Greylock’s Saam Motamedi on How Venture Firms Endure | Ep. 37

Saam Motamedi 0:00 Palo Alto and Workday both started at Greylock at the same year in the same office, two thousand and five San Mateo office. And Aneel obviously, and Dave Duffield started Workday, Nir Zuk started, uh, Palo Alto. Ashim, you know, wrote the first check, has been on- was on the board for eighteen years.

Jack Altman 0:15 Yeah.

Saam Motamedi 0:15 I think he just rolled off recently.

Jack Altman 0:17 And these are fifty to hundred billion dollar companies?

Saam Motamedi 0:18 I think Palo Alto is like a hundred forty billion dollar company-

Jack Altman 0:21 Hundred and forty.

Saam Motamedi 0:21 Workday's, I, I don't know, between fifty and a hundred.

Jack Altman 0:23 Yeah, big.

Saam Motamedi 0:23 Right? These are big businesses.

Jack Altman 0:25 Crazy.

Saam Motamedi 0:25 Right? And by the way, we've started-

Jack Altman 0:26 Now there's Abnormal.

Saam Motamedi 0:27 Been part of starting Abnormal, Sumo Logic, which went public.

Jack Altman 0:29 Yeah.

Saam Motamedi 0:30 Uh, several companies-

Jack Altman 0:31 Okay, so Greylock's good. But before we get to Greylock being good, like, why is this [laughing] ? [upbeat music] All right, Saam, I'm happy to be here with you. This will be hard to stay serious, but we'll find our way. You and I talk a lot. We text many times a day.

Saam Motamedi 0:42 I think we're in, like, what? Twelve different text groups.

Jack Altman 0:44 There was a joke, um, my wife and I had when we were sitting at dinner one time, and I was like... I, I was realizing, I feel like I have so many friends. It turned out that it was the same configuration of, like, three people, nine times, and they're all you.

Saam Motamedi 0:56 But isn't that- doesn't that make you happy?

Jack Altman 0:57 Yeah. Before we start, by the way, do you have any products you want to plug or things you need to get off your chest?

Saam Motamedi 1:02 I just got this new standing desk- [chuckles]

Jack Altman 1:04 Okay. [chuckles]

Saam Motamedi 1:04 -from Design Within Reach. First of all, it's a standing desk that actually looks good. I don't know if the videos can see these, but these are-

Jack Altman 1:11 These aren't what we want.

Saam Motamedi 1:11 These aren't what we want.

Jack Altman 1:12 By the way, mine already... Mine just arrived.

Saam Motamedi 1:14 Yeah, mine arrived Friday. [laughing]

Jack Altman 1:16 Okay. It is really good, though.

Saam Motamedi 1:17 But the middle is leather, and so I think the mouse just glides beautifully.

Jack Altman 1:19 We do have a memetic product thing going with our friends, where everything that one person buys, everybody ends up with.

Saam Motamedi 1:24 But I think, as a result, we all end up with amazing products.

Jack Altman 1:27 It's a, it, it's actually a big-

Saam Motamedi 1:27 Like this rice cooker you got me?

Jack Altman 1:29 The rice cooker's crazy.

Saam Motamedi 1:30 It's unbelievable.

Jack Altman 1:31 Okay.

Saam Motamedi 1:31 And it keeps

Saam Motamedi 1:32 it warm.

Jack Altman 1:32 I'm gonna start with a serious topic. I didn't realize this before, but when I did research prepping for, for you, Greylock started in nineteen sixty-five. Sixty years. I can understand, like, a firm being successful since twenty fifteen and evolving. I kinda get, like, even coming from the nineties, although that seems still, like, a lot to navigate. But in nineteen sixty-five, there wasn't the internet. Like, there wasn't like a TI-83. There wasn't, like, anything. So, like, what was happening in nineteen sixty-five?

Saam Motamedi 1:58 It's interesting. Greylock turns sixty years old this year. Um, our understanding, and, like, no one keeps an official record of this, is we're the oldest venture firm in the US to have started with multiple limited partners, and we sort of pioneered the GP-LP relationship that underpins-

Jack Altman 2:11 Everybody else was, like, a family office or something.

Saam Motamedi 2:13 The, the firms at the time were typically managing capital on behalf of a single family.

Jack Altman 2:16 Yeah.

Saam Motamedi 2:16 Greylock starts as an East Coast firm. Uh, it actually moved to the West Coast in the two thousands, and it's gone through generations of, of partners and generations of investing. And one of the things that's interesting about the firm is, like, we've navigated completely different sectors. So, like, if you rewind... B- by the way, it's interesting, we have some of the original partner group is still alive-

Jack Altman 2:34 Wow

Saam Motamedi 2:34 ... and comes to our limited partner meetings.

Jack Altman 2:36 And they're ninety?

Saam Motamedi 2:37 In their nine- in their nineties.

Jack Altman 2:38 Yeah.

Saam Motamedi 2:39 And so I talked to them about, like, how was venture in the sixties and the seventies? Well, the first thing is, like, there's no internet.

Jack Altman 2:43 Yeah.

Saam Motamedi 2:44 So how do you find companies?

Jack Altman 2:44 Yeah.

Saam Motamedi 2:45 It turns out, they would buy newspapers of different cities, look in the classified sections for job postings, because that was an indication that a company was emerging and hiring, and then they'd fly to the city, show up at the office, and meet the entrepreneur. You know, decisions today move pretty quickly.

Jack Altman 3:01 Yeah.

Saam Motamedi 3:01 You know, term sheets happen in days.

Jack Altman 3:03 They had, like, a year.

Saam Motamedi 3:03 Six months.

Jack Altman 3:04 Yeah.

Saam Motamedi 3:04 And by the way, what was the investment size they were contemplating?

Jack Altman 3:06 A million dollars.

Saam Motamedi 3:07 Two hundred thousand.

Jack Altman 3:08 Yeah, that's crazy.

Saam Motamedi 3:09 So you take six months to make a two hundred thousand dollar investment decision.

Jack Altman 3:11 How big was the first Greylock fund, do you know?

Saam Motamedi 3:13 I don't know.

Jack Altman 3:13 Like, small?

Saam Motamedi 3:14 Small.

Jack Altman 3:15 And what were they investing in?

Saam Motamedi 3:16 So one of the first major wins for Greylock was a company called Continental Ca- Cablevision-

Jack Altman 3:20 Okay

Saam Motamedi 3:20 ... which underpinned a lot of cable in the US. It eventually became AT&T and then Comcast. So the underlying kinda cable networks that power a lot of the US, that was one of Greylock's first large successes.

Jack Altman 3:30 Mm.

Saam Motamedi 3:30 But we were investing in all sorts of different companies. I mean, Neutrogena, the, the-

Jack Altman 3:33 The soap

Saam Motamedi 3:33 ... you know, the skincare product, I'm sure y- you use some of it-

Jack Altman 3:36 I just do, yeah

Saam Motamedi 3:37 ... uh, wa- was an early Greylock investment, so that was, like, an initial era. Then there was an era that was more, uh, health and bio-focused, and Greylock was, you know, initial investor in companies like Millennium, Vertex, Stryker.

Jack Altman 3:47 Yeah.

Saam Motamedi 3:47 These are all, like, publicly traded, hundred billion dollar companies today. And-

Jack Altman 3:50 Hundred billion dollar.

Saam Motamedi 3:50 Yeah, and like, you know, Greylock was early in them, and today we do very little in, in healthcare and bio. So it's like-

Jack Altman 3:55 Yeah

Saam Motamedi 3:55 ... this firm has kinda navigated through different sectors.

Jack Altman 3:58 It's crazy.

Saam Motamedi 3:58 And then, you know, we went into, like, the open source era, and we did Red Hat, which is the largest outcome in open source software.

Jack Altman 4:03 Yeah.

Saam Motamedi 4:03 And then the internet and social network area with the era with, like, Facebook, LinkedIn, Instagram.

Jack Altman 4:08 Yeah.

Saam Motamedi 4:08 Marketplaces with Airbnb, now, a- you know, enterprise

Saam Motamedi 4:11 software.

Jack Altman 4:11 So what I'm curious about is, like, we were talking about this a little bit yesterday, but like, venture firms, for the most part, have like a run, and then they mostly don't make it.

Saam Motamedi 4:20 Yeah. Yeah.

Jack Altman 4:20 There's a small number-

Saam Motamedi 4:21 Yeah

Jack Altman 4:21 ... that do.

Saam Motamedi 4:22 Yeah.

Jack Altman 4:22 Greylock's obviously-

Saam Motamedi 4:23 Yeah

Jack Altman 4:23 ... like, I think, like, the oldest I can think of, basically.

Saam Motamedi 4:25 Yeah.

Jack Altman 4:25 What is consistent from nineteen sixty-five till now? Do you think there is a thread that stuck, or is it just constant reinvention, and it's like the whole thing's different at this point?

Saam Motamedi 4:35 There are some core dimensions that have persisted since 'sixty-five, and then I think critically, the firm has continued to reinvent itself, and I think absent both those things being true-

Jack Altman 4:44 Mm-hmm

Saam Motamedi 4:44 ... like, Greylock-

Jack Altman 4:45 Yeah

Saam Motamedi 4:45 ... wouldn't be Greylock in twenty twenty-five.

Jack Altman 4:46 So what do you think stuck? Like, what sticks?

Saam Motamedi 4:48 I think the number one thing is just the core values and ethos of the firm, right? And this is a firm that was founded on a service mindset. Actually, like, there's this really interesting letter one of the original partners wrote to the partnership that I found, like, a few years ago, and I read it. And he was... I think he wrote it as he was, like, leaving, you know, sort of graduating. It was sort of a reminder to the partners of what the core ethos of Greylock is, and in it, there's a line I love, which is, "That the ambition of every Greylock partner should be to win the Oscar for the best supporting actor to the entrepreneur." And in that is the ethos of the firm, which is, we're a service-oriented firm. We're a people-oriented firm. We don't- we're not the stars of the show. We do very little press. We do very little marketing. But we wanna be the person who is in the founder's corner in the first call when something's going wrong. And that core ethos of, like, "This is a service job," has persisted throughout the generations and decades, and that people orientation has also persisted. Many other things have evolved.

Jack Altman 5:41 Yeah.

Saam Motamedi 5:41 Like, the sectors we invest in. We're now a Bay Area, a Bay Area-based firm. We used to be an East Coast-based firm, right? The things we look for in partners-

Jack Altman 5:49 Mm-hmm

Saam Motamedi 5:49 ... the speed at which we operate, like, all of this has been very fluid, and we've reinvented ourselves. But I think that core ethos and guiding north star has not changed.

Jack Altman 5:56 Is being not loud and external and brand and press, is that core, or is that a evolving thing?

Saam Motamedi 6:04 It is our core ethos, and we will never be the loudest. Um, but I think if you put- if you built, like, a spectrum, right?

Jack Altman 6:10 Yeah.

Saam Motamedi 6:10 And a one was like, you know, there's no website-... and there's no pers- you know, there's no firm-related marketing ever, and a ten is the firm's a marketing machine-

Jack Altman 6:18 Yeah

Saam Motamedi 6:18 ... and it, it has an investment arm appended onto it. I think you have to question, like, in the current environment, can you stay at a one, or do you need to go to, like, a three or four?

Jack Altman 6:25 Right.

Saam Motamedi 6:26 And I think that's a debate we have internally, but I don't think we would ever change that core ethos of, like, there's no Greylock partner or individual that should ever be larger than the companies and founders that we're in business with.

Jack Altman 6:38 Venture got loud basically when Andreessen Horowitz came around, right?

Saam Motamedi 6:41 I think that's in that period. That's right.

Jack Altman 6:43 And that basically, like, prisoner's dilemma forced everybody else to get loud?

Saam Motamedi 6:46 There is a dynamic where if you, if you're co- you're, you're in a really competitive marketplace, and if you're competing against people who are very loud-

Jack Altman 6:52 Mm-hmm

Saam Motamedi 6:52 ... and have presence all over the place, how do you ensure that you continue to see the best opportunities?

