not having a conversation where the company's running out of money imminently. And so you want to make sure you're ahead of the Series A conversation by, you know, a pretty good amount of time. And you're in lockstep with your companies. Uh, you understand where they're at, what the, what they need to do, what they need to show, what the slope of that traction needs to be to get an A done. And then also, you know, your job as an investor is to be supporting them and socializing with, you know, those downstream or upstream, whatever, whichever way you call it, uh, venture capitalists that are going to be investing in the Series A. They're going to be, you know, supporting on that round. Are the current investors going to be doing their prorata? Does everybody support them going to market now? Uh, but yeah, it is, it does feel soupier than ever before to provide advice around it, considering that like you'll see one company that's at a million ARR with eight term sheets for a series A, and another company that's, you know, at two and going to ten this year, and it's like, well, it's an unsaxy space, and you know, nobody's excited about it, and they just haven't done a good job of, you know, their own kind of building the vision, selling the story, you know, getting out there and being, you know, talk of the town in that way. So it is a little bit of a f a funny market right now.

SPEAKER_01

It's an interesting one. And as much as it's true that it seems to be more gray area than ever to be able to pin down what what's the right timing and what's the right advice, I I do want to leave people with a couple pieces of advice that we find are foundational to raising that series A in particular right now. And and to your point too, yeah, chop wood, carry water. At the end of the day, you build a great business, there's going to be capital available to you. But if you are, you know, raising that traditional series A, and Amanda Robson, Robbie, who we've had on the podcast before from MTF, did a good summary here and couldn't agree more across the board, is one momentum in the slope of traction seems to be more important than the absolute traction metric. So if you're, you know, you might look at a benchmark and say the average series A company is raising at 2.2 million ARR right now. But if if you get you know zero to 1.5 million in seven months, but it's gonna take you another seven months to get that next million to get to 2.4, you're sometimes better off because of just the slope and speed of the acceleration in the early days to go out and raise. You know, it might feel early, but the slope of that traction we're finding is more important than the absolute number. The second part is, you know, selling a big novel vision. I think the type of company you can build, the impact you can have on your customers, what what's possible from a technology perspective has never been more ambitious, has never been broader. And you have to realize that every other, you know, seed company raising a series A is pitching a hyper ambitious vision to Series A investors when they're in the room. And you have to match that and have to believe it. I mean, I think people can tell when you're, you know, putting a few sentences that sound sexy on a deck and whether you really believe that that's where the business can go. And then I think needing to be ready. I don't think that every founder needs to be defensive about this in a pitch, but you need to be ready to to field the questions about competitive positioning in an age of AI. Where are you defensible? Where are your areas, corners, surface areas to win, and how can that accelerate over time versus standing right in the way of you know what the frontier model companies uh and foundation model companies are building?

Max Altschuler

Absolutely. It's it and it that does put you know bring up a kind of funny topic, which is like the last decade essentially was the SaaS decade, recurring revenue, software only. Now all of a sudden we've gone into like services, forward-deployed engineers, we've gone into hardware as the as defensible to you know the AI models because you know, Anthropic isn't gonna go build uh wearable glasses or a containerized data center. And then you've you've opened up kind of all these little wrinkles of conversations around what is revenue. Oh, it's not just ARR anymore. It's like, well, everything is being considered ARR, and investors are just like, okay with that. It it's it's gotten a little bit hilarious. I think, you know, there when people do say, like, oh, are we in a bubble? There are certain parts of that that are bubbly that are like this isn't gonna let like not all revenue is recurring revenue, and it's being passed off as recurring revenue. And so we'll see where this goes. I I think in the next year or two. Right now, everything's just growing so fast, people are just like, okay, well, they'll figure it out. But I do think it comes to a head to a certain degree.

