Matt Murphy
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The Peel with Turner Novak · Inside the Anthropic Bet That Made Menlo a Top AI Firm | Matt Murphy
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Why Did Matt Murphy Join Menlo Ventures?
Matt Murphy joined Menlo because the firm had already done the generational handoff that wrecks other venture firms. Mark Siegel, one of his closest friends from business school, had been handed the keys by the founders. Murphy calls that transition one of the hardest things in venture: firms blow up, slow down, or miss a technology wave. Menlo handed Siegel the keys and let him build the next partnership. Siegel retired about three years later, once that group was in place.
Murphy had been in the business for 15 years. Menlo was an almost 40-year-old firm with a long brand and a reputation for backing important companies and doing the right thing. That combination is why he picked it.
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How Did Menlo Raise an SPV With No Anthropic Financials?
Matt Murphy says Menlo's first special-purpose vehicle for Anthropic nearly got ahead of the firm. A scary 30 to 45 days followed in which he thought Menlo had overcommitted and might not get the round done. Anthropic was supportive, and it also barred the firm from sharing financial information. Investors were being asked into what he put at an $18 billion valuation with product slides and, at most, last year's revenue, and with no forward projections.
State pension funds told him they could not responsibly do that. Three did. He says each of those three has made well over a billion dollars at the last round's valuation. The close was not a one-week sprint. The term sheet was mid-December,
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Why Is AI Not a Repeat of 1999?
Matt Murphy says this AI wave is not a repeat of 1999 because that boom hit a wall this one does not have. In 1999 a narrow slice of people could use the new products. Few had fast broadband or a PC, and many would not type a credit card into a website. Companies got a fast start from that small group and then never reached the next 98 percent of the population. If the next 98 percent, or even the next 50 percent, had been reachable sooner, scale might have repaired weak gross margins. It took too long.
AI, as he describes it, is immediately available to every consumer and every enterprise. The business models are different too. This wave has durable models selling to enterprise customers,
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How Did Menlo Become a Top AI Firm?
Matt Murphy says Menlo became a top AI firm by stacking pieces for years, not by spotting Anthropic on the day of the round. The firm needed a fund that could invest at Anthropic's stage, a prepared thesis for what it was looking for, and a services team that gave a company a reason to pick Menlo. Anthropic showing up, with a team that had created ChatGPT, at what he calls a four-billion-dollar entry, was not enough on its own. The surrounding team supplied the courage, the technical work, and the ability to win the deal.
He treats venture as a team sport. He was highly convinced on Anthropic, and that conviction was still an intuition until Tim Tully, a former chief technology officer, spe
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Why Is Anthropic's Headline Burn Figure Not Cash?
Matt Murphy says Anthropic's headline burn figure is not cash. The company is in a quiet period, so he will not walk the S-1 line by line, but the indicators he watches are operating cash flow, gross margin, and the growth rate. Warrant and convertible-note items are non-cash accounting charges, not a picture of money leaving the business.
He describes a headline of about negative $42 million burned and says that is not a burn number and not a cash number. Readers who do not know an S-1 treat those charges as proof the business is failing. He points instead to what the filing shows on operating cash flow: the company has been positive and expects to stay that way. Gross margin sits in that
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How Fast Is Anthropic Growing Compared With Google?
Matt Murphy says Anthropic is growing on a clock that makes Google's famous run look slow. At Kleiner Perkins he sat in Google's board meetings from the investment until the IPO. People still treat that business as the fastest ever: about zero to $1 billion in five years, zero to $10 billion in eleven years or eight, then $10 billion to $100 billion in the eleven years after that. He puts the whole climb at about 19 years to $100 billion, which he still calls tremendous.
A company in this wave, he says, can cover that same kind of climb in about a third of the time or less. That gap is the phenomenon he is pointing at in AI, not a small step up from the last generation of software.
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Why Did Menlo's Anthropic Check Look Too Small?
Matt Murphy says Menlo's first Anthropic check looked too small to matter to the fund. It did not fit the venture fund or the growth fund. At a $4.5 billion entry, even a double would not be meaningful, and the usual test was that a deal does not move the needle unless it can be a 10x. He puts that 10x at $45 billion, and at the time that sounded crazy.
The reason to do it anyway was the kind of company, not a tidy fund fit. Earlier technology waves were held back by devices, slow internet, or people not trusting their data in the cloud. This one was immediately available to everyone, and it was growing faster than anything the firm had seen. His question for the partnership was how Menlo c
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What Is Menlo's Anthology Fund?
Matt Murphy says Menlo's Anthology Fund was a way to see more of the AI map before it was obvious which companies would matter. After the firm led Anthropic's round, it started the fund in partnership with Anthropic: about $100 million, with checks from roughly $100,000 to about $1 million. The point was a wider aperture across applications and infrastructure when nobody could yet tell what would be big.
The first check was about $100,000 into OpenRouter. He points to a rumored $8 billion acquisition of OpenRouter by Stripe, and he names Whisper, the dictation product he describes at a multi-billion-dollar valuation, and Goodfire among four or five valuable companies from the same strategy.
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Should Venture Firms Slow Down?
Matt Murphy is open to venture firms slowing down, and he does not know that the market needs a lot of changes right now. Enough really strong mergers and acquisitions have already validated that some of the valuations, and the companies being backed, are going to have great outcomes.
He treats a weak acquisition market as the worry. Everybody would have chips back on the table and there would be no exits. The lack of exits is scary enough to raise whether firms should slow down. He is open to slowing down anyway.
Acquisitions have already taken some pressure off the release valve. Capital has gone back to LPs, and the returns are good.
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Why Do Venture Firms Decay?
Matt Murphy says venture firms decay through poor handling of generational transition. In the bad version, people hang around too long and younger talented partners leave. The partner who would have brought in the new founder starts his own firm or goes somewhere else, and the old firm does not even see him. The firm loses its younger generation, or the partners simply do not share as much alignment.
Some of the best decisions at his firm came from incredibly high alignment to do something that felt a little off-spec at the time, the sort of move that made people ask why they were doing it. A high-trust organization is what makes that alignment possible. When people are fractured, they do t
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Why Did Menlo Go All in on AI?
Matt Murphy says Menlo put all its chips on the table when the AI wave arrived. Conviction inside the whole firm was incredibly high. The shift came shortly after the launch of ChatGPT, and he puts the timing at roughly six months before Menlo funded Anthropic.
Menlo had sat out crypto and had sat out VR, passes he treats as probably good moves. Crypto money was made, but in terms of real businesses a lot of trading companies were in the mix. The category was not for Menlo. The firm could not be all things to all people, and the AI wave was the moment for a full commitment.
Menlo was, in his view, the first firm to put out a market map of the AI infrastructure stack. Every technology wave
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Why Did Matt Murphy Back Anthropic Before Revenue?
Matt Murphy backed Anthropic before it had revenue because the partnership had decided it had to be in the category. Anthropic was at least the second-best company, with the best technical team.
He participated in the Series C and then led the Series D. Anthropic was pre-revenue and pre-launch, at a four billion, four-plus-billion-dollar valuation. Back in 22 and 23, an exit at a four billion valuation was a spectacular outcome in the history of venture, and that price was the entry point. A venture fund had to work out a commitment of that size. A growth fund had to work out a company still pre-revenue and pre-launch, so the round was caught in the middle. The team had created ChatGPT, the