Jack Altman 6:58 Yeah.

Saam Motamedi 6:58 And you have to have some strategy around that. And like, at the end of the day, you've gotta play the game on the field.

Jack Altman 7:02 Yeah.

Saam Motamedi 7:03 You can't not react to what's happening on the field.

Jack Altman 7:05 Can we talk about, like, just your own experience of, like, the handoff that, you know, happened with you and is kind of in process? You, like, became a partner very young. Now you work really tightly with, you know, Ashim and the rest of your partnership. How did you get set up for success to the degree that you did, as young as you did?

Saam Motamedi 7:20 I think one of the core things that's unique about our talent model is we're a very sort of apprenticeship-focused talent model. And by the way, if you rewind the clock, and I think this is true for most of venture, but it was certainly true of Greylock, like, you go back to the original generations, people joined Greylock in, like, their mid-twenties to mid-thirties, and they built their entire careers at the firm. And there were many peoples who had multi-decade tenures at Greylock, right? And then I think what happened as venture evolved is, like, in the early two thousands, there was a shift towards hiring people who were much more senior, came out of really rich operating backgrounds, people who were founders, CEOs, et cetera. And at one point, actually, a lot of the industry fully rotated that way.

Jack Altman 7:57 Mm-hmm.

Saam Motamedi 7:58 And now I think there's a mix, right? And if I look at Greylock today, we have a mix. We have people like myself, I joined the firm at twenty-three years old. And we have people who joined, like Ashim or Jerry, who had, you know, significant operating tenures, or Reid Hoffman-

Jack Altman 8:09 Yep

Saam Motamedi 8:10 ... before they became venture capitalists.

Jack Altman 8:11 Yep.

Saam Motamedi 8:11 But independent of when anyone joins the firm, we take them ap- we take the approach to talent that venture is a very different business than whatever business you were doing previously. We're gonna hire people who have a beginner's mind, and we're going to develop them in a very, very deep and intricate way.

Jack Altman 8:26 Mm.

Saam Motamedi 8:26 And so, for example, I joined the firm at twenty-three. I immediately joined a number of boards alongside my partners.

Jack Altman 8:32 Yep.

Saam Motamedi 8:32 I was in every conversation with them, right? Ranging from the board meetings itself, the follow-on conversations with the CEOs. When they were interviewing executives, I was sitting next to, you know, the partner doing the interview, and then after the interview, there would be a discussion of, like, what that person detected in learning, right? And so you have this, like, osmosis that happens and this level of immersion that's... I'm not sure happens at many firms, and it may be hard for others to appreciate, and, and that enables our younger talent-

Jack Altman 8:58 Yeah

Saam Motamedi 8:58 ... to get

Saam Motamedi 8:59 sort of developed.

Jack Altman 8:59 I feel like one of the dynamics that has to happen is the senior partners have to have... or the, by senior, I mean, older partners have to have, like, a generous mindset to the younger partners. Like, if you're not willing to say, "I know this company's really good, but I'm actually not gonna bear hug it, I'm going to let my younger partner take a lot of that relationship on," like, it won't work, right?

Saam Motamedi 9:20 Exactly. This all comes back to even, like, how we run the firm, right? So, for example, like, you know, many firms, when they think about, uh, investments and attribution, they think a lot about who sourced the opportunity.

Jack Altman 9:28 Mm-hmm.

Saam Motamedi 9:28 Right? And the person who sourced it is the one who does it and the one who gets the credit, and if you're a young person, the way you progress in the firm is you source amazing opportunities. We don't use that language at Greylock. We use the language: Were you causally impactful to a successful investment? That could mean you sourced it. It could mean you built a prepared mind, which enabled us to make a quick decision. It could mean you helped us win the opportunity. It could mean after we got into the opportunity, you, you know, were on the board and-

Jack Altman 9:51 Yeah

Saam Motamedi 9:51 ... and did a bunch of great work. Everyone strives to be causally impactful on successful investments, and what that does is it creates the right set of incentives and orientation. Literally, like, if you were in our partner meetings, right, when a senior or more tenured partner intersects an opportunity, their first reflex is: Can I get one of my younger partners into this opportunity as the primary alongside me? Because at the end of the day, like, that's what's gonna make that person successful, which is what's gonna make the firm successful.

Jack Altman 10:16 Does it require, like, a big enough gap then? Like, I feel like one of the things that can be hard is, like, if somebody's only X number of years in, it's hard for people to hand things off to somebody who's just, like, a little click below. Like, it's almost easier when you have these partners that are wildly successful already, who have been doing it for a long time. Like, does that... Is that part of the way you think about it? Is it easier to hand it off to somebody twenty years younger than five years younger?

Saam Motamedi 10:37 I don't think so. Like, I, I think the, the orientation for us is... Well, first is, should, should we make the investment? That's the number one question. Independent of any individual dynamics, like, should Greylock try to be- earn this founder's trust and right to invest? And then the second question is: What does the founder want, right? And, like, in everything, that's how we approach, you know, uh, sponsorship, if you will, which is, if you're the founder, we're like, "Hey, Jack, what do you want? And here's, here's what we think the different people can offer, but, like, you should make that decision." But then let's put those two aside, and now let's say, "Okay, those two things check out." Our orientation is always, like, at any moment in time, who on the team is best suited to take on this project? And it's not about, like, is the gap, you know, ten years or five years. It's like, hey, if, if this person has more capacity and has the time to go dedicate to this company and work in service of this company, and they didn't source the opportunity, great, like, let's have them go do it. If this person is the one who built a prepared mind on this market area and, you know, happened that this other partner sourced the opportunity, it makes more sense-

Jack Altman 11:31 Mm-hmm

Saam Motamedi 11:31 ... for the person who actually understands the space to go sponsor the investment.

Jack Altman 11:34 When you think about, like, a venture firm persisting over, let's forget sixty years, let's just take, like, a decade. When you think about that, what do you think are the actual components that are, like, durable? Like, what are the things that hang on through teams and from fund to fund? Like, what persists in a venture firm?

Saam Motamedi 11:52 So I think a couple of things. One is what I- we started with, which is: What are the core values and ethos of the firm? I think that gets embedded in the DNA and persists, and part of that is also: What's the approach to the job?

Jack Altman 12:02 Mm-hmm.

Saam Motamedi 12:03 What does it mean to be a venture capitalist? What does it mean to be a board member? And that gets trained in the new generation of people, and that does get passed on.

Jack Altman 12:10 Mm-hmm.

Saam Motamedi 12:10 So that's one dimension.

Jack Altman 12:11 Yep.

Saam Motamedi 12:12 The second dimension is the firm's brand, right? And at some level, my mental model on firm's brand is the following, which is, you're a new company, nobody knows who you are. You come raise money from Greylock. We stake our credibility on you.

Jack Altman 12:22 Yep.

Saam Motamedi 12:23 ... you now go to customers, and, and now cust- you're like, "Hey, I'm Greylock-backed." Now, the CIO of this enterprise company is like: "Great, I'll take a risk, because last time I took a risk on a Greylock-backed startup, it worked for me." The engineer is like: "Oh, I'll take a risk, because look at all these other great companies this firm has been in."

Jack Altman 12:35 For sure.

Saam Motamedi 12:36 And eventually, your brand becomes bigger than Greylock's, and it accrues back to the firm.

Jack Altman 12:40 Yep.

Saam Motamedi 12:40 And now the firm goes and stakes that on the new entrepreneur.

Jack Altman 12:43 Yep.

Saam Motamedi 12:43 That flywheel, I think, persists. It can erode if you don't keep making terrific investments-

Jack Altman 12:47 Yeah, but it has some amount of time.

Saam Motamedi 12:49 But it has some time, a- amount of time.

Jack Altman 12:50 Yep.

Saam Motamedi 12:50 And then the third is the network, and there's a two-sided network. There's the sort of industry network-

Jack Altman 12:56 Mm-hmm

Saam Motamedi 12:56 ... the companies you're a part of, and I, I'll come back to that in a moment, and then there's the limited partner relationships. It's so interesting how much compounding there is in the network and what we do, right?

Jack Altman 13:04 Yeah.

Saam Motamedi 13:04 And there's so many, like, stories I could tell you, Jack, but I'll, I'll tell you one that I think is interesting. You know, rewind the clock, Greylock moves to the Bay Ar- you know, to be Bay Area-based in the mid-two thousands.

Jack Altman 13:13 Yep.

Saam Motamedi 13:13 Okay? We're in San Mateo. It's two thousand and seven, okay?

Jack Altman 13:16 Okay.

Saam Motamedi 13:17 There's a star product manager at Google named Josh McFarland. We... This predates me, but we reach out to him to try to recruit him onto the investment team at Greylock. He's like: "Hey, you know, spent a bunch of time. I don't wanna be investor, but I'm really glad I met you guys because I wanna start a company." So we're like: "Great. Leave Google, come be in the IR office, and start a company." He leaves Google, comes and sits at the Greylock office, initiates a company at Greylock called Teleport. It's an ad tech company leveraging, you know, ML techniques for different ad tech use cases. He hires a young engineer from Google named Sanjay as one of his founding engineers, and kind of a few years in, business is progressing. He acqui-hires a small company called AdStack, and has two co-founders, a founder named Evan Ryser and a founder named Thanos Baskos, okay? A few years goes by, this company gets acquired by Twitter. Uh, it's like five hundred million dollar acquisition, largest acquisition Twitter did, you know, pre, uh, you know, becoming X. The head of engineering at the company is a guy named Wade Chambers, who leaves and comes and becomes an EIR at Greylock, an exec in residence. He then introduces Greylock to Sanjay, that founding engineer, and Evan, that initial product manager-

Jack Altman 14:16 Yep

Saam Motamedi 14:16 ... who were ending their time at Twitter and beginning to think about what's next. We start working with them nights and weekends and conceive a new company that becomes Abnormal AI. We fund that company in twenty eighteen. That company is now, you know, second fastest-growing security company of all time, you know, late-stage private, you know, could be a public company.

Jack Altman 14:33 Yep.

Saam Motamedi 14:33 In the process of that company getting built out of our, uh, our offices, we meet two new, young, very strong product leaders, uh, a woman named Nicole and a guy named Vineet. Nicole joins the company as one of the first ten employees. Vineet is, you know, a year or so after her. They both are part of that business until hundreds of millions of ARR, and last year, uh, you know, they decide, okay, they wanna go start new journeys. Both of them come back to Greylock, and two new companies get started-

Jack Altman 14:56 Yeah

Saam Motamedi 14:56 ... you know, Fable Security and Cogent. And so-

Jack Altman 14:58 And it all kinda starts with the reach-out to Josh.

Saam Motamedi 15:00 Exactly, and it's like we're now eighteen years later, right? And by the way, these two new companies are just beginning to flourish.

Jack Altman 15:07 Yeah.

Saam Motamedi 15:07 Tomorrow, I'm going to an all-hands at Cogent, and I guarantee you there are engineers in that audience-

Jack Altman 15:12 Who will be founders

Saam Motamedi 15:12 ... that three to four years from now, are gonna be back in our office, starting the next company. That's, like, an amazing flywheel around our, our franchise, and I do think that there's a lot of durability to that.

Jack Altman 15:21 And that's just time, time and working closely with the companies.

Saam Motamedi 15:24 Yeah, and earning people's trust. All of these people could have worked with any venture capitalist they wanted, but they see that first-hand experience of, of who we are, what we're like to work with and-

Jack Altman 15:33 Can this type of flywheel happen without the board relationships?

Saam Motamedi 15:36 Let's put the board aside. I think the question is, are you intimately involved?

Jack Altman 15:39 A board-level relationship.

Saam Motamedi 15:41 I think you need a very intimate level, uh, like, sort of intimate relationship with the company.

Jack Altman 15:45 Like, you can't just invest and have this happen.

Saam Motamedi 15:47 I don't think so.

Jack Altman 15:47 'Cause it requires knowing people at the company that aren't the founders. It requires the founders saying: "Hey, anybody who leaves should work with you guys." Like, it requires a few things.

