Mamoon Hamid: AI - Where Value Accrues, Startups vs Incumbents & Scaling Laws | E1217

1. 0:00 – 3:01

   Intro

   1. MHMamoon Hamid0:00

      (instrumental music) I love products that create markets. Slack created a market. Figma created a market. They get to create the playing field, they play on the playing field, and they win the game. We've invested in a lot of application-layer companies. We took, actually, the top 20 jobs in the US and who makes the most? And it's doctors, it's lawyers, and it's developers. How do we help supercharge these people who are highly scarce, highly skilled and we're not producing enough of them?

   2. HSHarry Stebbings0:23

      Ready to go? (instrumental music) Mahmood, I am so excited for this, man. I can't believe it. You just reminded me that SaaStr nine years ago was our first show. Thank you so much for joining me today.

   3. MHMamoon Hamid0:44

      Thank you so much, Harry, for having me. It's so great to be here.

   4. HSHarry Stebbings0:47

      Listen, I wanted to start... I started an LP update the other day that I did with, "It is the most exciting time to be in venture. It's also the hardest time to be in venture." Would you agree with that statement, high level?

   5. MHMamoon Hamid1:00

      It is the most exciting time to be alive. It is. We're in the midst of a, a supercycle like none we've seen before. Uh, the AI supercycle, as you know. And it reminds me of the time when I first came to Silicon Valley in 1997. I was 19 years old, and it was all just roses all around me. It was the rise of the internet. And this time feels much like it, multiplied by 10. And that, obviously, puts us in an interesting spot as venture investors who get to invest into this cycle, this, this sort of massive tidal wave of change that's coming. And yeah, the world's not going to be the same anymore.

   6. HSHarry Stebbings1:46

      It's not. Uh, the thing that's seismically different for me when I look at the two, and, uh, I don't mean to age you, I was four in that kind of period.

   7. MHMamoon Hamid1:54

      Yeah.

   8. HSHarry Stebbings1:54

      We didn't have the incumbents spending $100 billion on frontier models. Larry Ellison said the other day, "It's going to be $100 billion to enter the frontier model race." And you're looking at that going, "Christ, that is a different level of incumbent spend than we've ever seen before." How do we think about that, as it is a fundamentally different addition?

   9. MHMamoon Hamid2:10

      Yeah, we have some very strong incumbents, Google, Microsoft, Amazon, Meta, Oracle-

   10. HSHarry Stebbings2:19

       (laughs) .

   11. MHMamoon Hamid2:19

       ... who can all spend hundreds of billions on these front-end models. So you're absolutely right, and Larry's absolutely right, of course.

   12. HSHarry Stebbings2:25

       Does that make it harder for us as venture investors? With the rise of corporate investors who maybe have d- different motives or different incentive structures, does that make it harder for us?

   13. MHMamoon Hamid2:35

       It doesn't, uh, because I think the opportunity is still in front of us. I think the, uh... we can talk a lot more about AI, but just, it, there are so many things to build on top of this infrastructure, all these frontier models, that is going to create so many trillions of value over the next decade.

   14. HSHarry Stebbings2:53

       I- it's a really... I hate kind of broad and generous questions-

   15. MHMamoon Hamid2:56

       Yeah.

   16. HSHarry Stebbings2:56

       ... 'cause they're generally for crap interviewers, but, you know. Uh, as I said, I've done 2,700-

   17. MHMamoon Hamid3:00

       (laughs) .

   18. HSHarry Stebbings3:00

       ... so

2. 3:01 – 5:28

   Where Will AI's Value Accrue, and Where Should Capital Focus?

   1. HSHarry Stebbings3:01

      hopefully, I have some skills. But when you think about kind of the AI landscape today, how do you think about where the most value will accrue and you want to concentrate most of your time and capital?

   2. MHMamoon Hamid3:10

      We just talked about how everyone's overinvesting right now into this cycle, and... because no- none of us can miss, whether it's the large incumbents or us as venture investors backing companies. And so your question is like, where do we invest as venture investors? And I can tell you, we're, we've invested in a lot of app- application-layer companies, uh, that are solving very specific pain points. Uh, and the way we've looked at it, pretty s- simply is, if you think about we took actually the top 20 jobs in the US and who makes the most? Simple. And it's doctors, it's lawyers, and it's developers. How do we help supercharge these people who are highly scarce, highly skilled, and we're not producing enough of them? So you try to build software, AI, that helps them do their job better. And, uh, so we backed companies that help doctors, lawyers, and developers with co-pilots, so Harvey, Ambience, and Codium.

   3. HSHarry Stebbings4:12

      I completely understand that rationale. My question to you when I look at those is, fantastic. Trouble is, there's 10 alternatives going after every category.

   4. MHMamoon Hamid4:21

      Yeah.

   5. HSHarry Stebbings4:22

      How do you think about differentiation in this world when there are 10 transcribers, note-taking apps for doctors?

   6. MHMamoon Hamid4:29

      Yeah, I, I think it's like any other space, any other traditional linear software space, I call them. It's, it's about teams that will out-hustle and will out-work and have... In this case, actually, the technology really does matter. The quality of the output of their models really does matter. The tuning of, of what they've done to the frontier model does matter. You can't have a, a medical transcriber that's 87% good, okay? It has to be s- close to, like, 99% good. And that actually requires real technical depth and adeptness. And, uh, I would say all three of these examples I cited are started by founders who are extremely technical. And, uh, they've been at it. This is not just, like, some tourist AI engineer. It is, like, sort of deep ML experts who've been doing this before they started these companies, and paired up with a, uh, very, a domain expert f- co-founder who understood the market that they're going

3. 5:28 – 7:49

   Is AI Investing Different from Traditional SaaS Investing?

   1. MHMamoon Hamid5:28

      after.

   2. HSHarry Stebbings5:28

      It, it's really interesting. You said there that it's, you know, very much like investing of old, really, backing incredible teams in the right markets, you know, building incredible products. So many people said, "Listen, Mahmood is one of the greatest investors of the last decade," when we look at some of the picks from Rippling to Figma. The list goes on. It's insane. Is AI investing different to traditional SaaS investing?

   3. MHMamoon Hamid5:50

      It's n- no different than anything else in venture capital. Our job is to invest in early-stage companies that make history and are generational in nature. And our job is to recognize the trends and the tectonic shifts in technology, and then invest in the right people and the right markets at the right time.... and right now, I would say the, the entropy in the system is really high. It's crazy out there. It is like, things are changing left and right. And that makes, I think the job really fun. I, I just would say that it's the same as it was 25 years ago.

   4. HSHarry Stebbings6:25

      It, it's fun. It's also challenging from a pricing perspective. I saw three companies last week that raised over 750 million pre-product.

   5. MHMamoon Hamid6:33

      Mm-hmm.

   6. HSHarry Stebbings6:34

      How do you think about navigating the pricing environment when there is such fervor pitch excitement for these companies?

   7. MHMamoon Hamid6:40

      Great question, Harry, and I think we all sort of fall victim to those, uh, every once in a while. But that can't be the core part of the business. Yeah. That can be the, the one like that got away, and you have to get into this pre-product company because the founder is so exceptional. That can be, you know, one out of the 20 deals you do this year. It can't be every single one of them, because as you know, Harry, you know, we have to get our ownership at the early stages where you're investing five to $10 million for 15 to 20% for the math to work for, for our funds, and it can't be done if you're investing, you know, 25 million at 750 post out of an early stage fund.

   8. HSHarry Stebbings7:19

      My question is then, how do you think about breaking the rules and letting the one that got away not become the norm?

