The Exchanges

Q dollar pool. When you're writing like a three or a four million dollar check, Who gives a shit? I didn't mean that, but I would just pause when it's a hundred million dollar seed fund. God, three or four percent of your fund is a lot of money. Three or four million for a billion dollar pool. How do you maintain a high bar when the check size is irrelevant?

A Harry, we make very few investments at Greylock. Each partner might make one to two investments a year, and many of them start as very small checks. The last two investments I made Over the last 12 months, one was a six and a half million dollar check and the other was a five million dollar check. Okay. But our constraint is not the capital. Our constraint is our time. Because when we make these investments, we sign up to be accountable in service of the founder forever. Like it's not an option for us. And so we actually, on the six and a half million dollar check, I spent 90 days getting to know the founders in our offices before we wrote that investment where I was working with them every single day.

AI assessment note: “Our constraint is not the capital. Our constraint is our time.”

Q Tell me, what's the most memorable first founder meeting you've had?

A So there are many, Harry, but the one I would mention actually talking about Braintrust is the founder of Braintrust, my friend Ankur Goyal. So Ankur is someone who I've known for a long time. He was the first VP of engineering at a company called SingleStore, then went on to start Empira, which Figma acquired in our portfolio, ran the AI team at Figma. But when I met up with him last year when he was, you know, getting Braintrust started, and he painted a vision of how People would actually build AI applications and everyone's debating where's the value going to accrue the tooling layer, the model layer, the app layer. And he's like, some, I was at Figma. I know the team at notion. I know the team at Zapier. Here's what actual developers care about in their pain points. And here's how I'm going to go build a solution. There was such clarity in the way he spoke about an emerging market. You know, I, I walked out of that first meeting. I texted my team. I was like, we are immediately investing in this man. And you know, I'm glad we did. Now all of those companies are customers of his.

AI assessment note: “the one I would mention actually talking about Braintrust is the founder of Braintrust”

Q dollar pool. When you're writing like a three or a four million dollar check, Who gives a shit? I didn't mean that, but I would just pause when it's a hundred million dollar seed fund. God, three or four percent of your fund is a lot of money. Three or four million for a billion dollar pool. How do you maintain a high bar when the check size is irrelevant?

A Harry, we make very few investments at Greylock. Each partner might make one to two investments a year, and many of them start as very small checks. The last two investments I made Over the last 12 months, one was a six and a half million dollar check and the other was a five million dollar check. Okay. But our constraint is not the capital. Our constraint is our time. Because when we make these investments, we sign up to be accountable in service of the founder forever. Like it's not an option for us. And so we actually, on the six and a half million dollar check, I spent 90 days getting to know the founders in our offices before we wrote that investment where I was working with them every single day.

AI assessment note: “our constraint is not the capital. Our constraint is our time.”

Q I love Nick Ash at Palo Alto. I had him on the show and he was fantastic. So yeah, I totally agree with you. What have you changed your mind on in the last 12 months?

A 12 months ago, I was of the mindset that the large foundation model companies would crush all of the smaller focused models. So if you were building a model for audio generation or, you know, voice synthesis, yeah, you might have an advantage today, but how is it not going to be the case that OpenAI two years from now is going to have this way better? And so we didn't invest in any of those. And I still hold the view that just on the raw, like generate a voice, the underlying large models will get better. But the thing I have changed my mind on is if you can start with a better focused model and then very quickly move up the stack into the application layer, it's actually a very good strategy.

AI assessment note: “the thing I have changed my mind on is if you can start with”

Q A lot of people say that we're in an AI bubble. I just wanted to start here some. Are we in an AI bubble? And how do you think about the state of AI investing today?