Saam Motamedi 15:55 And also, it requires you having built those relationships. Like, I first met Nicole because I got introduced to her by Evan, and he asked me to go have coffee with her to convince her to... I think she was at Palantir at the time, to leave Palantir and come to Abnormal. So she remembered that coffee.

Jack Altman 16:08 Yep.

Saam Motamedi 16:08 Right? And she remembered the bet she took-

Jack Altman 16:10 Yep

Saam Motamedi 16:10 ... and so then, right?

Jack Altman 16:11 Yep.

Saam Motamedi 16:11 And then a relationship got built. Like, same with Vineet, and that's one of the things we- one of the things about our model is we're v- we're, we have a very small set of very concentrated relationships, and as such, we get to know people inside the companies.

Jack Altman 16:23 Yep.

Saam Motamedi 16:23 And there's a depth and intimacy to it that I think is very profound and, like, leads to this sort of, like, knock-on

Saam Motamedi 16:29 effect.

Jack Altman 16:29 Okay, I wanna come back to the depth thing and put it in contrast to another thing I know you care about a lot, which is, like, seeing enough of the market.

Saam Motamedi 16:36 Yeah.

Jack Altman 16:36 And I just wanna pull that open, but before we do, the first thing you mentioned was, like, the values and ethos and that, like, that's persistent. Can you describe what it is in Greylock's case specifically? Like, I'm a new hire. I just joined. I'm your Padawan. What are you trying to teach me on the brand and ethos?

Saam Motamedi 16:52 I think there's, like, five or six dimensions. The first, which I, I don't mean this to be trite, is, like, we are in the customer service business, and our cu- we have two sets of customers, entrepreneurs and LPs, but if we do right by the entrepreneurs, we do right by the LPs, so really, we're focused on the entrepreneur. I think you have to have that mindset, and it's a hard mindset to teach.

Jack Altman 17:08 Do you think not the majority of people in venture do?

Saam Motamedi 17:11 I think everybody in the abstract can say they have the mindset. I think in Christmas twenty twenty-four, you know, when we're on six hours of Zooms, helping a, a company navigate a last-minute financing, like, that really tests do you understand what it means to be in the service mindset? And our, our view is, like, if the entrepreneurs we're in business with aren't working, we're working, and, like, if they need our help, we're on Zoom, independent of where we are. That's, like, hard to actually do day in and day out.

Jack Altman 17:34 And you're saying it's a level that is different than the median venture investor?

Saam Motamedi 17:38 I am consistently disappointed with what I see, uh, from the median venture. Uh, put aside the median, I'm consistently disappointed by what I see from venture investors at firms we would consider top-tier firms.

Jack Altman 17:49 And you think that it's a lack of effort, or you think it's a lack of understanding what needs to be done?

Saam Motamedi 17:53 It's an incentive problem, right? And the model is fault, right? And sorry, now we're, like, ov- o- overlooking the topic.

Jack Altman 18:00 No, it's good.

Saam Motamedi 18:00 But look, I think fundamentally, for any venture capitalist, you have to have clarity or on what's your core economic engine. Are you in the carry business, or are you in the fee business? And if you're in the carry business, then the only way you do well is if your entrepreneurs do well, right? If you're in the fee business, actually, your success is... It's not completely orthogonal, but it's, it's less tightly coupled. What's happened to a lot of, I'd say, firms that historically would- we, we would have viewed as our competitors, is they've become scaled asset managers that are running very large portfolios.

Jack Altman 18:28 Yeah.

Saam Motamedi 18:28 And by the way, they're not-- it's not a dumb economic strategy, like I-

Jack Altman 18:31 No, because the best way for them to make money is to deploy money.

Saam Motamedi 18:33 Correct, and by the way, they can build an index of companies, and then they can track those companies, and they can see the top ones, and they can double down and concentrate a lot of capital into those companies. But-... what it means is now when you're the, the partner on the team, and you have, I'm just making up a number, twenty-five company relationships, and maybe two of them are of consequence in the way that you think about the world, it, it may actually be irresponsible for you to jump on the phone, you know, with the entrepreneur on, like, the company number seven on your- in your portfolio and help them navigate, you know, a h- a financing that's hard to pull together, when, like, instead, you could be focused on the next thing to go deploy twenty million dollars to. So it's not that you're not working hard-

Jack Altman 19:09 Yeah.

Saam Motamedi 19:09 -it's just, like, the incentives have, have, have changed.

Jack Altman 19:12 There's also an incentive problem if you don't think you're gonna stay somewhere for fifteen years. So you gave this example of, like, how one thing flows to the next, flows to the next, but those all stayed under the Greylock umbrella-

Saam Motamedi 19:22 Yes

Jack Altman 19:22 ... more than the per- I mean, you're, probably the person's relationship-

Saam Motamedi 19:25 Yes

Jack Altman 19:25 -was a thing.

Saam Motamedi 19:26 Yes.

Jack Altman 19:26 You know, like, you met with this person to try to convince them to join. You know, you could have probably not been at Greylock-

Saam Motamedi 19:30 Yes

Jack Altman 19:30 ... and that would still exist. But, like, you know, a lot of it endures

Jack Altman 19:33 with the brand. If you're at one of these firms, and you're coming up as, like, a junior partner or something like that, and you don't think you're gonna be there in seven years, your incentives are to just find a winner more than to help an existing company.

Saam Motamedi 19:44 Totally, and, and there are m- many examples now of people, basically... There's, like, this principal-agent problem, where the new young partner is like: "I just wanna put as many shots on goal as I can, because if I hit one thing-

Jack Altman 19:55 Yeah, I'll just get-

Saam Motamedi 19:56 -and then I'll just switch firms."

Jack Altman 19:57 Totally.

Saam Motamedi 19:58 "I'll switch firms. I'll, I'll wipe the slate clean. I'll come in in a more senior level, and I'll start from scratch."

Jack Altman 20:02 "And I'll have been an investor in X, and that's all that matters."

Saam Motamedi 20:04 Yeah, and, I mean, we all know tons of people who are doing this, right?

Jack Altman 20:08 Yeah.

Saam Motamedi 20:08 And it's cr- and it, by the way, it's really bad for founders. Like, we were talking about this before the show, right? But, like, you know, I've had a few- we both have had a bunch of companies raise follow-on rounds recently, right?

Jack Altman 20:16 Yeah.

Saam Motamedi 20:16 And, you know, these companies get multiple term sheets, and then, you know, you get in a room, and you're like-

Jack Altman 20:19 Yeah

Saam Motamedi 20:19 ... "Okay, what do, what do you wanna optimize for?" It's the first time this year where I've been like: "Guys, the number one thing we need to optimize for is, is the person who's joining the board of the company likely to still be at their firm in five years?" To me, that's more important than, like, brand, you know, experience, track record, 'cause fundamentally, it's a people business.

Jack Altman 20:35 It's so disruptive when it happens.

Saam Motamedi 20:36 And it's so disruptive, and it happens so frequently now.

Jack Altman 20:38 And the person who comes on next doesn't care in the same way, 'cause they're never gonna get credit for it, so they're never gonna care in the same way.

Saam Motamedi 20:43 Well, not only that, like, you have... Like, I think one thing that founders don't fully appreciate is, like, you go into a business with a firm. Do you really understand how decisions at that firm get made? You have your partner, but is your partner a decision-maker? Are they trusted by the decision-makers? Do they have influence? Are they gonna be there? Because, as you know, like, these journeys are not all up and to the right. Like, many of... By the way, it's really interesting. We were looking at the data recently. Many of our biggest successes had years where the businesses were in complete turmoil, like, flat years, financings that couldn't come together, and so the question is, who's going to step up when that happens? And the problem is, already, if you're a board member, you don't really understand the company as well, like, super well at all, 'cause all the context is inside the organization. But now, if you're the board member, and I'm your partner, and we're two partners in a firm, I really don't understand what's going on.

Jack Altman 21:27 Yeah.

Saam Motamedi 21:27 And so if you're somebody who's not high trust inside the organization, isn't a real decision-maker, and isn't there, now the company's in a really jeopardized position-

Jack Altman 21:36 Mm-hmm

Saam Motamedi 21:36 ... because one of their major insiders is not really supporting them in the way they need. And we see this happen time and time again in, in our companies when we work with other firms.

Jack Altman 21:44 As firms get bigger, which they obviously are, does that naturally lead to more turnover? Like, are those two things, like, inextricably linked?

Saam Motamedi 21:51 I think it depends on the strategy of the firm. Like, I think you could imagine firms that get larger but maintain a s- a very concentrated approach, a small set of relationships.

Jack Altman 22:01 So what about a large partnership?

Saam Motamedi 22:03 Absolutely, yeah.

Jack Altman 22:04 Okay.

Saam Motamedi 22:04 And I, I think empirically, that's what the data would show. Like, the turnover in venture today is much more dramatic. A- and let's just take, whatever, top eight, top ten, top fifteen firms-

Jack Altman 22:12 Yep

Saam Motamedi 22:13 ... the turnover at the partner level is much higher than it's ever been.

Jack Altman 22:16 And I bet you it's correlated with size of partnership.

Saam Motamedi 22:18 I think that's a big dynamic. It all comes back to this principal-agent problem, which is you have people who the only way they can progress inside their firm is showing momentum in their portfolio, so they put a lot of short-term, oriented shots on goal.

Jack Altman 22:29 Mm-hmm.

Saam Motamedi 22:30 A lot of that blows up in their face, and so then they sort of need to leave as one. By the way, let's say you're a strong-performing partner. You don't wanna be diluted by all these people.

Jack Altman 22:38 Of course.

Saam Motamedi 22:39 Right? 'Cause, like, that's all gonna dilute your terminal carry.

Jack Altman 22:41 Yeah.

Saam Motamedi 22:41 So at some point, you, you pick your head up, and you're like, "Wait a second, like, why am I in this structure?" And so then you leave for that. So there's all these different reasons why, why these turno- these turnovers happen, and it's bad for the firms, b- but again, it's really bad for the entrepreneurs.

Jack Altman 22:54 It's actually interesting, w- like, you know, between, let's say, like, amongst firms that are in the five to ten billion dollar range, the dispersion in number of partners is crazy. It's like ten X dispersion or something like that.

Saam Motamedi 23:06 Yes. Yes.

Jack Altman 23:07 Like, some have five, and some have fifty.

Saam Motamedi 23:08 Yeah.

Jack Altman 23:10 Just on that metric alone, do you believe more in one over the other?

Saam Motamedi 23:13 Maybe there's two parts to that. One is like, what do you personally want, and, like, what do you think leads to the best work environment? I think our view is we think above some group size, it gets really hard to make cohesive decisions, right? And, like, at Greylock, again, because our... O- one thing that I think is interesting about our talent model is, if we hire you to, at Greylock, at any role, we're only hiring you if we believe you have the potential to be a long-term partner and could literally spend the next twenty, thirty, forty years at Greylock. Whether you're a twenty-three-year-old sort of with one year of work experience or, you know, you're a forty-five-year-old CEO, how do we actually implement that? Well, there's no hierarchy inside the firm. Every single conversation is with the entire group. There's no concept of, like, a subgroup, an investment committee. It's like all the partners sit in a room, and we make decisions together. We talk about strategy together. We talk about the portfolio together, and so we do believe there's some size limit-

Jack Altman 23:59 Yeah

Saam Motamedi 23:59 ... at which, like, that conversation begins to degrade.

Jack Altman 24:01 I agree.

Saam Motamedi 24:01 Now, whether that's eight, ten, twelve, thirteen, like, we could debate that, but it's sort of in that range.

Jack Altman 24:06 Yeah.

Saam Motamedi 24:06 Right? And so I think it's hard to consistently make very good decisions when groups get beyond that in size.

Jack Altman 24:12 Yep.

Saam Motamedi 24:12 You also have this dynamic where it's easy to hide. Like, you don't wanna allow low performers-

Jack Altman 24:16 When it's big.

