Windsurf CEO & Co-Founder, Varun Mohan: AI's Biggest Acquisition to Date!

1. 0:00 – 1:28

   Intro

   1. VMVarun Mohan0:00

      One of the weird things about startups is that you don't win an award for doing the same wrong thing for longer. Down the line when you fail, none of them will care.

   2. HSHarry Stebbings0:06

      So excited to welcome one of the hottest, most talked about startups from the Valley to Windsurf and their CEO, Varun.

   3. VMVarun Mohan0:12

      Companies that are usually first to a new paradigm are companies that are willing to disrupt themselves. When you have a new great idea, even the crappy version of that idea is already amazing. Startups don't fail because they look like messes inside. Startups fail because they don't do the right thing well enough. It is much easier to run a company that has only one thing that matters than it is to run a company with the same amount of revenue with five things that matters.

   4. HSHarry Stebbings0:34

      What idea do you think that you are too in love with today?

   5. VMVarun Mohan0:38

      I think if I was to go empirically...

   6. HSHarry Stebbings0:40

      Ready to go? Varun, I'm so excited for this dude. I've heard so many good things, by the way, from Lee Marie, from Neil Mehta, from many others. So thank you so much for joining me, man.

   7. VMVarun Mohan1:02

      Yeah. Thanks a lot, Harry, for having me.

   8. HSHarry Stebbings1:04

      Not at all, dude, but I wanted to kind of pick apart, I've literally just been running, and I've been listening to some of your shows before. And there are a couple of segments where I was like, "Damn, I wish we'd double clicked on that." And there was one that I thought I wanted to start with. You said, "It's very rare that the first thing you believe will be the right thing." How have you changed your mind on what a truly great idea is versus what's

2. 1:28 – 3:33

   When to Give Up vs When To Stick at It

   1. HSHarry Stebbings1:28

      not?

   2. VMVarun Mohan1:29

      I think there's a lot that's right about the Peter Thiel-ism of you want to pick something that seems a little bit not obvious to start with, right, um, for, for whatever company you're starting. And the problem is most ideas that are not obvious are just bad ideas. Like most ideas that are non-conventional, just because you are non-conventional doesn't mean you're going to pick a good idea. Um, and I think people sometimes forget that. But I think at a high level though, like if you pick an idea that is like obvious to everyone, there's probably no alpha, right? A big company is going to go out and already beat you to the market, right? Because they have more distribution, resources, and capital than you. So startups usually win by picking non-conventional ideas to the public, but you kind of need to go in and be humble enough to understand that probably there's a good chance that your weird idea is not actually a good idea.

   3. HSHarry Stebbings2:19

      What'd you believe was your non-conventional insight when you made the pivot to Windsurf?

   4. VMVarun Mohan2:23

      Yeah, so, I mean, I could even start before this. Like the first idea that we had, even like our company name has changed twice now at this point, it was called ExafuncTion when we first built GPU virtualization technology, was that GPU workloads were gonna power the world, right? That was like sort of the, the mission there. A lot of us at the company had previously worked in autonomous vehicles and ARVR, um, at the, at the company. We had a fairly small team. That was actually accurate that GPUs were going to become very popular. Like we were, we basically said NVIDIA's gonna sell a lot of GPUs. The thing we were wrong about was how diverse the GPU workloads were going to be, right? We thought a bunch of different model architectures would be run, there were gonna be hundreds of different model architectures, and we were wrong. All of them ended up being transformers. And in a world in which all the architectures look the same, um, there's very little reason for us to be a differentiated infrastructure provider in that category. So we needed to pivot at that point. But that's some, one of those things where you don't know going into the market that that's how the world is gonna turn out, uh, right? And we were just wrong about our hypothesis. And, uh, so that's why, like sometimes you have a take that is not very obvious at the time, and then you could be wrong.

3. 3:33 – 7:42

   “Never Fall in Love With Your Idea”

   1. VMVarun Mohan3:33

   2. HSHarry Stebbings3:33

      Totally. The trouble is, many people are in love with their thesis. That's why I hate thesis driven investors, bluntly. But many people are in love with their ideas, and they're told that actually the true grit and persistence of an entrepreneur is what separates those that win versus those that don't. How do you think about that versus a brilliant statement, which I agree with you, you said, "Never be too in love with your ideas."

   3. VMVarun Mohan3:56

      I, I think, I think this is the hardest part about starting a company or, or building a company in, in the first place, right? It requires these two almost counter beliefs in your head, right? Irrational optimism, because if you don't have any optimism at all, you won't do anything and you won't get out of bed, right? And uncompromising realism. Every single day you need to be asking your question, "Do we have a reason to exist," right? And if the answer is not really, you need to change your mind really fast and reorient the entire company really fast. One of the weird things about startups is that you don't win an award for doing the same wrong thing for longer. Like it might feel better to tell your coworkers, tell your investors, tell your friends that, "Hey, I'm still doing the thing I did." But down the line when you fail, none of them will care.

   4. HSHarry Stebbings4:40

      What idea do you think that you are too in love with today? So I'll give you an example. For me as an investor, discipline around portfolio construction. I love the belief of a disciplined investor, the craft of portfolio building. The challenges in today's world, you have to break most rules, and it doesn't mean that you're a cowboy and you're gambling, but it means you're much more elastic than the more concrete investor mind. That's what I'm too in love with. What do you think you're too in love with?

   5. VMVarun Mohan5:09

      I think, I think if I was to go empirically, we were too in love with our ideas every time. Like other people outside looking in might have been like, "This company has pivoted multiple times and that's a positive outcome," but I wished we had done it faster. I still beat myself over the head on why did we not pivot from the GPU virtualization to the Code AI company three months earlier? I think we had the signals, but we waited until the companies we were working with were starting to go belly up before we actually pivoted the company, right? A lot of our customers at the time were autonomous vehicle companies and it was peak ZIRP era, right? And in the middle of 2022 when a lot of them were unable to raise their next funding round, that's when we started to question, hey, like the market is changing, the technology is also changing, but also our, our future customers are not looking like they're gonna be able to kind of satisfy our sort of, our market, right?... and, uh, I wish we had done that faster. And the same is also true for, for ideas like Windsurf, right? Um, I think we knew agents were going to be very powerful, and we could have built Windsurf a couple months earlier. And I think we, we should have done that if we could have.

   6. HSHarry Stebbings6:13

      Can I ask you a question? I just had the CEO of Fiverr on the show, and he said that time to clone is one of the most important things that have changed over the last few years. Time to clone being the amount of time it takes for someone to copy exactly what you have. Um, my question to you, how important is it to be first if time to clone is shorter than ever before?

   7. VMVarun Mohan6:35

      I think time, being first, being first does two things, right? Um, I think it's a signal of how you're running the company. That's one. Um, and the second thing is, it allows you to learn faster. And I'll maybe double click on the first one. Companies that are usually first to a new paradigm are companies that are willing to disrupt themselves. They're organizations that are open to the idea of changing at a dime, right? Uh, very, very quickly. And they're als- always investing in technologies that are not incremental and, and willing to sort of, sort of break themselves. Right? Um, and I think that's a good organization in a category like software or code AI where the space is changing so, so quickly. Right? That's one. And then two, I think it kind of boils down to what does it mean if you're first? That means you get to learn from the market faster, and that means you're first to the next idea too, right? Uh, because you, you see where all the dead bodies are in your category, right? Um, one of the nice things that I like to think is, um, if we have a product in market earlier, what are all the things we can learn in the first month that enable us to build the next product i- in the market as well? Uh, and I think that, that could give us a compounding advantage

4. 7:42 – 11:10

   What Founders Get Wrong About Being First

   1. VMVarun Mohan7:42

      with time.

   2. HSHarry Stebbings7:43

      Is it not more helpful seeing someone else go first, see what they do as a mistake, and then learn from their mistakes and leverage the costs that they have, and then do it without that cost for you?

   3. VMVarun Mohan7:53

      I think the problem in software in general is they could've made a lot of mistakes internally during research and development that we, we could never kind of take a look at. And-

   4. HSHarry Stebbings8:02

      Mm-hmm.

   5. VMVarun Mohan8:02

      ... organizationally now, I believe our company has so much wisdom in our category, uh, that there are ideas that we would not even touch because we are just like, "Hey, we've tried this before." Right? And it didn't actually work. And that's something that's, like, built into the DNA of the company, uh, as we continue to innovate. Um, and that's just not easy to just look at outside looking in.