A The short answer is yes, we are in a In an exuberant bubble. I think we may not even fully, uh, appreciate in how big of a bubble we're in, and what's happening, I could argue, is even crazier than what was happening in peak 2021, 2022 zero interest rate period. It's not unusual for us now, again, in kind of pure AI to see seed rounds for companies that are just getting started, being priced in the many tens of millions of dollars, even hundred million dollar plus post money ranges, and then companies that have a little bit of revenue growth, Um, you know, raising at a hundred times, even 200 times their revenue. That's with a backdrop where when you look at the top public names, I think the most valuable public company today for on multiples basis is CrowdStrike. And CrowdStrike is trading at, I think, 20 times forward revenue, right? And, and by the way, there's like maybe only five companies trading at north of 15. So you have this odd thing that's happened where in 21, we were investing at a hundred times revenue, but you had public names trading in the 50 to 80 X range. Now you're investing at a hundred to 200 times revenue when public names are trading at the, the best public names are trading at 15 to 20 times. That dislocation does not make sense to me unless you believe that these companies fundamentally have much more persistent growth than prior generation of softwar…

AI assessment note: “The short answer is yes, we are in a In an exuberant bubble.”

Q Grady these days, and so it's a large part of our marketing budget, but I'm pleased that it's working well. My question to you is, you know, when we look at your childhood, you grew up in tech, You moved to California for college. I think people are shaped often a lot more by their childhood than they think. What element of your childhood do you think shaped you most?

A Yeah, it's a great question. So I grew up in Houston, Texas, um, was born and raised there all through high school and then moved out to California for school. There's a lot in my childhood that shaped me. I think maybe two things are probably most formative. One is I, uh, I wasn't built for sports, but I was really good at debate and, um, Really competitive in, in policy debate in school, traveling around the country with my team and competing. And I think what that taught me is just a love for competition. And whether it's on the venture business when we're competing to work with the best founders or the companies we partner with, I think you have to be mega competitive to be good, ah, good in our industry. And then, and then the second is, I also did a lot of biomedical research and, and work around designing, um, early cancer detection techniques that we published on when I was in school. I think that taught me just the power of small teams. And with the small research team, we were able to produce some pretty cool work. And I think that's been quite formative to now what I do, which is invest in teams that are really, really small and then help them, you know, go on to build really formative companies.

AI assessment note: “I think maybe two things are probably most formative.”

Q Penultimate one. What do you know now that you wish you'd known when you started Greylock?

A I knew this when I started. I wish I knew how important it was, which is the importance of building in large markets and that most markets just don't matter. You talked about Nikesh from Palo Alto. I spent a lot of time in cyber, so I think carefully Apollo or CrowdStrike, both of which are now, you know, ballpark hundred billion dollar market cap companies. They're operating in phenomenally large markets. And so I now am very oriented. Like if you're a new founder and you're going to spend the next decade doing something, let's pick something where there's no ceiling and where the growth can keep compounding. Because why not go build a fifty billion dollar company, not just a five billion dollar company? And so I'm incredibly oriented on market size.

AI assessment note: “I wish I knew how important it was, which is the importance of building in large markets”

Q You mentioned a lot of mistakes when it's like amazing founder, but you hate the market. I'm just interested. The best shows are always when one's very open with mistakes, but then also has lessons tied to it. If I were to ask you, what are your biggest lessons when you think of that? And what, what situation was it? What would that be?

A So there are two that, there are many, right? Um, the two that like first came to mind, the first is Glean, right? So we have known, we at Greylock have known Arvind Jain, the co-founder and CEO of Glean for a long time because we were, uh, the Series B investors of Rubrik at where he was one of the co-founders. And so have known him for a long time, have thought super highly of him. When he started Glean, you know, we, we looked, I, I took the meeting on the, uh, I think the Series B, the round that General Catalyst ended up doing. At the time, and still now, but at the time, you know, it was an enterprise search company. Enterprise search as a market was littered with so many people who had tried and had been unsuccessful and who hadn't been able to crack enough end user value to get recurring, uh, to get recurring user love. And, you know, the business was early. And so we made a really bad decision, which is we didn't try to win the right to invest. And when I, and today I'd say Glean is, is, is on its path to being an iconic company. In my view, it's one of the most important AI application companies. And I think anyone who's not using it should immediately start using it if you're a large enterprise. And so if I reflect back on like, what was the learning? I think there's two learnings there for me. One is Arvind is an iconic founder. Like he is unbelievable. He had a lon…

AI assessment note: “if I reflect back on like, what was the learning? I think there's two learnings”

Q A lot of people say that we're in an AI bubble. I just wanted to start here some. Are we in an AI bubble? And how do you think about the state of AI investing today?