   9. MHMamoon Hamid7:26

      I think I heard from someone many years ago, you know, 20% of the strategy should be to not be on strategy. And, uh, in some ways, we have, uh, what we call like a YOLO bucket-

   10. HSHarry Stebbings7:36

       (laughs)

   11. MHMamoon Hamid7:37

       ... uh, in our funds, and where you just have this extreme conviction around the, the founder and the company where you're sort of willing to break the rules. Uh, and, uh, like I said, it's, it's by exception.

4. 7:49 – 14:18

   Sustainable Growth vs. Sugar High Revenue

   1. MHMamoon Hamid7:50

   2. HSHarry Stebbings7:50

      Have we ever seen revenue scaling like this either? I'm, I'm brought up in the days of like 18 months-

   3. MHMamoon Hamid7:55

      Yeah.

   4. HSHarry Stebbings7:55

      ... to 10 million ARR was amazing.

   5. MHMamoon Hamid7:57

      Yeah.

   6. HSHarry Stebbings7:57

      This was like the gold standard. And now, I mean, we're in 11x, um, which is insane revenue scaling, and you're seeing this across the board. How do you think about determining sugar high revenues, unsustainable but very fast, versus sustainable value creating?

   7. MHMamoon Hamid8:13

      In the, the age of AI, uh, we have to think about what are we doing. We're not just providing software. We're providing labor. We're providing capabilities that enable people to do 10x the work or 5x the work, and it's helping like real labor costs either multiply your abilities as a developer or a doctor or bring costs down. So you're not just getting paid for seat-based pricing anymore. You're getting paid for, for labor. We're seeing right now is that you have seat-based pricing that was like $30 a month, $40 a month, and now you're make, getting $300 a month, $400 a month, even $500 a month for the software. So simple math is that if you, you know, you go from, you know, from start to a thousand seats, you know, which, and you got paid $30, you know, you're getting $30,000 a month. And if you're getting, if you're getting paid $300, you're getting $300,000 a month, and you're going very quickly from zero to, you know, four or five million of revenue.

   8. HSHarry Stebbings9:15

      You've seen companies, like we said about kind of replacing labor there. We've seen companies like Klarna say, "You know, we're going to replace Salesforce and Workday," in that specific case, "and we're going to build it our own with, you know, our own AI tooling." Um, to what extent do you think we'll see the next generation of companies build their own custom tooling and replace existing SaaS solutions?

   9. MHMamoon Hamid9:35

      Yeah. Well, hats off to Klarna for, uh, undertaking this. Uh, I just remember the time when, um, we built an internal CRM at Kleiner Perkins, and, uh, I think it, it sort of cost us many millions of dollars and then ongoing millions of dollars a year to just upkeep. And at, at some point, we realized like there's a great tool called-

   10. HSHarry Stebbings9:54

       We could just get Affinity or something. (laughs)

   11. MHMamoon Hamid9:55

       Exactly. We, we use Affinity. It's great. Okay?

   12. HSHarry Stebbings9:57

       (laughs) Seriously.

   13. MHMamoon Hamid9:58

       All right. Yeah.

   14. HSHarry Stebbings9:58

       For like 3,000.

   15. MHMamoon Hamid9:59

       And you know, like we had four engineers on it, like working-

   16. HSHarry Stebbings10:03

       Why?

   17. MHMamoon Hamid10:04

       Yeah. Why? Exactly, why? Uh, now I think it's actually maybe slightly different. You know, I think it's like that's too broad of a brush to paint with, is if you think of the people you'd hire for customer support as labor that you would spend money on, now, how about you hire developers to, you know, do the labor work for you in the, in the form of AI? So I, I get the rationale perhaps that Sebastian has around doing that internally, but I also get like there will be a company that's going to do it really well for you, and you will have to pay for outcomes. Uh, and you will have to pay for the number of tickets resolved by that, that software or that AI. So the question is, are you not willing to pay that? Uh, and in most cases, at the end of the day, you're like, "You know, I should just pay Stripe two and a half percent, okay, rather than billing it all myself." So the question will be, well, how many companies will go down the path of Klarna? And, uh, the other side of it is that right now, we're in this area, you talked about sugar rush. We're in this era of doing a bunch of proof of concepts. You're just trying out all this cool stuff that's coming to existence in the last two years and seeing, "What can I do with it?" And every CIO at every large company is spending real money doing POCs. And, uh, in many cases, we realize like, you know, it's hard actually to build this custom thing inside. Uh, and this reminds me of like 25 years ago during the internet. Everyone's spending a lot of money internally to do things on the internet, and then you hired all these consultants from Razorfish and Sapient and other companies that came in and tried to help you with the internet. And I think that same thing is happening right now. And, you know, history repeats itself.

   18. HSHarry Stebbings11:40

       What today do we do or not do that in 10 years time we will look back and go, "That's crazy"? So some examples is, you would never put your credit card on the internet, one. Two, you would never find your partner on the internet now.

   19. MHMamoon Hamid11:55

       Yeah.

   20. HSHarry Stebbings11:55

       To-

   21. MHMamoon Hamid11:55

       I, I think we will hopefully never talk to a customer support agent ever again. Like someone you call for the airlines, like, you know, "Help me, my, my flight. I need to upgrade it," or, "I need to change my seat," or, "Can you cancel it because I can't go?" You know, the bank, things that, of that ilk that you still scratch your head, "Why don't, why am I still doing this?"... right? And it will happen, you know, hopefully just like you, like you provide a, a text message and it gets resolved on the back end. And it's all being done by, you know, agents talking to agents and stuff like that happening. I, I hopefully think the world will not... It will have a way better customer support experience.

   22. HSHarry Stebbings12:31

       Please hold. (laughs)

   23. MHMamoon Hamid12:33

       (laughs)

   24. HSHarry Stebbings12:34

       Uh, it's when you're waiting on like insurance lines and it's like, "Please hold." And like 30 minutes later, it's like, "You should put the phone down" on you. (laughs) Like, "What?" (laughs)

   25. MHMamoon Hamid12:40

       Y- you know, I was on a call, it was, uh, ye- yesterday with one of my CEOs and he said, "Hey, can you hold on for a second?" I said, "Sure." Got hold music from my CEO.

   26. HSHarry Stebbings12:48

       You got hold music? (laughs)

   27. MHMamoon Hamid12:49

       From one of my CEOs.

   28. HSHarry Stebbings12:51

       (laughs)

   29. MHMamoon Hamid12:51

       (laughs)

   30. HSHarry Stebbings12:52

       His, his reserve check just went. (laughs)
5. 14:18 – 20:50

   Will Foundation Models Subsume Application Layer Companies?

   1. MHMamoon Hamid14:18

   2. HSHarry Stebbings14:18

      I do have to ask, you know, when we look at a lot of potential use cases, a lot could be subsumed by the foundational model companies, if they are big enough. An example could be talking translators, you know, talking avatars that you could talk to in a friendly enough way. How do you... Do you worry about application layer companies being potentially subsumed by foundation model layer, if they are such a core competency?

   3. MHMamoon Hamid14:41

      I don't. It's a, it's a bit like, uh, the hyperscalers thinking they can do everything and they've decided that that's a great business model, is to, uh, own the electricity and, uh, or the... and the pipes, uh, and then just charge for... by the, by the hour or the kilowatt hour. And I think that's a pretty darn good business model for the hyperscalers that provide the models, um, in OpenAI. And I was reminded by, you know, we- I was at OpenAI maybe a month ago, and you know, we're going through all these demos of cool products that are coming out, like o1 and Strawberry, and realized that, uh, their positioning is, "We can't do everything. We're a 1600 person company. We can't build the, the application layer stuff that you guy- we want you guys to build, or your companies to build." And so, I think that there's a great business to be had in LLMs and in providing the compute and the, the electricity, and there's a great business to be had by being very vertically focused around applications.

   4. HSHarry Stebbings15:39

      I mean this nicely.