SPEAKER_01

Absolutely. And and I think one of our most interesting takeaways of you know, have of course, after investing in, you know, helping companies and supporting companies through the 2021, 2022 and the followed in the late 2022, 2023 era, is great companies indoor, build a good business. Um, every company that, you know, of that era, uh, we would have conversations with founders and our investors about, you know, valuation marks and who's gonna be successful and you know what companies are gonna come out the other side of it. And guess what? The best companies come out to the other side of it. We just had Vanta portfolio company from Fun One announced 300 million AR. I mean, we had conversations in 2021, 2022, and guess what? Christina's an incredible founder, that's an incredible business, and you know, they they get to the other side of it, not just successfully, but you know, shining through the other side of it. And so my advice to anyone, which is pretty simple advice, is build a great business and the rest of the puzzle pieces will fall into place.

Max Altschuler

Absolutely. We got our hands on uh another portfolio company of ours, Writer, their state of AI article. And um, survey findings reveal 79% of organizations face challenges in adopting AI, a double jet increase from 2025, with 54% of C-suite executives admitting that adopting AI is tearing their company apart. This is despite the fact that 59% of companies are investing over 1 million annually in AI technology. So it kind of goes back to the booming of the services business. I've read a couple tweets over the uh the past couple weeks and uh articles here and there that were saying that the uh spend on AI will be trumped by the spend on services organizations helping companies implement AI. It's pretty fascinating. What are your thoughts on the state of AI article from Writer?

SPEAKER_01

Yeah, I mean, we could go on and list, I think, a dozen other nuggets from that uh article that were particularly fascinating. And I think to writer's customer base and where the survey focuses is you know, these are some incredible enterprises that they're getting data from about how much AI are you deploying, how much, uh, how many agents are you deploying, how much of your workforce is using AI, and then what's the success on the other side of it? And just the growth of the services and implementation. And and you know what's not captured by those numbers, which is even more interesting, is not just the okay, services and you know, you have your consultancies that come in and that help you deploy AI as an enterprise, but how much capital is being deployed by the companies themselves and forward-deployed engineers and you know, forward-deployed customer success to be able to spin up, you know, enterprise AI and agentic workflows across these, you know, end customers. It speaks to the sheer demand and and I think the realization from a lot of people that this is going to change their business, it's gonna change how their markets shaped and they cannot be left behind. But the other shoe to drop here is there needs to be customer value. And I I think you know, it's not just writer's survey, it's MIT last summer. There it has been lagging true ROI on the other end of all of this uh capital being deployed and money being spent by customers and resources and change management. We see the capabilities of the technology on the other side, so I believe it's gonna happen, but it's you know, it's the startup ecosystem, it's the you know, AI ecosystem's job to make sure that that happens and happens soon for customers on the other side.

Max Altschuler

All right, without further delay, we're gonna get into the episode with Tyler Hogue, general partner at Pelyon Ventures. Let's get into it. Our LP base spans from individual operators to institutional allocators, and Angelus has been instrumental in supporting all of them. They handle everything from investor onboarding and accreditation to distribution and tax documentation, creating a seamless experience across geographies and fund types. Plus, all of this is available on a single modern platform. For an LP base like ours with over 300 C Suite and VP level operators, this kind of white glove service and seamless workflows is so important. Also instrumental that we support our institutional LPs that we're fortunate to work with, and Angelus is able to do so every step of the way. If you're looking for a platform that can support any type of LP investing in your fund, learn more at Angelus.com slash GTM Fund. Welcome to another episode of the GTM Now VC Podcast is a bonus podcast that we do every other week focused on VCs and the state of venture capital in general. I'm joined here by Tyler Hogue, rhymes with Vogue. There we go. I'll never forget it now. I'll never forget it. Thanks for coming on.

SPEAKER_03

Yeah, man. Thanks for having me. Good to see you here.

Max Altschuler

GP at Pelian Ventures. You got it. Utah startup ecosystem. What a high hit rate per capita. One of the best.

SPEAKER_03

That's kind of the thing we hang our hat on is there's this day that comes out of the Stanford professor all the time. And the unicorn per capita, Utah is second behind California. And so there's two ways to look at that. One is like, yeah, high hit rate. We're we have a good batting average. And the second way to look at it is the denominator is just too damn small. We don't have enough founders. We don't have an the ecosystem is too small. So I think both are true, but we're we're pretty proud of it.