   6. HSHarry Stebbings8:22

      What have you tried before that didn't work that the world doesn't know about?

   7. VMVarun Mohan8:27

      Yeah, so we, we shipped a beta version of this product, but we were dogfooding it for such a long time. I'll give you maybe a couple examples here. The first thing is we actually shipped a beta product for code review last year, and we actually tried out different ways of shipping a code review product. We had a Chrome extension, we did something internally where we built a parallel website, and we were able to try a bunch of things internally, and none of them felt quite right. And now, a couple weeks ago, we actually shipped a code review product, and it feels much better and is providing a lot more value. And we shipped it in the way we shipped it because of all the failed attempts that we made last year. I'll give you a second example here. For the Coda agent product that we launched with Windsurf, we actually had a first cut of that product in the beginning of last year, and it was not good. It was not good for a variety of reasons. And that enabled us to go back to the drawing board and fix up the different elements that would allow us to ship Windsurf, right? Which was that we needed to get really better at code-based understanding, as well as the models needed to get better. But then once the, once the models had already gone better, our internal R&D on code-based understanding had gotten good enough that we were ready to go and ship the product. So, this is one of those things where if we had just waited for the rest of the world to have it, we would need to have played catch-up on multiple axes, right, just to ship the product.

   8. HSHarry Stebbings9:40

      Can I ask you, do you advise founders to raise as much as possible early? Because it is about the number of at-bats that you have, the experiments that you can take, and if you raise more, you have more experiments fundamentally. Do you advise that given the experience that you have?

   9. VMVarun Mohan9:54

      So, we're, we're obviously, like, just to shed some light here, we actually raised our series A on the GPU virtualization idea. Uh, Greenoaks actually led that, led that round. Um, whether or not they were-

   10. HSHarry Stebbings10:05

       They led you, they led you a seed as well, no? They did three on 2020.

   11. VMVarun Mohan10:08

       They led a seed too.

   12. HSHarry Stebbings10:08

       Yeah.

   13. VMVarun Mohan10:09

       Yeah. They led our seed too, which, uh, whether or not they should have invested in the series A on, on that one, I'll, I'll, I'll leave that to, uh, to the audience. Uh, but I think what that did give us is the confidence that, hey, like, if we pivot, we will still have the cash to go out and, and pursue an idea. And we actually launched Codium, the extension product, before this entirely free. And we were able to do that because of the infrastructure expertise inside the company. But also we were confidently able to do that because we knew we had cash in the bank, right? Uh, to go out and, like, actually ship this product and not have to worry about any details there. Right? So I actually agree with you. It does give you more shots at that, but I think you need to be a company that is able to pivot very quickly. Right? Um, like most companies, I would say when they have 10, 15, 20 people, they're unwilling to change the idea, their idea entirely. Um, we, on the other hand, decided we wanted to work on Codium over a weekend, me and my co-founder, and we told the company on Monday, and everyone started working on it that Monday, despite the fact that we had, we were making a couple million in revenue off the previous

5. 11:10 – 14:40

   What Would Windsurf Do If They Had Unlimited Resources

   1. VMVarun Mohan11:10

      business.

   2. HSHarry Stebbings11:11

      Is there anything that you can structurally do to increase the response time of an organization to move faster post-pivot?

   3. VMVarun Mohan11:18

      Yeah, I think, I think the answer is for a startup, one of my true beliefs is that companies don't succeed because they do many things well. They succeed because they do maybe one thing really well. Like, uh, it's kind of like what I said. I think having one good, uh, idea already is like a miracle for most startups. Right? And when you think about it from that perspective, when you think about a company, um, think about two companies. You know, e- any product has some sort of exponential curve at which it's able to grow, right? There's some R-value attached to a product. Uh, the right thing for a startup to do is always focus on the product with a higher R-value. It never makes sense to be diverting your resources to work on two different...... of products that have different exponential growth curves, right, if they're completely disjoint. So when you do a pivot, I think the right answer is, you should just give up what you were doing in the past. Because the thing you were doing in the past probably will have no sort of relevance to your business going forward, right? The revenue multiple on that business is not gonna look at all like the revenue multiple of the other business. And I think if you can go cold turkey and actually go and make your organization completely work on the new thing, uh, you're more likely to succeed. But that's scary, right? You need to tell people, tell your investors, tell your customers you're no longer gonna support that. Uh, but I think once you make the tough decision, it's really easy.

   4. HSHarry Stebbings12:29

      Dude, revenue cannibalization when you're doing millions in revenue is hard. So yes, I completely agree with you. You said that success is about doing one thing really well, and it's hard enough to have one thing. You have that, but what thing would you most like to do that you're not doing because you retain that element of focused mindset?

   5. VMVarun Mohan12:51

      Yeah. I think in our category, maybe if I was to just say this, in our category, a lot of our users of Windsurf are actually people that are non-developers. They are people that are vibe quoting apps, and they're actually using it for productive use cases. Like, internally at our company, we have someone who's a non-developer who leads partnerships that has used our product and built apps to replace a lot of sales tool spend. Like, over $500,000 of sales tool spend internally. And I think there's a lot of things we can do to make-

   6. HSHarry Stebbings13:18

      So they, they, they, they've coded $500,000?

   7. VMVarun Mohan13:21

      They built an app. Yeah, they built apps inside the company for, like, a partner portal and quoting tool and so on and so forth, that these are sales tools that in the past cost hundreds of thousands of dollars a year. Now, the reason why-

   8. HSHarry Stebbings13:32

      They deserve, they deserve a pay rise, Farhan, right?

   9. VMVarun Mohan13:34

      Yeah. I mean, we should, we should get, we should consider that. Um, but the reason why that was the case before, um, not to go on a tangent, was because no one really ... These are very bespoke tools, right? These are very bespoke tools that do a singular function, and no single company wants to build this out themselves, right, in the past. But now with software being so cheap to build, like ephemeral software or simpler, simpler software being so cheap to build, um, you can now have non-technical people kind of building these apps. And I think, Harry, like, one interesting avenue for us is, how do we make that user much more productive than they are right now? But there's always this tension, right? If we make that user much more productive, we might be giving up the ability to make developers that operated on large code bases much more productive too. It's just a focus game.

   10. HSHarry Stebbings14:19

       Is Windsurf about making engineers 10X better, or is it about making the normal person able to be an engineer?

   11. VMVarun Mohan14:28

       Yeah. So I think we are focused on the former. Uh, we are focused on the former, and a consequence of that is the latter, right? Because the technology underneath is capable of doing that. But the focus is definitely the former.

6. 14:40 – 17:31

   Will Lovable and Bolt Ultimately Compete with Windsurf and Cursor

   1. HSHarry Stebbings14:40

      Will you converge over time? Will Cursor and you converge to eat the Lovables and Bolts, or will the Lovables and Bolts converge to try and eat you?

   2. VMVarun Mohan14:52

      You know, I think once, once ... And this is, uh, this is, I think, a really common question we get. Which is that, I think those tools that are very focused on, like, the Lovables, the Bolts, that are very focused on the non-developer, I think with time, they're going to need to build out more and more tunables, more and more ways to configure the product wi- with time. Um, but I think, I think for us, if we can deeply understand code, like large code bases, it'll naturally follow that, with very little effort, non-technical people can build apps. But maybe my point is, if we build for that use case right now, it's, it's ... We're, we're gonna be kind of foregoing the ability to help developers. But I think it will converge. It will converge with time, uh, between both of these categories. Like, a company that deeply understands your code base will be able to, with very little natural language, build an entire app that is consistent with existing code bases inside the company.

   3. HSHarry Stebbings15:44

      If you had infinite resources ... I'm so enjoying this, by the way. I'm sorry, I had this beautiful schedule, but fuck it. Uh, if you had infinite resources, is there anything that you would do differently to how you're doing it today?

   4. VMVarun Mohan15:56

      I think we would be making many more bets. We'd be making many more bets inside the company. Like, trying many more things. Like, as I said, probably 50% of the things that we try inside the company or more actually fail, right? We are actually investing a lot of our product technology on things that are in the future, uh, and most of it fails, actually. I would like to fail even more. But the weird thing about startups is, the one thing that works pays for the hundreds of things that fail, uh, internally at a, at a startup.

