George Jagodzinski (00:00):

It's crazy to think about, but we've been in an app economy for two decades, and at this point, it's ripe for change. My guest today discusses how apps may be dying. He believes we're entering an era where the interface disappears and is replaced by intent. And he's currently training a new generation of talent to lead that charge by managing $100 million in assets while they're still in college.

(00:20):

I'm joined by Peter Harris, the founder of University Growth Fund. Peter runs a co-investment model across universities where students are diving into the deep end and managing venture capital investments quickly, rather than just reading about them. Today we define what an app even is, why the next generation's traditional experience might actually be their greatest superpower in an AI native world, and why Peter wants students to move from pretend work to real results quickly. If you want to see the future of talent and technology through the eyes of a man already building it, this is the episode for you. Please welcome Peter Harris and check him out on his own podcast, PE Pete.

(01:07):

Welcome to Evolving Industry, a no BS podcast about business leaders who are successfully weaving technology into their company's DNA to forge a better path forward. If you're looking to actually move the ball forward rather than spinning around in a tornado of buzzwords, you're in the right place. I'm your host, George Jagodzinski. Peter, thanks so much for being here.

Peter Harris (01:34):

Hey, thanks for having me, George.

George Jagodzinski (01:36):

So last we talked, we started to get into the topic of the death of apps. Since then, I've been thinking about it, and it made me feel really old that we're just about 20 years into the app economy, which is nuts to think about. It's probably ripe for change. I figured an interesting place to start is within that context, what even is an app?

Peter Harris (01:55):

Yeah, that's a great question because it can mean so many things. I think at its core, it's software that does a task for you. Today what that's meant is that it's a pretty prescriptive if then kind of outcome. If I create this trigger, I get this outcome. And that's embedded into software that does that task for us. Whether that's everything from editing photos to entering in data to running calculations and outputs, it can go on and on and on from there, right? I don't know. What do you think? Is it something more than that or different?

George Jagodzinski (02:34):

I guess first and foremost, I think about it from a user experience perspective. It's this window into a set of functionality. And I think, more times than not, it also comes with a little bit of a walled garden in that this is the world that you're playing in. I remember when I started putting all automations into my home, I kind of wanted one thing to rule them all. But then I became pretty actually comfortable with the fact that, hey, the app that controls the security of my home is going to be different from the app that controls the lights. And the HVAC is different from that and the garage is different from that. And so now I've got a handful of, quote, unquote, "apps," but the intentions of what I want to do kind of transcends those apps, right?

Peter Harris (03:16):

Yeah. Well, it's some job to be done. And I think historically, especially prior to AI, it's been very prescriptive in that we had to run off these if then statements, and that created these walled gardens. Due to the nature of how programming occurs, you kind of had to take the user down a very prescriptive path to get whatever job done that they had in mind.

George Jagodzinski (03:42):

Yeah. Yeah. Remove the number of clicks, make it as easy as possible from a user experience perspective. And then, or do you, and why do you think that they're dying?

Peter Harris (03:52):

So there's a lot of reasons largely driven by AI. I don't know that apps are dying per se and that we'll never use apps. I just think that the number of shared experiences with an app will sharply decline. And part of that's because because apps are so, kind of like historically, have been programmed to be so linear. It's this if this happens, then do this outcome. You had companies that would try to build an application that was simultaneously as helpful as possible to their target customer, but still broad enough to attract a large number of customers.

(04:38):

So you only ever got to like 70, 80% of what would be an ideal application for a customer. It was too expensive and too hard to build software that got you into that 90, 95, 98% for all of your customers. And being able to build it, maintain it, support it, like all of those things was just cost prohibitive. And that's what SaaS was really built on, was this idea of like, well, we can get to 80%, and 80% is still a really big market, and it's still really useful and we can build interesting businesses there.

(05:10):

I think what's happened, and that's what's been really interesting, is over the last 16 years that I've been venture investing, the cost to start a new company, and especially a software company, has just dropped dramatically, even before AI. So it used to be that you had to invest millions of dollars into your own servers and switches and build out your whole backend infrastructure just to host a website.

George Jagodzinski (05:38):

Before client number one.