   5. MHMamoon Hamid15:40

      Yeah.

   6. HSHarry Stebbings15:40

      Is there really a great business to be had in the LLM layer? When you look at the price dumping that's occurring right now, it relatively... And the commoditization that we're seeing occurring, you know, you get people like Sarah Tandal, who we love is like the fastest depreciating asset in history. You know, every week it's like, "Anthropic's better than the OpenAI." Now, yeah, OpenAI is better than Anthropic.

   7. MHMamoon Hamid15:58

      (laughs)

   8. HSHarry Stebbings15:59

      And bluntly, the price dumps are real. Is it actually a good business?

   9. MHMamoon Hamid16:03

      The beautiful thing about just the, uh, GPU is getting better, and, uh, the infrastructure just layer just being more performant, models getting better at... Sure, they're get- the models are getting bigger too at the same time. So there's... Let's maybe like draw the difference between there's all the folks who are providing... There's GPUs, there's, uh, people providing data centers, there's people who've now built LLMs on top of, uh, all this compute infrastructure that's there. Uh, so what's a... Clearly, NVIDIA is a great business. Uh, hyperscalers are investing today for the future. And I think ultimately, the margins, just like if you look at 20 years later, uh, of AWS, how great of a business that is, that on a standalone basis would be a top four enterprise software company, right?

   10. HSHarry Stebbings16:51

       Mm-hmm.

   11. MHMamoon Hamid16:51

       Same with Google Cloud. So, that's a great business over time. And then, uh, you look at the LLMs. So if you're just providing tokens or if you're selling tokens, is that a great business? Uh, and right now, (laughs) uh, given the public profile of OpenAI and the financials that we've all seen, today, it's, it's not a great business. But, you know, I think they're smart enough to figure out how they can get to a gross margin that will allow them to be a highly profitable business over time.

   12. HSHarry Stebbings17:19

       Do you think the scaling laws will continue?

   13. MHMamoon Hamid17:21

       Yeah. So just the rough math is that in the last 18 months, uh, the price of a token has gone down by 200X. But that's just like the super early innings, right? We're talking about the first... Two years ago, we didn't have ChatGPT. And, uh, t- today, we have so many different applications that are uting- utilizing this technology. So, uh, will it go down 200X over the next, uh, t- two years? I don't know. But it will probably go down, uh, by, by 10X or 20X. And then do we expect to see, uh, 10X better models or 20X better models? That'd be pretty insane, right? Like, what do you... Don't you think that though a 20, 20X better model is going to be pretty insane for all of us?

   14. HSHarry Stebbings17:58

       David Cahn at Sequoia wrote this article, The $600 Billion AI Question-

   15. MHMamoon Hamid18:02

       Yeah.

   16. HSHarry Stebbings18:02

       ... kind of pointing out the chasm, as you know, between, you know, bluntly, the cost and the CapEx and then the revenues that are incredibly lagging from, you know, AI companies and essentially being the $600 billion question of AI.

   17. MHMamoon Hamid18:14

       Yeah.

   18. HSHarry Stebbings18:14

       Do you share his concern with that or do you have a different view?

   19. MHMamoon Hamid18:18

       I'd say...... uh, if I look at the ... Do you know what the world's GDP is?

   20. HSHarry Stebbings18:22

       No.

   21. MHMamoon Hamid18:23

       It's about $100 trillion. And, uh, of that, about 50% to 60% is in labor. Uh, technology is roughly, like, 15% of it. And over the next decade, if we grow at the more traditional GDP growth rates, it'll be anywhere from 125% to 130%. What if technology grows from 15% to 20%? That's like $25 trillion in technology companies. And up from say $15 trillion today. So, $10 trillion of annual spend will get created for technology companies over the next decade. When you think about, you know, $200 billion spent on CapEx or $600 billion spent, I think the, the question's really like, the $200 should result in $600 billion of revenue. I think the revenue will be there for ... Because again, we're not just tackling software, linear software as I call it. We're tackling, like, labor and labor shortages and things that humans can do but it's the worst part of their job, or we don't have enough people who can do the job. Again, go, I go back to the example of doctors. We're not producing enough doctors. We're not producing enough developers. We're not producing enough lawyers. It's- it's those types of jobs where we're going to see the immediate more near-term impact.

   22. HSHarry Stebbings19:43

       Listen, when we spoke before-

   23. MHMamoon Hamid19:44

       (laughs)

   24. HSHarry Stebbings19:44

       ... you said to me that, you know, the nature of the landscape is changing so fast and it's kind of all the same but different in terms of the venture landscape. In terms of the venture landscape, what's the same then?

   25. MHMamoon Hamid19:57

       The same is, hey, we're, we're in the business of backing incredible founders who are perseverating on a problem set that may be a hair-on-fire problem for- for lots of folks. And they're building, and they're building the right product at the right time. And that's the same. We're, we're in the business of fi- finding those people who are doing that job and trying to build a business. And hopefully we can help them a little bit in building their business.

   26. HSHarry Stebbings20:25

       So, what's different?

   27. MHMamoon Hamid20:26

       What's different is that there is more capital in our industry than ever before. Uh, and that capital at times thinks that everything will be a Decacorn. And, uh, you're over-funding some companies. Maybe they deserve it because they're the far-and-away leaders. Uh, but at the same time, there's another, you know, half a dozen, dozen competitors

6. 20:50 – 22:07

   Where Does Kleiner Perkins Fit: Boutique or Capital Accumulator?

   1. MHMamoon Hamid20:50

      that get funded.

   2. HSHarry Stebbings20:51

      When we look at the venture landscape, you have like, in my mind, boutiques, USV Benchmark Boutique, and then you have like capital accumulators, which is Tiger, Coatue, Andreessen, General Catalyst, Lightspeed, Sequoia now. Respectfully, uh, and I say this with total-

   3. MHMamoon Hamid21:07

      Yeah.

   4. HSHarry Stebbings21:07

      ... where does Kleiner sit in that? Because you kind of sat in the middle, in my mind.

   5. MHMamoon Hamid21:11

      Yeah.

   6. HSHarry Stebbings21:11

      How do you think about that?

   7. MHMamoon Hamid21:12

      We are primarily early stage-focused. Uh, we have a- an $800 million fund for that, and then we have a, uh, $1.2 billion growth fund, and we ... This team of seven folks, um, invests out of both of those funds. I would characterize us as boutique because we're kind of a small team that believes in the craft of venture capital. Uh, it's, we, we think it's a business that doesn't scale actually. Um, and so, uh, w- we're not scaling through people but we have the scale of capital. Because our growth fund even, half of the dollars are allocated towards ... Not allocated, but half those dollars are invested in our best companies from our early stage funds. So, it doesn't require us to have a, a, a large, uh, team, so to say, because we're already involved with some of these companies like Rippling and Glean and Figma that we're doubling down

7. 22:07 – 26:53

   Lessons in Reserves Management & Capital Concentration

   1. MHMamoon Hamid22:07

      into out of our growth fund.

   2. HSHarry Stebbings22:08

      What have been your biggest lessons? I suck at doing reserves.

   3. MHMamoon Hamid22:10

      Yeah.

   4. HSHarry Stebbings22:10

      I think it's a very hard thing to get good at. (laughs)

   5. MHMamoon Hamid22:12

      (laughs)

   6. HSHarry Stebbings22:13

      So, please, uh, give me your wisdom. What have been your biggest lessons in how to do reserves management and concentration of capital well?