Saam Motamedi 24:17 When it's big.

Jack Altman 24:17 Yeah.

Saam Motamedi 24:18 You know? 'Cause, like, when it's small, like, at the extreme, if it's just you and I-

Jack Altman 24:21 Yeah

Saam Motamedi 24:21 ... like, you're gonna know if I'm carrying my weight or not.

Jack Altman 24:23 You probably wouldn't, but that's fine. [chuckles]

Saam Motamedi 24:29 [chuckles] And so I think what's happened at a lot of these larger firms, the way they solve this problem, is they create these subgroups and subcommittees and subfunds, and so, like, you know, there's an eight-person team that's focused on this and an eight-person team that's focused on that. But it still leads to all sort of degradation and conflicts inside the organization.

Jack Altman 24:44 Okay, I wanna talk about breadth and depth in venture.

Saam Motamedi 24:47 Yeah.

Jack Altman 24:47 And everything you've talked about so far is sort of an, um-... you know, you advocating for depth in a sense, and you're talking about these examples where the close relationship with the company leads to more, the small team, which, you know, sort of implies a small portfolio and all these other things. But I also know from knowing you well, that you care a lot about seeing a lot of the market, and about not sort of missing out on kind of like what's happening and having a pulse. And I'm just curious how you think about those two, 'cause they seem at odds.

Saam Motamedi 25:16 Yeah. So taking a step back, like at, you know, at Greylock, what, what do we care about? We care about being meaningful partners to the most meaningful companies in every vintage, right? And we don't need to be in every company, right? In a given fund, we'll do something like twenty to thirty core relationships, and the math would suggest that if three to seven of those go on to become really important companies, we'll have very successful funds. So by definition, we don't need to be in every company. That said, we have to be extremely paranoid about are we seeing the best entrepreneurs and seeing the best opportunities? And so that's why despite the, let's say, focus and depth of relationship, we care a lot about our capital competing against the opportunity set in the marketplace. And so, for example, one of the things we were talking about before is like, we every single week tr- like, there's six core sectors we invest in at Greylock. For all of those sectors, we have a list of the competitors we most admire, firms and individuals, and every week we track all the financings that have gone and done by those groups, and we ask ourselves the question: Did we see or have the right to do that financing? Not like, did the... You know, did we meet it with eight hours to go before a decision got made?

Jack Altman 26:27 Yep.

Saam Motamedi 26:27 But were we there, you know, ten days before a decision got made?

Jack Altman 26:30 In position.

Saam Motamedi 26:30 In position, real shot to win the opportunity. And if that number is, like, not seventy to seventy-five percent, like, that's a big problem, right? 'Cause we, we respect our competitors in the business. If we're fundamentally making investments in a set without seeing the things that they're seeing, it's really arrogant to assume that we're seeing the best opportunities. And so you, you need to see that cross-set, but then you have to remind yourself, and it's [chuckles] really hard, but you have to remind yourself that so few companies matter, so few founders are truly-

Jack Altman 27:00 Yeah

Saam Motamedi 27:00 ... iconic.

Jack Altman 27:01 Yeah.

Saam Motamedi 27:01 So few markets can support and have the characteristics to support these outliers. And so most things that top-tier venture capital fund will not go to successful outcomes.

Jack Altman 27:10 So I get sort of like, logically-

Saam Motamedi 27:12 Yeah

Jack Altman 27:13 ... but, like, emotionally-

Saam Motamedi 27:14 Yeah

Jack Altman 27:15 ... it seems like a very different head space. How do you avoid the FOMO chasing of deals where, you know, you heard Benchmark's looking at something, so we should be looking at something 'cause Benchmark's smart, but, like, we really should, like, continue working quietly on this, you know, new company we're initiating with this person we've had a relationship for six years, and going and spinning our wheels this week on something just 'cause we heard some top tier is chasing. Like, how do you not get lost?

Saam Motamedi 27:41 By having real clarity in what you're looking for, and then the ability to process and make decisions very quickly. So, you know, it's interesting, like, over my tenure at Greylock, I've been at the firm for nine years, there's this pendulum that swings on, like, everything, right? 'Cause we're constantly reinventing ourselves. So there's periods when we wrote these really long investment memos, these, like, fifteen-page memos, all this, like, work, right? And then, like, there's periods where we have, like, no investment memo, and, like, it's two paragraphs and, like, you know, y- you know, like, the Midwit take would be like: "Oh, well, investment memos are more rigorous. Like, if you write an investment memo, you're making a better investment decision." But it's like, not really, 'cause, like, we're primarily doing first check investing, right?

Jack Altman 28:16 Yeah. You're betting on people.

Saam Motamedi 28:18 We only care about two things. One is, who's the person?

Jack Altman 28:20 Yeah.

Saam Motamedi 28:21 And the second is, what's the general area in which they're building in? And, like, if those two things are bright green, we're ready to invest, and we've made decisions in hours. And if those two things are not bright green, like, yeah, we can go call a bunch of customers and, like, call the design partners and, like, you know, learn some stuff about, you know-

Jack Altman 28:35 Yeah

Saam Motamedi 28:35 ... what they're building, [chuckles] but, like, we're not gonna get to a yes on the decision. And so I think a big thing for us over the last few years has been continually refining what is it that we're looking for, and then if we, if we intersect an entrepreneur who's in market and, you know, gonna get seven or eight term sheets, we wanna process that opportunity. But, but we wanna spend a few hours with the entrepreneur. We wanna talk to a few people who know him or her. We wanna understand the area they're building in, and if those things are really bright green, then we'll run really hard to earn their trust and right to win, and if not, we ha- we don't have the FOMO of passing and knowing that one of our top-tier competitors is gonna do the deal.

Jack Altman 29:05 How do you sort of manage people to this? Like, I think performance management and venture is just, like, probably way under-discussed, under-thought about. Like, it's thought about much more in operating companies, I think. Some of it's because it's really hard. You know, it's like, on some level, the only thing that matters is, like, what were the returns? But that takes forever. There's luck involved. There's, like, all this complicating stuff. So, like, how do you understand if somebody's doing a good job?

Saam Motamedi 29:27 It's really

Saam Motamedi 29:28 hard. We, in the last several years, have adopted what we call, like, an inputs-based approach to performance management. So we got together as a full partnership. It was right after COVID, so I wanna say in, like, twenty twenty-one, and we sat together in Napa for two days and we said: "Let's build a set of inputs that we would all agree. If we hired a new partner, Sally, tomorrow, and she excelled on all these inputs, she's highly likely to have strong outputs over time." Will it be in five years, three years, ten years? Hard to predict. There's luck. Because at the end of the day, what's a partnership? You and I are pooling together and saying, "Hey, we wanna share in each other's investment interests," right? And so if w- we need to agree on what it means to be a good investor, and then if we agree on that and someone's performing on those things, we can take a long-term view on people, and hopefully people get lucky early on, but if they don't and they keep executing the inputs, we'll take the bet that, you know, luck will come their way and the outputs will follow.

Jack Altman 30:20 What are the inputs?

Saam Motamedi 30:20 So we have a document that has eighteen inputs, and it's across the dimensions of the job. So it's across, uh, C-

Jack Altman 30:27 [chuckles] Eighteen's a lot.

Saam Motamedi 30:29 Eighteen's a lot, but, um, we want these things to be-

Jack Altman 30:32 Is it bucketed?

Saam Motamedi 30:33 Yeah, it's bucketed.

Jack Altman 30:33 Okay.

Saam Motamedi 30:33 So there's the four components of the job, which is, uh, uh, C, decide, when, build.

Jack Altman 30:39 Yep.

Saam Motamedi 30:40 And then there's internal partnership.

Jack Altman 30:41 Mm-hmm.

Saam Motamedi 30:41 Right? And so, for example, like, on C, one of the, um, uh, dimensions is, is did you see seventy-five percent?... of the seed and Series A opportunities that were done by your competitors in the sector that you're responsible for?

Jack Altman 30:53 At the indi- this is getting a little, maybe a little too, like, fine-tooth comb, but, like, at the individual level, do you care that they saw a certain percentage or that they were doing the inputs that led to, that would lead to seed?

Saam Motamedi 31:03 I think a bit of- like, I think what you're asking is, like, okay, well, if someone's going and, like, pounding the pavement and hosting great events-

Jack Altman 31:08 Yeah, exactly.

Saam Motamedi 31:08 - and, and outbounding to entrepreneurs, is that what matters, or is it the seventy-five percent number that matters? W- we measure the se- we, we measure the number, but then there's a qualitative sense of, like, are you doing the right set of activities?

Jack Altman 31:18 And if it's going wrong, you kinda dig into the inputs-

Saam Motamedi 31:20 Correct

Jack Altman 31:20 ... to that output.

Saam Motamedi 31:21 Correct.

Jack Altman 31:21 Yeah, yeah, yeah.

Saam Motamedi 31:21 Correct. Another one that's, like, really basic is, like, we have a, um, a responsiveness SLA, because if you're in a service job, you've gotta be incredibly responsive. And so we literally measure each other on how long does it take to us to respond, both to, uh, the entrepreneurs we're in business with and internally.

Jack Altman 31:35 How can you measure that? You're not, like, going through someone's phone, so I'm like, okay...

Saam Motamedi 31:38 Well, we're not going through someone's phone, but we collect feedback from the CEOs that people partner with, and then we also, uh, internally have a sense of this. And so what we do is we score each other one to five on these dimensions. So it's not like, you know, I know, "Hey, you're six hours-"

Jack Altman 31:49 Oh, god, there's, like, a three sixty going on.

Saam Motamedi 31:50 Yeah, exactly.

Jack Altman 31:51 Yeah.

Saam Motamedi 31:51 There's another one around domain leadership, right? Which is, are you... We do a lot of- internally at Greylock, we do these things called sector reviews.

Jack Altman 31:58 Mm.

Saam Motamedi 31:59 Two to four times a year, we present internally on, like, okay, if I'm covering AI applications, what do I think is gonna happen in the next twelve months? And then we look!

Jack Altman 32:07 Oh, wow.

Saam Motamedi 32:07 And we're like: "Hey, Jack."

Jack Altman 32:09 Your idea was terrible. Yeah.

Saam Motamedi 32:10 "Did you actually understand what was happening in your domain? Oh, it turns out all of CRM was reinvented, and you were asleep." That's not good.

Jack Altman 32:16 That's not me specifically, but that could-

Saam Motamedi 32:17 No, not you specifically, Jack-

Jack Altman 32:18 Yeah

Saam Motamedi 32:18 ... but, like, [chuckles] in the abstract.

Jack Altman 32:20 That's interesting. So you basically, like, make people write down what they think is gonna happen.

Saam Motamedi 32:23 What we have people do is b- build a point of view on what's gonna happen in their sector.

Jack Altman 32:28 Hmm.

Saam Motamedi 32:29 Present that point of view to the partnership. We debate that, and it drives a, a lot of good things. One is it forces the person to be proactive. Two is it drives a prepared mind in the entire partnership, because now if I know that... Like, for example, we're very interested in, uh, service management and IT service desk and disrupting it with AI. And so the next time we meet a company that's doing that, there's a prepared mind. It's not just the two or three partners who are pursuing that, but all eleven of us know that this is a red-hot area.

Jack Altman 32:57 You've thought about the space.

Saam Motamedi 32:57 We've thought about-

Jack Altman 32:58 You've thought about the wedge.

Saam Motamedi 32:58 Exactly.

Jack Altman 32:59 You've thought about, like, what are the weaknesses and the competitors, all that stuff.

Saam Motamedi 33:01 Yeah, and so it, that's what enables you to decision quickly-

Jack Altman 33:03 Yeah

Saam Motamedi 33:03 ... but still have rigor. And then there's the accountability piece, which is, okay, were you focused on the right themes in your sector? And, um, and if, if you weren't, and that consistently is the case, then how can you be a leading investor in your domain? So, like, that's another input that we would measure. Another one we, we, we care a lot about is, did you do things that were impactful to the firm, independent of your own personal investments?