   5. HSHarry Stebbings16:23

      I, I spoke to Neil Mehta about stuff that I had to ask you before, and he said you do have to ask him about how he builds product and his product building cycle. You mentioned that 50% fail, the internal cycle. Can you talk to me about some unconventional ways that you think about internal product building that you think are important?

   6. VMVarun Mohan16:42

      Yeah. I think there's conventional, uh, wisdom in, you know, from other people, that a company with more engineers is just gonna succeed. But that sort of kind of makes software engineering and just R&D feel like a factory building process. I think the right way to actually look at it is, when a product or an idea has no legs and you're proving it out, you should actually have very few people working on, on an idea, right? Because actually, like, this is a very common, uh, everyone will understand this. Imagine having 10 people working on something that has not been proven out. Everyone has opinions, everyone has ideas, and nobody's ideas are wrong, right? Because no one has proven anything out. So it's very hard to get alignment. It's very hard for people to work in one direction without causing communication issues. Um, instead, what is actually really good is, can you have a handful of people with an opinionated stance that can go out and prove out an idea?

7. 17:31 – 20:26

   The Product Development Rule That Breaks All Startup Rules

   1. VMVarun Mohan17:31

      And then the question is, uh, with that, if you can, if you can go and get a nugget of value, and this is, like, a hard question for any product, how do you know when to stop working on it, right? Um, and I think there's this interesting, uh, like, kind of piece of wisdom that, that we've built. And a lot of us at the company have worked in hard tech before this. Like, companies like ... Autonomous vehicle companies before this. Is that when you have a new great idea, even the crappy version of that idea is already amazing. Like, it already proves something amazing.... right? Uh, like for instance, when we built the first working version of, like, the agent in Windsurf-

   2. HSHarry Stebbings18:04

      Mm-hmm.

   3. VMVarun Mohan18:04

      ... um, the, even the crappy version of that was able to do things that we were never able to do in the past, like, eight or nine months ago, right? And we were like, "Okay, this thing has legs." And then at that point, once you've proven the crappy version has legs, you can then go and resource more, uh, more people on the project to actually go out and, and, uh, and, and pursue it d- more deeply.

   4. HSHarry Stebbings18:23

      That, no wonder Neil loves you, because he always talks to me about like the real customer delight moment, and that shock and awe that they feel when they have that first agent experience that you mentioned. Um, I totally get it. Can I just dig in on a couple of elements before we carry on? You mentioned, like, a handful of people. How many is that? How do you structure these teams on new bets?

   5. VMVarun Mohan18:44

      It's, it's maybe three or four people. Yeah.

   6. HSHarry Stebbings18:46

      Okay.

   7. VMVarun Mohan18:46

      I think.

   8. HSHarry Stebbings18:46

      And a cou- couple of engineers and a designer?

   9. VMVarun Mohan18:49

      Yeah. Or, or actually, in the, in the case of if it's just purely like a systems technology or it's like a... It could be just, you know, kind of pure engineers that are building this out. One of the cool parts about our product is we are a developer product. So our developers themselves have some intuitions on, on a crappy version and how useful it could be, at least the v0, right? Because we're building a product for developers.

   10. HSHarry Stebbings19:12

       D- Budget-wise and time-wise, do you set that? Do they set that? How does that work?

   11. VMVarun Mohan19:17

       I don't think we actually think about that, and I think that's, that's partially because we're in an unconstrained market right now, right? The value of great technology that could accelerate software development is so valuable to our customers, that, um, for us, like, I guess, w- we largely speaking don't think about it from, like, a perspective of, what is the budget of a particular project? Now, what we do look at inside the company is, what are the, what is the progress we're unlocking in a project over time?

   12. HSHarry Stebbings19:42

       Mm.

   13. VMVarun Mohan19:42

       And whether or not we should decide to move on and work on something else, like table something and work on it later, like that is something that we decide and that's not a democratic process inside the company. It is, it is like a little bit of a top-down process inside the company.

   14. HSHarry Stebbings19:53

       Is there an- is there anything that you've tabled that with the benefit of hindsight, you're like, "Oh, Varun, I should have kept going with that one."

   15. VMVarun Mohan20:00

       Yeah, I think, I think so. I think, uh, an example of something we probably did table was the autocomplete experience, which is the first product that we actually built out. I think we actually delayed on building a much better product experience sooner rather than later. Part of the reason why we, the product experience wasn't as good actually, was because we were stuck in VS Code, and VS Code didn't give us the UI capability to make the product much better. And once we had Windsurf, we were able to invest much more in

8. 20:26 – 25:20

   The Cold Truth About Moats in the AI Era

   1. VMVarun Mohan20:26

      the capability.

   2. HSHarry Stebbings20:26

      You mentioned VS Code there. It brings me to the topic of kind of moats and defensibility. I'm obviously an ambassador for my sins today, as well as being a terrible British podcaster. Um, are moats dead in a world of AI? You, you, you're not blind to this. Everyone says, "Cursor, Windsurf, I can switch between the two." Help me understand, are moats dead, and how do you think about that?

   3. VMVarun Mohan20:50

      You know, I think startups by and large, just this idea of a startup having a moat is usually kind of silly, uh, for the, for the most part. Like, The Conventional Seven Powers, you know, the, uh, like, if, if anyone in the audience has actually listened, uh, you know, read the book, um-

   4. HSHarry Stebbings21:03

      I love it.

   5. VMVarun Mohan21:04

      Yeah, it's a great, I think it's a great book. I think it's just premature for a startup, uh, for the most part. Because, okay, fine, you have a company with 50 engineers. Um, you could have the best engineers in the world. I think we have amazing engineers, like, uh, like, a majority of our engineers are from MIT. I think we do get the top percentage, top few percentage of MIT to come to the company. And, um, but still, like, it's still, like, if we have 50 to 100 engineers, it's still only hundreds of engineering years that have gone into our product. This is not something where ultimately someone else can't build something in this, in this as well. And I think the only moat in our category is speed. It's kind of like what I just said, it's learning where the dead bodies are, learning how to compound an advantage. And I think maybe an example of this that I, I like to bring up is, even a company like NVIDIA, I think everyone outside looking in is like, "CUDA is the real moat," or something like that. Um, I think that's just inaccurate, right? When you look at large companies like OpenAI, Anthropic, Google, let's say Google if they were buying NVIDIA, I know that they build their own GPUs, they spend tens of billions of dollars on chips. Are you telling me if CUDA didn't exist, they would not use NVIDIA GPUs? No, they'd find a way to write assembly, the lowest level code, and make that run on the GPUs. It's that expensive for them, right? The reason why people use it is it's just awesome. They've made it really capable at doing low floating point math, they've made the interconnect really good, the computers really fast, and every year, they have a ticking time bomb on their head. If they don't make the hardware, the interconnect, um, kind of the memory bandwidth much, much faster every year, they're gonna lose. Like, their profit margin is gonna shrink, right? And AMD will be on their case, right? And that, you know, that's a, that's a little bit of a surprising sort of, uh, sort of feeling. Like, it doesn't have the, like, NVIDIA doesn't have the same properties of a company that a company like Google has, right? Uh, but it's still one of the most valuable companies out there.

   6. HSHarry Stebbings22:54

      I agree totally in terms of the moats for startups. Like, if you have two companies starting start line today, but if one of them becomes part of a very large company, say, an OpenAI or an Anthropic, and they suddenly have distribution, and they have brand, and they have resources which buys, you know, chips at scales that are unparalleled compared to what any other startup can do, suddenly Seven Powers becomes increasingly prominent and moats exist, no?

   7. VMVarun Mohan23:23

      I, I think the reason why some of this wisdom is potentially not, not correct is, I think speed is still important in that case, right? And, and the reason why is like, why does a startup ever win, right? Why does a startup ever win in an important category? Why did Google win in, in the early 2000s when Microsoft was already a behemoth at that point? I think it's just if, if a company has good insights and is able to out-execute strategically another company, they will win. They will win in a, in a space. Um, they-

   8. HSHarry Stebbings23:50

      I would, I would argue that distribution is more important than speed. Listen, you're the multi-billion dollar founder, so like, please correct me, but I'm like, partnership agreements is really what propelled Google in the early days to be so successful, and distribution-

   9. VMVarun Mohan24:01

      But it was also that there were lots of companies in the category, and they had the best product, and for that reason, a lot of people wanted to partner with them. Maybe, let me put it this way, our space is like very, very valuable, I would say. But if you actually look at a lot of the hyperscalers, their products in the category are not amazing products.... right? Um, even though they have a lot of distribution already. Why is that? And I think it's actually because it is hard to marshal together talent to actually go out and execute in this category very quickly, right? We're the kind of company where right now we're shipping a major release every one to two weeks. Name a large company that is able to learn that quickly.