   7. MHMamoon Hamid22:19

      Yeah. So, reserves is one. It's like when you have a co- uh, an early stage fund ... And we typically invest in about 35 companies per fund. Uh, and so- so do you ... How much do you reserve for each one of those investments? Uh, uh, typically, we, we try to invest about ... And we've looked at the math. Uh, more than half in that first check. So, let's say you're doing ... Over the life of the company, you're investing $25 million in a, in that early stage company. Let's ... But you're starting out with a $15 million check, and then you're reserving another $10 for the series B and beyond. And I would say it's- it's generally worked out pretty well. Like, you know, we're now-

   8. HSHarry Stebbings23:00

      So, you're 60% initial, 40% for subsequent two rounds?

   9. MHMamoon Hamid23:03

      Yep.

   10. HSHarry Stebbings23:03

       Yeah.

   11. MHMamoon Hamid23:04

       Mm-hmm. That's a rough, rough math, and then we move dollars around. You know, some ... A company may get acquired early or a company might shut down and we'll rejigger those dollars a- around. It- it's not a ... It's an art and a science.

   12. HSHarry Stebbings23:15

       When you don't do it, how do you communicate that to founders well?

   13. MHMamoon Hamid23:18

       If you're not giving someone ... Well, I think because we're on the board and there's so much signaling involved, uh, in us doing let's say nothing, uh, we generally do something. And I think that's allowed us to get away with, like, doing a small amount in a follow-on round. And m- in many cases, if it's a really attractive round where, uh, folks want as much as possible and we're doing a little bit less than pro rata, everyone's happy. But if it's the, "We need the money," and you're s- you're, you're not going to invest in this round ... And well, these days there's pay-to-plays, so if you don't invest, you get wiped out. Okay, so don't want that. Um, so, so there are different scenarios here.

   14. HSHarry Stebbings23:56

       Have you ever had a pay-to-play turnaround? One of ... I said this the other day-

   15. MHMamoon Hamid23:59

       Mm-hmm.

   16. HSHarry Stebbings23:59

       ... to an investor and they said, "Okay. I bet you, if you never participate, you will do better off."

   17. MHMamoon Hamid24:04

       Uh, yeah. Mm-hmm.

   18. HSHarry Stebbings24:06

       You have?

   19. MHMamoon Hamid24:06

       Mm-hmm.

   20. HSHarry Stebbings24:07

       Wow. That's good to hear.

   21. MHMamoon Hamid24:08

       Yeah.

   22. HSHarry Stebbings24:08

       That's reassuring.

   23. MHMamoon Hamid24:08

       I- I've had companies, uh, that are one week away from cash out become public companies.

   24. HSHarry Stebbings24:15

       Wow.

   25. MHMamoon Hamid24:16

       Yeah.

   26. HSHarry Stebbings24:17

       Can you say?

   27. MHMamoon Hamid24:17

       Yeah, sure. Uh, Box.

   28. HSHarry Stebbings24:20

       Really?

   29. MHMamoon Hamid24:21

       Yes.

   30. HSHarry Stebbings24:21

       Wow.
8. 26:53 – 30:19

   Why Do Breakout Companies Plateau?

   1. MHMamoon Hamid26:53

   2. HSHarry Stebbings26:53

      What are the biggest reasons breakout companies plateau, in your mind? You've seen some absolute monsters and you mentioned that Box f- s- struggled in those times. What are the reasons why breakouts plateau?

   3. MHMamoon Hamid27:05

      They don't, uh, innovate anymore or not fast enough. Uh, they are w- what big companies become, which is, you know, you're trying to protect your turf, and you're not disrupting yourself enough, and someone else comes in to p- disrupts you, and starts taking away revenue from you.

   4. HSHarry Stebbings27:21

      You mentioned Box there. Box, obviously, IPOs. A liquidity event is, is always, you know, welcomed by LPs and investors. How do you think about when's the right time to sell? It's the age-old thing. You look at all of, you know, Bessemer's, uh, memos, "You always underestimate the size of your winners." How do you think about when to sell?

   5. MHMamoon Hamid27:39

      I wish there was a bit more selling happening right now, uh, or op- opportunities to sell. Uh, as you know, the M&A markets have been pretty, pretty slow, uh, recently. So, uh, but to answer your question, Harry, there's a local maxima that I think about sometimes, about, with companies where this is sort of the local maximum in terms of perceived value by the market for a company, and, uh, it, that's a great time to sell. And so now you have to figure out when is the local maximum for a company? Um, and, and I would say it's like, it's sort of, you know, the markets are riding high but it's also like where people believe that this company is the leader, but there's questions around whether there's, there's a standalone company to be built and it's way better off being acquired by a strategic who can do even better things with the company. Uh, uh, but that is, again, doesn't happen as much anymore.

   6. HSHarry Stebbings28:29

      Have you done well selling?

   7. MHMamoon Hamid28:31

      There's one s- particular example, uh, that I think, uh, ended up working out pretty well. Uh, this is, uh, when Yammer got acquired by Microsoft, uh, it was a $1.2 billion acquisition. At the time, it felt like, "Man, we've got so much ahead of us. Uh, Yammer can become the, the next Slack," you know? And fortunately for us, Yammer got acquired, and a year later we had a chance to invest in Slack. And so it almost like, was like, you know, you had a great outcome and then you weren't conflicted out of investing in the future Slack, which was obviously, which was Slack.

   8. HSHarry Stebbings29:09

      Also, you don't have the challenge when it's acquired of like, "Do I hold? Do I distribute? Do I not?"

   9. MHMamoon Hamid29:13

      Yeah.

   10. HSHarry Stebbings29:13

       And that awful choice (laughs) -

   11. MHMamoon Hamid29:15

       Yeah.

   12. HSHarry Stebbings29:15

       ... is almost easier when the choice is removed. Do you know what I mean?

   13. MHMamoon Hamid29:17

       Yeah, yeah. In this, in that case, you know, when you get just cash, you just distribute the cash, and you move on, and, you know, generally speaking, I would say even when companies go public, for us, uh, we've been pretty good about distributing stock to our LPs.

   14. HSHarry Stebbings29:30

       Mm. It's tough when you think Shopify went public at 700 million though.

   15. MHMamoon Hamid29:34

       (laughs) Yeah, and e- e- ev- everyone-

   16. HSHarry Stebbings29:36

       Um, it's, it's one where either way you're gonna get criticized.

   17. MHMamoon Hamid29:39

       Yeah, yeah. And I would say just h- Harry, like, again, you know, you, we have a lot of friends in the industry. Um, in almost all scenarios of when you're returning 10X the fund on a great outcome or 5X plus let's say of a fund through, uh, you know, a legendary company, uh, your, your LPs are happy, you're happy, you wish you would've held on and you know generated another, you know, few u- few multiples on that fund. Uh, but, uh, I, I think, and y- you have an option of holding it, the LPs do, as do you as a GP, you can hold onto your s- Google stock forever as, as John Doerr has done over the last 25 years. Uh, then that's, that's a great choice

9. 30:19 – 38:55

   What’s Mamoon’s Best Performing Investment

   1. MHMamoon Hamid30:19

      you have.

   2. HSHarry Stebbings30:19

      What has been your best-performing investment?... on a pure multiples basis.

   3. MHMamoon Hamid30:23

      Probably Slack, I would say. You know, even, um, at the 250 post, uh, that's, you know, with all the delusion over time, and if you take the 27 billion or some other number, um, that's a, obviously a good- mo- great multiple. Um, Figma, you know, the initial investment was done at about 100 post. Um, multiple wise, that's, um, you know, Rippling was also in the sort of 250 post when we did it and, um, you know, currently valued. There's one investment I remember doing, uh, early days of USCP where we did it at, I think, 10 post, and, uh, it was a $3 million check for like 30% of the company. And that company, about a year and a half ago, the founder, CEO, Steve Flagg, still a friend, amazing guy, uh, they sold it to Siemens for $700 million. And that ended up being, you know, that's, uh, se- seven- 70X. Um, i- it was a crazy multiple, right? Some ridiculous multiple. Uh, but you know, when you hold onto something for 15 years, uh, guess what the IR on that investment was if you took... If you still owned, let's say, 25% of that company at $700 million? So like 100 and something, 170 million. Three million becomes 170 million or something like that or-

   4. HSHarry Stebbings31:44

      Wow.