A The short answer is yes, we are in a In an exuberant bubble. I think we may not even fully, uh, appreciate in how big of a bubble we're in, and what's happening, I could argue, is even crazier than what was happening in peak 2021, 2022 zero interest rate period. It's not unusual for us now, again, in kind of pure AI to see seed rounds for companies that are just getting started, being priced in the many tens of millions of dollars, even hundred million dollar plus post money ranges, and then companies that have a little bit of revenue growth, Um, you know, raising at a hundred times, even 200 times their revenue. That's with a backdrop where when you look at the top public names, I think the most valuable public company today for on multiples basis is CrowdStrike. And CrowdStrike is trading at, I think, 20 times forward revenue, right? And, and by the way, there's like maybe only five companies trading at north of 15. So you have this odd thing that's happened where in 21, we were investing at a hundred times revenue, but you had public names trading in the 50 to 80 X range. Now you're investing at a hundred to 200 times revenue when public names are trading at the, the best public names are trading at 15 to 20 times. That dislocation does not make sense to me unless you believe that these companies fundamentally have much more persistent growth than prior generation of softwar…

AI assessment note: “The short answer is yes, we are in a In an exuberant bubble.”

Q The question that I'd have for you is with that hyper competition being so front and center, do you agree that ventures a young person's game?

A I mostly agree, but I'll tell you there are exceptions, right? Like my partner Ashim, who I think is not, I think the data would suggest is a, is a truly generationally great investor, has been doing this for more than 20 years, has had many IPOs under his belt, and still works seven days a week. And, you know, if he learns with a founder fundraising that, that he, you know, he thinks is high quality, he'll drop everything he's doing and go meet that person tonight. Um, so I think some people are just wired that way. And if you're wired that way, I think it doesn't matter if you're 20 years old, 30 years old, 40 years old, 50 years old. But I think if you're not wired that way, you're dead. And it takes a while to notice, given the lagging nature of our business. But this is a super, super competitive game.

AI assessment note: “I mostly agree, but I'll tell you there are exceptions, right?”

Q You can have real preempting, but the real thing for me is like on the negative, negative side of that, if, if Greylock doesn't do it at all, will it kill it?

A It's never been an issue for us. Like Harry, I'll give you an example. Like I, I led the series A in a company called Cresta, right? I, I may have mentioned it earlier. Contax and I had a company. Sequoia led the B. Company's doing great. Andreessen had done the seed. I remember when we looked at the company at the A, I was like, hey, why isn't Andreessen doing the A? And I'm like, they probably passed. I mean, I, I don't, I still to this date don't know, but I assume they passed. Doesn't matter. Like, we evaluate the company on the merits of the company. We love the founders. We love what they're doing. And, you know, we did the A. And, and, and I'm just picking, I mean, that's the first example that jumped into my mind. There's so many ones where we did the A, where someone else did the C. We just look at it as independently. Especially with some of these global platforms that are doing 50, 60, 70 C deals a year. I think it's hard for them to even keep track of what companies are investors in. And so I'm not gonna let that get in the way of backing a great founder.

AI assessment note: “It's never been an issue for us.”

Q When do you think most obviously you were contrarian and right in that way?

A I think for Greylock writ large, and then I'll give you a couple of concrete examples for, for myself personally, we are willing to invest behind great people and great markets when the traction data is not there, often when others would pass. So for instance, we were fortunate at Greylock to initiate a company called Abnormal Security, which recently announced they've crossed a hundred million of ARR growing north of a hundred percent. You know, I think it's, it's one of the fastest growing private companies today. You know, we did multiple rounds in that company before it was clear that there was repeatable product market fit, but we had, you know, really deep conviction in the market and in the founder's evidence, Anjay. You know, we mentioned Upwind and the large seed round. I'm sure many people looked at that and were like, wow, these guys are smoking something. Twenty six million dollar seed round. It's like, no, Amiram's amazing. He's, he's gonna be an iconic founder. That company just started sales. It's one of our fastest growing new companies. Um, so that's the form of risk we're willing to take. And I think any investor has to be willing to take some type of risk that the market writ large is not willing to take.