   10. HSHarry Stebbings24:33

       Why do large companies suck at velocity of development when the market is as hot as it is today? What-

   11. VMVarun Mohan24:39

       I think it's existential dread, right? A c- a startup (laughs) has existential dread on, on whether or not they can survive if they don't ship fast enough, if they don't learn fast enough, right? If I'm inside a behemoth, like I'm inside Amazon, right, and Amazon has a product in our category right now, um, do you think the employees working on this are worried if they will have a job in six months if they don't ship a great product? If we had shipped the same quality product that some of these hyperscalers have shipped, we'd be out of the market a year ago. But they probably still have their jobs right now.

   12. HSHarry Stebbings25:11

       It's the seven days a week that's becoming the norm again in Silicon Valley, huh? In fact, I, I-

   13. VMVarun Mohan25:15

       I mean, we're, we're an in-person company, actually, right now. Yeah, we're br- like a 100% in-person

9. 25:20 – 31:59

   Remote vs. In-Person

   1. VMVarun Mohan25:20

      company.

   2. HSHarry Stebbings25:20

      Can you build a company today, remote, as efficiently as the in-person, seven days a week, Silicon Valley specialness that you're seeing return to the Valley again?

   3. VMVarun Mohan25:34

      I think it's just it might just be a little bit harder, right? I think you need to be a much more, I guess, principled company to start with. But I also think it's, it's, it's just an unfair advantage if a company is able to get, get their engineers kind of in the same room and on the same page, like, every five minutes if necessary, right? It's an unfair advantage on speed, uh, compared to a company where people are on different time zones. Like, you don't know when you can reach out to someone, right? Now, if, if, if, if it's 2:00 or 3:00 PM, everyone at the company can be cal- can be kind of, like, brought into a room at that very moment, right? So it just, it just makes your flexibility a lot faster. And in the early days, Harry, when I was talking about how, how obvious it is that your first idea or your ideas are not gonna be accurate, um, you should be able to pivot extremely fast and kind of, like, marshal everyone at the company as quickly as possible.

   4. HSHarry Stebbings26:25

      Do you think in your category, brand power is important? People associate with being a Windsurf user or a Cursor user. Do you think brand has that same power that it does in other categories?

   5. VMVarun Mohan26:38

      You know, I, I would, I would like to ... Obviously, I think having a g- a large brand is just helpful. It enables you, as you ship more and more new products, for more and more people to be able to use it and not have to build that, build the user base up from s- from scratch. But if I just was to remind everyone, you know, kind of like a year or two ago, probably in Silicon Valley, GitHub Copilot was the product that everyone, everyone was talking about, right, uh, at that time. And if I was to talk about it a year ago, right, actually a bit over a year ago was the Devin launch. And I think for three to six months, I was not hearing anything but Devin, uh, from, from everyone, right? And I think it's like in our category, we need to prove ourselves almost every day. If in three months we don't ship something amazing to our users, we will become irrelevant, right, uh, to, to a lot of them, right? If we don't actually, like, keep up with, with the pace of innovation, we will become irrelevant. So I think it's, it's a little bit of if you can maintain, if you can continue to innovate at breakneck pace, the brand is definitely helpful. But I don't think the brand gives you the right to move slower as a company.

   6. HSHarry Stebbings27:44

      But should these businesses not be valued inherently less, or at a much lower multiple, if their s- sustenance of value is able to deteriorate at s- more quickly than ever before? As you mentioned Devin, as you mentioned GitHub Copilot, brilliant examples.

   7. VMVarun Mohan28:00

      Yeah.

   8. HSHarry Stebbings28:00

      And then suddenly have a reduction of value so fast. Should they be valued in the same way?

   9. VMVarun Mohan28:06

      So I think there are still k- qualities of our company that we haven't really talked about of, like, having a large enterprise business, being wall-to-wall at very large Fortune 500 companies, right, and being able to work properly for large teams, which has inherent switching costs for the business, right? Not the same class of switching cost as a, as some of the products like, I don't know, Salesforce yet. I don't think we've built that out. There is a trade-off where if you focus so hard on making your product to switch off of, if you also don't improve your product fast enough, people, people will just switch onto the, onto the better product, despite the fact that it is hard to switch off of your product, right?

   10. HSHarry Stebbings28:40

       I always remember seeing a tweet from Tom Bloomfield, who's a friend of mine. He was like, "Ah, I didn't really get this space. I was a Cursor user, and then I switched to Windsurf, and it was, like, better or just as good or..." Like, he switched to Windsurf for this one project. Um, I have no idea if he stayed. I'm not making a comment. Tom, don't kill me. Um, but, um, my question to you is like, how do you think about switching costs and retention, and is it that easy to switch between the two?

   11. VMVarun Mohan29:05

       We need to innovate on features and product fast enough that we are able to build differentiated experiences for, for folks. That actually takes a lot of work, right? Like, as I was saying, like, most of our products that we end up building don't end up working. And even though we're shipping releases every couple weeks, some of the more complex pieces of technology that we've shipped, they take months to actually ship. So I'll give you an example. A couple weeks ago, we shipped a model that was comparable to some of the frontier models at the Agentic workload. And our model SWE-1 is much faster, much cheaper for us to run, and capable of operating over a large code base as well. And we were able to do that by learning from our users on how they use the product internally, right? And that was not a single month kind of experience for us. It took us many months to actually build out that, that model internally. But these are the kinds of- And now it processes hundreds of billions of tokens of code a day, that single model, right, and it's running on our own GPUs. Um, but this is, like, one of those things that it takes time to kind of build out these capabilities. Uh, just like how maybe, you know, for everyone in the audience and folks like Tom, he probably never heard of our company 10 months ago and used our product 10 months ago, right? So I think these ch- these things change extremely quickly. But you're totally right. The fact that it can change this quickly means that you need to be ultra vigilant, right? The same reason why no one had heard of us in Silicon Valley, like, maybe 10, 12 months ago and now, eh, like, a lot of folks have heard of us, um, the same thing can happen in the other way too.

   12. HSHarry Stebbings30:27

       You mentioned the strength of enterprise in your business. How much of your revenue/usage today is enterprise versus, um, bottoms up?

   13. VMVarun Mohan30:34

       Yeah. So, I would say like, probably of our total amount, it's like over 50% is, is, is actually, is actually enterprise, uh, and so for me-

   14. HSHarry Stebbings30:42

       What are the biggest questions, lessons, things that enterprises care about when they buy you?

   15. VMVarun Mohan30:47

       I think it's, there's a, maybe a handful of things. Uh, I think the first thing is, a lot of enterprises and large companies, this is something that's not very obvious to folks outside looking in, they have a lot of Java developers, right? And for the Java developers, actually most, most large companies have a lot of code in Java, they use an IDE called IntelliJ as part of the JetBrains family. So, this is like a, an interesting fact. Even though we have the Windsurf editor, we still support plug-ins into all the JetBrains IDEs, and it has the same functionality as the Windsurf editor. The reason why we forked the VS Code, uh, editor was because we didn't have enough flexibility to build out the UI that we wanted, uh, to give out the new Agentic experience. But we were able to give that out entirely in JetBrains in the plug-ins. And I'll give you an example. JPMorgan Chase, who is a customer of ours, over 50% of their developers are JetBrains users inside the company. And for those people, we're able to support all of their developers. We're not a product that's only for their VS Code users, right? Uh, so they can move over to Windsurf. So that's, again, an interesting fact that I think outside looking in people don't really understand, that for the enterprise there are lots of these IntelliJ users that we need to satisfy. And when we go into an enterprise, we don't want to tell them, "Hey, only 40% of your users can use our product." We want to make sure all of their developers can use,

10. 31:59 – 33:54

    Who Actually Counts as an Engineer in 5 Years?

    1. VMVarun Mohan31:59

       use our product.