   5. MHMamoon Hamid31:45

      That's a great multiple. Uh, but the IR over 15 years looked more like, I think it was like 15%.

   6. HSHarry Stebbings31:52

      (exhales)

   7. MHMamoon Hamid31:53

      So... (laughs)

   8. HSHarry Stebbings31:55

      Wow.

   9. MHMamoon Hamid31:56

      Uh, we're in the multiple business still at the end of the day, but, uh, IRRs, you know, do take a hit when you hold on some- to, to something for 15 years.

   10. HSHarry Stebbings32:05

       But liquidity is tough. And liquidity is tough because M&A is not what it used to be. Mamun, are M&A markets dead?

   11. MHMamoon Hamid32:14

       They're just slow, man. Yeah. Slow. Uh, I think a lot of the big companies are just gun shy. I hear this all the time, just like not ready, you know, just like too much going on in the regulatory, you know-

   12. HSHarry Stebbings32:28

       Why would you bother, if you were them?

   13. MHMamoon Hamid32:30

       E- exactly. You're like, "Why create headaches?" We- we're, "We already have like multiple legal things that we're pursuing, and we don't need yet another thing we're questioned about, or used as an example in, in this other thing." So yeah, why bother? Uh, they would love to buy. Uh, so the question is are there a next tier of companies that will buy? And, you know, we thought obviously with Adobe Figma, Adobe is that next tier. And even that, um, as you know, you know, um, the story's been told.

   14. HSHarry Stebbings33:01

       Well, I think the thing that you are seeing is actually like incredibly high priced companies.

   15. MHMamoon Hamid33:05

       Yeah.

   16. HSHarry Stebbings33:05

       I'm not gonna name names 'cause-

   17. MHMamoon Hamid33:06

       Sure.

   18. HSHarry Stebbings33:07

       ... they are too high priced. But they are actually acquiring much smaller companies in only stock deals. And, you know, I've had quite a few deals by the way, you know, I'm getting like shares at $10 billion and it's coming from my worst worth too. And that is the kind of acquisition currently that they're going for, and they're small enough that regulation-wise, they're not getting any done. That's the only thing I'm seeing.

   19. MHMamoon Hamid33:26

       Yeah. You're right. Yeah. There are big private companies looking to buy small private companies.

   20. HSHarry Stebbings33:30

       Yeah.

   21. MHMamoon Hamid33:31

       That's happening, and I think s- sma- that was never part of the playbook.

   22. HSHarry Stebbings33:34

       What would change the M&A market, say?

   23. MHMamoon Hamid33:37

       Y- you know, it's easy to say, like, you know, regulatory environment, like, the people running these organizations.

   24. HSHarry Stebbings33:42

       Yeah. Is it... I mean-

   25. MHMamoon Hamid33:43

       Yeah.

   26. HSHarry Stebbings33:43

       ... being blunt, is it like, "Hey, Lina Khan gets replaced and then we get right M&A back?"

   27. MHMamoon Hamid33:47

       I don't think so. I don't think, uh, a lot of us put a lot, a lot of the blame on Lina Khan, poor Lina Khan. Um, because, you know, m- in our own experience, that's not, that was not the issue for Adobe Figma. It wasn't Lina, uh, or the FTC. Uh, there were other issues. So, I think it's b- broadly speaking, I mean, this is here in the UK, there's a CMA that, uh, was really involved there.

   28. HSHarry Stebbings34:09

       IPO markets are also like bluntly not easy. Uh, Cerberus, I think I'm pronouncing it right. Uh, but part of-

   29. MHMamoon Hamid34:16

       Yeah, I think it's Cerberus.

   30. HSHarry Stebbings34:17

       Cerberus. There we go.
10. 38:55 – 43:14

    What’s Mammon’s Founder Type?

    1. MHMamoon Hamid38:55

       that- that's a beautiful thing.

    2. HSHarry Stebbings38:56

       I spoke to Owen, another one of your founders, before-

    3. MHMamoon Hamid38:58

       Yeah.

    4. HSHarry Stebbings38:58

       ... who I love. Um, Intercom's a great story. But he said that you definitely have a type. You ha- (laughs)

    5. MHMamoon Hamid39:07

       (laughs)

    6. HSHarry Stebbings39:08

       I- it's young and it- (laughs)

    7. MHMamoon Hamid39:10

       (laughs)

    8. HSHarry Stebbings39:10

       And it's not where you're going. It's product oriented. (laughs) Okay?

    9. MHMamoon Hamid39:14

       (laughs)

    10. HSHarry Stebbings39:14

        And he said, "It's very much deeper than that though." Unpack that with him.

    11. MHMamoon Hamid39:20

        Yeah.

    12. HSHarry Stebbings39:20

        So when you think about your founder type-

    13. MHMamoon Hamid39:22

        Yeah.

    14. HSHarry Stebbings39:22

        ... I know we say we don't have one and we, you know, everything, but probably not true.

    15. MHMamoon Hamid39:27

        Yeah.

    16. HSHarry Stebbings39:27

        What is your founder type?

    17. MHMamoon Hamid39:29

        Yeah. Uh, I think what Owen is alluding to is, uh, one of the founder types that I love, and that first one is the- is the first time founder hyper obsessed about building a product in a sort of newish market where it's not obvious and the market doesn't necessarily exist, uh, and that would put Owen from Intercom in that bucket. It'd put, uh, Dylan from Figma in the bucket. It'd put, uh, Mathilde from Front in that bucket. Uh, and so- so it was that bucket. It's like a... And that's, I think Mathilde, uh, Owen's alluding to young product-centric founder. And the other bucket for me is like actually the- the repeat founder who has maybe even had an okay outcome or even a pretty good out- outcome and is doing it again. And I would put Stewart Butterfield from Slack in that bucket. I would put Parker from Rippling in that bucket. You know, he was a repeat founder, as you know. So there's the first time founder going into a market that they're hyper obsessed about. They're building a beautiful product, like taste is on, the- the level of grind and grit is there, and then, uh, there's a second time founder who wants to just, you know, surpass anything they'd done before.

    18. HSHarry Stebbings40:46

        What founder profile don't you like? So I can give you like-

    19. MHMamoon Hamid40:49

        Yeah. I- I don't like the, "We looked at the landscape, and we discovered that this is a great place to build a business." Like, we did a whole market mapping exercise and the TAM is going to be X billion dollars, uh, and you know, we've got, um... Yeah. It- it is that sort of like the top down approach to building a company versus the bottoms up approach to building a company.

    20. HSHarry Stebbings41:16

        Are you okay paying a premium for the experience? We see a lot of, yeah, "I'm doing a seed now, Mamoun."

    21. MHMamoon Hamid41:22

        Yeah.

    22. HSHarry Stebbings41:22

        And I so appreciate-

    23. MHMamoon Hamid41:23

        Yeah.

    24. HSHarry Stebbings41:23

        ... you being an LP in my funds. The price is slightly up. It's like 40 million for pre-seed, pre-product, pre-anything.

    25. MHMamoon Hamid41:31

        Yeah.

    26. HSHarry Stebbings41:31

        The founders are unbelievable from one of the best companies in the world and exceptional. I'm paying a premium for experience.

    27. MHMamoon Hamid41:39

        Right.

    28. HSHarry Stebbings41:40

        You always happy to do that?

    29. MHMamoon Hamid41:42

        Yeah. So I mean, I'll just give hard numbers. When we backed Arvind and Glean-

    30. HSHarry Stebbings41:45

        Yeah.
11. 43:14 – 46:10

    Should Founders Maximize Fundraising and Valuation Only?

