Greylock's Saam Motamedi: AI creates most disruptive software opportunity since 2005 cloud wave — new pricing, interface, and data models arriving simultaneously

across the entire development cycle from road map to release. [applause] Um, we also have a venture capitalist joining the show. S can break it down for us. And I'd love to know his thoughts on this bombshell report from the say you're cooked. You're cooked. It says, you know, if you're in venture, pivot to, you know, uh, uh, toiletry. Not toiletry. Uh, plumbing. Be an electrician.

Become a become an electrician because it's all over. Do you think it's over? Do you think venture capital the game's over?

Uh, guys, the game is it's never been better. I think

we uh,

let's [laughter] go.

Thanks for having me on.

Venture capitalist. It's never been better. Put the headlight up. I love it. Greylock turned 60 years old this year. So this firm started investing before the internet. The original partners would find companies.

Wait, how many years old?

60.

Yes.

What? That's so old. I had no idea. I thought it was like 10 years old. That's crazy.

I No, I the oldest firm in the US.

Overnight success. I love it.

Yeah, overnight success. And we're in our 17th fund. And I would tell you our the company quality we see right now, we've never seen anything like it. I I mean there's there of course there's a lot of things that are crazy going on, but if you just look at the overall secularity of what's happening. Yeah. I think I I really think the game's never been better.

Yeah. But you're in a unique position. You have a name brand, you know, like

not seem insane that that we raised there was more money raised in

21 22.

Yeah. So, so, so help me understand it because Greylock is in a great position. It's a great brand. It's a name that everyone knows, been around for 60 years. It's crazy. Um, you can get into the companies that are doing really well. If we are witnessing like, you know, more monopolistic markets, more winner take all bets, more okay, the the champions being crowned in this category. Everyone's just got to get in. You're going to be one of the funds to get in. A lot of people are not going to get in. Do you think that's what's driving the lower amount of new funds that are being raised? Is that what's going on? How how are you interpreting the fact that um that the number of funds seems to be going down year-over-year for the past four years?

I think we had and you guys were talking a little bit about this, but there was almost this like one-time anomaly in the market structure in the 21 period where you saw like an explosion of new funds and on the one hand it was like super exciting all these solo GPS, new funds, new guard, etc. And then I think like once you hit an air pocket and you realize like life is not just straight and up to the right, but these cycles have ups and downs and even the best companies have ups and downs. I mean I think about the companies we've been a part of from when they got started. The most recent success case being Figma. Like it took Figma several years to get the product right and start accelerating sales and they became one of the fastest growing companies of all time. Entrepreneurs want firms that are in this for the very very long run. And so what you're going to see is a reconentration to a small set of firms that are like venture capital is a 100% of what they do. They don't have any other jobs. It's not a side gig. And those firms are going to raise more capital and be stronger partners to the best companies. It wouldn't surprise me if like the net number of firms goes down because most firms don't perform. But uh but but I think if you think about it on an aggregate basis and like what lies ahead for venture uh it's there's good reason to be extremely optimistic. Let's talk about SPVS because I think that might be a piece of what's going on here. Do you does does Greylock historically have a policy around when to pull the SPV off the shelf? I know some firms they never use them. They never have in their history. Other firms, you know, yeah, they use them as much as they want.

They're not even that special.

I just call them purpose vehicles. I don't call them special purpose vehicles. Just regular purpose vehicles. Uh just internally, walk me through Greylock uh uh Greylock's thesis on SPVS. Our business model is very simple, which is we want to partner with a small set of founders and be their most meaningful partner. We we keep everything else really simple. We have a single fund. It's a billion dollar vehicle. We've raised billion dollar vehicles consistently over the last

15 to 20 years. That billion dollars goes into a really concentrated set of core positions, something like 25 companies.

And then if we do our job right and we partner with the right teams, some subset of those go on to become iconic public businesses. And the founders do really well, our investors do well, we do well. We're not trying to like optimize at the margin and spin up an SPV here and spin up an SPV there. We think it like takes the eye off the ball. Like the only thing that really matters is leading that first or second round in in the great companies.

Okay, love that. Uh, do you think that the fact that there are other firms spinning up a lot of SPVS for bigger and bigger deals could be just I'm trying to resolve the cognitive dissonance of like I'm looking at a chart going down down down in terms of money and then every day I'm hearing bigger and bigger numbers around the AI boom and the AI bubble potentially. And it just feels like maybe some of the dollars that are flowing into just tech and growth investments and high growth companies is maybe not being captured by v traditional venture capital firms. It might be sitting outside of the normal system. Do you think that's possible?

Yeah, I think I I think it is. So maybe two-part answer. So one is power laws always dictate a technology in venture. AI makes the power law more extreme. So we'll, as we're saying, there's going to be a smaller set of companies, but also a smaller set of firms and capital pools that are involved with those companies and supporting those companies, and they will become larger than ever before. And I just saw the news about the most recent SpaceX tender. It's just the latest example of that.

