Zach Weinberg (Sold Flatiron Health for $2B) Unpacks VC Trends, The AI Wave and Remote Work

Welcome to the Logan Bartlett Show. I am your host, Logan Bartlett, and what you're going to hear on this episode is a conversation I had with Zach Weinberg. Zach is the co-founder of Curie Bio, which is trying to build a YC for biotech. Before that, he was the co-founder of Flatiron, which sold to Roche in a multi-billion dollar outcome, and before that, he was the co-founder at Invite Media, which sold to Google shortly after Zach graduated from college. He also runs his own venture firm called Operator Partners, where he, along with his longtime business partner Nat Turner, make investments in companies in healthcare and in software. This is a wide range of conversation on markets, where we talk about what we're seeing in the venture landscape, what's going on with down rounds, fund sizes. It's very hard to return a 20 billion dollar mega fund. Smart people in this, a lot of effort and hustle, the good stuff will get funded, it will survive, it will work eventually. Some principles around operating in a remote world, among a bunch of different things. Zach's always a pleasure to have on and nothing short on his opinions as well. If you are enjoying the content that we're putting out there, please do like, share, subscribe. It really helps spread the word for us. Now without further ado, Mr. Zach Weinberg.

What's the closing bell ceremony? What is it?

So last we spoke, you had publicly launched your Curie Bio, which I... Curie, like Marie Curie?

Have you calculated the total cost? I realize it's not just a cost trade-off, it's also like a talent opening up the aperture of talent, but have you calculated does it end up still being cheaper than having an office space in New York to house the number of people, or have you not even done that math?

What about process wise? Have you guys done anything process-like in a purposeful way outside of that for remote communication, or is it just standard Slack? Have you done the... I saw you tweeting about Rome and what Howard's doing. Have you guys done anything interesting from a process standpoint for remote workers?

I referenced it, but for people that don't know, Howard Lerman was the CEO of Yext, public, whatever billion dollar company. His thing now is... there were a few of these that tried it. What he's done with Rome is it's pretty utilitarian in the way that a professional tool should be. You can quickly see who's in calls or in meetings in a visual manner, you can drop in on that, you can do one-click knock to set up an audio or a visual conversation. It's cool. One of my companies uses it within their engineering team and they swear by it. I think Howard is doing a slow roll out of the number of people that get to use it. It makes sense. I feel like the process stuff with Slack is it's almost like... I'm dogmatic about email me about those things. If someone sends it to me and it's this detailed thing and I'm coming out of a meeting and I'm trying to catch an Uber and then I have this essay written out about should we do XYZ thing, the context switching is really hard. I was listening actually to an interesting podcast. The guy's name is Cal Newport. Have you ever heard of this guy? I think he's like a Georgetown professor or something. He was on Sam Harris talking about... I think he was saying his view is actually that Slack as a tool hasn't led to... around it in the hybrid environment, like, 'Hey, these things go in Slack and you, our expectations are you respond in 24 hours. These types of things never go in Slack. You need to have your alerts off.' Just having different expectations set from a process standpoint of how it works, just because it's so you can do so much with it. The expectations I even have this with like quick response. I see green light, get back to me quickly on it. Obviously that interrupts people's deep work, which you only have so many hours a day that you can do that stuff. It's interrupted in chat as opposed to audio, where you're just higher fidelity. You can... There are clearly some things that are particularly useful for a small team. Group chat in a small team I'm sure is better than long-threaded emails. It's just what it devolves into. Channels with 400 people in them, I just felt like it was distracting. So we don't use it at the moment. We're also a small group, we're like 30, 35 people now, so it's not huge. By the way, Rome I think is going to be great. I'm an investor, so... I've known Howard for a long time, but I think something like that will become the default for many people. We obviously did the remote thing not because I cared about the cost savings, but because the talent it allows us to just... Like Zoom or Teams or whatever, we use Zoom but same idea. We record quite a bit of the internal meetings, especially the ones that are the most complex from a discussion standpoint. Our investment committee, for example, all our IC meetings are recorded. Even some of the lead up internal meetings we have to the investment committee where we're doing debate on the company itself, that's all recorded. We use Grain, which is another company we invested in. I'm not an investor in Rome, so I just think it's interesting. I'm two for two here, you know, Rome and Grain. We use all the tools I invested in personally. With Grain, we record all the meetings. When there's 800 little boxes on a Zoom, people's behaviors change in those meetings. What this does is it lets us keep the meeting room smaller but still provide context without them having to be there. That was really nice. We have that weird thing with entrepreneurs coming in and pitching where we want to be inclusive and we want to have people in fullness have the expectations of what's going on in the firm, but then an entrepreneur comes in and we want to feel bespoke, like if I'm going to invest in you, it's going to be us. Then you have 15 boxes on a screen and it just feels like you're presenting to an auditorium in some ways. I think as an... The other use case we use it for is onboarding and training, because we basically have a playlist that we can give somebody in the two weeks before they start. Then when they actually start, it's like, 'All right, you want to see what the kind of work that we do and what we're up to? Just go watch all these 17 videos that we've flagged for you.' They're all, well, mostly internal meetings, some external ones. I think we'll end up recording more and more with the founders over time. As a founder myself, being on the other side of this, when we were fundraising for Curie in the first place, would I have hesitated to have the meeting recorded? Yes. At the same time, there's so many decision makers inside of these firms... within an organization in a way that if they're not... The notes document is doing it? I'd rather them hear it from me personally.