    1. MHMamoon Hamid43:14

       at that stage.

    2. HSHarry Stebbings43:14

       A lot of times, founders are told, "Listen, your job is to raise as much money as possible at the highest price."

    3. MHMamoon Hamid43:20

       Yeah.

    4. HSHarry Stebbings43:20

       Agree or disagree?

    5. MHMamoon Hamid43:21

       I disagree. At that series A seed, it's a- it's about the people you're surrounding yourself with.

    6. HSHarry Stebbings43:28

       I, I, I agree totally. I also think, bluntly, it can damage you incredibly for the next round. When you don't actually scale into it, and suddenly you have to do a bridge or whatever it is, it makes it so much harder when you've got a hugely high watermark that you have to fill.

    7. MHMamoon Hamid43:41

       I agree, totally.

    8. HSHarry Stebbings43:42

       I totally agree with you that do you think you should always be raising?

    9. MHMamoon Hamid43:45

       For the CEO, founder CEO or CEO, your job is to make sure your, your company never runs o- out of money. If you have $300 million sitting on your balance sheet, I'm not sure you should be raising at all. And, uh, so, so, so if you're well capitalized, heads down, go build. Generally, I would say you get the markets wrong. (laughs) Yeah.

    10. HSHarry Stebbings44:05

        Can a great founder overcome a bad market?

    11. MHMamoon Hamid44:08

        Yeah, hard. Bad markets, the structure of industries where margins are compressed and customers are bad, life's just too hard that way.

    12. HSHarry Stebbings44:16

        So will you back a really great founder if they're in a shit market?

    13. MHMamoon Hamid44:20

        Probably not.

    14. HSHarry Stebbings44:21

        Really?

    15. MHMamoon Hamid44:22

        Yeah.

    16. HSHarry Stebbings44:23

        That's interesting.

    17. MHMamoon Hamid44:24

        Yeah.

    18. HSHarry Stebbings44:24

        'Cause like, for me, it's like, I'm pre-seed and seed generally speaking.

    19. MHMamoon Hamid44:27

        Yeah.

    20. HSHarry Stebbings44:27

        We use series A as well, but like, generally pre-seed and seed. I'm like, "You know what? Great founders find their way to great markets." And if they're truly great, honestly, they'll pivot, they'll change, they'll make their way.

    21. MHMamoon Hamid44:39

        Yeah. I mean, I think one could have said that about like, you would have, maybe would have missed the seed at Uber because of what, probably not-so-great economics early on, right? Customer acquisition and, like, trying to pay the drivers, et cetera, so.

    22. HSHarry Stebbings44:52

        Was Slack an obvious home run when you did it?

    23. MHMamoon Hamid44:55

        None of these are obvious home runs when you do them, right? And no, it wasn't. It was 500K of ARR at the time, and it had-

    24. HSHarry Stebbings45:03

        What price did you do it at?

    25. MHMamoon Hamid45:04

        Uh, 250 million post. (laughs)

    26. HSHarry Stebbings45:08

        (laughs) You did it at 500X ARR?

    27. MHMamoon Hamid45:10

        Yeah. Uh, uh, yeah, and I think, uh, it was, we weren't thinking in those terms.

    28. HSHarry Stebbings45:14

        Why? Was it usage patterns again?

    29. MHMamoon Hamid45:16

        Yeah. Yeah, uh, I think there were enough... Uh, at that time, there were 10,000 or so users. Like, uh, a third of them were using the product every day for multiple hours a day. We were like, "Okay, well, this is... Uh, we, we all need something like Slack, and you can scale this by 1,000X because there are lots of companies that look like this, that use it like this today."

    30. HSHarry Stebbings45:38

        Do you think that's the wrong mindset to approach it with? A lot of investors do approach it on a revenue multiple basis. Is that wrong?
12. 46:10 – 47:53

    What VCs Do Today That They Shouldn’t

    1. MHMamoon Hamid46:10

       a million.

    2. HSHarry Stebbings46:11

       What do you think is nuts that VCs do today that they shouldn't do?

    3. MHMamoon Hamid46:14

       There's just a big echo chamber. Uh, and a lot of people live in the echo chamber, uh, where folks think that's information and information is knowledge and knowledge is arbitrage. Uh, but when everyone has the same knowledge, then it's no longer arbitrage.

    4. HSHarry Stebbings46:29

       Do you think everyone does have the same knowledge? A lot of big firms say, "We've built out these amazing data platforms, and that's why we're operating off this proprietary information." Do you buy that?

    5. MHMamoon Hamid46:40

       I think it's mostly BS.

    6. HSHarry Stebbings46:41

       Yeah.

    7. MHMamoon Hamid46:42

       Yeah. I think, uh, many have tried and, and failed at using the, the very data-oriented approach to investing in startups. When, at the end of the, the day, it's about the founders and how-

    8. HSHarry Stebbings46:54

       And the founders wanting to work with you.

    9. MHMamoon Hamid46:56

       Exactly. Exactly. So yeah, no, I, I think, uh-

    10. HSHarry Stebbings47:00

        That's what I tell a lot of LPs, though, which is like, you know, I remember speaking to an LP actually about you. Um, and I was like, "The thing that you got to understand with Mamoon is like, everyone in the valley respectively probably sees the same deals, but you have to be aspirational capital to the best founders in the world where they say, 'Yeah, I've got 12 term sheets, but I want that one.'" And that's the only thing that matters. Doesn't matter that you saw it. Means shit. Do you know what I mean?

    11. MHMamoon Hamid47:22

        Oh, 100%. It's, it's about... And how do you position yourself, in terms of us, so that the founders are choosing us? It's based on reputation of our body of work, our firm's body of work, what the firm represents, uh, what we can offer them once we get involved, or even before we're involved. Uh, what are people saying about you? What, what's the, you know, the, you know, the folks who you worked with before have to say about working with

13. 47:53 – 51:21

    Thoughts on Voting Structures in Decision-Making

    1. MHMamoon Hamid47:53

       you?

    2. HSHarry Stebbings47:53

       How do you think about decision-making? I, one of the things I think is crazy is voting structures-

    3. MHMamoon Hamid47:58

       Mm-hmm.

    4. HSHarry Stebbings47:59

       ... in venture firms. I get asked this by a lot of LPs, which are like, "What is your voting structure?" And they kind of seem quite upset when I say, "Well, there's only four of us, and so anyone can write a check, and I believe that the best deals are often non-consensus and right."

    5. MHMamoon Hamid48:09

       Yeah.

    6. HSHarry Stebbings48:09

       Uh, so we don't have like four out of ten or six out of ten. They look quite upset with me (laughs) when I say this. I think that's nuts.

    7. MHMamoon Hamid48:18

       Yeah.

    8. HSHarry Stebbings48:18

       How do you feel about voting structures in decision-making?

    9. MHMamoon Hamid48:21

       Yeah, I don't believe in voting structures for early-stage venture capital. I think you have to ha- allow every partner to put themselves on the line.... uh, with their conviction that they built up over years sometimes, uh, m- weeks sometimes. But y- y- y- you have to give into the conviction of the person wanting to lead. And so the way we work is that, you know, because we sit around the table, we literally get to see each other's body language, how someone goes from excitement to less excitement. When, uh, one of our partners, like, you know, Ilya asks me a question about, uh, why I'm so excited about a company and then he asks another question and I just go, "Well, that's a good question that I don't have a good answer for." And so maybe my excitement wanes and then I come back a few days later when we see each other again. It's like, "You know what? Like, we talked about that." And, you know, I've, I'm sort of leaning out on the opportunity. And so I think that's also the magic of being around the same table in the same room. Uh, you get to really test each other's conviction.