Peter Harris (05:40):

Right. Before client number one. And now within minutes, you can be up and running on the cloud. And new programming languages came out that were easier to learn, that were faster to deploy. There was more infrastructure applications out there that made it easier to deploy faster. So we've already seen an explosion in applications. And you can see that, especially on platforms like the app stores for mobile devices where there's literally millions of applications that have been built.

(06:08):

But I think like the new challenge is with AI where I can build an application that used to take six months to a year to build, and I can build it over a weekend basically for free, is going to create so many applications that any one application will effectively be dead in terms of its ability to attract a large market. But the benefit is that each of us individually, or companies individually, will be able to get applications that get to that 95, 98% perfection of what they actually need in order to be successful. So I think that's one piece of it.

(06:48):

And then I think another big driver is this concept of agents and agents swarms. It used to be that you would need software. I mean, you think about your IoT situation. You've got multiple apps. Part of the challenge there is that, in order to create a seamless, reliable solution, each of those apps needs to be deeply integrated with the end hardware. And that makes it difficult to build an all in-one solution, which is why it's something I've always hunted for, but it seems very elusive.

(07:20):

But in a world of AI agents, you could easily have agents that just go out and interact with each of those applications or each of those devices individually. And then pull the data back together, analyze it, and give you the ability to work with it, almost as though you had 10 versions of yourself that were going out and doing the actual work of interacting with the applications, triggering the things you cared about, and then reporting back to you on what's next.

George Jagodzinski (07:52):

Sounds horrifying, thinking of 10 other versions of myself out there in the world. To make that work though, do the walls of the gardens need to move, like the monetization strategies need to change?

Peter Harris (08:05):

I think so. Because I think if they don't, they're ultimately going to just be disrupted. Yeah. I mean, if you're Apple, you had this amazing gate where, if you wanted to be on Apple's devices, you had to pay the toll. 30% or whatever it was, or is, depending on the company, of your revenue, goes to Apple. I don't know that all of a sudden that matters as much anymore if an agent can just bypass the apps that are on your phone. If it can just go onto the web, pull whatever it is you need, and bring it back to you and act on your behalf. I think Apple's got to figure out what that new monetization strategy looks like, as does Google and everybody else.

(08:52):

The other thing that we're seeing already is a significant shift in pricing with startups. The traditional SaaS business model was a phenomenal model. It was high margin, high repeatability. So SaaS was this amazing business model where you could forecast out for a long time period what your revenues were going to be like.

(09:12):

And now what we're starting to see is two main drivers that are really impacting that. So one, a lot of the traditional SaaS businesses are seeing their businesses under threat from new AI solutions. Those AI solutions though are built on the large LLM models. They have to pay basically a toll back to Anthropic or OpenAI or Grok or Gemini in order to run their business, which is putting a lot of pressure on margins. And then simultaneously when they're going and selling to their customers, those customers in many cases are reluctant to pay and sign up for multi-year contracts anymore.

(09:57):

And so what we're starting to see is a shift from long-term repeatable revenue through SaaS to more usage based contracts where it's like, hey, I'm going to use this much and so I'm going to pay that. And there's this spread between what the companies generate in revenue for that use and what they pay back to the LLMs for that use. So we're already seeing like some of that, some of those monetization strategies shift in real time. And in some ways, it's kind of sad to see the SaaS business model under threat and maybe going away because it was such an amazing-

George Jagodzinski (10:32):

Repeatable high margin is good business.

Peter Harris (10:34):

Good business. Yeah.

George Jagodzinski (10:36):

Do you have someone in your portfolio right now that is like, you look at them, you're like, man, this would've been so expensive five years ago. They're just able to do it so quickly and monetize in a different way.

Peter Harris (10:48):

The deal that comes to mind is a company here in Utah called Voz. And what's interesting to me about Voz is the technology that they have is good. It's a note taking tool, of which there are many out there. So that's not unique. But what it does is it helps sales reps specifically in kind of more industrial blue collar fields sell more product. So when they're meeting with a customer, it's listening, and then it's deeply integrated with the ERP system on the backend and can identify in real time and make suggestions about what types of products that sales reps should be selling to their customers. And this is an industry that's just never really adopted software before and it's all been handshakes and paper and pencil.