AI assessment note: “Abnormal Security, which recently announced they've crossed a hundred million of ARR”

Q Got you. Okay. Uh, tell me, why have some firm incubations worked and others not?

A Broadly, I think incubations don't work for a number of reasons. Um, I think most firms take too much of the cap table. There's negative selection bias where they don't get the best founders to want to work with them. They can't actually help. And so I broadly think incubations don't work. That said, some have worked out outstandingly. And, you know, Greylock, Palo Alto Networks, and Workday are two largest historical outcomes. Um, my partner, Ashim and I were fortunate to help incubate a company called abnormal security. I mentioned earlier that, you know, is on its path to be a company of that elk. If I think about those businesses, they had amazing founders, they picked really large markets, um, and then they worked really collaboratively with their venture partners around recruiting and customer development to build the right team and initial set of customers out of the gate. And, you know, others like the folks at Sutter Hill have done that really well, but broadly speaking, I don't think incubations work.

AI assessment note: “they had amazing founders, they picked really large markets, and then they worked really collaboratively”

Q The question that I'd have for you is with that hyper competition being so front and center, do you agree that ventures a young person's game?

A I mostly agree, but I'll tell you there are exceptions, right? Like my partner Ashim, who I think is not, I think the data would suggest is a, is a truly generationally great investor, has been doing this for more than 20 years, has had many IPOs under his belt, and still works seven days a week. And, you know, if he learns with a founder fundraising that, that he, you know, he thinks is high quality, he'll drop everything he's doing and go meet that person tonight. Um, so I think some people are just wired that way. And if you're wired that way, I think it doesn't matter if you're 20 years old, 30 years old, 40 years old, 50 years old. But I think if you're not wired that way, you're dead. And it takes a while to notice, given the lagging nature of our business. But this is a super, super competitive game.

AI assessment note: “I mostly agree, but I'll tell you there are exceptions, right?”

Q Do you think the open AI could kill my business is a legitimate fear in the same way that Apple have killed many businesses with updates to torch calculator maps? You name it. Do you think that is a legitimate fear or we're overemphasizing the concern that an update to open AI could kill my business as a application AI company?

A So we have to start by acknowledging open AI is, is ruthless and the quality of their execution is just incredible. And we should expect them to continue executing and shipping amazing products. Harry, I'll tell you my mental model for this, which is it's not quite consumer versus enterprise. But the way I think about it is there are some applications that I use the word, and this word is overloaded, but I think it was very foundational, like very foundational primitives and workflows on top of AI. And you talked about, like, the calculator or maps on the iPhone. You could say those are foundational capabilities for the iPhone. And so, right, content generation and writing, editing is a foundational capability. ChatGPT is really good at it. I think coding is a foundational capability. And I think if you just take kind of Pure code generation. I would bet very strongly that OpenAI is going to compete ruthlessly on that. Now, do I think building a co-pilot for lawyers or for physicians or building software development tooling that's not the code generation itself, but maybe it's the incident response and SRE workflow. Maybe it's debugging tools. Do I think those are going to be kind of core foundational things that OpenAI is going to need to own? I don't. And so kind of our lens is we're less, we're not closed for business, but we've really got to believe to back a team that's co…

AI assessment note: “we think there's like immense, immense opportunity in really focused applications on top.”

Q And then the third one is what, sorry?

A The interface. So like Harry, you probably have a lot of sales reps in the companies that you work with who complain about Salesforce. They hate using it. They hate the UI. It's super clunky. They're constrained by the interface, yet they've learned how to use it, right? If you got, if I, if you hired me as a new sales rep tomorrow, you're going to train me on some, here's how you do your work inside Salesforce. Well, with generative AI, the entire interface could change. In fact, like there may no longer be an interface. I may have an agent that's working alongside me as the sales rep, helping me do my job. And it's navigating all the underlying systems on my behalf. And by the way, when it doesn't know something, it'll come back to me and it's not just going to be a chat bot. It might be a UI, but it'll be a generated UI. It'll be very dynamic. And I would argue in 10 years, sales reps won't even know what the Salesforce UI looks like because the interface to the underlying system of record has changed.