    10. HSHarry Stebbings49:16

        So you don't have a vote?

    11. MHMamoon Hamid49:18

        Yeah.

    12. HSHarry Stebbings49:19

        You don't have a vote?

    13. MHMamoon Hamid49:20

        There, we have a discussion, but there is no vote.

    14. HSHarry Stebbings49:22

        If I disagree with you, and I say, "Mamoun, I don't think we should do this deal-"

    15. MHMamoon Hamid49:26

        Yeah.

    16. HSHarry Stebbings49:27

        "... I, I do not see the market, I don't see the upside, the entry price is too high."

    17. MHMamoon Hamid49:31

        Yeah. I think if you wanted to veto me, you could veto me.

    18. HSHarry Stebbings49:34

        Wow.

    19. MHMamoon Hamid49:36

        But, uh, that hasn't happened.

    20. HSHarry Stebbings49:38

        No one's ever vetoed?

    21. MHMamoon Hamid49:39

        No.

    22. HSHarry Stebbings49:40

        Why do deals get crushed mostly?

    23. MHMamoon Hamid49:42

        I'd say it's when questions get asked, good questions, around, uh, the market or, uh, is this a fleeting cycle of adoption for this sort of product? Or this is going to be gnarly dog fight because there are too many competitors. Uh, or this is the wrong time. Uh, it's, it's not... The r- the risk/reward isn't great for this round. Uh, and that's when your excitement tends to wane.

    24. HSHarry Stebbings50:10

        Do you do outcome scenario planning?

    25. MHMamoon Hamid50:12

        We used to. And, uh, haven't done it more recently. Used to do, like, what is the probability of this company being a zero, a, uh, a $500 million exit, a, you know, $250 million exit, a billion dollar exit, and a $10 billion exit, and you do the, the p- the percentages.

    26. HSHarry Stebbings50:28

        (laughs)

    27. MHMamoon Hamid50:28

        It's such false precision.

    28. HSHarry Stebbings50:29

        I always do 25, 25, 25, and done.

    29. MHMamoon Hamid50:31

        (laughs)

    30. HSHarry Stebbings50:31

        Thank you so much. (laughs)
14. 51:21 – 54:24

    Mamoon’s The Most Contentious Deal

    1. MHMamoon Hamid51:21

       seeing?"

    2. HSHarry Stebbings51:21

       What was the most contentious deal that you did?

    3. MHMamoon Hamid51:24

       You know, actually Figma was quite contentious.

    4. HSHarry Stebbings51:26

       Really?

    5. MHMamoon Hamid51:26

       Yeah, it was... Yeah. Y- because to your point, around, like, half a million of AR at a 110, 15 post, whatever it was at the time, uh, it was r- really, like, the same thing. There's Envision, there's Sketch, uh, this company's been around for five years. Uh, it's, it's not obvious to us. Yeah, it, it was, it was not, you know, a fight, but it was not... It was contentious to that there was a lot of questions around the investment.

    6. HSHarry Stebbings51:53

       You had a fund that, I, I can't remember the exact vintage, and it was a fast deployment. It was, like, 12 or 18 months.

    7. MHMamoon Hamid51:58

       Yeah.

    8. HSHarry Stebbings51:59

       Um, it was a time when everyone was deploying fast-

    9. MHMamoon Hamid52:01

       Mm-hmm.

    10. HSHarry Stebbings52:01

        ... but it was fast. How do you think about deployment pace? Is it a play the game on the field? Or do you take a much more structured disciplined view towards it?

    11. MHMamoon Hamid52:08

        I, I think the view is, "Hey, we- we'd love to deploy over a two and a half to three year period of time." And so when we got to KP, uh, I came in 2017, a bunch of the team joined in 2018. So Bucky, Ilia, Annie joined that year. Uh, Josh joined the same week I did. So, um, so there's a period of time in 2019, so we just raised our first fund as a team together, where we deployed that fund, like, within, like, 15 months.

    12. HSHarry Stebbings52:36

        Mm-hmm.

    13. MHMamoon Hamid52:37

        And I think it was just-

    14. HSHarry Stebbings52:38

        Was that on the Rippling fund?

    15. MHMamoon Hamid52:39

        It was. Rippling, Glean, a bunch of other stuff in there that is great. Uh, it's... We just were a new team that was... Didn't have board seats. We, we had drie... Like, we had a fund ready to de- deploy, and so we deployed it fairly quickly. And I would say mostly series A, like, real ownership series As. Sort of the, the core of the business. And so, uh, I think if I look at that fund, I think it'll be an amazing fund actually.

    16. HSHarry Stebbings53:05

        Unbelievable.

    17. MHMamoon Hamid53:06

        Right? And so you could have said like, "Well, wait a second. You guys didn't do time diversify." It was... Should... If you would have deployed over a two and a half year period, you would have missed, uh, high valuation environment into a lower," and yada yada. And so I would say that that would be the counterpoint to fast deployment. Like, no, you can actually work.

    18. HSHarry Stebbings53:25

        Very dear mutual friend of both of ours is Kush. Kush and Thrive think that bluntly everyone has the plasticity to move between stages or the... In their firm.

    19. MHMamoon Hamid53:34

        Yeah.

    20. HSHarry Stebbings53:34

        Um, I don't think everyone, but, like, their investors do. I think that is just really hard to do.

    21. MHMamoon Hamid53:39

        Yeah.

    22. HSHarry Stebbings53:40

        Do you agree? Which side do you take?

    23. MHMamoon Hamid53:42

        I think generally speaking though, uh, it's hard to have the neuroplasticity to one day think about, uh, you know, ten years ahead and, uh, a, a new in- infrastructure company that's building on a new open source framework, and the next day think about, like, pre-IPO stage, you know, consumer company. Uh, and so while we all have one meeting, one pipeline meeting, one investment team meeting for both early stage and, and venture, uh, all of us do venture investing and a few of us will do more of that select investing. Uh, so because we don't want to burden everyone to bring neuroplasticity, uh, to, to the job

15. 54:24 – 57:33

    Mamoon’s Biggest Loss

    1. MHMamoon Hamid54:24

       every day.

    2. HSHarry Stebbings54:25

       Y- you said about kind of, you know, putting your name on the line and, you know, really believing. When have you put your name on the line most and been wrong?

    3. MHMamoon Hamid54:33

       You know, I've just gone through, uh, my first sort of bigger loss in terms of capital lost. And, uh, for a while company just, um, shut down, a company called Tally. And the founder, Jason Brown, who I've known for 15 years-

    4. HSHarry Stebbings54:46

       I had him on the show.

    5. MHMamoon Hamid54:47

       Yeah. And, um-

    6. HSHarry Stebbings54:48

       How much did you lose?

    7. MHMamoon Hamid54:49

       ... uh, 30 million or so. And that's multiples of the largest loss prior to that. So, um, you know, I- I don't ha- I don't wear this badge of honor of, like, losing a lot. I mean there's a- there's a whole thing in venture, like, you need to lose, like, so many million dollars before you made it kind of thing. And I think there's, uh, a lot more precision one can apply even at the early stage than to not put more money in, to lose more. Because our job is to invest five, 10, 15 upfront, and if you lose five on a seed check, all good. That's your job.

    8. HSHarry Stebbings55:19

       Is there anything you learned from Tally in that?

    9. MHMamoon Hamid55:22

       That lending businesses are really hard.

    10. HSHarry Stebbings55:25

        (laughs)

    11. MHMamoon Hamid55:25

        Consumer lending is very hard.

    12. HSHarry Stebbings55:26

        Did you do reserves there?

    13. MHMamoon Hamid55:28

        Yes.

    14. HSHarry Stebbings55:29

        And that was where it went wrong?

    15. MHMamoon Hamid55:30

        Uh, well, the first check was, you know, back to the 60/40. It was like 60/40.