George Jagodzinski (11:40):

Tribal knowledge.

Peter Harris (11:41):

[inaudible 00:11:42].

George Jagodzinski (11:42):

You got someone who's been working there for 30 years that knows where everything is, right?

Peter Harris (11:46):

Yep. Well, and you think about like these sales processes and the types of products they're selling, their quotas are in the millions of dollars because they're selling heavy equipment. And unlike SaaS where you've got, call it a couple SKUs that you've got to keep track of, this company will literally have like tens of thousands of SKUs. Every little bolt and switch.

(12:11):

And so it's hard even for somebody who's been around for a long time to keep all of that in their head. And so this is what I think is really interesting is AI has enabled this business to basically like analyze all of these tens of thousands of potential products, surface the most relevant ones in the moment that it matters, and help these sales reps close more deals. And I think that's something that would have been very, very challenging even just a few years ago to build.

George Jagodzinski (12:39):

Yeah. That's a great example. I'm curious, as an investor, where your head's at on this topic, which is, I always worry about the companies that are building on top of the LLMs as far as like at what point does the LLM just transcend them?

(12:54):

And I'll give just a fun anecdote that I'm working on right now, which is over the past couple of weeks, I've just been trying to get my nutrition and fitness styled back in to triathlon shape. And in the past, I've used a lot of those apps quite regularly. It's throughout every single day, you're logging your food, you're looking at your fitness.

(13:14):

And I decided to do an experiment where I was just like, okay, let me do one of those apps, but let me also pop back and forth between, it's actually a lot of copy pasting and effort, but it's like Claude, Gemini, and ChatGPT. I'm going to log all my food and it's going to coach me and all that. And it's like so far so good, man. Because it can take into the whole picture of what I'm doing. Now there's some fitness apps out there that have the AI embedded and that's interesting, but it's not as interesting as having something that can truly coach me full circle throughout everything. I'm curious as an investor how you think about those types of building on top of LLMs.

Peter Harris (13:50):

Oh yeah. I think it's terrifying for like half my portfolio that is either not built on top of the LLMs, and therefore faces the threats that we've already talked about, or they are heavily dependent and built on LLMs. We try to be very careful and thoughtful about that. I think there are some businesses where I don't know that the model companies will come after them anytime soon. So that there are ways in which you can build somewhat of a moat through user experience and through integrations, and then over time through proprietary data.

(14:32):

But if you don't have those types of things and/or the models decide that you are a very valuable sector to go after, so like the legal profession, for example, I think that's really, really tough and really scary. Because I don't know. I foresee a world where you just have law firms that are a couple people and they're doing the work of like 1,000 lawyers. And I don't know that you need anything all that more robust than what Anthropic or OpenAI provides today in order to do that. So I don't know.

George Jagodzinski (15:06):

Yeah. I've got some friends running mid-market law firms and they're horrified right now for that reason.

Peter Harris (15:13):

Yeah. I was telling two of my former students who both worked at some of the top law firms in Silicon Valley, because they saved a bunch of money and decided to travel the world. Kudos to them. But I was like, "When you guys are done with your world travels, you should start a law firm because you have the credentials from the big law firms, and you should just outcompete them. You should charge like a 10th of what they charge, and move 10 times faster and leverage AI to do it. And you would probably create massive waves in the industry if you really went after it."

(15:51):

So it's interesting. There's a company that's gained a lot of notoriety, Harvey, and they've raised a lot of money and they've signed up a lot of law firms, and they are kind of the dominant name in the space and valued north of $10 billion. That's a deal where like there must be something else going on because I don't see how that's going to be a relevant company in five years. But we'll see.

George Jagodzinski (16:19):

We've been talking about the youth, and you're talking about them being disruptive, which I love. I mean, I got my start during the first dot com era and like, if you knew how to build software well, you were just viewed as a God back then. When it was expensive to do things, talent was really valuable. I'd love to talk about that next generation of talent, but maybe first, explain a little bit about your fund and what you're doing there.