AI assessment note: “The interface. So like Harry, you probably have a lot of sales reps”

Q You can have real preempting, but the real thing for me is like on the negative, negative side of that, if, if Greylock doesn't do it at all, will it kill it?

A It's never been an issue for us. Like Harry, I'll give you an example. Like I, I led the series A in a company called Cresta, right? I, I may have mentioned it earlier. Contax and I had a company. Sequoia led the B. Company's doing great. Andreessen had done the seed. I remember when we looked at the company at the A, I was like, hey, why isn't Andreessen doing the A? And I'm like, they probably passed. I mean, I, I don't, I still to this date don't know, but I assume they passed. Doesn't matter. Like, we evaluate the company on the merits of the company. We love the founders. We love what they're doing. And, you know, we did the A. And, and, and I'm just picking, I mean, that's the first example that jumped into my mind. There's so many ones where we did the A, where someone else did the C. We just look at it as independently. Especially with some of these global platforms that are doing 50, 60, 70 C deals a year. I think it's hard for them to even keep track of what companies are investors in. And so I'm not gonna let that get in the way of backing a great founder.

AI assessment note: “It's never been an issue for us. Like Harry, I'll give you an example.”

Q When we're thinking about evaluating series A's, I think we take quite brute mental models to how we evaluate companies at this stage. Mostly it's kind of ARR dependent as a good way to screen for it. Uh, what do you think, why do you think more importantly, sorry, ARR is wrong in terms of a filtering mechanism at Series A?

A This reminds me of what we were just talking about when an investor says they like something at 20 and not at 30. It drives me crazy when I hear, you know, investors write these blog posts, your checklist for the Series A, number one, a million dollars of ARR. Why does that drive me crazy? Because for you to make money on a Series A is, and let's just take SaaS or enterprise software to simplify, You've got to get into a business that gets into the hundreds of millions of ARR, right? Because that's the only way you can become a public company. And so if your goal is to get into the hundreds of millions of ARR, and your main thing that you're looking at is, is this a company at a million or two million of ARR? Harry, how many companies get to a million of ARR that don't get to 10, that don't get to 50, that don't get to a hundred? The vast, vast majority. And so my argument is like, I don't get why that's the primary thing that people look at. I really believe it's misleading because you might look at that and be like, oh, this thing's at two million of ARR. It's great. When it turns out that the market's super capped and it's going to grow to twenty million and then massively decelerate and the business is going to be worthless. Or it turns out you don't really believe it's a superstar founder. And conversely, you might look at something and, you know, we were, we, we did inves…

AI assessment note: “how many companies get to a million of ARR that don't get to 10”

Q When do you think most obviously you were contrarian and right in that way?

A I think for Greylock writ large, and then I'll give you a couple of concrete examples for, for myself personally, we are willing to invest behind great people and great markets when the traction data is not there, often when others would pass. So for instance, we were fortunate at Greylock to initiate a company called Abnormal Security, which recently announced they've crossed a hundred million of ARR growing north of a hundred percent. You know, I think it's, it's one of the fastest growing private companies today. You know, we did multiple rounds in that company before it was clear that there was repeatable product market fit, but we had, you know, really deep conviction in the market and in the founder's evidence, Anjay. You know, we mentioned Upwind and the large seed round. I'm sure many people looked at that and were like, wow, these guys are smoking something. Twenty six million dollar seed round. It's like, no, Amiram's amazing. He's, he's gonna be an iconic founder. That company just started sales. It's one of our fastest growing new companies. Um, so that's the form of risk we're willing to take. And I think any investor has to be willing to take some type of risk that the market writ large is not willing to take.