    16. HSHarry Stebbings55:35

        Yeah.

    17. MHMamoon Hamid55:35

        But there's more along the way that went in, because, you know, they raised subsequent up rounds from great investors the round after us. Um, Angela at Andreessen Horowitz did it, and it was a great, great round, great time for the company. And then it did an, one in 2022, um, with, um, one of our seed investors, Sway led this, the growth round, because things were going really well. And then consumer lending just turned. This is when interest rates went up, um, from, you know, zero to 5%. And- and that really made that business really difficult.

    18. HSHarry Stebbings56:09

        How have you changed most significantly as an investor over time?

    19. MHMamoon Hamid56:12

        I think obviously there's more experience, but I actually don't- try not to let that weigh me down. Because I think job is to stay open-minded and have naivete, and dream the dream, and I think, uh, too many scars aren't necessarily a good thing for- for- for, like, being open-minded and thinking about what the next Figma or Rippling will be.

    20. HSHarry Stebbings56:34

        Where do you most need to improve as an investor?

    21. MHMamoon Hamid56:37

        You know, I- I think I'm- I'm a dreamer, and I want to just believe in the people that I back.

    22. HSHarry Stebbings56:42

        I heard this, I heard that you are such a dreamer, that sometimes you believe for too long.

    23. MHMamoon Hamid56:46

        Yeah.

    24. HSHarry Stebbings56:46

        And you should cut things before.

    25. MHMamoon Hamid56:48

        Yeah.

    26. HSHarry Stebbings56:49

        How do you think about knowing when is the right time to cut the belief and actually, we've had enough time?

    27. MHMamoon Hamid56:54

        I agree, I agree with that. Uh, that is fair criticism.

    28. HSHarry Stebbings56:57

        (laughs)

    29. MHMamoon Hamid56:57

        Uh, that I need to... But I think that's just part of the package. That is who I am. I believe in the people, and I want to be on that journey with them.

    30. HSHarry Stebbings57:06

        Do you believe in VC value add, Mamun? Vinod Khosla's famously said, you know, 90% of VC is actually detrained value.
16. 57:33 – 59:11

    How Do the Best CEOs Run a Board?

    1. MHMamoon Hamid57:33

       board.

    2. HSHarry Stebbings57:33

       How do the best CEOs run a board?

    3. MHMamoon Hamid57:35

       They start off with a high level overview of how the company's doing, and then they give a chance for their leaders, their very capable leaders, to go dive in deep and, uh, share, and be, ask questions, and there's a fair bit of cheerleading, but a fair bit of, like, asking the- the hard questions. Uh, and I like board meetings where there's one or two things that are talked about in detail. Uh, meaning, like, you go deep dive into one or two things. Because at any given point in time in a company's juncture, that moment in time, one or two things that really matter that can, we can help change a trajectory on. And so if we're wa- talking about seven different things that matter, we're probably missing the point. And so I- I love board meetings where that's sort of the structure.

    4. HSHarry Stebbings58:19

       Two more questions-

    5. MHMamoon Hamid58:20

       Yeah.

    6. HSHarry Stebbings58:20

       ... and then we'll do a quick fire. Do you mind super diluted businesses? Like your DoorDashes as well, like your Uber-

    7. MHMamoon Hamid58:24

       Yeah.

    8. HSHarry Stebbings58:24

       I know Uber's and DoorDash different, g- profiles intensely, but still, do you mind them?

    9. MHMamoon Hamid58:29

       Personally?

    10. HSHarry Stebbings58:30

        Yeah.

    11. MHMamoon Hamid58:30

        Uh, I- I'm, those are not my kind of businesses. I like more capital efficiency, uh, but I can get behind them.

    12. HSHarry Stebbings58:37

        What would you like Kleiner to look like in 10 years? When I hear you there, it feels like actually there is scope for you to go into the capital accumulator bucket.

    13. MHMamoon Hamid58:45

        Yeah.

    14. HSHarry Stebbings58:45

        Do you want that?

    15. MHMamoon Hamid58:46

        Uh, no, I don't. I don't think we want that at all. I think we- we love where we are today. We really do. And I- I don't try to... And I'm not BSing you, you're a longtime friend, and I would, I believe in venture, early stage venture being a beautiful asset class, especially if you can follow the power law and be in the few companies that matter. And then you can invest in the very few companies that really matter out of your select fund, and then call it a day.

17. 59:11 – 1:03:41

    Quick-Fire Round

    1. MHMamoon Hamid59:11

    2. HSHarry Stebbings59:11

       I want to move into a quick fire.

    3. MHMamoon Hamid59:12

       Mm-hmm.

    4. HSHarry Stebbings59:12

       So what do you believe that most around you disbelieve?

    5. MHMamoon Hamid59:15

       Venture is an easy job. It's glamorous. It's- it's all of that except glamorous.

    6. HSHarry Stebbings59:23

       My favorite is the amount of friends I have who are operators, who are like, "This isn't what it said on the tin. This is so fucking hard." (laughs)

    7. MHMamoon Hamid59:31

       Totally.

    8. HSHarry Stebbings59:31

       And you're like, "Yeah." It's, yeah. No, I- I totally agree with you there. What's the most memorable first founder meeting you've had?

    9. MHMamoon Hamid59:38

       It has to be Aaron Levie, uh, when I first met him.

    10. HSHarry Stebbings59:40

        Why?

    11. MHMamoon Hamid59:41

        He brought along with him a wonderful person, Karen Page, because he thought he had to bring on an executive, or bring an executive to the first meeting. Uh, and it just, he was, like, hyper nervous, I felt, a- b- coming to a VC firm office, like, in- in a coat and shirt. And, uh, but I could tell from that meeting that he had thought about the problem of cloud storage f- in more than, and this is 2007, so, like, cloud storage was not a thing, more than anyone else. And so for me, it was like an instant, "I need to invest in this founder, like, right away." Uh, but it was also just memorable from the other things that were going around.

    12. HSHarry Stebbings1:00:15

        Do public market mult, revenue multiples need to reflate for venture to be a sustainable business? Like, you mentioned Box there.

    13. MHMamoon Hamid1:00:21

        Yeah.

    14. HSHarry Stebbings1:00:22

        Box is, like, whatever it is-

    15. MHMamoon Hamid1:00:23

        A billion in revenue.

    16. HSHarry Stebbings1:00:24

        Billion in revenue, and it's like-

    17. MHMamoon Hamid1:00:25

        Four and a half billion market cap.

    18. HSHarry Stebbings1:00:27

        Yeah.

    19. MHMamoon Hamid1:00:28

        Yeah, I think, uh, you know, growth and, uh, profitability. Rule of 40.

    20. HSHarry Stebbings1:00:33

        So to my point, d- do we need to see the reflation for venture to be sustainable or not?

    21. MHMamoon Hamid1:00:37

        I- I think just getting back to sort of normal historical levels would be good enough.

    22. HSHarry Stebbings1:00:41

        Which venture investor do you most respect and learn from outside of Kleiner?

    23. MHMamoon Hamid1:00:45

        One of my favorite investors is, uh, Matt Cohler, uh, from Benchmark, who I-

    24. HSHarry Stebbings1:00:49

        In London?

    25. MHMamoon Hamid1:00:49

        ... got to see him yesterday.

    26. HSHarry Stebbings1:00:50

        Well done.

    27. MHMamoon Hamid1:00:51

        Uh, and I wish he and I were on more boards together.

    28. HSHarry Stebbings1:00:54

        You can be CEO for a day, Mamun, of any company. Which company are you CEO of?

    29. MHMamoon Hamid1:00:59

        Easy. OpenAI.

    30. HSHarry Stebbings1:01:01

        Really?

Episode duration: 1:03:41