It is interesting though. We came from the spectrum. If you talk to the people that were dogmatically remote first pre-pandemic, it was like Matt Mullenweg from Automattic or Sid from GitLab or whatever. There's a handful of them and how purposeful and thoughtful those folks were about stuff. 'Hey, if we're going to do a big meeting, everyone needs to be in Zoom. If people are in the same office, we can't have them in the same room together because it changes the dynamic.' Having two people having a conversation in a room while... It was fine because everyone was remote at the peak of the pandemic. There weren't two people that were sitting in the same room. Now as we've unwound remote as the standard and move back either to this hybrid thing or just more people are fully remote, I feel like the lessons are being learned from COVID and people are just taking what they did in COVID and going to in person. Now we sort of have this weird hybrid situation where seven people are in the room together and three are on video, and the three that are on video aren't tied in with the seven that are in the room. Rather than going back to the first principles that Matt and Sid and whoever... I think a lot of people are still in that ish mindset right now and it's hard to unwind it. I'd be interested in your perspective on this. Let's say you want to go back to fully in person. I've talked to CEOs, they want to get back to fully in person and they feel like they made some mistakes over the course of COVID in allowing and hiring people to come in as remote workers. How do you get there? Do you tell them over the next two years we're going to transition and so you make a decision if you want to move or not, and you give them two years, 18 months, six months, three months? What is the right time horizon to tell them that they need to be back? What cost of living adjustment do you do? All of these things. It's pretty hard to... What percentage of them are actually the really good ones? I don't know. Can you really mandate fully in person for the average company? If you are... I kind of view it as there's a lot of things you can ask your employees to do when you pay them a ton of money. You work at a hedge fund, they could be like, 'You're sleeping in the office for the next 14 days or you're fired,' and people will be hot, but then when you realize, 'All right, I make like four million dollars a year and the alternative job for me is nowhere close,' yeah, you're going to go sleep in the office. You pay people to do that. I think some of these really high comp hedge funds in particular, yeah, you're going to be in the office because that's... The employer needs because maybe their alternative is not great. These are lower skilled but remote type jobs where the power sits with the employer. It's that whole middle that I would actually be really concerned about, which is the vast majority of companies. It's probably 95%, something like that. By the way, every employee exists on a slightly different perspective on this. If your co-founder or the VP of Eng that you worked the last five years to bring on board and now that person lives in Florida, are you going to create slightly different rules for it? Are you really going to let the VP of Eng walk over this thing? It's hard and they drift. I kind of... At whatever point, it's tiny. If you're really good, you kind of always have choice. Maybe you don't have the highest end, but you have choice. You could just go get a job with a company that really wants you that is going to allow you to be remote. That specific pressure where your best people can kind of do what they'd like is going to be really hard to keep people in the office. What's interesting is it's your best and also the most fungible. That's really hard. Let's say you have a bulk group of CS people or something, and there's 150 of them. This isn't ragging on CS people at all, but you're kind of beholden to... We see this in venture all the time about our... At risk of the entire class, an entire group of people being like, 'Well, I like this place, but this other place will let me do this, and I can go do that.' I think that's true of the jobs that are fairly fungible as well, where you might face just a mass exodus of EAs or customer support reps or whatever it is. There are a bunch of those jobs that are going to be allowed to be remote as well. Weirdly, it's a barbell. The highest end people and the theoretically most fungible, but losing either is bad in mass. It's really hard to do. I also think we talk about in-office time as if it's all created equal. I don't know. I think people are going to head in the direction frankly that we are at Curie, because I sat and thought about this for a very long time. I had a blank slate. I had seen the in-person thing for my whole career. Flatiron previously was a heavy in-person in New York culture. We had some remote, but I think in-office is going to be planned, not just which days you're going to be there, but actually the agenda. 