    2. HSHarry Stebbings31:59

       Do you think your customers will have more or less engineers in five years time?

    3. VMVarun Mohan32:04

       It depends on the type of customer, right? And, and the word engineer is gonna become a very flexible word, as I was saying, right? As the technology gets better and better, people that are technical adjacent are going to be using Windsurf as well, and we're already seeing this, by the way, at some of the companies.

    4. HSHarry Stebbings32:17

       What does engineer in five years time mean?

    5. VMVarun Mohan32:20

       If I was to explain it to an engineer, if you were to go over time, just for an engineer, right? If you go back 50 years, everyone is writing Assembly. Then after that they're writing C. And by the way, people still write Assembly, though. They... So, after that they write C, then it's like C++, then Java and Python, and then now a lot of people are writing JavaScript, right? I'm, I'm, I'm just giving you an example. And like ease of programming has gone up, but a lot of the people that are, that write JavaScript have no idea how to write Assembly at this point. So I think it's gonna be something along those lines, right? There will be people that are able to operate purely on a natural language based obstruction, right? And the AI tools are able to explain to them how different components of the software stack work, so that just, even though they're operating on top of natural language, they're able to still be valuable to the company. But then ultimately down the line, there will always be production critical applications. Let me give you an example. Let's say I'm JPMorgan Chase and I'm building my transaction processing system. You probably don't want a vibe code then, right? Like, Harry, if you give me $100, probably you don't wanna like lose 100 and for me to not get the $100, right? I'm gonna complain. And that's some transaction processing system that's running in JPMorgan Chase that is probably doing millions of transactions or billions of transactions a day, right? And for that, you probably want someone that can go all the way down to the weeds and validate this actually makes sense, because that's core to the way the business operates. So I think you're gonna have a spectrum of people, right? People that can operate purely on top of natural language and they're building capabilities and technology and, and ops inside companies, but then people also that can go to the weeds, go down to the weeds. Um, now, how many people need to go down to the weeds? Probably fewer than there are today.

11. 33:54 – 37:10

    Will Product Managers Even Exist in 2030?

    1. VMVarun Mohan33:54

    2. HSHarry Stebbings33:54

       Do we have PMs... I'm, I'm always told that PMs are CEOs of the product, and many have said that actually we're not gonna have PMs anymore. ElevenLabs, I had their, you know, head of growth on the show the other day and he was like, "We don't have PMs." Do PMs have a role in five years?

    3. VMVarun Mohan34:09

       I think the expectation for PMs is not going to be down the line. It's not going to be, "I tell someone to go and build something." It's going to be, "You should go out and build it too." Right? Uh, there will be, need to be a lot more agency on their side. But the benefit is these AI tools are going to give them that capability, right? Let's say you do have a technical PM that is, that understands code and that can write code, they are even more deadly now than they were in the past. You don't need to give them a team of 10 people to prove out their idea, right? And one of the things that I kind of don't like about PMs probably and, and, uh, nowadays in a lot of cases is, they spend so much time writing docs to try to convince the organization to do what they, what needs to be done. But instead, they should just go and build a version of what they want to get done and then prove to the organization that that's what needs to get done. Why do you need to spend so much time babying your organization, playing a, playing a Game of Thrones, right? It doesn't really make a ton of sense in the future.

    4. HSHarry Stebbings35:00

       Do we skip the design stage and go straight to prototyping in the future?

    5. VMVarun Mohan35:05

       Probably the ability to very quickly mock up a design that is consistent with the design inside your company and prototype it is going to be much faster, right? Like, internally right now when we build apps, we are not very, very quickly going to Figma at the very beginning if the app can be built very fast, uh, inside. And then obviously if it's core to our product experience, we're gonna go out and design the layout and make sure it's, it's, it's, it's to our standards. Uh, but rapid prototyping can skip, it can, we can definitely skip like a laborious design stage right now.

    6. HSHarry Stebbings35:36

       I'm just fascinated. Like, where, where all of it converges together, as we said, you meet the Lovables and the Bolts in the middle, and then the Figmas are coming in now and actually saying, "Hey, turn design into code," and kind of coming in from outside. I'm trying to figure out what it l- this kind of-

    7. VMVarun Mohan35:52

       Yeah.

    8. HSHarry Stebbings35:52

       ... mess looks like in five years time, respectfully.

    9. VMVarun Mohan35:55

       You know, yeah. I think, I think it's a fair question. Maybe one thing is, for people outside looking in, the things that the Lovables and Figmas do is like maybe a very small fraction of what software is, uh, like ultimately. Like most software is not just like a website that, that has like some backend attached to it, right? It's, there's complex database systems, uh, software out there. There is all of this infrastructure. Most of Google is not the front end, right? Of Google. Like, think about how much work goes into Google. Google is probably one of the most complex pieces of technology. There's a very complex re-render. There's this database called Spanner that's a geographically consistent database, um, that, that exists that's probably tens of millions of lines of code, right? And all of those things, there's no one that's designing something in Figma for modifying the Spanner code base.... right, inside, inside the company. But we would like it so that they were using Windsurf to actually go out and do that. So the way we sort of like to look at it is, like, I don't, we don't sit and think about what these other companies are doing all the time. We're sort of thinking about, what are all the ways in which software engineers spend their time, and how do we make them much more efficient? So you're totally right, that I think the design stage, a lot of things are gonna get disrupted inside. But maybe one point I just wanted to add is, that's maybe just the tip of the iceberg on what a software developer ultimately does.

12. 37:10 – 41:03

    Async Agents Are Coming But Most Will Fail & Why?

    1. VMVarun Mohan37:10

    2. HSHarry Stebbings37:10

       I was going through some of your tweets as well. And you said, "Async remote agents will happen." And I just wanted to double-click on that first. Can you expand on how you think about this, and which tasks will be automated first?

    3. VMVarun Mohan37:23

       So the idea of async remote agents, if you were to look at w- a product like Windsurf, Windsurf is actually a local agent that runs, runs locally, and it can do very long running tasks. Like, you can migrate an entire code base from one version to the next, and it should be able to do that without you having to touch your keyboard, right, once you, once you instruct it to. Which is very, very powerful. But this idea of being able to do it asynchronously is also very powerful. You can imagine, like, just firing something off from your phone and it just generating a, like, a pull request for you. But I think one of the complexities of this is there's a building products in our category, is I think there are three things that really are important, right? Uh, there's latency, so how long it takes to get the response back. There's quality-

    4. HSHarry Stebbings38:03

       Mm-hmm.

    5. VMVarun Mohan38:03

       ... right, which is, what is the, what is the correctness, right? And then correctability. How quickly can you make a change, right? And I think people kind of feel like if the technology's really good, they can kind of ignore these facts. But it's really, really important. If you build an asynchronous exper- experience, and it takes 10, 20, 30, maybe a couple of hours to go out and build something, people's expectations on the output are gonna be really high. Your quality has to be really, really high. And if the quality is not high, it better be easy to correct. But it's not very easy to correct. Like, when you, when the workflow of how people build software, if all I do at the very end is I create a pull request on GitHub, which is the final way that people review the code, and even 20% of it is wrong, let alone 10%. I, I wrote it has to be at least 90% correct. People were like, "It needs to be 99% correct." Because, and I think they, I think they might be right. Because if even 10% is wrong, people lose faith in the product, because they waited hours to get the result, right? And they need to bring it back in locally. And modifying something that is 90% correct is not that easy, because you need to understand the 10% that is wrong also, which takes time too, right? You're still human time limited at that point. So my rough feeling on things is, what are going to be done asynchronously remotely are things that, where the task is so easy that it can actually get it done properly. Like, the complex tasks are still going to get done in Windsurf in the, in the short term, right? Um, just because things that are complex and require a lot of rapid iteration, it's unlikely that you're gonna do something asynchronously, wait 30 minutes, go and look at it in GitHub, and then decide, "Hey, it's not correct," and bring it back. This, the feedback loop is too slow at that point.

    6. HSHarry Stebbings39:39

       To what extent do users care about latency, have you found?

    7. VMVarun Mohan39:42

       Very, very much. I'll give you an example. Like, even for our tab product, 10 milliseconds, which is like the product that gives you not only the auto-complete but, but the, uh, automatic re-factors as the user is typing, every 10 milliseconds affects a percentage points in acceptance rate right now for the product.