AI assessment note: “we were fortunate at Greylock to initiate a company called Abnormal Security”

Q You mentioned a lot of mistakes when it's like amazing founder, but you hate the market. I'm just interested. The best shows are always when one's very open with mistakes, but then also has lessons tied to it. If I were to ask you, what are your biggest lessons when you think of that? And what, what situation was it? What would that be?

A So there are two that, there are many, right? Um, the two that like first came to mind, the first is Glean, right? So we have known, we at Greylock have known Arvind Jain, the co-founder and CEO of Glean for a long time because we were, uh, the Series B investors of Rubrik at where he was one of the co-founders. And so have known him for a long time, have thought super highly of him. When he started Glean, you know, we, we looked, I, I took the meeting on the, uh, I think the Series B, the round that General Catalyst ended up doing. At the time, and still now, but at the time, you know, it was an enterprise search company. Enterprise search as a market was littered with so many people who had tried and had been unsuccessful and who hadn't been able to crack enough end user value to get recurring, uh, to get recurring user love. And, you know, the business was early. And so we made a really bad decision, which is we didn't try to win the right to invest. And when I, and today I'd say Glean is, is, is on its path to being an iconic company. In my view, it's one of the most important AI application companies. And I think anyone who's not using it should immediately start using it if you're a large enterprise. And so if I reflect back on like, what was the learning? I think there's two learnings there for me. One is Arvind is an iconic founder. Like he is unbelievable. He had a lon…

AI assessment note: “the first is Glean, right? So we have known, we at Greylock have known Arvind Jain”

Q I totally agree with you. I, I really do. I, so many times it's like your ICP is way too wide, your product marketing is not tight enough, And that's really been detrimental to your ability to get your first hundred customers. Which venture investor do you most respect and learn from outside Greylock? And it can't be Pat Grady.

A I love Pat, uh, and there are many amazing people that you and I both know who I learned from, so it's hard to pick one name, but I'll go with Elad. I think Elad Gil is, is just an outstanding thinker and ambassador. You know, we've worked with him closely over the years. I have the good fortune of working with him at Braintrust, um, which is a company in the AI developer platform space, and his ability to do everything from, you know, help initiate new companies like Braintrust, to lead series A's, to do terrific growth rounds, He's a thinker that can extend across all stages in a single person. And I'm just very impressed by him.

AI assessment note: “it's hard to pick one name, but I'll go with Elad.”

Q Tell me, what's the most memorable first founder meeting you've had?

A So there are many, Harry, but the one I would mention actually talking about Braintrust is the founder of Braintrust, my friend Ankur Goyal. So Ankur is someone who I've known for a long time. He was the first VP of engineering at a company called SingleStore, then went on to start Empira, which Figma acquired in our portfolio, ran the AI team at Figma. But when I met up with him last year when he was, you know, getting Braintrust started, and he painted a vision of how People would actually build AI applications and everyone's debating where's the value going to accrue the tooling layer, the model layer, the app layer. And he's like, some, I was at Figma. I know the team at notion. I know the team at Zapier. Here's what actual developers care about in their pain points. And here's how I'm going to go build a solution. There was such clarity in the way he spoke about an emerging market. You know, I, I walked out of that first meeting. I texted my team. I was like, we are immediately investing in this man. And you know, I'm glad we did. Now all of those companies are customers of his.

AI assessment note: “the one I would mention actually talking about Braintrust is the founder of Braintrust”

Q Okay. So now we understand those three. What does that mean in context of like now's the best time to be investing in AI? And that question.

A Yeah, so now to connect it back to why is now a great time to be investing in SaaS. If you buy my point that the largest outcomes in SaaS come from when you're able to go after these horizontal big application companies, right? Again, think Salesforce, think ServiceNow, think Workday, think SAP. You need disruption on these three buckets for the opportunity to be real. Otherwise, it's just incremental. And I'll give you an example of what I mean to make it more concrete. There are many like mobile CRM companies like, Hey, I'll put, you know, CRM on the iPhone. Great. That's not that different. It's just another client for interacting with the CRM. Salesforce now has a mobile app and you and I don't talk about any of the mobile CRM companies anymore. Right? So I'd say for the last 10, let's take the last eight years that I've been investing, those three things have not been true, which is why I would argue it's been impossible to go after those large, you know, platform companies. I now think they are true. I now think you don't need the data model that Salesforce suggests anymore because your AI agent can go and just suck up your inbox, suck up all your gone call recordings, and on the fly materialize the views of data it needs to help you run your sales team. So when you're doing a pipeline forecast, you don't need to go into sales, Salesforce. You can just ask an AI applicati…

AI assessment note: “You need disruption on these three buckets for the opportunity to be real.”