Max Altschuler

Silicon slopes, you know, Ryan's done a great job of kind of evangelizing that. I think you've had some some folks over the years, you know, you were part of Divi that had a great outcome. What do you think the catalyst needs to be to continue to drive, you know, making that capita bigger, more expansive?

SPEAKER_03

I think uh there's a couple of things that have to continue, and and I am seeing it happen. It's it's not gonna be super surprising to you, but it's the flywheel of more exits leads to more capital flowing into it, leads to more executives willing to move to Utah, leads to more founders wanting to start, which leads to more exits. And the hopeful flywheel just continues. And I think there's a couple ingredients that Utah's gotta improve in order to like speed up that flywheel. One is founders have to, I think, need to be more ambitious. We need to swing, swing harder. Utah's kind of been known for the application layer, hit a single or a double type thing. And I think we're seeing that change now where people want to build$10 billion businesses instead of 500 million. I think VCs have to be far more courageous. And I think in executives and leaders have to be far more intense. Uh, you know, we're we're a pretty big work-life balance state, and there's no free lunch in tech. I think if you don't work hard, someone else will, and Utah probably can step it up in terms of intensity.

Max Altschuler

Yeah, I mean, it seems like they've got, you know, a lot of folks who've been there done that now at this point, coming out of great firms. They've got the the VC firms like yourself and others that are starting to invest in the ecosystem. Do you see a lot of the Utah VCs continuing to best invest in Utah companies? Or does that kind of is it a Utah firm, but they're still investing in the Bay and everywhere else?

SPEAKER_03

Yeah, there's probably four or five active firms that are based in Utah that have the ability to lead around. And I'll speak for Pelion specifically. We're a$500 million fund. It's our eighth fund. So we're Utah's oldest and largest venture fund. And about half of our investments have a tie to Utah. That's not a deliberate quota per se. It's just a function of our network. But it's been true now for I think seven or eight years, where 50% of every investment we make has a Utah founder. Or a Utah headquarter. And then the other 50%, the majority is call it California, New York, Southern California, Southern California.

Max Altschuler

I didn't mean to make this a commercial for Utah, but I mean, what's not to like, right? There is not to like, man. Such competent people across the board. I mean, some of my best employees at Outreach, you know, were from Utah and ended up in Seattle or worked remotely from Utah. We worked with a ton of, you know, partners and customers that were up and down that kind of strip of offices. Um, you call it maybe Silicon Slopes or whatever. It's uh, you know, Draper, Sandy, Lehigh, you know, that whole Provo kind of strip there. And then, you know, you get these amazing views from your office buildings of like Snowcapped Mountains. It's uh great quality of life. It's relatively cheap compared to the Bay and other cities. So it makes total sense. Are there any other, you know, I guess like parallels? Like it does it have to do with like kind of the LDS background or anything like that, that you know, folks have gone out and done two years of selling. And then, you know, of course, maybe selling in an area where you don't speak the language might be a lot easier than you know, going door to door than you know, getting on the phone and selling software.

SPEAKER_03

Yeah, there's no doubt there's an element of that. The joke is that if you can sell Jesus, you can sell anything and software falls into that bucket for sure. And so you have a lot of people who are used to getting turned down, who are used to rejection, who are used to meeting new people. And so our bread and butter as a state has really been kind of the go-to-market side. In recent years, though, because of like the quality of BYU's computer science, University of Utah, our engineering has stepped it up quite a bit. We're not at Silicon Valley levels, but we are producing great engineering teams. Redo, Remy, Jump, several of these startups now, I think are on par with some of the best Silicon Valley engineering orgs in the world. It's it's fun to watch.

Max Altschuler

As an investor then and a former operator, are you getting most of your deal flow coming out of the BYUs and engineering organizations, engineering colleges, or are they folks that have come out of Phil or Divi or you know, companies that you worked for previously or your colleagues have worked for?

SPEAKER_03

Yeah, it's a mix of both. Um, if I go back to the last four or five investments that I led, one was a referral from another venture capitalist, my friend Larson, who runs Harpoon, who said we gotta meet this founder from Valinor. Another one was Cold Outreach on Twitter, Marty from from Agree. Another one was a referral from a friend. So there's a lot of referrals and there's a lot of Twitter and Utah networking that takes place. I think it's a good mix of all that.