'We're in office for this reason. We're debating next quarter goals or this spec or something along those lines.' It's pre-scheduled and there's clear agendas and there's action items and takeaways and all that. It's not like... In sales, in particular, where there's objective measures of your performance, sales ramp is hard and oftentimes you need very specific metrics to measure that and figure it out, but there's ways of doing that. If you're an IC salesperson, you're very self-contained in a lot of the things you're doing, and performance is very trackable in a lot of ways. Engineering, you're very self-contained in a lot of ways of what you're doing. It's harder to measure performance, but those jobs are so desirable and the people so scarce that you're a little more beholden to the circumstances around it. There's the more collaborative jobs that exist where it... Short circuiting a lot of the stuff by being in person. Then there's this whole other bucket that's like culture and just the depth of relationship you're building with your colleagues. At the end of the day, I feel like especially our generation, the millennial generation on down, grew up in the time at which the white picket fence... We saw our parents as Boomers pursue their job as a means to an end of having this great life. Then a lot of us saw all of that unwind in 2008, where they're like, 'Oh, they bought this big house and now they're underwater and their life savings were tied up in it, now they can't sell it.' I think those people, the culture especially when you're younger, is a super important thing. It's kind of like to what end are you having these in-person office things? I think it's just going to be remote first will win for most of these companies over the long period because of talent, and talent alone. Not because it's better, not because it's more effective or anything along those lines. Maybe it is, maybe it isn't. But just because the best people, which are what you need, are going to demand it because they want the flexibility and they can. Remote first will win most of the time as the best talent realizes they have the leverage. Then you're going to have to back... In-person is just way more frequent than I think people currently do it. The recording thing is interesting by the way that you're doing that. I've always thought there was a company... Mind tickle that was like sales enablement for video dissemination. If you had a bunch of enterprise sales reps, you could record the pitch of, 'Hey, here's how I would articulate the battle card against our number one competitor,' and as it changes, it would get pushed out almost like many TikTok or YouTube videos that sales reps could watch 90 seconds of the founder actually saying it. I think video recording and LMS related stuff is underutilized, particularly now in this world where we have a camera on us for so much. Documentation of decision making. If you do the five whys, there's so many things that you can improve on when you have the source data and it's not somebody's notes in a meeting or somewhere remote. It's just like, 'All right, let's just go pull up the video and see what happened.' The other thing we started learning with this stuff with the recordings, especially when we were early... Curie is not that we're around for like a year and a half, whatever, but really in the beginning, we would be having debates about how to position the business or pricing or something like that. Usually there's somebody there taking notes, and that person really can't participate as well in the meeting because their brain is in note-taking land. You can press a button and it flags it, it's like a bookmark. Afterwards you can go back and pull the video and you have the transcription. You can turn it into the slide that you need to make. It's really kind of amazing if you lean into it. Everything's recorded, at least most important things are recorded. That's my guess. I think we're heading in a world where recording is the default. Tracking people's work when they're at home becomes the default. The Big Brother thing is actually we're going to head more Big Brother than I think people realize, because if you're remote first, 'Okay, well what are you working on? What are you spending your time on?' All of a sudden those become pretty reasonable questions. That's the trade. If you want to be able to work in your pajamas... I have sandals. I don't think I put shoes on for like five days. That's what you're going to have to make the trade for. I think people are going to do it. Lifestyle wise, I think the work from home stuff is materially better, but it's not like... Living in cities is getting cheaper? It's getting more expensive. Housing costs are going up in every major city. Especially for people that are starting families and they want more space, that trade's going to win. The more space in the burbs is going to win. I don't know, it'll be interesting.