Jack Altman 33:20 Hmm.

Saam Motamedi 33:20 So for example, you helped us recruit someone amazing. You, you know, Corinne, who, uh, you know, you obviously know well as well, you know, helped build the Greylock Edge program.

Jack Altman 33:28 Yep.

Saam Motamedi 33:28 Right? Which is sort of a formalization of all the company initiation work.

Jack Altman 33:30 And she has change agents.

Saam Motamedi 33:32 She has ch- Like, those are amazing initiatives. Did- are those directly responsible for an investment Corinne's worked on? Well, now they are, but, like, th- th- those were in the service of the firm, not in the service of, of Corinne as an individual.

Jack Altman 33:43 Yeah.

Saam Motamedi 33:43 So we look at all these dimensions. And then another thing that's interesting, and I think could be controversial, is, like, if someone has good outputs but no inputs, that's also not a fit for our system.

Jack Altman 33:53 Because it's luck.

Saam Motamedi 33:55 Because we can't be convicted that they're gonna reproduce the outputs.

Jack Altman 33:58 Right. You have no reason to think it'll happen again.

Saam Motamedi 34:00 Yeah.

Jack Altman 34:00 Okay, I wanna ask you a little bit about incubations, which I know you call initiations, but, like, Greylock is extremely good at starting companies. We were talking before about this, but, like, you've had, like, several that are really big, you know, like Palo Alto Networks, Workday. Like, people maybe don't realize that those were, like, started, like... I don't know if they were started in your offices or with your partners, but, like, they were, like, Greylock incubations, more or less. Can you talk about, first, like, why is it so hard? 'Cause, like, so many VCs do try to do them, and there's not that many good examples of them working, even though there's lots of attempts. So why are they hard?

Saam Motamedi 34:34 Yeah, by the way, as you were speaking, I was reminded that, uh, Palo Alto and Workday both started at Greylock at the same year in the same office, two thousand and five, San Mateo office. And Anil, obviously, and Dave Duffield started Workday. Nir Zuk started, uh, Palo Alto. Ashim, you know, wrote the first check, has been on- was on the board for eighteen years.

Jack Altman 34:52 Yeah.

Saam Motamedi 34:53 I think he just rolled off recently.

Jack Altman 34:54 And these are fifty to hundred billion dollar companies.

Saam Motamedi 34:55 I think Pa- Palo Alto is, like, a hundred and forty billion dollar company.

Jack Altman 34:58 Hundred and forty.

Saam Motamedi 34:58 Workday's, I, I don't know, between fifty and hundred-

Jack Altman 35:00 Fifty plus

Saam Motamedi 35:00 ... right? These are big businesses.

Jack Altman 35:02 It's crazy.

Saam Motamedi 35:02 Right? And by the way, we've started, we've been part of-

Jack Altman 35:05 And other abnormal

Saam Motamedi 35:05 ... starting other- A- Abnormal, Sumo Logic, which went public.

Jack Altman 35:07 Yeah.

Saam Motamedi 35:08 Uh, several companies. You made the joke of, like, we don't use the word incubate, but w- but we actually don't like that word, right? And, and the reason is, like, it comes back to: who is the core of the company? Is it the founder, or is it the VC firm?

Jack Altman 35:21 It's the VC firm, obviously. [chuckles] Cut. [chuckles] Go ahead.

Saam Motamedi 35:29 And, and, like, our view is, to state the obvious, it's the founder. And like, and, like, uh, really, the way I think about it is there's a spectrum, okay? And on one bookend, you have, like, a company that's in momentum, you know, at five million of ARR, raising a Series A or Series B. And on the other bookend, you have, like, a person with no idea, right? And what we wanna do is we wanna intersect people as close to this left bookend as possible. Now, in some cases, they literally have no idea, and we co-develop the idea together. There are cases where they have an idea, but there's no team. There are cases where they have a team but no product.

Jack Altman 35:57 Mm-hmm.

Saam Motamedi 35:58 And I was checking this over the weekend. In our current fund, billion-dollar vehicle, we're about eighty, eighty-five percent allocated. Ninety-three percent of our dollars are in companies where we back them at that stage, like, we were the first institutional capital in the company.

Jack Altman 36:12 Hmm.

Saam Motamedi 36:12 And then our approach does not necessarily vary a lot based on whether or not we developed the idea or we just partnered with someone post-idea and, like, really helped support them, right? So, like, I think that's the s- the kinda area we're focused on. And then I would say the founder is the core, and then we're very focused on taking out the market risk before the company starts. And so, like, we think about things in... Uh, and actually, this is a model Ashim, I think, has perfected in his investing career, and I and others have learned from, which is sort of when you think about a company, you could think of two broad vectors of risk. There's market risk, and there's execution risk. And what we wanna do is pick opportunities where there's zero market risk and actually a lot of execution risk.

Jack Altman 36:50 Hmm.

Saam Motamedi 36:50 Because in the execution risk, you build your moat.... product's hard to build, there's real technical IP, it's hard to take to market. So like, if you believe that the founders you back and the peop- the teams that are built around them are gonna be the es- best executing, it's actually good for there to be execution.

Jack Altman 37:05 All you need to believe is that they can do this hard thing.

Saam Motamedi 37:07 Correct.

Jack Altman 37:07 But you don't have to wonder if it's done, whether it'll be valuable.

Saam Motamedi 37:10 Correct. And, and not just like, will it be valuable, but like, then there's a lot of nuance. Like, okay, who's the end customer you're selling it to? Can, can that customer base be serviced by a go-to-market motion that's sort of unit economic attractive? How secular is the area? What are... Like, there's a lot that goes into, like, no market risk.

Jack Altman 37:25 Mm-hmm.

Saam Motamedi 37:25 But if you look at these Greylock, uh, these companies Greylock's been a part of, either, you know, helping initiate or, like, from very, very early, they all have a shared DNA, which is they have unbelievably customer-centric founders and are placed where there's very little market risk, right? Workday, like replatforming HRIS for the cloud. Palo Alto Networks was like... By the way, when Palo Alto Networks started, there were, like, ten or eleven firewall companies. It started as a small add-on to the firewall, then displaced the firewall. Today, it's a, it's a, firewall's a small part of their business.

Jack Altman 37:55 Yeah.

Saam Motamedi 37:56 We started Abnormal, AI-based email security company. There was two billion dollars of email security TAM and two public incumbents. There's no question that if we delivered a new innovative approach that could solve kind of these more advanced social engineering attacks, there would be a business. The question was, could you build, like, an AI machine that could actually detect these attacks?

Jack Altman 38:13 Mm-hmm.

Saam Motamedi 38:13 Could you actually scale? Those are the shapes of opportunities we look for, and I think many other firms, when they try to operate at that stage, they make two fatal flaws. One is, they're- they view themselves as the core of the company. And by the way, I don't mean that in a trite sense, but, like, one example of that is they do investments that are not economic.

Jack Altman 38:28 Mm.

Saam Motamedi 38:28 They're like, "I'm gonna take, you know, half the company," or, "I'm gonna take forty percent of the company for ten million dollars." It's like-

Jack Altman 38:33 It's too much. It destroys-

Saam Motamedi 38:34 You're not gonna get the best founders.

Jack Altman 38:36 Yeah.

Saam Motamedi 38:36 Like, we view it as we want a market fair op... Like, we just want market terms.

Jack Altman 38:41 Yeah.

Saam Motamedi 38:41 We might write a bit more capital, and so maybe we'll get a little bit more ownership, but you-- If we're working together, you should view the investment proposal as a fair proposal.

Jack Altman 38:49 Yeah.

Saam Motamedi 38:49 And why do we care about that? Because the most important thing is the founder and the founder quality. And so if you have any negative selection skew in the founder, you're in trouble. And so I think that's one huge mistake, and, like, almost all the firms that try to do this kind of fail on that. And then the second is, I think they pick areas and ideas where it's less deterministic, and so you can't engineer your way to success-

Jack Altman 39:09 Mm

Saam Motamedi 39:10 ... the way that you can when you pick these markets that, like, have, quote, unquote, "no market risk."

Jack Altman 39:14 Is it a learnable thing by most firms, or do you think actually most people are wasting their time? Like, is there something that is extremely nuanced about a small number of firms who are able to do this? Maybe it's you, Sutter, Founders Fund, but then you see so many other examples where people try, spin wheels, I think spend a huge amount of calories on it.

Saam Motamedi 39:30 I think there's very few people who can consistently do this. By the way, there's the, the firms, including the ones you mentioned, there's also individuals. Like, I think Zach Frankel's some version of this.

Jack Altman 39:39 Oh, yeah.

Saam Motamedi 39:39 And he's, like, incredible at it, right?

Jack Altman 39:41 Yeah.

Saam Motamedi 39:41 So but, I, you know, we could build the list. It's like, I don't know, between five and seven entities, right? I think it is very, very hard to do.

Jack Altman 39:47 Mm.

Saam Motamedi 39:47 It requires the ability to detect, uh, uh, people and have the right people filter. It requires the right market filter, which I think is very, very hard. Then it requires... Okay, let's say you have those two things right. Like, we think of ourselves as company builders, not as investors, right? And so in these companies, we're interviewing and helping closing, like, the first twenty engineers, the first key core executive team. You know, at Abnormal, I, I don't remember the exact statistic, but I think we sourced, like, thirty to forty percent of their initial pipeline-

Jack Altman 40:12 Wow!

Saam Motamedi 40:13 ... to, you know, ten million of, of revenue. So, like, we are gonna go in there and be causally impactful, to come back to that phrase.

Jack Altman 40:19 Yeah.

Saam Motamedi 40:19 Right? And then together, we're gonna get the company to a place where now it, it kind of can be off to the races. That's a type of work that I think most venture capitalists don't know how to do, nor do they want to do.

Jack Altman 40:29 The thing you were saying before was that one of the reasons it's important for you to, like, look at on-market opportunities is because you need to compare it to your initiation set. And so I guess some of the idea there is when you're in... working with these companies, you've got such a close relationship that you could concentrate like crazy in them, but you need to still make sure that you don't, like, get just so attached to the company. Is that, like, the idea?

Saam Motamedi 40:50 Yes, and, and also, I, I, I think, again, it would be very arrogant for us to say that gr- we are gonna intersect all the best founders of this generation before they've started companies-

Jack Altman 41:01 Yeah

Saam Motamedi 41:01 ... and get the chance to work with them from the foundational stage. And so if you believe that's not true, and it's definitely, you know, definitely won't be true, then how do you know if the person that you're working with or the company you're backing, on a relative basis, is likely to be one of the best in this vintage? The only way you know is if you've met other companies and other opportunities.

Jack Altman 41:17 Mm-hmm.

Saam Motamedi 41:17 And we don't start with a, "We wanna initiate a company" mindset. We start with a, "We wanna back the best founders in the best markets" mindset. And if we do zero initiations, amazing, 'cause they're, [chuckles] they're, they take a lot of time and a lot of work.

Jack Altman 41:29 Yeah.

Saam Motamedi 41:30 But what ends up inevitably happening is we meet some founders who are, you know, off and running with great companies, we back them, and we, and we help them, and we p- take the same mindset that we take very early on. And we end up meeting some situations where, like, wow, this person and this idea is better than anything we've seen this year. And yeah, it's gonna... it's really raw, but we're gonna really dig in and, and go do the work. And to your point, because we build that intimacy, we can put a lot of capital behind them.

Jack Altman 41:54 Mm-hmm.

Saam Motamedi 41:54 Like, we're working on investment right now where we're writing a thirty-six million dollar pre-seed check, right? I mean, we've, in this fund alone, we're in multiple twenty to thirty million dollar checks behind an individual with no code and no idea. Like a general sense of, like, we're gonna go explore this area.

Jack Altman 42:08 Yeah, and prepared mind. You know the area well, I'm sure.

Saam Motamedi 42:10 Exactly, and they know the area well, and often they might come from the domain.

Jack Altman 42:13 And you know the person previously, probably.

Saam Motamedi 42:15 Either we know them previously or we've spent real time to get to know them.