Max Altschuler

Yeah, you've been um very active on Twitter over the years. Do you attribute good deal flow and and you know positive outcomes from kind of that activity?

SPEAKER_03

Yeah, I can point to a lot of positive outcomes from Twitter. Uh, I can point to a lot of negative stuff too. I think on net it's been awesome, but you know, it's a time suck, no doubt. But like every job, be it uh early in my career when I got hired at Wealthfront, Andrees and Horwitz, then Divi, all of it can be tied to some part on Twitter. People find you, they they read what you write, you form relationships before you meet in person. Several hires that I've made have come from Twitter, several founders that I've invested in. So yeah, Twitter is a definitely a big part of my addiction.

Max Altschuler

You've been great, follow on there. It's a common theme with the uh a lot of the investors we've had on the show so far. And what I kind of like is investors who are good investors that are, you know, 1A and then like 1B is good on Twitter too, not kind of the other way around. Um, we had Ed Simon recently follow a lot of his stuff, great newsletter. Um, but just you know, really thoughtful uh investor, um, obviously track record to back that up, but then you know, great follow on Twitter as well. You know, let's go back to your time as an operator. So, Wealthfront, Divi, what do you take away from those experiences uh, you know, and and bring to your investing style now?

SPEAKER_03

Well, I'll give you an example from Wealthfront. So Andy Ratcliffe and Adam Nash were the CEO and co, you know, Andy was the co-founder of Wealthfront. They both kind of gave me the shot to join Wealthfront. And it was my first time in product. I was a salesperson before that. And I, if I'm being honest, that's who I am. I'm probably a salesperson at heart, but I learned product at Wealthfront. And so that was number one is I learned how to work with exceptional engineers at Wealthfront as a product lead on a bunch of our core experiences and had a blast. I love product, and that's what I ended up doing at Divi as the VP of product. But so that's number one is they taught me how to build product with a high bar of quality and to move as fast as you can with engineers who will push your thinking every single day. And I fell in love with that. I'd say the second thing I learned is just how important it is to have an intense driven CEO. Andy was the CEO for most of my time at Wealthfront. And he uh he's just driven, man. He was absolutely driven to take the industry on and to build a public company. And in the face of so many people who thought Wellfront was the dumbest idea, uh, you know, he took it public. Wealthfront went public like six months ago, and you know, it was worth a billion or two billion dollars, depending on how the markets are reacting. But it's uh it's pretty incredible to see a guy call his shot. Maybe it takes 12 or 15 years, but to go out and do something when the odds are against you, it only happens when the founder is intense. And so that is like a big component of what I look for now is you've got to be ultra intense across essentially everything you do as a founder, or you just have no shot.

Max Altschuler

Yeah, and that goes to then Divi too, which had a phenomenal outcome in in 2021. Did you stay on through the bill acquisition at all?

SPEAKER_03

Yeah, uh, so Divi got acquired in 2021, and I was there for maybe a year or so after that, and then it was pretty clear that you know it wasn't the right place for me and several of the uh my other friends, and most most of us were going after that. But yes, that theme was true as well. Blake Murray, the founder of Divi, is ultra intense. He was trying to build a massive business, and the unique thing about Divi is the speed that it happened. I mean, we went from zero to a hundred million back in these days, it was really fast. It took like four years, you know, uh, which is phenomenal, maybe five years. Whereas now it's like you do it in a year, I guess. But that and then we sold for two and a half billion dollars after three or you know, four years basically. So it was just a phenomenal ride, and the intensity was just how quickly everything happened.

Max Altschuler

And you got out at the right time for like local maximum valuation, right? Because you look at what Brex just went for, it's only 2x that, and the revenue had to be, I don't know, probably closer to 10x, right?