    8. HSHarry Stebbings40:00

       When we think about these async remote agents that have to be incredibly responsive, that have to be correctable, what form factor do they take? We imagined that earlier, like, just pinging off a message. How do you envision the right form factor, and what that will take?

    9. VMVarun Mohan40:15

       Yeah, I think it's, it's, it's not super clear, right? It, it's possible that the right form factor is you need to fire this off from your ID, because people are, people are in their work state in their ID. Now, the question is, d- how, how common is the use case that people want to fire things off from their mobile phone, right? And then if they do, is it fine for it to just be on Slack? Do people want to continuously talk to something on their mobile phone? I think the answer is, maybe not. Because if I get thousands of lines of cha- code changes, I don't know how to review code very effectively on my phone. And then in which case, like, I don't wanna interact with something on my phone back and forth. So maybe I'm, I'm game to do one-and-done interactions on my phone, and then it better be 100% correct, and I'll go back to my laptop and be like, "No, it's correct," and then stamp, stamp it and then approve it and merge the code. So it's, there is a lot of trade-offs

13. 41:03 – 42:54

    The Truth About Agent-Only Workflows

    1. VMVarun Mohan41:03

       here.

    2. HSHarry Stebbings41:03

       When we talk about the right form factor for these remote async agents, it kinda makes me think about something that Satya said, and I, I did write it down 'cause I wanted to make sure (laughs) that I got it right, 'cause I didn't wanna misquote Satya. (laughs) But he essentially said that obviously apps will collapse into agents and become just databases with business logics. Do you agree with him in that respect? Uh, Salesforce becomes a database that agents just crawl all over, uh, HubSpot the same, and you basically have their utility value reduced to just databases.

    3. VMVarun Mohan41:34

       Yeah, I mean, I'm, I'm trying to think about why I think that's, that is not exactly true. But you're totally right that, uh, I mean, you know, for any company, their entire state could, could be distilled down to a database, right? Uh, for, for any company. I don't know if I completely buy that in the short term, these complex applications, like Salesforce and Workday, completely get replaced by another company that just builds a database and an agent operating on top of it. I think a lot of complex workflow has been built around the idea of using Salesforce. I'll give you an example. When we built our sales team, everyone already knows how to use Salesforce down the line. And now we build custom workflows inside Salesforce. And you're right, those are all database transitions, but they affect the way humans operate with software. It's very unlikely to me that what's gonna happen is Salesforce will get dethroned by a company that is just a database with an agent operating on top of it. It, it just, there's too much inertia for the company, uh, building out these complex workflows. And maybe here's the, the final piece, and maybe why I believe that, I don't think agents are good enough today, that you can kind of just let them operate on top of, on top of a database, and write to the database, automatically write to the database, uh, without human supervision, uh, for some arbitrary workflow-... right? Right now, we're still in the stage right now where these agents are mostly reading from data sources. They're not, like, modifying things at scale, um,

14. 42:54 – 44:26

    What Cursor Got Right (That Windsurf Didn’t)

    1. VMVarun Mohan42:54

       and that's just because maybe we don't have the tr- the, the, we don't, we don't trust these systems, uh, deeply enough right now.

    2. HSHarry Stebbings43:00

       Do you think we are overly optimistic about the progression of the agent landscape? Obviously, as a venture investor, the only thing we give a shit about today is agents. Um, do you think we are overly optimistic about where we are?

    3. VMVarun Mohan43:13

       This is gonna be the m- the most obvious statement, but I think people think these systems are way more capable than they, they... A lot of investors might believe they're more capable than they are, um, today, and I'll give you an example. My goal here is not to, not to, you know, kind of downplay anything here. But I remember last, last March when kind of the Devin launch came out. Everyone was giddy with excitement of the idea of, like, software engineers getting replaced. Uh, like, a bunch of investors were like, "Oh, there's no reason to ever hire a junior developer. You will have this." And now we're very far from that right now, right? I don't think, like, or at the time, we were very far from actually replacing a junior developer with, with an asynchronous AI agent, right? But I think what people don't understand is even if the technology's not there yet, I don't think they grasp how quickly the exponentials are improving, right? Which is that in six months, what is capable of these models is gonna be very different than what is capable today. And I think people are... it's, it's very hard for people to understand that. Like, what I just said about agents and the fact that they're really good at reading systems at scale, but people won't trust them to make rights to systems, to internal databases at scale. That will probably change in six months, right? Uh, because eight or nine months ago, people were not using agents a ton. So yeah, I think people underestimate the speed at which these

15. 44:26 – 50:28

    The One Area of Engineering That AI Will Eat Next

    1. VMVarun Mohan44:26

       things improve.

    2. HSHarry Stebbings44:27

       What do you think in 12 months will be crazy that we don't have today? Like you said there about kind of the transition and models bluntly improving so fast in such short time frames, if you think about what we do today that we would consider crazy that will be a reality in 12 months, what do you think it would be?

    3. VMVarun Mohan44:42

       I think a lot of things that maybe I understand the software development, uh, landscape a lot better, um, is the wa- how end-to-end these tools are gonna be is gonna be, I think, shocking to people. I think right now, if I was to say one of the biggest problems with these tools is mostly they help in the code writing experience. They're not helping in a lot of different aspects of the, of the software development life cycle, which is software developers design, design software, right? They deploy software, review software, right? Uh, build, navigate. They do a lot of debug, test, they do a lot of different things. And I think the reason why it's mostly been kind of siloed to one or two areas is actually when, when you look at a software engineer and their job at a company, they look at a lot of distinct data sources. They look at, like, a logging system. They might look at a database. They might do all these other things, and I think these agents are gonna get access to all of this data and all of this data, your browser data, all of this stuff. And I think what's gonna be possible is debugging very complex tasks, designing systems is gonna be something that these agents are gonna give much more leverage for than they are today. And I think this idea that software engineering, there's, like, a part of software engineering that AI's not gonna touch because it's too hard, I think is, is just gonna be wrong. I think every aspect is gonna become 10 times more effective.

    4. HSHarry Stebbings45:55

       Can I ask you a really hard one? You mentioned Devin there. If you look at, say, a cursor, what have they done well that you've learned from, and what do you think they've maybe made a mistake on that you've learned from?

    5. VMVarun Mohan46:06

       I don't know. I don't know about a mistake, but I think for them, just actually, I think they took a really good approach on building high-quality UI/UX, um, and that actually proved to be, uh, what people really loved, right? And I think that's, that's, like, very impressive that they were, that they, that they were able to do this right off the bat. I think that's, that's, that's not actually what our initial intuition was, um, and I think they, they actually hit it well.

    6. HSHarry Stebbings46:29

       What do you mean by that? It wasn't where you placed importance in terms of that initial UI/UX being seamless?

    7. VMVarun Mohan46:34

       Yeah, I think for us to go out and build Windsurf, we actually felt that we needed a massive, like, technical breakthrough of, like, actually a new product experience. And I think that was the only reason why we actually decided to go out and build, like, actually have our own IDE. I, e- like, if we didn't do that, I think we're the type of company that would not just go out and build UI/UX just for the, like, you know, for a much better experience by default, unless we had great technology. I like to think of ourselves as, like, we're a technology company, and I think we ship product to maximize the amount of technology that our users can consume productively, right? Um, and we want UI/UX that is not harming people's experience of our, of our product.

    8. HSHarry Stebbings47:14

       To what extent is the quality of your customer experience defined by the software that you create, the UI, the UX, versus the model progression that lies beneath it being OpenAI Anthropic?

    9. VMVarun Mohan47:27

       Yeah. I think, I think you can't downplay the fact that, that the latter is very helpful, right? The frontier model is getting ca- getting more and more capable. Every new capability unlocks maybe a new type of product experience that wasn't capable in the past. But I think it's a little bit of both, right? Um, may- maybe, maybe to put it, put it kind of, uh, kind of bluntly, like, we were the first agentic A- IDE experience, right, uh, for when we launched Windsurf. Uh, we were, we were the very first ones. Obviously, now that idea is not very, it's not non-consensus, like, it was the obvious thing to do. But these models like Sonnet had existed for quite a while, but it actually took us some work to actually put together, uh, like, using these models, but also using our own models internally to make this a usable experience with the UI/UX to be able to review all the software very quickly before people actually, this, the product experience kind of took off. So I think it's a, it's maybe a, a little bit of both, but I don't wanna underplay how much the models actually affect, you know, the value people get from these experiences.