Jack Altman 42:19 Mm-hmm.

Saam Motamedi 42:19 And we, like, intimately understand them at their core.

Jack Altman 42:21 Which is really hard to do in, like, a market process. Like, in a, like, I'm fundraising, I have two weeks to make a deci- like, you just can't do it, really.

Saam Motamedi 42:28 No, and a- actually, I was reflecting on my personal investments, and, and, you know, w- we do portfolio reviews at Greylock, and we happen to be in the middle of one now, and so, you know, looking at the fund's investments, disproportionate our best invest- not all, there are good- there are actually a couple of very key exceptions, but for, for our seed stage or pre-seed stage investments-

Jack Altman 42:46 Mm-hmm

Saam Motamedi 42:46 ... I'm not talking about things in momentum, our best investments are when we've gotten to know the person over very long periods of time.

Jack Altman 42:52 Makes sense.

Saam Motamedi 42:52 And either we've backed them before, like we've had teams where they're on their third company that's been Greylock-backed-... they've worked at our companies before, or they're just people in the industry who there was mutual respect and liking and understanding. And like, I do think that's one thing that delineates Greylock relative to other firms. We care a lot about the people we go into business with, and these people also become some of our closest friends because the relationships are so intimate that, um, it, it's just hard to overstate how deep these, these connections become, and as such, kind of really understanding the person at the core is

Saam Motamedi 43:22 very, very important.

Jack Altman 43:23 As you look around twenty twenty-six, and, you know, next year, and you think about where there's alpha in venture right now, you know, we've got obviously all the dynamics with AI behind us. We've got, you know, firms getting really large, we've got some that have chosen to stay small. You've got new entrants, you've got some of the big platforms that seem as dominant as ever. Like, what do you think are the strategies that you bet behind? Like, let's say you're an LP.

Saam Motamedi 43:46 Yeah.

Jack Altman 43:46 Like, what, what strategies do you believe in right now, or-

Saam Motamedi 43:49 Um

Jack Altman 43:49 ... setups do you believe in?

Saam Motamedi 43:50 Yeah. So I'll give you a couple frames that I think about. One is, are you a market maker or are you a market taker, right? And by the way, market maker doesn't mean you create something, but it just means, did you create some proprietary opportunity or are you part of an auction process? And I'd say if you're a market maker, there's structurally more alpha than if you're a market taker.

Jack Altman 44:08 Yeah.

Saam Motamedi 44:08 And like we talk about this in our friend group, uh, you know, we have this, like, first money and last money.

Jack Altman 44:12 The barbell.

Saam Motamedi 44:13 The barbell.

Jack Altman 44:14 Let's talk about the... What- Tell, so what's the barbell?

Saam Motamedi 44:15 But I think there's truth to that-

Jack Altman 44:16 Yeah, yeah

Saam Motamedi 44:16 ... which is like, where are there real market makers in the current era of venture? One is the people who are investing at the start, and it doesn't mean you initiate, but you invest at the start.

Jack Altman 44:25 Yeah.

Saam Motamedi 44:25 There's nothing there. You stake a lot of capital behind the person.

Jack Altman 44:28 I think there's also something that at the, at that front of the barbell, where you take something that's really raw, and you make it un-raw-

Saam Motamedi 44:36 Exactly

Jack Altman 44:36 ... And the first person to sort of turn those ingredients into something that looks like a meal-

Saam Motamedi 44:40 Yes

Jack Altman 44:41 ... there's a huge jump that happens-

Saam Motamedi 44:43 Yeah

Jack Altman 44:43 ... from there.

Saam Motamedi 44:43 Actually, a friend of mine gave me this analogy to venture, uh, like that part of venture connected to, like, movie production, right? And it's like, okay, you know, there's the founder, there's the talent, there's the customer.

Jack Altman 44:51 Yeah.

Saam Motamedi 44:51 Right? There's the capital.

Jack Altman 44:52 Yeah.

Saam Motamedi 44:52 And there's, like, that- that whole thing has got to sync.

Jack Altman 44:54 And when they're all disconnected, the whole price on that situation is way lower.

Saam Motamedi 44:58 Correct. And often you're doing... Like, you're doing contrarian investing in the sense that, like, that's not something that goes to ten firms and gets eight offers.

Jack Altman 45:05 It's also very easy to write that situation off, and it's like, "Ah, there's nothing there. I'd rather wait for some data." It's like, okay, you're now going to pay seven times more.

Saam Motamedi 45:11 And, and by the way, this is not a side note, but we were... You know, we, we, uh, I mentioned we do these competitive reviews, right? So we, w- we were doing one two weeks ago, and w- we saw all these great investments that we, you know, that we didn't make, but we saw them, and we're like-- And our number one takeaway was we met things when they were too raw. [chuckles]

Jack Altman 45:26 Mm-hmm.

Saam Motamedi 45:27 And by the way, often we invest when it's very raw, but even still, I'd say Greylock is really oriented towards the raw stuff, and still that's where we make a lot of mistakes.

Jack Altman 45:34 Yeah.

Saam Motamedi 45:34 'Cause it's like, you know, the person met us, we just hated the area they were in.

Jack Altman 45:37 Mm-hmm.

Saam Motamedi 45:37 And then we never followed up, and six weeks later, of course, they're a smart individual. They're like-

Jack Altman 45:40 And they moved-

Saam Motamedi 45:40 ... "Yeah, that area sucks."

Jack Altman 45:41 -to a great area.

Saam Motamedi 45:42 They moved to a great area.

Jack Altman 45:42 And now it's great.

Saam Motamedi 45:43 And now, you know-

Jack Altman 45:44 Yeah

Saam Motamedi 45:44 ... it comes back to us for Series A at, you know-

Jack Altman 45:46 Five times the price, nine times.

Saam Motamedi 45:47 Or ten times the price.

Jack Altman 45:48 Yeah.

Saam Motamedi 45:48 Yeah. So I think that's one place where you can kind of be a market maker. I actually think the other place is, like, the last money in, uh, and, and these really, l- uh, late-stage private rounds where, you know, to price the round, you have to raise a billion dollars.

Jack Altman 45:59 The Thrive rounds.

Saam Motamedi 46:00 Thrive i- i- is doing a great job here, Founders Fund-

Jack Altman 46:03 Yeah

Saam Motamedi 46:03 ... Green Oaks.

Jack Altman 46:03 Yeah.

Saam Motamedi 46:03 Right? Again, they're market makers. Like, they, they construct the round, they bring it together, they set the price-

Jack Altman 46:09 Yeah

Saam Motamedi 46:09 ... and there's alpha in that.

Jack Altman 46:10 Well, simply by virtue of there not being many competitors who can create-

Saam Motamedi 46:13 Correct

Jack Altman 46:13 ... those rounds.

Saam Motamedi 46:14 Correct. Uh-

Jack Altman 46:15 So it's like one's driven by scarcity at the big end-

Saam Motamedi 46:16 Yeah

Jack Altman 46:17 ... and then one's driven by, like, squinting at the early end.

Saam Motamedi 46:19 I'd say both also have an element of capability. Like, on, on, on, on, on the kind of late-stage stuff, it's like, do you have the capability to look at something at a fifty billion dollar price and imagine it being a five hundred billion dollar company? That's not easy.

Jack Altman 46:28 By the way, also, I think a lot of people think that they're just, like, YOLO-ing these checks-

Saam Motamedi 46:32 They're not

Jack Altman 46:32 ... and they're doing, like, deep work.

Saam Motamedi 46:33 Exactly.

Jack Altman 46:33 Yeah.

Saam Motamedi 46:33 No, they're incredibly high-conviction, high- rigor-

Jack Altman 46:36 Yeah

Saam Motamedi 46:36 ... investors.

Jack Altman 46:36 Yeah.

Saam Motamedi 46:37 And then on the other end, it's also like, do you have the capability to take this person who's a twenty-four-year-old engineer and partner with him or her and help them shape the company?

Jack Altman 46:44 For sure.

Saam Motamedi 46:44 A lot of people don't have that capability.

Jack Altman 46:45 Or the patience.

Saam Motamedi 46:46 Or the patience. So I think that's one s- s- sort of source of alpha, is like, be at one of those two bookends.

Jack Altman 46:51 Yeah.

Saam Motamedi 46:51 The other, like, I think, kind of consensus approach right now, which I think is bad for founders and I think will net lead to worse returns than, than the prior, but still could lead to decent results, is the indexing model.

Jack Altman 47:03 Mm-hmm, where you just do enough companies-

Saam Motamedi 47:05 No, I'm gonna do-

Jack Altman 47:05 ... that you'll catch one.

Saam Motamedi 47:06 I'm gonna do eighty investments-

Jack Altman 47:07 Yeah

Saam Motamedi 47:07 ... or I'm gonna do a hundred investments.

Jack Altman 47:09 Catch something.

Saam Motamedi 47:09 I'm gonna catch seven or eight. I'm gonna track these things ruthlessly. I'm gonna concentrate a lot of capital on them-

Jack Altman 47:14 Mm-hmm

Saam Motamedi 47:15 ... write off the others. If the founder calls me, I'll pick up.

Jack Altman 47:17 Yeah.

Saam Motamedi 47:17 But otherwise, I don't have anything to do with the business.

Jack Altman 47:19 Yep.

Saam Motamedi 47:19 That probably... I don't think it's gonna generate five, eight, ten X funds.

Jack Altman 47:23 Yeah.

Saam Motamedi 47:23 But could that generate two, three, four X funds? Possibly.

Jack Altman 47:25 So basically, you just believe early, late, for the most part?

Saam Motamedi 47:28 For the most part, but then, like, I... You know, and we were talking about this before the show. It's funny, right? Because, like, there's all this discussion, and, like, you've done an amazing job of bringing a lot of this, these viewpoints to life on the show.

Jack Altman 47:36 Stop. Say a little bit more.

Saam Motamedi 47:37 You know, at some level, it's just like, you get judged by what you invest in.

Jack Altman 47:40 Yeah.

Saam Motamedi 47:40 And like, you know, if you're in a fund and you've got a few great companies, n- none of this stuff even matters.

Jack Altman 47:46 Yeah.

Saam Motamedi 47:46 And it's like there's so much discussion. "Oh, this firm lost this partner, this transition, whatever."

Jack Altman 47:50 For sure. It's just like, what was in the fund?

Saam Motamedi 47:52 Yeah. Just like, okay, great, but they were in, like, four great companies.

Jack Altman 47:54 It's actually-

Saam Motamedi 47:55 They worked really hard on those companies, and they had an amazing fund.

Jack Altman 47:58 Yeah. How close do you think the connection is between, like, performance of a fund and, like, perception of that firm at that moment in time?

Saam Motamedi 48:04 Well, I think it depends on, like, what circle of perception, right? I think-

Jack Altman 48:07 Yeah

Saam Motamedi 48:07 ... in the kind of ex zeitgeist-

Jack Altman 48:09 Yeah

Saam Motamedi 48:09 ... you know-

Jack Altman 48:09 Let's say that one

Saam Motamedi 48:10 ... I, I think it's, like, d- very l- loosely-

Jack Altman 48:12 Like, nearly nothing, it seems like

Saam Motamedi 48:14 ... coupled. I think there are, like, you know, the classic kind of, like, big brands that, like, generally aren't gonna do well, but I think it's very loosely coupled. And, and by the way, another-- I mean, I'm stating a very obvious fact, but it's also like, okay, cool, you own all these logos, but how much do you own and at what price? 'Cause, like, not all these companies are gonna be hundred billion dollar companies.

Jack Altman 48:29 Yeah.

Saam Motamedi 48:29 So yeah, like, you got into this great AI app, but you got in at a billion dollars, and you own six percent of the company.

Jack Altman 48:33 And your fund is two billion.

Saam Motamedi 48:33 And ten years later, it's worth four billion-

Jack Altman 48:36 Yeah

Saam Motamedi 48:36 ... and, you know, your, and your fund is two billion, and, like, you know, you've been diluted, so now you own five percent.