SPEAKER_03

Yeah, so when we sold, it was around a hundred million dollar run rate and it sold for two and a half billion dollars, and so a 25x multiple. And so obviously that's a very good multiple to sell at. The market you're hinting at this market right after the acquisition, it actually continued to go way, way up. Bill stock was like, you know, doubling. And then in 2022, I believe when rates hiked, everything was just crumbling. And so, in retrospect and in prospect, the the timing was very, very good. It was a great, it was a great time to sell. And you know what's cool about it is I think if you asked Bill.com, they would say they don't regret doing it, even at that price. I think it's a big component of their story, it's a big component of their growth. And they would say that that was just the market at the time. And I think that we're they're happy with it. I don't want to speak for them, but I think that's what they'd say.

Max Altschuler

Yeah, I think so. I think it was a great deal for them, and their stock went up quite a bit uh at that point. So I'd love to know your kind of thoughts then on like the macro environment. You're investing in this wild time of AI. You had 2021 where we had this kind of peak and then trough into 22, 23. Now you kind of go peaking again here a couple years later. How do you reconcile, you know, Divi being worth two and a half-ish billion, you know, uh in 2021? Then you've got Brex realized at five and a half in 2025, and then you've got ramp unrealized but invested at 32, you know, in 2025. Like as you're investing and as you're, you know, part of this ecosystem, like how do you buy and sell your own companies accordingly? If you were investing in one of your companies and it was in the same world, like let's see you were an investor in ramp, but you were in their series B, are you are you taking profits at 32, seeing what's happening across these other companies?

SPEAKER_03

It's a really good question. And uh obviously it's case by case. If you ask Ramp specifically, I actually believe they'll be worth$100 billion someday. And so one of the main lessons from the Divi Ramp Breck story is that in infinite markets, which you know, B2B spend essentially is infinite, you have room for many, many, many, many people who have successful exits. That doesn't mean there's many winners, because it appears that ramp ramp is the winner. I don't want to get caught in that. Like ramp is winning, but there can be many successful exits, which I would put Brex and Divi in that camp as well. And you know what's crazy is you even look today, 2026, there's still people attacking this market. Slash, are you familiar with them? Slash is going to have to raise it a massive valuation, and they're doing something fairly similar. Mercury's now in the space. Uh, it's just not never ending. And that that's one lesson is these big markets like tsunamis, they can pull massive businesses into very, very large sizes. So would I think of selling ramps equity if I had it right now? I would not. Uh, I think it's gonna be 3x as valuable as it is today in the next five years. I could be wrong there, but that that's my belief.

Max Altschuler

So then are you trying personally when you invest, are you trying to invest in categories where the markets are huge and there could be many winners? Or are you niching down and and you know verticalizing and saying, like, okay, this is gonna be a winner take all? Or is it nuanced, but is there a strategy around that at all? Having seen it played out.

SPEAKER_03

I do think it's nuanced, and where I kind of find the the line between all of it is you have to have a a founder that you are just so excited to work with that you will you have to be in business with. And and then if that founder is that good, they will either grow the market. I mean, Brian Chesky grew this market out of nowhere, or you know, you think of Uber and Travis growing this market out of nowhere. So I would hate to say that it has to be a big existing market, like corporate spend is. But you know, you might say with Uber, there was an existing market. It's called taxis. And they just had a unique way to capture that in the same way that Divi Rex and Brex and Ramp had a unique way to capture that existing market. But the common thread across all is like, do I have to be in business with this person? And do I want to call them on Friday evening and hear how things are going? And do they want to call me? And then hopefully you're in a market that continues to grow massively and they've got a unique wedge to capture it. But that's the common thread. I think is the people are really good. And Eric's amazing, Pedro and Enrique from Brex are amazing, and I think Blake and Alex from Divi did an amazing job.

Max Altschuler

And in the companies that you invest in, since your background is kind of on the sales and strategy BD side of the house. Is that where you and the firm are typically supporting portfolio companies, or is it pretty much everything? Like what's the Pelion kind of package?