Q Is that still possible? With deal compression, with heat in markets, I would love that.

A It is if you build the founder relationships early. In this case, we got to know these people when they were still full-time employees elsewhere, and we're helping them before the company even existed, and that actually, I think something like 80% of our investments, they're of that flavor, where we met the person before the company existed, and that's not to say we don't sometimes make decisions in 48 hours, sometimes we have to, but But that's our orientation. And so, so Harry, just to complete the point, you know, that six and a half million dollars might grow into fifty million dollars over time, right? And so we have many, and if you look kind of over our more recent funds, whether it's a Figma, a rubric, an abnormal security, a Discord, many of these companies, we've put real capital to work over time, and we've earned the right to do that with the founders, but they all started as really small checks.

AI assessment note: “It is if you build the founder relationships early.”

Q one of my biggest reasons for saying that, like, there's five people doing it. We're one of N. We're pricing power. None. I just don't, and you said earlier, oh, isn't everything in competition? No, like, you know, I look at my biggest and best property management in Berlin, commodities pricing providers, like, unsexy businesses where no one is going after it. That's, I think, where great money is made.

A I agree with you, but I would say that great money is made, you know, to be pithy, being contrarian and being right, right? And there are multiple ways to do that. I think the common way people do that, and congrats to you on those companies, like, is they find companies or markets that others aren't all over, and they invest in them, and then a year later, it's clear that things are really working, and they benefit from cheap following capital. But another way you can be contrarian is, right, is to take a really competitive situation and say, hey, I'm willing to pay twice the price anybody else is willing to pay because I actually am such a believer in this thing that I I'm willing to price it at twice the price you are. And I think like, and again, I come back to the whiz series A, right? That's a good example. I think at the time the price was astronomical. I'm sure many people passed due to the price, but you know, credit to the people who funded it. They were right.

AI assessment note: “another way you can be contrarian is... to take a really competitive situation”

Q Do you think the open AI could kill my business is a legitimate fear in the same way that Apple have killed many businesses with updates to torch calculator maps? You name it. Do you think that is a legitimate fear or we're overemphasizing the concern that an update to open AI could kill my business as a application AI company?

A So we have to start by acknowledging open AI is, is ruthless and the quality of their execution is just incredible. And we should expect them to continue executing and shipping amazing products. Harry, I'll tell you my mental model for this, which is it's not quite consumer versus enterprise. But the way I think about it is there are some applications that I use the word, and this word is overloaded, but I think it was very foundational, like very foundational primitives and workflows on top of AI. And you talked about, like, the calculator or maps on the iPhone. You could say those are foundational capabilities for the iPhone. And so, right, content generation and writing, editing is a foundational capability. ChatGPT is really good at it. I think coding is a foundational capability. And I think if you just take kind of Pure code generation. I would bet very strongly that OpenAI is going to compete ruthlessly on that. Now, do I think building a co-pilot for lawyers or for physicians or building software development tooling that's not the code generation itself, but maybe it's the incident response and SRE workflow. Maybe it's debugging tools. Do I think those are going to be kind of core foundational things that OpenAI is going to need to own? I don't. And so kind of our lens is we're less, we're not closed for business, but we've really got to believe to back a team that's co…

AI assessment note: “we think there's like immense, immense opportunity in really focused applications on top”

Q And then the third one is what, sorry?