    10. HSHarry Stebbings48:25

        People often compare the model landscape to the cloud landscape. Uh, the thing that I, I find challenging about that is cloud, you generally stick to. You're on AWS. You're not switching between AWS and Google and anyone else. To what extent do you think model landscape will be one where have a preferential relationship with an AWS as welding cloud or Anthropic or OpenAI models versus actually, you just work between many different model providers, and you switch between them for different functions?

    11. VMVarun Mohan48:54

        I think you're right. The, the space is very early, is the reason why it's kind of like the switching costs of these cate- of the category is not very high, right? Moving from one model provider to the next, it's very low switching cost, ultimately. And by the way, that's because there's no state in these models for the most part. So for the most part, it is almost like a Twilio-like experience where it's like, send text message and you kinda send a text message. But maybe I could send text messages with a lot of different applications. But I don't take that as a big negative. I think what that means is we're still evolving in this category, right? Down the line, you could imagine models can actually internally keep a lot of state, right, about a user, about th- about all the data they have inside their company, about all the data they, they use locally. If you were to look at a lot of large code bases, they are actually getting to billions of tokens of code, right? What if that's actually something stateful that you can inject and- inject and eject context about this from a particular model provider. Like, I'm sure there are ways in which they can increase their switching costs down the line as the technology gets better and better. But I think this is what it comes down to, right, Harry? In a category that is evolving so quickly, and when the models are improving so quickly, I- it is actually bad for them to over-invest in ways in which they can increase switching costs. That d- doesn't make sense. Because let's suppose they did do that, but they miss the next improvement in the model. Like, they for- they, they didn't, they didn't do test time compute or something. They would be behind, and then it wouldn't matter that they increase the switching cost. So I think ultimately your- the analogy to cloud providers is not accurate right now. They don't have the same properties. It's not the same kind of business right now. Um, but could it be down the line? I think it could.

16. 50:28 – 53:31

    Are LLM APIs Already Commoditized?

    1. VMVarun Mohan50:28

    2. HSHarry Stebbings50:28

       Today, models do have non-commoditized properties. Anthropic is often hailed as being better for developers, for example. Just as like a most base one. To what extent do we actually see the complete commoditization? I mean, there are literally 12, 13 different providers in China who are racing faster than ever, and will reach some asymptotic utility point where all of them hit the same level, and I'm sure the US will be the same. To what extent do we hit that versus, "No, no, Anthropic is the one for developers. X is the one for whatever else."

    3. VMVarun Mohan51:02

       I think it is unlikely that in the short term you will have a, like a, an ability for one model provider to just run away with a particular category, um, if the category is, like, very valuable. Right? I think it's, it's unlikely that that's the case. Now, I do believe in things like the scaling hypothesis, which is to say with more scale you, you are able to build better and better models, and you do have, like, your h- your hands tied up if you're operating with less capital in the category. Right? It's just, it's just the, the nature of the game, um, right now. But I don't, I don't think we're anywhere near the point in which you're gonna have someone who's the defining leader of having a great model and no one else can touch it for, for years, right? Um, and, and maybe the, the reason for that is actually because six months from now, if a new technique exists and someone else finds the new technique, um, ultimately, they're able to do it in a much more efficient way. And if they're able to do it in a much more efficient way, it means that if you just miss it and you're still ap- applying your previous technique, you're gonna be behind them, right? So it's almost like unless you believe that company is, uh, one company is going to get all the capital in the world, uh, and no one else is ever gonna get the capital in the world, and one company has a monopoly on all great ideas, it is unlikely that you're gonna have someone that is able to, like, run away with, with something in, in the short term, if that makes sense.

    4. HSHarry Stebbings52:25

       Given the commoditization of that model layer, as we said, and no one being able to run away, to what extent do model providers have to move into the app layer to have any form of differentiation?

    5. VMVarun Mohan52:35

       Maybe in the, in the API side. I think there are lots of ways you can build better APIs for a lot of different applications, and it's kind of like maybe you can f- you can, you can kind of focus on the applications you do support. And an example of this is, like, let's say you were, you were kind of working with a company like us, um, and we were using a model provider. You know, w- when we output code, maybe a lot of the code looks the same as existing code, and you can actually optimize from a latency perspective to help our workload versus another workload that exist for images out there. And you can be a much better kind of vendor to us than another company. So there is maybe specialization you can have on different axes to provide a better experience. But I- as you can see, you, you are seeing, like, these model companies actually going up to the app layer too, in whatever apps they see are, like, valuable to them. Um, so I think you're seeing a little bit of both. People have too many opinions about what the right way to do things are, and I think you, you have to be rational on, on what the best way to win is. And I think

17. 53:31 – 59:01

    Should Model Companies Own the App Layer?

    1. VMVarun Mohan53:31

       that's the only thing that matters.

    2. HSHarry Stebbings53:32

       Uh, finally, I do, I do just have to touch on, 'cause I talked to you for a long, long time. Um, Dario the other day was talking at, at some event or conference or whatever, and he was like, "2026 will have, like, solo billion-dollar companies without doubt." I just wanted to touch on this with you. Do you agree?

    3. VMVarun Mohan53:50

       I don't believe in that. No, I don't believe in that.

    4. HSHarry Stebbings53:52

       Please explain.

    5. VMVarun Mohan53:53

       I mean, I think-

    6. HSHarry Stebbings53:53

       This feels like a university essay. Discuss. (laughs)

    7. VMVarun Mohan53:56

       I mean, I mean, I think the, like, the solo billion-dollar company would imply that no one else cares. Like, we live in a capitalist market, so there's competition. And if you're able to do something with one person, unless you're just a thousand times smarter and more capable than everyone else, like, someone with two people that are as smart as you are probably gonna be able to do your idea. And then if they do, that's gonna compress your margins. That's gonna compress your ability to be the pervasive brand out there. That's gonna compress your customer acquisition cost or increase your customer acquisition cost. Like, I don't know, seems like very hard for it to be the case that a single person is gonna be able to run away with a billion-dollar product, uh, without continued investment. Like, it just, the implication of that is, like, no one else cares about this, but magically you're able to do well. So I don't know. It feels-

    8. HSHarry Stebbings54:40

       What, what do people who believe this to be true get wrong? What are they fundamentally mistaking?

    9. VMVarun Mohan54:45

       I, I, I actually, I never understood this idea of, like, a single person is going to be able to build a billion-dollar company. (laughs) I've never kind of understood it. I mean, because what is a company? A company is the sum of the discounted cash flows over time, and, uh-... and, like, down- down the line, like, you're gonna need people probably, or if the AI is so good that you don't need people, like, at some point, I would just wonder, like, if, like, what are you really contributing, and is the AI building the whole thing? In which case, like, I don't know, like, actually that would reduce the- that would increase competitive pressure because everyone else will have access to the AI too, so...

    10. HSHarry Stebbings55:16

        Can I ask you, you know, you've been across multiple different cycles of the business, ups and downs. When did you question your love for it most? I- I think we often say, like, "Oh, I'm always inspired." I'm not inspired every day to do what I do.

    11. VMVarun Mohan55:31

        Yeah.

    12. HSHarry Stebbings55:31

        Some days I am, some days... Was there a period where you were not, and how did you get through that period?

    13. VMVarun Mohan55:37

        I think every time, basically every time we've needed to make a strategic pivot, like, actually it's before the pivot that- that it's- it's probably the- the most anxiety-inducing because you feel like something could be much better than it is, but you are not acting on it, and I think that is potentially the- the part that is- that is the most, uh, kind of gut-wrenching. Um, you know, it's actually an interesting point, when we pivoted from ExoFunction to Codium, I actually think post-pivot was- was the freest I've ever felt because I'd written off in my head, uh, both me and my co-founder that we're likely gonna fail, but at least we're likely going to fail in something that we believe in. In the past, yeah, we were making a couple of million in revenue, but I know what it means to be like a very large successful company, you need to be able to make billions in revenue, right? Uh, so we were so far away from that outcome that it was almost like, yeah, this- this feels very hard to do. But after pivoting, we had a new lease on life, and I actually feel like for us, and for me, the part that is the most anxiety-inducing is when we believe we could be doing much better but there's random inertia, uh, friction that is preventing us from doing the right thing. And even if doing the- doing the right thing has a low probability of success, actually starting to work on it is- is the most free experience that I feel like I've had at the company.