I've been trying to get you to opine on... I know you've had thoughts on the state of the venture market. We had this scheduled I don't know six weeks ago or four weeks ago or something, and it... Like what's going on right now on the market?

Interesting. I agree on the fintech and healthcare. There were definitely multiples ascribed or assumptions made on what type of operating leverage could exist. Fintech had this weird thing that a lot of it was very circular, where it was like, 'Oh, it's a fintech company and it sells to some banks, but also then it sells to all these other fintech companies.' So it's like, 'Okay, so we're kind of rinsing venture dollars around in this pool over here,' which was definitely... I mean, SaaS had the same thing in some ways, but there was more forgiveness in certain ways there. I think if you look at one of the things... Venture-backed startups, we should discount that revenue way less than any other revenue within SaaS. Over time, there's been a bunch of companies like HubSpot or Shopify or whoever who have actually proven SMB, yes, higher churn, recession definitely more damaging, but they've outstripped any of the expectations I possibly could have had for what those businesses were. That said, a lot of people lost sight of a dollar selling into an enterprise or a non-tech customer was not the same as a dollar selling into a venture-backed customer because of all the money... Liberal in their ambitions around what their licensing would look like. Now as they triage it because they're venture-backed companies and they're trying to control their numbers, they are cutting back on their seats. While these are good companies, the acceleration of the growth that they had over the course of 2020, 2021, 2022, let alone valuation, obviously valuation went wacky and people were willing to pay 50, 100 times, but the assumption options around what would the fundamental atomic unit of growth that they were going around... People really forgot that stuff as well. It's pretty painful. These are great companies, but it's going to take two years or three years of these businesses right-sizing their licensing and maybe at zero growth in a lot of ways. I've been doing this stuff for a lot of years. You're going to get kicked in the face a little bit when you pay up for something at a price that's 4x, 5x, 6x what it should be. It's not like things were fraudulent, it was just overpriced in almost every case. Overpriced and under-considered on the risk. I never heard someone say, 'Hey, the risk-adjusted multiple of this company because they sell all venture-backed businesses should be lower than this or should have a higher risk adjustment than this company that sells to enterprises,' which would have been the right perspective. A lot of people assumed markets were bigger than they really were. You see these companies that get to... I will tell you, no one, and we were victims of this, no one was saying, 'Okay, well, the likelihood is all these things trade out at 10 times free cash flow or 22 at terminal state.' There was a lot of, 'Well, Snowflake is a 50 to 75 billion dollar company.' I do think this can be a tenth of Snowflake. Then you're paying a high price based on what is already a high price. Then Snowflake comes down and you're sitting there with, 'Oh, well, actually that doesn't work anymore.' That totally breaks the valuation framework that you had from the start. Snowflake is in one of the largest markets in... What is nuts is just the quality of the ideas that I think entrepreneurs were held to for the last six or seven years were really bad. It's kind of like every low-hanging fruit idea in the world that maybe you could turn into some SaaS workflow tool got funded. That's the one. By the way, the second and third and fourth and so... The whole category economics got messed up because there were four people going after a 200 million dollar market opportunity. All their CAC went up to 60 months or whatever. Now where do these companies go? I think there's a... The founder and the quality of the strategic thinking and complexity of the...

