Last week, on a StrictlyVC event in San Francisco, we sat down with Mamoon Hamid and Ilya Fushman, two long-time VCs whose paths first crossed as children in Frankfurt, Germany, and who were hired to restart the historic venture company Smaller Perkins about six years ago.
Apparently they have accomplished their mission of polishing the brand. Among Kleiner's bets in recent years: Rippling, the workforce management company founded by serial entrepreneur Parker Conrad that was valued at more than $11 billion last year; Loom, a video messaging company recently acquired by Atlassian for just under $1 billion; and Figma, the design tools company that emerged is near until being acquired by Adobe for $20 billion, and which, according to Fushman and Hamid, is now happily charting a course as an independent company.
Perhaps not surprisingly, the Kleiner team is also leaning heavily toward ai investments, and this is what we spend the most time talking about. You can find a video of that chat at the bottom of the page; In the meantime, below are excerpts from our conversation, lightly edited for length and clarity.
The last time we sat together in person was four years ago, at a previous StrictlyVC event. At the time, SoftBank dominated the conversation. It has since been reduced; What do you think was its impact on the industry?
IF: We're coming off three or four years of incredible amounts of capital invested in companies, and that's not just SoftBank, but a lot of people who have had growth funds and crossover funds. And that flood of capital has accomplished some things. First, he created many great companies. Secondly, some of those companies (were) overfunded and some are now having to rationalize what's happening to them. Our opposite approach when we were here four years ago was to go back to basics and focus primarily on early-stage (startups), where we said, 'Hey, we're just going to have a venture fund and a very small team.' We've always thought that this is a much more boutique business than some of these larger players.
Your company seems bigger than the last time we sat down. It now has old guard investors, specialists and advisors (in KP), including Bing Gordon and John Doerr.
MH: I think we might actually be smaller than we met last time. I think our total staff in the company is around 50.
Does 'All things ai' change anything? Can you do more with less or do we really need more people chasing all these ai researchers who keep leaving Google to start companies?
MH: It's incredible to have this wave of technological innovation. I moved to the Valley in 1987 when we were in the middle of the Internet boom, and being able to experience another boom like this twice in a lifetime feels like a dream. So I think there is no better time to be alive than today and invest in startups because, to your point, there will be a functional change in the way we all live and experience life, as well as the way we work. It will come in the form of productivity that we will all gain through ai, and I think we are already seeing that in the types of businesses we support, whether it is legal, healthcare or software developers. ai is truly empowering the highest-paid type of employees out there. They can do more in less time.
Regarding all these ai engineers being developed, are VCs actively reaching out to these big companies with offers to bet on them? Have you done this?
Image credits: TechCrunch
I think that's definitely happening, but the pull factor of ai (the wow factor) has actually pulled people out of these companies. As these tools become more useful and data becomes more accessible, these opportunities become much more obvious and accessible. The most important thing for us with this first wave of people who tried to go out and found these companies was to try to understand: Are these really the people who know how to do this? We trust our founders to (help with these questions); We look for that pedigree, the people who know how these things work.
If you think about the last 10 years in the business sector, there are waves where technical talent becomes the scarcest resource, and we are seeing that right now.
How are your portfolio companies addressing this challenge in terms of hiring? Meta, Google and OpenAI are offering multimillion-dollar packages to make this talent stay.
YES: We have companies that like ai/”>Harvey They are transforming the legal profession. We have companies like Atmosphere that are transforming healthcare. We have companies like ai/”>Verbigracia that perform automated stroke detection and medical diagnoses. The mission definitely resonates with the people who join those companies; That's a huge component. Second, while platform companies are building a phenomenally large infrastructure, when you get into real-world use cases and you get into these niches that turn out to be really big over time, you realize that you need to modify the models. and potentially build your own models and potentially your own infrastructure, and that becomes a really interesting technical challenge, which is also incredibly engaging.
From the outside, it's difficult to understand how these startups build moats, or how strong these moats can be, given how quickly everything is changing.
YES: It depends on the company. Moats and overall market size are the hardest things to understand as an investor; These are usually the things you get most wrong about.
One thing we have learned throughout our history is that we always underestimate our biggest winners. Companies that do the best always grow faster. They create or expand their market much more than anyone could have anticipated. That's why we look for some intangibles, one of which is incredible customer engagement. For example, when the product becomes part of your daily use, it is very difficult to remove it.
The most obvious part of the moat is the part of the market it is in. Many of the companies we support, especially in ai, are occupying a large problem space that a company can and should own. Enterprise Assistant, for example, is a big space, and the people who figure it out first will be the ones who move the fastest. If you look at ai, unless we've created an amazing product that's flying off the shelves, we're not going to get free distribution like we did with mobile. ai requires distribution and requires data to improve the product experience, so those first to define a product category can, in our opinion, run much faster than anyone else.
How many ai-related releases do you see weekly or monthly?
MH: From a percentage point of view, I would say more than 80%. To be fair, if you were starting a company in 1996 and didn't mention the Internet, you'd be crazy, right? Likewise, not mentioning ai or using it would be a missed opportunity.
And how active are you in this area, if we can call it that?
MH: If we look at last year from Q1 to Q3, it was the slowest year we've had in 13, 14, 15 years. December, meanwhile, was a really good month.
That's when youai/”> led a deal in Together ai, a very ai-chip-reseller-raises-50-million-in-financing-led-by-kleiner-perkins?rc=omehqc”>buzz deal. Why are people so fascinated with this company?
IF: You are running a platform and set of services for people who want to run their own models. In a way, it's an orthogonal bet to a kind of oligopoly (centered on OpenAI, Microsoft and Google) that provides infrastructure, but it's a company with incredible customers, really strong growth and a phenomenal nominal team, and the numbers speak. for themselves. Again, we are building vertical experiences (in healthcare, legal, software, engineering, science) and there will be fine-tuning and (proprietary) models that may be necessary for some of these use cases, and that opportunity is actually quite exciting that's why.
I understand you've also invested in a wearable device started by someone that would make venture capitalists salivate. Tell us more!
MH: I'm not sure I can tell you more today. I don't think they like that. Next time.
Based on what you're seeing, do you think an ai-enabled wearable will win? Just as we carry a phone, will we use a portable device?
I think we all ask ourselves the question of what is the computing platform beyond the mobile phone. Some people put on Oura rings, others put on Fitbits. I wear a Whoop. These are nice, basic wearables. They are not that smart.
What is capturing the imagination of all of us is what will be the next portable computing device that we will all adopt that doesn't look like a cell phone. There's the Rabbit, there's the Humane ai pin and soon you'll see the Vision Pro vision. Interesting things are happening. But as you know, it's very difficult to get consumers to adopt a new form factor and a new way of doing things. It takes incredible design, a low-cost product, and beautiful interfaces, and I think we're excited to see all of these things.
Figma, whose Series B round you led in 2018, just raised halved its valuation, from the $20 billion that Adobe planned to pay for it, to $10 billion. Where does it go from here?
MH: Figma is one of those companies that comes around once a decade, both because of the team, the product they built, the love of their community, the revenue profile and the profitability. It's a venture capitalist's dream. So it's not sad that he's charting his own independent course. It was pretty bittersweet to agree to sell the company for everyone at the table in September 2022. So I think we're very excited about the future and the company continues to do incredibly well.
