Kleiner Perkins’ Mamoon Hamid and Ilya Fushman: AI is now involved in “more than 80%” of pitches

Image credits: Slava Blazer/TechCrunch

Last week at the StrictlyVC event in San Francisco, we spoke to two long-time VCs, Mamoon Hamid and Ilya Fushman. They first met as children in Frankfurt, Germany, and were brought in about six years ago to reboot the storied venture firm Kleiner Perkins.

They seem to have accomplished their mission of polishing the brand. Among Kleiner’s recent bets is Rippling, a workforce management company founded by serial entrepreneur Parker Conrad that was valued at more than $11 billion last year. Loom is a video messaging company that was recently acquired by Atlassian for just under $1 billion. And Fushman and Hamid argue that Figma, the design tools company that came close to being acquired by Adobe for $20 billion, is now happily charting its course as an independent company.

Perhaps unsurprisingly, the Kleiner team also leans heavily into investing in AI, which is what we spent the most time talking about. A video of that chat is at the bottom of the page. Meanwhile, excerpts from our conversation, lightly edited for length and clarity, follow below.

The last time we sat together in person was four years ago at a previous StrictlyVC event. At the time, Softbank dominated the news. Since then, it has shrunk. What impact do you think it has had on the industry?

IF: We’ve been putting an incredible amount of money into venture companies for three or four years, and it’s not just SoftBank, it’s a lot of people who have growth funds and crossover funds. And that flood of capital led to several things. The first is that it created many large companies. 2. Some of those companies [became] There is a surplus of funds and some of them now have to rationalize what will happen to them. Our contrarian approach when we were here four years ago was to go back to basics and focus on the early stages. [startups] Mainly because we said, “We’re just going to build a venture fund and a very small team.” We’ve always considered this to be much more of a boutique business than these large companies.

Your company looks bigger than when we last sat down. Now we have investors, experts and advisors from the old guard. [at KP]Bing Gordon and John Doerr.

MH: I think we might actually be smaller than the last time we met. I think the total number of employees in the company is in the low 50s.

Will “all AI” change anything? Can you do more with less? Or do we actually need more people to follow the AI ​​researchers who keep leaving Google to start companies?

MH: It’s incredible to see such a wave of technological innovation. I moved to the Valley in 1987, during the height of the Internet boom. It’s like a dream to be able to experience a boom like this again, twice my life. So I think there’s no better time to be alive and invest in startups than today. Because, to your point, there will be a step-function change in how we all live, experience life, and work. Because step function change will come in the form of productivity that we all gain through AI. And I think we’re already seeing that in the kinds of businesses that we support, like law and health care. For software developers. AI is actually significantly increasing the number of the highest-paid types of employees in the world. Get more done in less time.

With all these AI engineers spinning out, are VCs actively approaching these big companies and making offers for investment? Have you ever done this?

Image credits: tech crunch

I think that’s definitely happening, but the pull factor of AI, the wow factor, is really pulling people away from these companies themselves. As these tools become more useful and data more accessible, these opportunities will become more obvious and more accessible. What was important to us as we faced the first wave of people trying to start these companies was to try to understand: Do they really know how to do this? We rely on our founders to [help with these questions]; We’re looking for people who know that lineage, how these things work.

If you look back over the past decade in venture, there’s been a wave where technical talent has become the most scarce resource, and we’re witnessing it now.

How are your portfolio companies addressing this challenge in terms of hiring? Meta, Google, and OpenAI are offering multi-million dollar packages to retain this talent.

IF: There are companies like Harvey that are transforming the legal profession. There are companies like Ambience that are transforming healthcare. There are companies like Viz that do automated stroke detection and medical diagnostics. This mission is sure to resonate with those who join these companies. That’s a big factor. Second, platform companies are building a lot of incredible infrastructure, but when you get into real-world use cases and into these niche areas that turn out to be so big over time, you have to change your model. You realize that you need to tweak and potentially build. They require their own models and, in some cases, their own infrastructure. This poses a very interesting technical challenge and is also very fascinating.

From the outside looking in, it’s hard to understand how these startups are building their moats, or how powerful these moats are given how quickly everything is changing. It Is difficult.

IF: It depends on the company. Moat and overall market size are the most difficult things to understand as an investor. They are usually the most error-prone.

One thing we’ve learned throughout history is that we always underestimate the biggest winners. Companies that do their best always grow faster. They create or expand the market much more than anyone expected. So we’re looking for some intangibles, one of which is great engagement from our customers. For example, once a product becomes part of everyday use, it becomes very difficult to tear it apart.

The more obvious part of your moat is the part of the market you are in. Many of the companies we support, especially AI companies, are occupying large problem spaces that companies can and should own. For example, in the case of enterprise assistants, it’s a big field and the first people to figure it out will be the ones to act the quickest. If you look at AI, you can’t give it away for free like you can with mobile, unless you have a great product that can hit shelves quickly. AI requires distribution, and improving product experiences requires data. That’s why we believe that the first person to define a product category can do it much faster than anyone else.

How many AI-related pitches do you see each week or month?

MH: In terms of percentage, I would say it’s over 80%. Honestly, if you were starting a company in 1996 and you didn’t mention the Internet, you’d be insane, right? Similarly, not mentioning or leveraging AI would be a missed opportunity. Become.

And how active are you in this area?

MH: If you look back at the first three quarters of last year, this was the slowest year in 13, 14, 15 years. December was a really good month.

That was around the time you led the Together AI deal, which was a very hot deal. Why are people so fascinated by this company?

IF: We run a platform and set of services for people who want to run their own models.In a sense, this is like a bet against some kind of oligopoly. [centered on OpenAI, Microsoft and Google] It’s an infrastructure company, but it’s a company with great customers, very strong growth, an incredible name team, and the numbers speak for themselves. Again, we are building vertical experience in healthcare, law, software, engineering, and science. Fine adjustments will be made, [proprietary] Some of these use cases may require modeling, so the opportunity is actually quite exciting.

I hear you’re also investing in wearables, which was started by someone VC’s salivating over. Please tell us more!

MH: I don’t know if I can say more today. I don’t think they want that. next time.

Based on what you’re seeing, do you think one AI wearable will win? Will we only carry one wearable device, just like we carry one cell phone?

I think we’re all asking ourselves the question: What is a computing platform beyond a mobile phone? Some people wear Oura rings, others Fitbits. I’m wearing hoops. These are cute and basic wearables. They’re not that smart.

What captures the imagination of all of us is what computing wearables that are not similar to mobile phones will we adopt in the future? There’s also Rabbit, there’s Humane AI pins, and you’ll soon see Vision Pro vision. Exciting things are happening. But as we know, it’s very difficult to get consumers to adopt new form factors and new ways of doing things. That requires great design, low-cost products, and beautiful interfaces, all of which I think we’re excited to see.

Figma, whose Series B round you led in 2018, cut its valuation in half from the $20 billion that Adobe was planning to pay to $10 billion. Where do we go from here?

MH: Figma is one of those once-in-a-decade companies, both in terms of the team, the product they built, the love from the community, the revenue profile, and the profitability. It’s a venture capitalist’s dream. So it’s not sad that the company is charting its own trajectory. For everyone around the table, agreeing to sell the company in September 2022 was extremely bittersweet. So we feel very energized about the future and I think the company continues to do incredibly well.