SPEAKER_03

And like where do you here's how I pitch it to founders is you and I both have probably spoken to a few thousand founders at this point. And I think I know what they want, which is a product they want to buy, which is not just money because anyone can give you money, it is improved odds of success. So, in my view, the best investors find a way to bend the odds of success for a founder. And I think there's two modules to that product, and I break it down into two modules. The first is a trusted advisor, and the second is a helping machine. And the trusted advisor piece, it may sound like trite and stupid, but most investors fail this piece. They're not a trusted advisor in the sense that I don't believe, like, does the founder know that they have the founder's best interest at heart, even ahead of their own? Does the founder know they will always tell them the truth? Does the founder know that they can call them with good or bad news as soon as it happens and have a productive conversation? When they get a text from this person, do they like getting this text or do they cringe a little bit? We all know the difference between the two. And to me, that is the key of a trusted advisor. True. Do they have experiences that I believe have given them credibility to give me any advice? If they've never worked in startups, it's pretty hard to do that, in my view. There's exceptions to this. And that's the trusted advisor piece. The helping machine piece is a pretty particular pitch we give founders. And I'll give you a specific example. I'm on the board of a company named Redo, Redo.com. It is one of the fastest growing companies in the country. Most people haven't heard of it yet, but they are growing massively. They're at 4,000 brands now. It's an e-commerce compound startup. So anything your brand needs to touch between the customer and the brand, Redo basically handles it. And I sat down with the CEO of Redo, who happened to be Divi's CRO. His name is Sterling. I was gonna say, yeah, okay. So he's there now. Yeah. He's there now. He's running a redo. And he and I put together a contract. We called it like a bend the odds contract. And I said, Sterling, I'm gonna commit to X number of customer intros, X number of engineer candidate intros, and X number of product sessions with your GMs to help them. And we created this contract with a specific quota because he's, you know, every he puts everyone on a quota, signed our name to it. And then every month, at the end of the month, I sent him my investor update for what I did to bend the odds of success to redo rather than sitting back and waiting for him to send my investor update. You know, as far as I know, there's not many investors that provide that product to their founders, and it doesn't scale well, which gets back to you better fall in love with the person you're working for because you can't do that for many people. But you know, we sent like 50 customers to redo and like 15 great candidates. And, you know, I think he would say it definitely bent the odds of success, especially in the first year of business. So trusted advisor helping machine, that's the package I try and offer people.

Max Altschuler

So then what's the fund model for a$500 million fund for that type of company? So, like if you're you know, you're very in the weeds with this company, they're pretty far along. Are you buying up as much as you possibly can along the way? Yep.

SPEAKER_03

In the case of redo, it's actually we have we led their seed round, then we led the A, then we preempted the B or co-led the B, and another round that hasn't been announced yet. So we have plowed a large amount of money into Redo, and we try and do that with our best companies. Remy is another one, RemyHQ.com. And the best example of this, Pelion's best investment ever, was Cloudflare. You know, it returned well over a billion dollars to our investors, and we were early in Cloudflare and ended up putting in tens of millions of dollars into Cloudflare. The key though is you have to do it in the right companies, right? Because follow on into the wrong companies is obviously no good. And that's the default. The default is they're not an exceptional company. So you gotta find the few where they can actually do this. That is the key of the whole game, as you know.

Max Altschuler

Yeah, and then buy up as much as you can, be as helpful as you can. That's right. What do you so and and you're supporting obviously with distribution, customer introductions. Uh, did you make the investment and then plug Sterling into the business, or was he the founder?

SPEAKER_03

Yeah, what happened is the founder, his name's Tay Brown, Utah guy, great, great entrepreneur. Sterling and I left Bill.com around the same time and joined Peleon as venture partners. And the idea was we'd find a few companies to help and to advise as venture partners. Sterling picked Redo, and you know, Ridoo picked him. And they really liked each other. Tay and Sterling got along well. And to Tay's credit, he came to this idea before us and said, honestly, if I could get Sterling to run this business, I guarantee it would have a much higher ceiling and I'd rather scale out of it. And so we uh we worked with Tay to figure out the right structure for that. Sterling basically became a co-founder after the company had started and uh took over as CEO and has ran it for the last, I guess, three years now. So that's a very unique example where he started as a venture partner and then became a CEO. And we don't, you know, obviously do that very often, but that type of active help incubating companies is something we do pretty commonly.