Jack Altman 48:40 Yeah.

Saam Motamedi 48:40 And so, like, you know, you made two hundred million dollars on a two billion dollar fund.

Jack Altman 48:43 It's not great.

Saam Motamedi 48:44 It's not great.

Jack Altman 48:45 Do you think in general that venture firms... Like, take like, you know, well-branded venture firms. Do you think the tendency is to get weaker or stronger over time?

Saam Motamedi 48:54 It takes a long time to kill a venture brand, right? Because you, you have this brand that's been accrued through the relationships that you've built, and there, there, there's some persistence, like inherent persistence in that, right?

Jack Altman 49:04 Yeah.

Saam Motamedi 49:04 And tomorrow, when you meet a new entrepreneur versus a brand-new franchise-

Jack Altman 49:07 Yeah

Saam Motamedi 49:07 ... you have more things to rest on.

Jack Altman 49:08 Much easier.

Saam Motamedi 49:09 But I still think the default trend line is one of decay. Why? Because-... almost like there's this weird empirical thing that happens when people become successful, they are not willing to reinvent themselves.

Jack Altman 49:18 Mm-hmm.

Saam Motamedi 49:19 And reinvention can mean, like, different things, right? It, it, it doesn't mean, like, we necessarily radically change our strategy. Like, I, I don't think Greylock has radically changed its investment strategy in the last twenty years, but we have made a lot of other changes. Um, and I'll give you, like, one, one example is, like, our team today is a lot younger, even has skewed young.

Jack Altman 49:36 Versus ten years ago or something?

Saam Motamedi 49:37 Versus ten, fifteen years ago. One big reason why is, like, the world's changing very quickly. A lot of companies are being started by younger people. I think that in this AI era, like, first principle thinking and approach to company building is, is more, in some ways, more important than experience. So you have to have a team that can, like, meet the entrepreneurs where they are and also support them where they are. But we're not afraid to go make that change to team composition, or we're not afraid to say, "Hey, we have a new partner," and yeah, they haven't had, like, some huge win yet, but the inputs are amazing, and so we're gonna empower this person to do more and more. Like, we bet we-- Like, we almost preempt our own talent-

Jack Altman 50:08 Yeah.

Saam Motamedi 50:08 -if you will.

Jack Altman 50:09 Yeah.

Saam Motamedi 50:09 I think that enables us to stay very relevant and, like, you know, n-not decay, but I think at many firms, that's not what happens.

Jack Altman 50:15 Totally. It's also, like, um, you have to keep a almost like a, like a deranged paranoia, despite the fact that you're objectively winning all the time.

Saam Motamedi 50:24 Yeah.

Jack Altman 50:24 You know, like, think about if you're Sequoia. Let's just take it as an example. They're, you know, in most cases, able to see and win everything, but they still somehow have this maniacal paranoia that, "We need... You know, we're only as good as the next thing." I think it's really rare.

Saam Motamedi 50:40 And it's absolutely necessary because this business is defined by a small set of decisions, every vintage.

Jack Altman 50:45 Yeah.

Saam Motamedi 50:45 I would take the bet that if you took the top firms, every vintage they see, and like, truly see in a position to win enough things to have a 10X fund.

Jack Altman 50:54 Yeah.

Saam Motamedi 50:54 But many of them don't, and so [chuckles] something between the top of the funnel and, like, the bottom breaks. And so if you're not, like, super paranoid that the default is that's going to happen to you, and so what are the new lenses you need to take on picking or on appealing to entrepreneurs or on, like, supporting, and that that's gonna change every era, you're more likely to, to make the wrong decisions.

Jack Altman 51:15 But it's also a crazy thing where, like, if you're... Let's say, let's say you're seeing ninety percent of the market, but, like, you're still- you still need to get upset about the ten percent you didn't see versus being like, "Oh, this is amazing. We saw ninety percent. We could have a thirty X fund that's contained in here."

Saam Motamedi 51:28 Yeah. Well, like-

Jack Altman 51:28 That's great

Saam Motamedi 51:29 ... if you saw, like, in this last period, if you saw everything and you didn't see the early rounds of OpenAI and A- Anthropic-

Jack Altman 51:34 You missed a lot

Saam Motamedi 51:35 ... you missed a lot of potentially venture gains in this period, and you could have seen all these other great things. And by the way, a lot of these other things will be great, but, like, it might be that those two companies end up being a lot of-

Jack Altman 51:44 It's funny, you and I were texting about this last night, but we looked at, like, who were, like, the top firms in the year two thousand. You recognized them. I didn't recognize, like, most of them. You know, it's just like-

Saam Motamedi 51:52 It's crazy.

Jack Altman 51:52 And so it's basically like a game of how do you... You know, for you, I'm sure you're thinking about this, where you've got this, like, storied history, and, like, the features, you know, we've got these advantages. And, you know, the way I see it basically is, like, if you're an existing brand with application of force, you're better off than somebody who doesn't have the brand, but there's all these things that work against you naturally, too, just over time.

Saam Motamedi 52:12 Exactly, and so you have to be willing to change everything about how you work. And so for, like, you know, we moved the firm HQ to San Francisco-

Jack Altman 52:18 Yeah

Saam Motamedi 52:18 ... because that's where the AI era is. It's not in Menlo Park. We have partner meetings multiple times a week. We don't- we can make an investment decision without bringing an entrepreneur into a full partner meeting. I think if you interacted with us, you would feel like you're interacting with a brand-new firm, and the speed and velocity and sort of- that we work, but then it rests on the foundation of all the learning, experience, institutional knowledge, network, and relationships of the companies we've

Saam Motamedi 52:38 been a part of.

Jack Altman 52:38 Okay, I want to talk a little bit about, um, some other aspects of the firm. So, um, I asked you this morning about portfolio services. I said: "Do you think that most portfolio, you know, services at venture firms work?" "Nah, not really." "Do Greylock's work?" "Yes." So can you explain to me why? First of all, like, why do you think they don't work that well?

Saam Motamedi 52:55 Yeah.

Jack Altman 52:56 What do you do to make them work? 'Cause I agree. I mean, I take the view, uh, it's rare that they work, is my perception.

Saam Motamedi 53:02 Well, you didn't work with Greylock.

Jack Altman 53:03 I haven't worked with Greylock. I would, I... It's a mis- it's a mistake.

Saam Motamedi 53:05 It, it would've been special to work together.

Jack Altman 53:06 Maybe it's not too late, yeah.

Saam Motamedi 53:08 Um, are you gonna start another company?

Jack Altman 53:09 Yeah, you can be, uh, on the board of AltCap.

Saam Motamedi 53:12 I'd love that. I won't name the firm, but one of the major firms that invest a lot in portfolio services once asked me a question, like we... I was catching with someone there, and they're like: "Do you view portfolio services as in service of the company or in service of marketing for the firm?"

Jack Altman 53:23 Yeah, exactly.

Saam Motamedi 53:24 I was like, "Obviously, the former." And they, they were like: "You're thinking about it absolutely wrong. It's, it's, it's only marketing."

Jack Altman 53:31 Mm-hmm.

Saam Motamedi 53:31 "Like, if I do all these-- if I have all these people running around and doing these services, I'm doing them because I wanna convince the next entrepreneur that, like, I will be able to help them."

Jack Altman 53:39 By the way, it's also I wanna convince my LPs that we are scaling, and it's appropriate.

Saam Motamedi 53:44 E- exactly.

Jack Altman 53:44 It's both.

Saam Motamedi 53:44 I think, again, it comes back to, [chuckles] like, what's the ethos, and, like, do you view it as marketing, or do you view it as, like, I'm gonna go w- create value for the founders I'm in business with?

Jack Altman 53:52 Yeah.

Saam Motamedi 53:52 And I'd say, for us, we view it as the latter, not the former, and that changes everything about how you approach it. Like, I'll give you a couple of examples about how we do it, right? One is, we call them specialist teams. They're not portfolio services. They're specialists because they're, like, extremely good at what they do. Like, uh, uh, like Glenn Evans, who runs our engineering recruiting, ran all of recruiting for Slack and before that, infrastructure recruiting for Meta in the heyday, right? He's got a team of, like, amazing recruiters, right? We have the same in exec. And so we treat people like first-class citizens. They sit in our weekly partner meetings. They're, like, a key part of every firm decision we make.

Jack Altman 54:22 Hmm.

Saam Motamedi 54:22 And so there isn't this first-class, second-class culture. I tell them... I, I, I tell our team that, like, w- I would not be successful as an investor if I did not have the specialist support I have across, you know, recruiting, customer development, marketing, and the rest. So that's one dimension, which is just, like, how do you actually approach them? How integrated are they into the firm?

Jack Altman 54:39 Mm-hmm. Mm-hmm.

Saam Motamedi 54:40 And then the second is, like, what's the impact they go have, and how intimate is the relationship they go build? And so, for example, like, um, and I don't wanna create a commercial for our, our, uh-

Jack Altman 54:49 Yeah

Saam Motamedi 54:49 ... our specialist team.

Jack Altman 54:49 Let's pause this.

Saam Motamedi 54:50 Although I'd, I'd be happy to if, if, if you- [chuckles]

Jack Altman 54:52 We'll chop this in post.

Saam Motamedi 54:53 Yeah, yeah, but, like, um-

Jack Altman 54:54 Go ahead

Saam Motamedi 54:54 ... the, the level of imp... Like, we measure the impact. Just like we measure the inputs, we measure the impact very quantitatively. By the way, we, we measure things like how many engineers did we place at, at, at our portfolio companies. Like, we backed Resolve when it got started last year. In the last fourteen months we've been in business with them, we've placed nineteen engineers.

Jack Altman 55:08 Can you make more progress with a company early in its life?

Saam Motamedi 55:11 Exactly.

Jack Altman 55:11 So it's more-- it is also connected to the strategy.

Saam Motamedi 55:14 Yes, and I, uh... And actually, the way I-- the mental model I use is, like, I'm, we're an Iron Man suit.... you as a new founder, you don't have any of your own machinery. You plug into our Iron Man suit, right?

Jack Altman 55:22 Yeah.

Saam Motamedi 55:23 Now, we're recruiting for you, we're helping you find customers.

Jack Altman 55:25 Right. By the time I'm at a hundred people, I have my own recruiters, I've got my own sales team, all this other stuff.

Saam Motamedi 55:29 Exactly, and so that's actually informs how we prioritize our talent, our, our resources-

Jack Altman 55:32 That makes sense

Saam Motamedi 55:32 ... which is we're not spending time on the late-stage companies. I mean, we will on a very high leverage thing. You know, you're hiring a CRO, that's high leverage. But like 90% of their effort are on the companies that are just getting started, and if I can help that company get into the capital river faster-

Jack Altman 55:46 Yeah

Saam Motamedi 55:46 ... like, that's a huge win for the company, it's a huge win for us.

Jack Altman 55:49 Can we talk about the capital river? What's the capital-

Saam Motamedi 55:51 Yeah.

Jack Altman 55:51 What's the capital river?

Saam Motamedi 55:52 So you and I have talked about this, but I think it was my friend Kevin Kwok, who first gave me this analogy. I hope I'm not misattributing, but, like, one way to model what's happening in venture right now is there's this river, and there are companies that get into the river, and if you're in the river, like, the current's behind you and everything is flowing. Like, every six months, you have the ability to raise capital at, like, three times your last price. That more capital enables you to hire better engineers. They come to you because, like, also your valuation's higher, you're perceived as a winner. That enables you to build better product, which then, uh, gets more customers, which enables you to raise more capital, and all these things. As a new company, you need to get into this river. And by the way, it's this really funny dynamic because, like, you know, in, in every category, there's, like, ten or twelve companies, and, like, one to two get in the river, and companies three, four, five are, like, super pissed, and they're like, "Why am I not in the river? Like, that company has less ARR than I have."

Jack Altman 56:38 In the river, company usually wins?