A The interface. So like Harry, you probably have a lot of sales reps in the companies that you work with who complain about Salesforce. They hate using it. They hate the UI. It's super clunky. They're constrained by the interface, yet they've learned how to use it, right? If you got, if I, if you hired me as a new sales rep tomorrow, you're going to train me on some, here's how you do your work inside Salesforce. Well, with generative AI, the entire interface could change. In fact, like there may no longer be an interface. I may have an agent that's working alongside me as the sales rep, helping me do my job. And it's navigating all the underlying systems on my behalf. And by the way, when it doesn't know something, it'll come back to me and it's not just going to be a chat bot. It might be a UI, but it'll be a generated UI. It'll be very dynamic. And I would argue in 10 years, sales reps won't even know what the Salesforce UI looks like because the interface to the underlying system of record has changed.

AI assessment note: “The interface. So like Harry, you probably have a lot of sales reps”

Q So is AI investing at the application layer? Is it any different to traditional software investing?

A I don't think it is. And I, I think this is like one of the biggest misnomers in the venture zeitgeist where Everybody's talking about like, hey, are these just wrapper companies? What makes these things defensible? Is value going to accrue to them? And the history, I don't think any SaaS software company is like rocket science in terms of the underlying technology. I saw a tweet from Brian, the founder of HubSpot, maybe yesterday or today, where he said like, hey, people used to say HubSpot was a wrapper on a database, right? And just some workflow on top of a database. And I think, I think we're going to look back on this discourse a few years from now, and it's going to feel very similar. I come back to, like, the SaaS companies that have really become market defining, build for a specific end user, very deep and valuable workflow that becomes very sticky and critical to that person's job, and are able to have significant pricing power. And then they get to distribution before others who have the distribution, namely incumbents, are able to copy their innovation. And the ones that have done that really well, HubSpot being very high on the list, Figma in our portfolio being high on the list, Have gone on to be iconic businesses. And by the way, SAS is littered with lots of point solutions that didn't do that, had more superficial value. Maybe they got bought a lot during the …

AI assessment note: “I don't think it is. And I, I think this is like”

Q Do you think that's good? My worst performing companies are the five on 25 or, or bigger. Because you lack urgency, you lack creativity because you can just buy it, and you lack real speed of decision making. I don't think giving founders much money early is, like, the solution.

A I think it all depends on the founder. It just all depends on the founder. And the more I do this, the more I come back to, like, everything is about the founder. I can tell you, Harry, there are situations in our portfolio where we've done large seed rounds and where the velocity and desperation and paranoia Is unlike anything you've seen, because the founder is just amazing, and there are situations where we've done a million dollar round, and there isn't that orientation. I think you are right to say that when there's more capital, perhaps there can be more of a temptation to overspend, you know, not be as scrappy the rest, but I think the best founders, they inherently have the right orientation on those dimensions, and so the capital just becomes an accelerant to them. It allows them to Think bigger, build more of a complete product, target larger customers from day one, and that makes a big difference.

AI assessment note: “I think it all depends on the founder.”

Q Okay. So now we understand those three. What does that mean in context of like now's the best time to be investing in AI? And that question.

A Yeah, so now to connect it back to why is now a great time to be investing in SaaS. If you buy my point that the largest outcomes in SaaS come from when you're able to go after these horizontal big application companies, right? Again, think Salesforce, think ServiceNow, think Workday, think SAP. You need disruption on these three buckets for the opportunity to be real. Otherwise, it's just incremental. And I'll give you an example of what I mean to make it more concrete. There are many like mobile CRM companies like, Hey, I'll put, you know, CRM on the iPhone. Great. That's not that different. It's just another client for interacting with the CRM. Salesforce now has a mobile app and you and I don't talk about any of the mobile CRM companies anymore. Right? So I'd say for the last 10, let's take the last eight years that I've been investing, those three things have not been true, which is why I would argue it's been impossible to go after those large, you know, platform companies. I now think they are true. I now think you don't need the data model that Salesforce suggests anymore because your AI agent can go and just suck up your inbox, suck up all your gone call recordings, and on the fly materialize the views of data it needs to help you run your sales team. So when you're doing a pipeline forecast, you don't need to go into sales, Salesforce. You can just ask an AI applicati…

AI assessment note: “connect it back to why is now a great time to be investing in SaaS”