Yeah.

So what do you hear by the way in the quality of thinking that leads you to have this conclusion? Because thinking is such an ethereal thing. Is it just that they're not pricing that they're gonna go into that market with, how they're going to defend it, how they think about customer segmentation, the business model side of it?

I find it when you poke and when you dig into the details... so that definitely for me stands out.

Biotech is all I... I do think yeah, the main business, but probably 250, 300 companies let's say over the last eight, nine years. And if you're having that conversation and reaching that conclusion, are you telling them? What counsel are you giving? Or ultimately, is it... obviously I don't think saying 'you suck' is a productive conversation to have. But when you have that conversation, or you hear this, are you, as a mostly passive early-stage investor, encouraging them to maybe tap out and say, 'Hey, you might want to start thinking about a different landing spot for this business'?

One thing you tweeted, I don't know how many months ago it was, that I wanted to talk to you about. You said, I'll give a summary of it: 2013 and later stages, Series B, C VC will be defined as everyone has money but no one has chutzpah. In my opinion, this comes from a dynamic of not wanting to be outside... deals out there that are underpriced. If you have conviction and no fear, the best investors know this. Question is, can they convince their partnerships to swing?

They're just always sub-segments where it's not true. What happens in healthcare is different from enterprise infrastructure. Each of these categories has gotten so big that you have a ton of heterogeneity in all the markets.

To take myself out of the founder seat and put it more on an LP side of things. You go and talk to, as I did for Curie Bio, and I talked to many sophisticated LPs. And the thing that I could never get in my head straight was: they know that the larger the fund, typically the lower the returns. There's an inverse relationship between size of fund and returns — they all know — and pace of deployment as well. Like anybody who's been an LP at any sophisticated endowment, family office, whatever, for more than a few years understands this inverse relationship. And yet for like six or seven years they were joining... I mean, I was an LP at one of the Tiger funds too, like that was big. Not the biggest ones, but some of the recent ones. And we all just got caught... mega fund in the private market. Yes, that is not hard. It's not an easy thing to do when you know there's like one outcome every year that can support it.

So one of the things that's interesting now with AI, and we can talk a little bit about that, is any time I've been in this market where we've had to rethink our investment prosecution, investment committee, how we operate, and decisions on things, anytime that's been a terrible fucking time to invest in the company that you're required to do it in totality. Quite literally...

Buying it — what are they paying? What's the substitute product? Why do they pay you more? How many — you know what I mean? It's just a business. And so I think a lot of these AI companies, the way I look at them is: cool, you're another enterprise software company, that's great. Let's just go look at it through that lens. Who are you selling to? What are they willing to pay? And why? And those are the interesting unlocks. By the way, I think there's going to be a lot of enterprise businesses that are public or whatever that are going to be able to increase their gross margin because customer support is going to go down as a percent. Some lift in that, or ticket deflection. If you're ServiceNow, you'll have some AI. Or Adobe, they'll have some AI. And then... historically, legal was just an okay business, but you had to throw a ton...