Max Altschuler

That yeah, that's it, that's incredibly impactful. Switching gears for a second, you know, we're you know, you're out there trying to find these, I wouldn't call them diamonds in a rough, but you know, great companies coming out of Utah or having some kind of tentacle in the Utah ecosystem. And then you've got OpenAI, Anthropic, some of these massive, massive companies. How are you thinking about the ecosystem with uh like those players involved? Like, are you is is every company gonna eventually be a wrapper to the models? Are you thinking about moats and like, hey, we need to build companies that Anthropic can't just pivot into or build a product into? Obviously, you know, they're doing picking up TBPN for a hundred million bucks or whatever it is. It's like it's a drop in the bucket for distribution, right? So if they want to conquer something, they can is really what that acquisition said to me. How are you thinking about that in terms of investing and distribution in general?

SPEAKER_03

Well, the most direct answer is I don't think I have it figured out, but I think I am thinking about it a ton. And it certainly is a component. I mean, the question of how quickly can Claude build this is certainly a component. And the value of software, as you I'm sure you'd agree, is basically zero now. I mean, I'm building things now that would have taken our engineers at Divi months to build. I'm doing it in literally 27 minutes, you know? It's just wild. And so I don't think there's much value in software per se. But one of the other lessons of Divi Max was you have to have a product innovation. And if you have a business model innovation and tie these two together, massive companies can form. And in the case of Divi, yes, we had a product innovation. We were getting rid of expense reports, we were automating them and tying them to a card, but the business model innovation might have been more impactful, which is we give it away for free and we monetize on the interchange. And that seems obvious now, but no one was doing it then. And and I think you're gonna see more and more of this business model innovation in a world where software is commoditized, which means marketplaces could play very well because you can now monetize through a rake rather and give software away for free. Funny enough, Redo is another example of this. They give a bunch of their software away for free and then monetize on something called like the returns coverage that they offer, as well as other things. And it's just a world where you start to charge, maybe it's outcomes, which is a business model innovation. Your agents are charging for outcomes, but charging for software is just dead, I think. I don't I don't think you can do it and build a venture scale business. Now, there's exceptions to that. Obviously, I think uh you'll see Harvey and Lagora, they're charging for software. But really, is it software? I don't know. I think it's actually moving to outcomes, and that is a business model innovation, so it might fit in my framework okay.

Max Altschuler

Yeah, we're in a company called Paid, which is the former CEO of Outreach Mel Company, and it's uh billing, metering, and margin management for you know AI. So you can charge for workflow, you can charge for credits, you can charge for actions. Seat-based pricing is uh is certainly feeling more like a thing of the past. And and even in the seat-based pricing heyday, when you look at some of the best public companies, their platform plus consumption. Like they were almost never seat-based, right? So I always remember being at Outreach and doing this math in my head, like, well, we tell the customer we're gonna make them 20% more productive. And so like they could either like Javon's paradox that thing and like hire more people because they're now they're more productive, but they can also go the opposite way and like hire less people to hit the same number, and then like we charge per seat, yep, kind of screwing ourselves here because like we're helping the customer get a better outcome, but also buy less of our software. So maybe this isn't the best way to charge, but the problem is that you run into is like, and I think Rory O'Driscoll said this on a podcast recently uh about like letting the customer the way they like to be charged, yeah, getting people out of this like seat-based pricing mentality and into something new that might be better for them is tough. And especially when there feels like a there's less predictability around it or it's harder to track. Are you have you been going through that kind of exercise with your portfolio companies at this point?

SPEAKER_03

Yeah, 100%. I think every one of them is going through a transformation right now on how they charge, what products they build, and having this business model innovation is being forced upon them if they're the incumbent. And that's why it's always great to not have it be forced upon you, but to do the forcing, right? And and so I think the quicker people adopt this agent-first framework of outcomes and charging in clever ways that aren't just seat-based, the better off they'll be.

Max Altschuler

Yeah, I agree. What's one thing you've learned from raising kids that's helped you become a better investor? I've had a lot of people on the show that have kids, but I ask you that because you are very you post a lot about your kids and it's awesome. Like Alpine looks like a lot of fun. We've talked about it separately. Um, you know, we've looked at potentially moving to a mountain town either there or or somewhere like it. But I feel like there's always so much that I learned from having kids that it's so applicable to this job. And you know, even as an operator, probably similar, like managing people, but wanting to get your two cents on that.