Peter Harris (16:43):

Yeah. So we're a little different than most venture funds. We have about 50 to 60 student interns across 14 universities. Those students are really empowered to run the fund. So they're doing all the underlying due diligence. They get a vote on which deals we end up investing in. And then we co-invest alongside other funds. And so they're learning from those other investors, they're learning from the entrepreneurs and they're doing different value add projects to support our portfolio companies. So it's really designed to be a very rich, hands-on, real-world experience for students. We manage about $100 million and co-invest alongside a lot of different venture and private equity firms across the country.

George Jagodzinski (17:22):

And I believe you have a mantra, which is enough thinking. You want to get people in there doing reps versus just planning and thinking about overthinking things. And I love that because when I'm in a room with 20 people just pontificating and not getting anything done, my skin just starts to crawl. And so expand on that a little bit.

Peter Harris (17:42):

Our belief is rather than sit down and put our students through a bunch of training, we believe you learn the best by doing. That's why we exist. So we do provide some initial training just to provide a framework and a vocabulary for the students, but then we throw them in the deep end as quickly as possible. So they're jumping on deals their very first week at our fund. They're meeting with founders, they're digging through data rooms, they're building financial models.

(18:10):

And what I tell students is the reality is like you need real experience because there are so many little things that you can't get any other way than by doing it. And so I just encourage them, get as many reps as you can. Just work on lots and lots of deals. You'll see good, you'll see bad, you'll see stuff you're not interested in and you'll realize that you're not interested in it. You'll find things that you didn't think were interesting, and you end up being super passionate about. Especially because at an early age, you don't know what you don't know. And so you just need exposure to lots of different things.

(18:47):

I think in the world of AI, the thing that will matter a lot is this ability to get real world experience. And I think education in general needs to go through like a massive transformation where everything that we've done in education to date is being very quickly disrupted by AI. There's nothing that like a professor can sit at the front of a classroom and lecture that I can't get for free already on YouTube, but like certainly through AI. And so like that whole advantage is kind of going away. And I think where they need to go is by providing this real world experience, moving from like pretend working, which is what school really is, to like actual working so that you can start learning some of those kind of nuances that only come from actually doing.

George Jagodzinski (19:40):

Yeah. Yeah. I mean, if you're not watching, there's a bunch of books behind me and I love books, but I recently had someone ask me, "Hey, I'm trying to get up to speed on this AI stuff. What's a good book?" Yeah, I feel like it doesn't exist and nor will it. It's just changing too quickly.

Peter Harris (19:57):

Too quickly. No, your best way to learn AI is just go talk to it and interact with it and build with it.

George Jagodzinski (20:05):

I love your model, but is there an argument from an investor perspective of like, hey, Peter, I'm investing my money. I don't want a bunch of kids learning on the job with it. Give me your rockstar that gets proven results.

Peter Harris (20:18):

I mean, on its surface and on the face, yes, that is a concern. And certainly our model does not work for all investors. We've definitely been turned down by, quote, end quote, "professional investors" who aren't going to risk their day job backing a bunch of students. But for those that are willing to suspend that belief for a minute, and actually understand the underlying strategy, I think we have a fairly compelling story. And that is capital today is more or less fungible to a certain extent. And so as a venture fund, you need something that sets you apart and gives you a reason to be able to get into the most competitive rounds because there's only so many deals per year that actually matter, and you need the ability to get into those.

(21:04):

There's a lot of ways to do that. If you're Sequoia, you have an incredible brand. And if you're Andreessen Horowitz, you have a strong brand, but you also have literally 1,000 people that will help portfolio companies. If you're really small and niche, maybe you have relationships and you're able to go super early, or you have a lot of connections or you have deep expertise.

(21:26):

For us, the way we look at it is we are very thoughtful and focused on providing a great educational experience for students. And because of that, we can talk very authentically about it when we meet with founders and other investors. And it turns out that most investors and most founders are really good humans and they want to support the next generation. And the idea of taking capital in exchange for giving back is kind of this really novel concept and allows us to go get access to deals that we wouldn't have access to if we didn't have our student program.

(22:07):

What's happened beyond that is the impact we have on students has been incredible over the years, allowing them to land some of the best jobs in investments and venture capital and private equity. And those same students are now, they recognize they would not be there were it not for our program. And so they're incredibly loyal and sending deal flow back to us. And so for example, our OpenAI investment that we made a number of years ago was actually sourced through one of our former students who brought us into that deal. And so yeah, on the face, it doesn't make sense to entrust students with millions and millions of dollars. But on the other hand, I think we actually have a unique value prop relative to other funds.