Land... yeah, yeah, right. Image and video stuff is cool. That's the one area I've spent time playing around with. It looks awesome. And I haven't — I don't do anything in that area, I don't know how any of it works, it's all fucking magic to me. The idea that somebody can draw a picture of a person that even looks like a person is mad. That's just incredible. Video stuff — Runway is one that has come out — I think it's just so fucking cool. And I don't know how you get... it seems far away from utility being derived at scale. The one thing that I think is super interesting with that, and I assume YouTube and Tick... let's value all that stuff well. Think about now that you can personalize any video. Zach sees a video and there's a cat in it; Logan sees a video and it's a dog; Zack sees a video and it's a black woman; Logan sees a video and it's an Asian man. Just all the advertising that can be had on YouTube TV. Nike can spin up — every video could be personalized to the individual from an advertising standpoint and also from a content standpoint in general. That's pretty cool, that you're going to be able to have mass personalized video. Obviously TikTok is doing it in an algorithmic way which is interesting in and of itself, but from a content generation standpoint, I think it's fascinating. And I don't know what the implications of it are, but like... the audio, whatever the text content was, completely made up, and it's just them debating 24/7/365. So there's some really interesting entertainment.

I don't know. I think about the content aggregators and their ability to verify audio, especially around... Drake had that hit song that went viral that came out with The Weeknd and it was just totally made up and fake, with copyright licensing things. But Spotify's position now to actually stamp 'This is a Drake and The Weeknd song' and the need for aggregate verification — I can do these things at scale. It kind of goes back to maybe you should just buy Google and Apple and Microsoft and Amazon and call it a day, because these big players are going to accumulate so much value in verifying... Facebook probably as well, which authentic content, what's total garbage, copyright infringement, all of that.

I do the thing that I think is... of other people figure out whether that thing is real before I jump to conclusions. Everyone has like their friends' WhatsApp group or whatever. Someone sent me a picture of Biden falling on the stairs because he's old. I'm like, 'All right, I don't know, did that actually happen? Is that a mashup of when it did happen one time but now they're redoing it?' I just have no idea. So I just assume it's all comedy and fuck until I see it — honestly, until I see it on the front page of multiple verified third-party sources. Even if it's just in one spot, New York Times whatever, I'm kind of like, 'Maybe it's probably true,' but I'm like... I just haven't read that much about it. It's just not in my life. I don't know. It seems like a complex issue, I just don't really care that much about that specifically. And they're like, 'How could you not care? It's about Hollywood and people getting paid and you work in tech and the streaming and the licensing...' And I'm like, 'Yeah, I don't have time.' Do you just stay away from actually engaging in some of these things from an opinion standpoint?

Governments... that's my favorite. Back in COVID days, the original stupid argument I got into with Keith from Boys' of like, 'There's already...' and there's probably some complex reason why giving it to a bunch of people in a non-randomized study doesn't give you the answer. But we're so quick to just assume that we know better because everybody else is in it. There's complexity. All of this is always complicated. That's always my funny one where someone has a conspiracy theory and then you just make them walk through how many people would have to be involved in a cover-up, or how that would even... I'm convinced there can be no conspiracy theory more than like four people. Yeah, that's right. Everyone gossips and talks. So how would that actually play out? Quite literally, how would that play out when it gets to like 12 people?

That's why the one that... and then I have to jump. But the one that always stands out to me is just when people start to get into medicine, because I had to do this. I had to be the tech guy who knows literally nothing about healthcare and... necessarily a good thing because there are harmful side effects. There's different contexts that you have to kind of learn the basics of, and then you can have an informed opinion about it. A lot of things I thought were stupid about medicine — the reimbursement of it or whatever — once I actually sat down and understood them, I was like, 'Okay, maybe I don't fully agree with it, but it's not as dumb as it looks from the outside. There's a 'why' behind this.' That would be great if you just kind of assume that somebody thought about it. I don't know man, all big pharma trying to line their pockets at the expense of the American working man — I think that's the big conspiracy that we have going on here.

I have a lot of opinions about that stuff. So we can do operating and life hot takes or something next time.

Inevitably you have to have opinions, though. You have to have opinions about things, right?

Yeah, all right man, see ya.