But then the second is you're right like a lot of the capital especially at the very late stages may not look like traditional venture. I mean a lot of it is actually corporate capital. If you look at the role that Nvidia just Nvidia alone plays in AI financings that's a big portion of dollars uh SPVS are are for sure a piece um other capital pools that we wouldn't view as traditional venture capital firms crossovers

credit debt I mean there are there are companies where they're hard tech and they'll see you'll see a big headline number 100 million 200 million raised and actually 80% of that's debt because yeah they're going to be buying a building and you don't want to pay for that in in equity and so yeah that's another maybe distortion to the financing

and as a as a as a as a founder like you want to pick the mostly optimal way to finance the business at any junction in time. It's not always going to be traditional venture capital. If there's a that provider or strategic capital provider who doesn't think about ROI on the capital the same way a traditional venture investor would like that could be a lot more attractive for you at a certain point in the company's life. So I think it's probably overall healthy for the ecosystem and honestly great for founders but that could explain what you're seeing in the the report that you're referencing.

Talk to me about Greylock Edge. how like what's the pitch to founders? There's so many different ways to start a new business. I'm I'm I'm interested in how you carved out a unique product there.

So, one thing I love about Greylock is our history is defined by helping founders get started from scratch in our offices. If you rewind the clock 20 years, there are two companies that got started at adjacent desks in our San Mateo office. One is a company called Palo Alto Networks, which is a ballpark $150 billion cyber company today. And the second is is a company called workday.

Since then we started other we've helped start

um celebrating.

Yeah. Keep them going. Keep them going.

They got two banger companies. Let's go.

Uh

do you still have do you still have those desks? Like do you do you keep them in like a glass box and pull them pull them out?

We have we have a variety of good luck charms from that office. I don't think we we've now elevated to the modern standing desks uh which I don't think were used back then. Um but uh but and then I'd say since 2005 we've had another eight or nine companies get started that way including you know abnormal which is late stage private and others. So with Greylock Edge we took all of that and we said hey let's go take that to the market so entrepreneurs understand when they get started they can work with us before there's an idea and we will work with them to help identify the right idea. We have nine senior recruiters on our team. They place an engineer at a portfolio company every other day. So we'll help build out their initial engineering team and then we have a large customer development arm that sources like somewhere between 40 to 70% of the first two years of pipeline. So kind of the way I look at it is we're an Iron Man suit. You plug into the Iron Man suit, we accelerate you out of the gate and then once you're on your own, you kind of get rid of the Iron Man suit.

Do you think it's particularly good uh for B2B enterprise companies? I mean that that sounds like where because if I'm like ah I'm starting a I'm starting a like a consumer company for you know Midwestern moms or something I'm going to be like how how are you going to help me go to market necessarily.

Exactly. I I'd say our focus is horizontal enterprise software.

Okay.

And and what I mean by that is by the way like there's 20,000 21,000 companies in the world that do north of a billion a year in revenue.

Cool.

They control like most of IT spend in the world. Yeah.

So very simplistically, if you're an enterprise software entrepreneur and you can build something that can sell to those 20,000,

you can build not just a public company, but a company of the scale of what I just spoke about and for those we have an understanding and an ability to accelerate. It's not going to apply to everything what you know but but for that shape of company, it's very very successful.

That's amazing. Cool. Jordy, anything else? This is a great

Yeah. Do you uh do you guys have any kind of thesis around uh what's been happening uh to SAS in in public markets? I was listening to uh the new Invest Like the Best episode uh yesterday uh with um sorry I'm blanking on his name. He talked about space data centers. Uh

Gavin Gavin Gavin Gavin Baker, sorry. It's Gavin Baker was on and uh talking about how he thinks like they're there's a lot of these uh enterprise SAS companies that are not really willing to uh kind of like cut into their margins and lean heavily enough into AI. like what's your guys' like general clearly you're bullish on the enterprise like for these companies that are getting off the ground and then maybe even latest stage companies like what is your general framework for how to think about how SAS is evolving I think in order to see a new rise in software you need three things to be true you need a new pricing model you need a new underlying software interface and you need a new data model last time that happened was in 2005 with cloud and the rise of those companies that's happening again now and in our view it creates an opport it creates the first opportunity by the way investors have been looking for this for a long time like 8 years ago was mobile and people like mobile CRM mobile HR software but that was just a new interface it wasn't fundamentally disruptive I think the confluence now with sort of this agent era is fundamentally disruptive and we are going to see uh us uh like let's say latestage and public software companies at threat from new startups that come in with an outcome oriented model an agentic based interface and oper operating directly on the unstructured raw data versus a structured schema and it's it's very disruptive right and like you know for example we're investors in a company called resolve AI which automates software operations on top of observability tools

but now when you have agents doing all that work instead of users and humans you have to ask yourself okay well if I'm a large public SASCO in that space all of a sudden I've been disintermediated from my end user what does that really mean for my long-term durability and so we take like a very constructive view on it which is really good good for new startup s and new companies. I think Gavin was making the comment that these late stage and and also public companies, they're in a bit of a stuck between a rock and a hard place because they worry about short-term margins. In order to really lean into AI, you have to be willing to take down your margins with the belief that over time you're going to drive value and margins will come back up as the unit cost drops. A lot of companies are not willing to make that long-term investment and in that dilemma creates the opportunity for startups.

Makes a lot of sense. Well, thank you. Thank you for joining. Uh, great to meet you and uh, sure will be back on soon.

Thanks for having me, guys.

We'll talk to you soon. Have a good day and merry Christmas.

Merry Christmas.

Gemini 3 Pro,

Google's most intelligent model yet.

It's state-of-the-art reasoning. Next