George Jagodzinski (22:53):

Well, it's interesting on the other side too, is these, quote, unquote, "professional investors," they will invest hundreds of millions in like... And I've been there, throwing no shade here, but like young lunatic founders. And they're successful sometimes. But it's like, where do you draw the line as far as what you're going to trust and not trust, right?

Peter Harris (23:13):

Yeah. Yeah.

George Jagodzinski (23:14):

I'm curious, since you're so plugged into this next generation, what have you been most surprised at from them?

Peter Harris (23:22):

I think maybe the thing I was most surprised about is just how they are engaging with AI. Fairly early on, a lot of our students were already using AI as a personal coach in all areas of their life. So we're talking like making important career decisions and making relationship decisions and-

George Jagodzinski (23:47):

You know what? I do deserve better. You're right. It gets a little dangerous, right?

Peter Harris (23:52):

Yeah, it can. And I don't necessarily know that I'm saying that it's good or bad. It's just interesting that they are. They're like, should I be with this person or not? Or how do I communicate with them or not? That's been kind of surprising, just the level of almost immediate trust in these models.

(24:09):

The other thing though, and I've been encouraging our students, is like, hey, you need to get super proficient with these models and start building with them. And I've had several students have taken me up on that challenge, one of which I was just chatting with the other day who, he's Muslim and he built a prayer app that blocks all distractions on his phone during prayer times, put it on the app store, and it's currently generating real revenue every month for him. And so that's the opportunity that I think is really interesting for young people is any idea you have now almost is doable.

George Jagodzinski (24:51):

That's neat. Anything's possible. That's a really-

Peter Harris (24:53):

Anything's possible.

George Jagodzinski (24:54):

... great spot to be.

Peter Harris (24:55):

Yeah. And so if you're ambitious and you're excited and you're full of ideas and optimism, which so many young people are, I just think it's going to breed all kinds of amazing outcomes and startups and ideas and so forth. So I'm excited about that part of it.

George Jagodzinski (25:11):

Yeah. Well, I mean, historically the toughest part of being a founder is that like the self-doubt, the people around you doubting you, just to get going. And if that bar can be lower, then we can probably untap a heck of a lot more interesting things just as society, I would hope. So this more AI native generation, are there skills you're seeing that they're missing that they really need?

Peter Harris (25:34):

So I think this gets back to what I was saying earlier around experience. I think this is the first technology wave where in general, I would say, younger people are at a disadvantage relative to older people. Because older people have more experience, and that experience translates into being able to leverage the models better.

(25:56):

You and I, when we interact with a model, have enough experience to know when the model is hallucinating, when it's going off track, when it's not really aligned with what we're looking for and being able to pull it back in. But if you don't have that experience, you might take what it says on face value. Even in relationships, you might assume that it knows better than you what you should do in a given situation, if you haven't been through a bunch of relationships already.

(26:23):

I think that is probably, it's not like one skill, it's more just like this lack of experience that then translates into an inability to get the most out of the models that you possibly could. And so that's why I keep coming back to like get reps, build stuff, put it out there, and learn about what happens. If you want to work in investments, start doing deals. Whatever it is you want to do, figure out a way to get real world experience because then I think that will level up your AI prompting game the most.

George Jagodzinski (27:00):

Yeah. Yeah. And hands-on mentorship along with that. It's just really just getting in there, and no more of this abstract case study type of thing that you're going to work through. And it's like, let's just stumble through this a little bit. What happens to business school?

Peter Harris (27:15):

Well, it's interesting you asked that. So we're working with a university right now on a program that I'm really excited about. The basic mechanics are that investors, well, donors, traditional donors who would have given money to the university to build a building or something, will instead allocate a decent amount of that money as an investment into our fund. That money will then be used to fund programs within the university, specifically a fund that would invest in student built startups, and those investment decisions would be decided by a class.