    14. HSHarry Stebbings56:56

        I heard you say once an interesting statement, you said you wait until you're drowning in a role before you hire for it. And I just thought it was really interesting 'cause I was always brought up on the value of board members being they highlight hires that you need to make six months ahead so you don't have a bottleneck in six months' time. How do you think about those two seemingly opposing ideas?

    15. VMVarun Mohan57:21

        We've had cases where I would say it's a little bit of a- of an anti-pattern on- on that one. Like, for instance, when we... before we hired our VP of sales, um, who- who's- who's really awesome, um, we- we actually closed some very large enterprises inside the company without any salespeople. Some very large enerv- but because we were able to do that inside the company, we were able to feel the pain of what enterprise sales would look like inside the company, and also it proved to the person we were going to hire, Graham, that we were an awesome company to potentially work at, right? So I think it's- it's an interesting trade-off where maybe there's a belief they have that domain experts are awesome, but if inside the company you're not able to get- get an outcome that is 1%, 10% as good inside the company, it's probably not the right time to go out and make the hire. Like, maybe, let me put it this way, uh, th- this is maybe the- the concise way to actually answer this. Startups don't fail because they look like messes inside, startups fail because they don't do the right thing, uh, well enough. That is the reason why they fail. And I think people love to say, "Hey, like, I don't have this role and that's why I'm not working," and it's, like, actually when you look at the most successful companies, they look like train wrecks inside, right? Ultimately. And what I think is important there is- is as long as you are doing the basic things that make your product very successful, I think you can actually make these hires, like, as necessary. I don't think it's, like, critical that you make them six months in advance. The worst thing for me would be making a hire and for them to not be important on day one and just to be, "Hey, chill out over here, and wait for the next three, six, 12 months," because then they're gonna manufacture something to work on and I won't really care about

18. 59:01 – 1:00:42

    What Does Varun Want to be Remembered For?

    1. VMVarun Mohan59:01

       what they're doing.

    2. HSHarry Stebbings59:01

       Final one before our quick-fire, what did you believe on management that you've changed your mind on? So, like, for me, as an example, like, I brought in this incredible person, Julien, he led, uh, workplace in Europe for 10 years, and I always believed, dude, arrogantly as a young person I could read Elad Gil's High Growth Handbook and I know how to manage people, and it's bullshit. The wisdom and experience this guy brought from 15, 20 years leading teams is so nuanced and granular, I learn so much from him about management every day now. It... you can't learn it in a book. I've changed my mind on that. What would your change of mind be on management?

    3. VMVarun Mohan59:38

       Maybe the biggest change of mind I- I did have was- was what you originally said, which is how large your team is is not a function of, like, output, um, output, and actually ruthless focus is the only thing that matters, right? So you can have a lot of people but the answer is if those people are not ruthlessly focused on one thing, uh, you are gonna be very, very not successful. Like, it is- it is much easier to run a company that is focused... that has only one thing that matters than it is to run a company with the same amount of revenue with five things that matters, that... with five different priorities. And I think in retrospect that always feels... that- that feels obvious, but at a startup like ours where there's so many things we can do, there's always a couple of shiny things. You can always open Twitter and it's like, "X is solved, Y is solved, Z is solved." But actually, I think being able to say no to things and to focus on- on the han- like, the one thing that matters with many people and ruthlessly optimize- optimize that, um, it's very hard, uh, but when you can actually get that right, you can- you can make magic

19. 1:00:42 – 1:04:45

    Quick-Fire Round

    1. VMVarun Mohan1:00:42

       happen.

    2. HSHarry Stebbings1:00:43

       I could talk to you all day. I do wanna do a quick-fire, and I have some great quick-fire questions for you, so I'm gonna start with one of... no, I'm adding, fuck these ones. Um, Neil Mehta, I love him as an investor and I'm an investor, so I don't see the same Neil Mehta that you see. What makes him so special for you as a founder?

    3. VMVarun Mohan1:01:01

       I think his ability to analyze companies and be very intellectually flexible is, is, uh, is actually pretty remarkable, right? Like, the breadth of knowledge that he has about all of these different businesses, but also to understand what makes them work, what are some of the ways they could improve, and how that could be applicable to us, um, is, is actually, like, very awesome. And he's, like, a very kind person with his time. Right? You would assume, given the fact that, you know, he is, he's, uh, he works with so many companies, that he would not have a lot of time, but he is extremely generous with his time.

    4. HSHarry Stebbings1:01:32

       Who do you not have on your board that you would most like to have on your board?

    5. VMVarun Mohan1:01:37

       Uh, actually I would love to have someone like Scott Cook on our board. Someone, someone like, uh, someone who's the CEO of like a, a CEO and founder of, like, an extremely successful software company. Um, yeah, someone, someone ... Uh, I've, I've had a handful of conversations with him, and every time I walk away just with a deeper understanding of just, uh, competitive dynamics and just what it takes to run a very enduring, long, long-term successful business.

    6. HSHarry Stebbings1:02:00

       Dude, that is a great shout. Um, I haven't had that before. If you had to make Windsurf open source tomorrow, how would you feel and what would you do instead to win?

    7. VMVarun Mohan1:02:09

       You know, I, I, I feel like that's a, that's a question I've been, I've been getting, uh, recently. I don't think it would affect, affect much if we had to make it open source, because most of the work that ... It's kind of like the thing I said before, right? You know, Google is, yeah, they have a front end, but the front end is just a single box. And if they open sourced the front end of Google, I don't think anything would really change about the world, right? That, that box or the UX for that was not really the big deal. Uh, I am aware of the fact that Copilot has done that, but most of our logic is actually in the back end, ultimately. So, I don't think that it would change a ton. I also don't think it would change our adoption, um, of the, of the product. Uh, like, most of the differentiation has nothing to do with the fact that the front end is actually open source or not.

    8. HSHarry Stebbings1:02:48

       You have a sibling. They're 18 years old, and they ask you, "Should I go to university? What should I study and how should I position myself best for this new world of work?" What do you advise them?

    9. VMVarun Mohan1:03:00

       Just focus on problem-solving, right? Uh, how do you, how do you, like, break down problems, uh, be a high-agency individual? And I think computer science, largely speaking, is just the study of problem-solving, uh, for the most part. So, maybe what doesn't matter as much is do you learn X language or Y language, but can you break apart a problem into their p- distinct pieces and actually go out and execute on them is, is probably the most important thing.

    10. HSHarry Stebbings1:03:23

        What's one thing that you think OpenAI did wrong that you've learnt from?

    11. VMVarun Mohan1:03:28

        Oh. Uh, may- maybe naming. (laughs)

    12. HSHarry Stebbings1:03:33

        (laughs)

    13. VMVarun Mohan1:03:33

        Na- (laughs) Let's go with naming on that one.

    14. HSHarry Stebbings1:03:35

        Penultimate one. You can change one aspect of your CEO-ship. What do you need to change most?

    15. VMVarun Mohan1:03:42

        I think there are probably some details I, I should be, I shouldn't be actually, like, looking at very deeply that fundamentally don't matter about the long-term success of the company. But I just, I'm a person that's very neurotic, and I like to understand everything that's happening internally, like what we're spending money on, at a level that probably doesn't matter. Uh, and, uh, and, uh, just like waste cycles in my head, um, that, that could be put to better use.

    16. HSHarry Stebbings1:04:05

        Final one for you. You can be known for having one impact on humanity. What impact do you want your future generations to say, "Varun, my grandfather, he did X"?

    17. VMVarun Mohan1:04:18

        I think the mission of our company is, is very exciting. And, and I wouldn't say it's just me, but, but the team, um, is, uh, we wanna reduce the time it takes to build technology by 99%. And, and if we are able to play a meaningful role of how that could shake out in the future, like, I would be extremely excited about that.

    18. HSHarry Stebbings1:04:32

        Varun, listen, as I said, I heard so many things from Lee Murray, from Neil. I, I was, uh, looking forward to this. You've been fantastic. Thank you so much for putting up with my base level of knowledge (laughs) and I so appreciate it, man.

    19. VMVarun Mohan1:04:43

        No worry, this was, this was fantastic, man. Thanks a lot.

Episode duration: 1:04:56