SPEAKER_03

Yeah, one thing you learn. Oh, so we have four kids, and and you learn pretty quickly that one approach for my oldest boy, maybe I come down on him really hard if he struggles in something. And I like, I know that that'll do, he'll respond well to that because he actually likes to be challenged and he likes when I come after him a little bit. Whereas if I do that with my other boy, he shuts down, his confidence is zapped, and he actually withdraws from me. And so I think you kind of learn that this is just a leadership principle, not VC per se, but people are different and that you better adjust your approach to every person if you're optimizing for an intended outcome. If you're not optimizing for an outcome, just do whatever you want to do and then let the challenge. Fall, but you can't really do that in parenting. And I don't think you can really do that as a leader either, because people respond differently. So you have to adjust. If your goal is to help them reach potential, you've got to be the one adjusting. And you can maybe guide them to be tougher over time, but people move maybe an inch at a time. And I see parents, I see myself making this mistake a lot where I maybe don't adjust between the two. And it hurts the relationship.

Max Altschuler

It's certainly like a delicate relationship between investor and founders. And especially like earlier in your career. Like I don't know if you see this the same way that we do. You know, we're a pretty new fund on the block. Like for us, reputation is everything. And so you need to make sure you balance kind of the challenge and the approach with being founder friendly and all that type of stuff. And ultimately, you know, you're founder friendly and you're founder focused, but you want to do what's best for the company and and make sure the company grows and scales the way that it does. But it's sometimes tough to strike a balance. And you're eighth fund now, but you're still pretty early in your venture career. So do you think about that at all, you know, when you're approaching investments and you're approaching founders?

SPEAKER_03

Yeah, for sure. I think the two assets that a venture capitalist has is their network and their reputation. And those two things play off of each other like a flywheel. I think the better your reputation is, the more your network will grow, and the more your reputation will get, as long as you meet that reputation with every new node in the network. And if you look at the winners in the venture capital game that we play, they generally have the best network and the best reputation. And there's many subcomponents of what causes that reputation. I tend to think it's if you're the most helpful and the most trustworthy, which is why I pitched it trusted advisor and helping machine. Those are the subcomponents of building your reputation, I think, which then creates a bigger network for you. And I think about my day in terms of that. What am I doing to improve my reputation in reality? Not my like my fake reputation, but maybe my character, so that I'm more worthy to attract a great partner, whether it's a partner of Peleon or whether it's a future founder. I think the best way to do it is to be good enough to attract him. Same as a spouse, right? How do you find a great spouse? Well, you deserve a great spouse. It's the Charlie Munger quote. And so I think that's the best way to play this game is how do I attract the next Sam Altman or Dario or whomever? Be worthy of someone like that, which means work very hard to earn their trust and to be in a spot where you could help them.

Max Altschuler

Well, we certainly appreciate your outspokenness on Twitter and and everything. I think I strive to be as good at that as you are. Would probably need to prioritize posting more on there. Was a LinkedIn guy uh myself for a long time, and now I I think I need to get over.

SPEAKER_03

It's in my friend Sterling. LinkedIn is like being the king of the trailer park. So just keep doing that, man.

Max Altschuler

I gotta move over. I gotta get over. I'm still calling Twitter. I gotta get over to X and and step my game up. For sure. Yeah. Well, appreciate you coming on the show. This was awesome. We picked we picked apart a couple different things here. Definitely wanted to get your take on kind of the parenting piece of it. You know, I huge respect for a lot of my Utah friends, lots of kids, great parents, also great employees, uh, and and hard workers and colleagues. And so um whatever whatever they're putting in the water over there, uh everybody should be uh having a sip at least. It's pretty cool.

SPEAKER_03

Open invite anytime you're in town, come by Peleon. We'd love to have you.

Max Altschuler

Definitely, definitely appreciate it.

SPEAKER_03

Yep.

Max Altschuler

That was another fantastic episode of the VC series on the GTM Now podcast. Head over to Apple, Spotify, or YouTube and give us a like and subscribe, and we'll see you on the next one.