(27:54):

And so now you could have a class of like 45 students that's making small investments, call it 10, 20, $30,000 per investment into small student run startups where they're probably using AI to vibe code something, and they need some money for sales and marketing. And in that way, you're impacting 90 students a semester with real world experience where they're getting outside of the traditional classroom and lectures, and actually making investment decisions, doing analysis, building companies, and so on and so forth.

(28:29):

And so I think universities that are really smart are going to shift to this like, let's create a safe accelerator, incubator type environment where students can get real world experience, but do so in a way that's safe and not career jeopardizing. And by doing that, when they graduate, they're like, yeah, I've got a portfolio of things I've done and I can hit the ground running in a way that wasn't possible before.

George Jagodzinski (28:57):

Yeah, that's exciting. I think the answer to this one's probably obvious, but it sounds like your overall outlook for the next generation of talent is optimistic.

Peter Harris (29:06):

Yeah. I mean, optimistic, but with some caveats. It's going to be a challenging labor market from a perspective of getting a job, but I think it'll be a tremendous opportunity for people that are a little more entrepreneurial, and that are willing to like go out on a limb a little bit more and start something on their own. All in all, like optimistic, but I do think it requires a bit of a mind shift for most people. And even if you get a job within a company, you're just going to be asked to do more with less and to leverage AI. And so you almost have to be like a founder within a large company managing teams of agents and building applications that work for your specific use cases and needs and so forth.

George Jagodzinski (29:51):

Yeah. I'm envisioning a future where you can go do your gap year and travel around Europe, but while you're doing that on the side, since the barrier to entry's so low, you could be building out a portfolio of real tangible things so that when you come back from Europe and you found yourself a little bit, you've got that portfolio that you're talking about, that you can jump into the job market with. So that sounds exciting to me.

Peter Harris (30:14):

Yeah. Yeah, for sure.

George Jagodzinski (30:15):

Peter, I could talk about this all day with you. I like to finish these on a fun question. Which is in your life, in your career, anywhere, what's the best advice you've ever received?

Peter Harris (30:25):

I'm a big fan of this principle, and I don't know that there was one person that gave me this advice, but just a confluence of a lot of people and experiences. You should always be looking to create win-win-win outcomes. And there's a lot of reasons for that that are actually very selfishly motivated. Probably the biggest one though is that when you create a win-win outcome with somebody else, they want to play the game with you again. And when you play the game with somebody again, it gets better. It compounds. And you get to play again and again and again. And the results compound again and again and again over time.

(31:07):

And as we know, compounding interest, as Albert Einstein says, is the eighth wonder of the world. I think that's the biggest potential rewards that you can get is where that relationship is just compounding over time, and gets really, really big and very, very lucrative. And however you want to define that, whether it's personal relationships or business relationships, or what have you.

(31:31):

And I think so often in business, especially, we look at relationships and we think of them as being very transactional and one time played games. And like I win, you lose. But I don't believe that it has to be that way in 99% of cases. I think it's just that we lack some creativity in how to identify a better outcome for everybody.

(31:56):

That's been like a guiding principle in a lot of my life. In a lot of ways, it's unlocked what I get to do today, which is what I love, which is working with students and teaching them and making investments in companies and all of that because we've created University Growth Fund is like in its core a win-win-win. Students win because they give this amazing experience. Founders win because they get capital, they get additional support, and they also get to feel good about supporting students. And our LPs, our investors, they win because we're getting access to really great deals. And so it just kind of win-win-win for everybody and has allowed us to build something really special.

George Jagodzinski (32:34):

I love it. It makes the journey just as fun as the destination. Peter, thanks so much for being here. Really appreciate it.

Peter Harris (32:40):

Yeah, this has been a really fun conversation. Thanks, George.

George Jagodzinski (32:44):

Thanks for listening to Evolving Industry. For more, subscribe and follow us on your favorite podcast platform, and pretty please, drop us a review. We'd really appreciate it. If you're watching or listening on YouTube, hit that subscribe button and smash the bell button for notifications. If you know someone who's pushing the limits to evolve their business, reach out to the show at evolvingindustry@intevity.com. Or reach out to me, George Jagodzinski, on LinkedIn. I love speaking with people getting the hard work done. The business environment's always changing and you're either keeping up or going extinct. We'll catch you next time, and until then, keep evolving.