Saam Motamedi 56:40 I've changed my mind on this. Like, five years ago, I did not believe that to be the case. I don't think it will always be the case that it's the case. I think we will look back in ten years, and there will be ones in the river that-

Jack Altman 56:49 But the river helps.

Saam Motamedi 56:50 I think it helps a lot.

Jack Altman 56:51 So do you believe in these king-making rounds as, like, the... Uh, is that, like, a thing that works?

Saam Motamedi 56:55 Again, works is not a binary, and you didn't mean in a binary sense-

Jack Altman 56:58 Yeah, I know, but I mean, is it-

Saam Motamedi 56:58 But, like, it's hugely-

Jack Altman 57:00 It's a creation of alpha.

Saam Motamedi 57:01 It's a creation of alpha, and it's in- it's, it's hugely accretive to the company.

Jack Altman 57:03 Would you say that's, like, a third bucket? You know, we talked about the initiation. We talked about, like, the far end of the barbell. Would you say that there's the people who can put you in the river, whether it's at Series A or B or whenever it is? Like, is that another moment that you would count?

Saam Motamedi 57:16 It depends on, like... It's a- it's interesting. Like, part of me says yes, because, like, you- the argument for yes would be if I'm the firm that, like, does that king-making round, and now that company is likely to be successful-

Jack Altman 57:25 There's a pricing image

Saam Motamedi 57:25 ... then there's a pricing advantage on downstream.

Jack Altman 57:26 Yeah.

Saam Motamedi 57:26 But then the flip is like, are those firms getting real price alpha when they're doing the king-making round? And I think in some cases they are, and in some cases they're not, and it connects also back to, like, what's the terminal outcome size for these businesses? It's probably a minor source of alpha, but, like, I, I'm not sure. I think it's way less alpha than the prior buckets we were talking about, uh, and also because I think there are many firms that can do the king making. I, I-

Jack Altman 57:45 There's, like, five, probably, right?

Saam Motamedi 57:47 I would guess it's closer to ten than five. But yeah, it's, it's in that range, right?

Jack Altman 57:50 Yeah.

Saam Motamedi 57:50 And what typically happens when these companies get king made is, like, all, all of them compete-

Jack Altman 57:55 Mm-hmm

Saam Motamedi 57:55 ... and then, you know, one gets picked, and then the ones that lose, they do the next round ninety days later.

Jack Altman 57:58 Although it's kind of funny to your point, because you're right, there's probably ten, not five.

Saam Motamedi 58:00 Yeah.

Jack Altman 58:01 So once one happens, someone else is like: Well, I can do it, too.

Saam Motamedi 58:04 Exactly.

Jack Altman 58:04 And then maybe you get two or three happening.

Saam Motamedi 58:05 And, and, and that's why in most categories, you should expect there will be two to three companies in this, quote unquote, "river".

Jack Altman 58:10 Yeah.

Saam Motamedi 58:10 But the reason why I bring it up is, like, I think if you're a new founder, and then also, like, you do seed investments, we do a lot of, you know, seed, pre-seed work. You have to... You do need to get into the river. And this connects full circle back to the specialist team, which is like: Okay, well, what's one of the things that leads to companies getting in the river? I, I believe it's, like, slope of early customer adoption and quality of customer taste, right? It's like if you're building a new s- applied AI company and you get, like, you know, Notion and Cursor and Figma to use your product-

Jack Altman 58:36 ...

Saam Motamedi 58:36 -like, the odds of you getting in the river are much higher because-

Jack Altman 58:38 I think the logo quality matters so much.

Saam Motamedi 58:41 If I, as your investor, can go help make that happen-

Jack Altman 58:43 Yeah

Saam Motamedi 58:43 ... you know, 'cause, like, Figma is a portfolio company, like, then I can, I can meaningfully dent the odds of you getting into the river. Same is true on talent. Like, okay, if you go hire a bunch of really strong AI folks out of, you know, DeepMind or Open, it's hard to do, but if you can get that talent into the business, there's a perception that you're likelier to build a winning product and therefore likelier to get in the river. There's all these subtle things around company design that you've got to get right in that first year, and if you get them right, like the trajec-- even though the business doesn't look that different yet-

Jack Altman 59:10 Yeah

Saam Motamedi 59:10 ... like, it's not yet in significant revenues or anything like that-

Jack Altman 59:12 Mm-hmm

Saam Motamedi 59:12 ... the underlying foundational architecture of the business is set up to be massively accelerated by getting in this river.

Jack Altman 59:18 How do you read these companies that are, you know, having these wild revenue ramps, and, like, you know, obviously, those, like, correlate with this river, but, like, you also see just, like, forget the capital. You see these companies going, like, zero to a hundred in, like, no time. I know you've never... None of us have ever seen this before. What is sort of your, like, uh, zoomed-out sort of assessment of this situation?

Saam Motamedi 59:36 I, I, I think that you have to, like, really decompose these businesses into, like, their underlying components and then measure their revenue and, and, like, think about their revenue in that context. So, for example, one misnomer that I see happening a ton is people are like: "Oh, this company is going zero to one hundred. We've never seen that happen before."

Jack Altman 59:52 Mm-hmm.

Saam Motamedi 59:53 And it's like, that's true if you think about it as an enterprise company. What if you think about it as a consumer subscription company? There are many consumer a, uh, you know, apps, and s- like, when Facebook Marketplace got started in the App Store went live, there were many consumer utilities that went like, I don't know about zero to a hundred, but zero to, like, tens of millions of, quote unquote, "ARR"-

Jack Altman 1:00:09 Yep

Saam Motamedi 1:00:09 ... very, very quickly. But they were not ARR businesses. They were, like, monthly, monthly recurring businesses. They had very low gross reten-- you know, l- low gross retention. The very reason they were able to grow so fast also was, like, an underlying weakness in the business, which is, like, low switching cost, very easy to adopt. You can swipe your credit card on a monthly deal. Like, it's a low price point. And so when I look at a l- lot of the companies that are growing on these really terrific revenue ramps, I think there's a lot to be excited about. And to be clear, I think some of those companies are going to go on to be exceptional.

Jack Altman 1:00:37 Of course.

Saam Motamedi 1:00:38 Right? But I also think you have to, like, look at it with a lens of, is it that, like, the very reason why you're growing so fast actually implies that you don't really have long-term stickiness, product depth, high net dollar retention?

Jack Altman 1:00:51 Mm-hmm.

Saam Motamedi 1:00:51 And I think for some of these companies, that's going to be the case. And the reason why I, I, I, I, I'm trying to, like, get this message out is I don't want us as an ecosystem to warp our perception of success. I'll talk to candidates, right, who are interviewing at one of our portfolio companies, enterprise portfolio company, that's going from, like, you know, four million to forty million or four- or, like, let's say four million to thirty million, and they're like: "Oh, but, like, this other thing went zero to one hundred. Is, like, four to thirty strong?" Like, the candidate's asking me this, and I'm like-

Jack Altman 1:01:16 Yeah, four to thirty is, like, unbelievable.

Saam Motamedi 1:01:18 It's, it, it... And by the way, this is like, you know, you're selling to enterprise, high gross margin. We didn't even talk about gross margin. A lot of those businesses don't have healthy margins today. High gross margin, high net dollar retention, it's amazing. It doesn't mean necessarily that the zero to one hundred is not also amazing. They're just- they're different businesses. They have different shapes. And so-... I would suspect when we look back in a decade from now, and we look at the mega winners in, let's say, in the AI application category-

Jack Altman 1:01:40 Mm-hmm.

Saam Motamedi 1:01:40 -there will be some that will have been these, like, zero to hundred to billion dollars kind of things. Some of those will also peter out very quickly, right? But there will be many, like, the modal outcome, if you will, will be things that, like, let's say in the past, like, when you were building Lattice, like, I don't know, a great ramp was, like, one to four to-

Jack Altman 1:01:57 Twelve

Saam Motamedi 1:01:57 -twelve-

Jack Altman 1:01:58 Yeah.

Saam Motamedi 1:01:58 -to twenty-five.

Jack Altman 1:01:59 Yeah.

Saam Motamedi 1:01:59 Like, maybe that's now one to ten to thirty to seventy-five. That's w-way stronger. If you play out that curve, that business is worth a lot more.

Jack Altman 1:02:06 Yeah.

Saam Motamedi 1:02:06 But it still looks like the laws of physics still apply to it.

Jack Altman 1:02:10 It's gonna be kind of interesting because I... You know, like, a couple years ago, there were, like, a bunch of these AI apps where you're like, "These things are promising," but not that many things have made it to ten. Then it became, not that many made it to fifty, you know, and like-

Saam Motamedi 1:02:20 Yeah

Jack Altman 1:02:20 ... it's moving up. It'll be interesting to see how many of these actually make it to five hundred or a billion and are still growing at these rates. I suspect it will be a lot more than they've ever been in the past. It's just gonna be a new, interesting thing.

Saam Motamedi 1:02:30 Um, I also have the positive view, but I'll give you the counter for a second, and I'll come back to the positive view. So what's the mistake we all made in twenty twenty-one?

Jack Altman 1:02:37 Many.

Saam Motamedi 1:02:38 Many. [laughing]

Jack Altman 1:02:40 [laughing] Ah.

Saam Motamedi 1:02:42 So one mistake-

Jack Altman 1:02:43 Which one? Yeah.

Saam Motamedi 1:02:44 -is we took growth rate to mean growth rate durability, and these are two different concepts. I-a major venture firm wrote this piece in twenty twenty-one, and I think, uh, you know, listeners can go look up the piece. It was something like, "Hundred X ARR multiples are not actually expensive." And the core argument in the piece was very reasonable, which is, if I'm investing in a company that, let's say, grew from, you know, one to five-

Jack Altman 1:03:04 Mm-hmm

Saam Motamedi 1:03:04 ... so it grew five X, and let's say they're projecting, uh, three X the next year and three X the following year, then if I'm paying a hundred times today-

Jack Altman 1:03:12 Ten times in two years-

Saam Motamedi 1:03:12 -I'm only paying ten times in two years.

Jack Altman 1:03:14 Mm-hmm.

Saam Motamedi 1:03:14 That's a cheap price for... And they're right. But then the question is, like, how many companies that went one to five actually go five to fifty in the next two years? And even the more interesting question is, how many companies that got to fifty get to five hundred, and how many companies that got to five hundred get to five billion? And I think what, what happened in twenty twenty-one is we-there was this pull forward of demand-

Jack Altman 1:03:33 Yeah

Saam Motamedi 1:03:33 ... because of digitization, all this stuff, and, like, you remember all the, like, video conferencing related tools, they were growing at unbelievable rates.

Jack Altman 1:03:39 Yeah.

Saam Motamedi 1:03:40 But, like, they very quickly saturated the market demand. They pulled it all forward, and then growth fell off a cliff.

Jack Altman 1:03:45 Yeah, it's like everybody who was interested in them heard about them at the same time.

Saam Motamedi 1:03:48 Exactly.

Jack Altman 1:03:48 And so basically, all the demand got expressed immediately.

Saam Motamedi 1:03:52 Exactly. So now, now connect that back to the current moment in time.

Jack Altman 1:03:54 Mm.

Saam Motamedi 1:03:55 Like, why are these businesses growing so fast?

Jack Altman 1:03:56 Maybe it's the same reason, but with AI.

Saam Motamedi 1:03:58 One view would be like, okay, and I'm just g- I, I, I love these companies. I'm just gonna pick on a sector. Like, if I'm a law firm, the managing partner of the law firm has probably come and said: "We have to buy an AI solution this year," right? AI's gonna transform business-

Jack Altman 1:04:10 So it all gets evaluated right away.

Saam Motamedi 1:04:11 Yeah, and everybody's buying, and these AI legal companies are growing at rates we've never seen in vertical software. But now the question is, like, okay, cool, so they get to a hundred, they get to two hundred, they get to three hundred, but are they gonna go from three hundred to three billion in revenue? Or is it that, like, all the demand got pulled forward, everyone got their solution, and everyone's like, "We're good"? And maybe that company that got to three hundred really quickly now, now completely atrophies growth.

Jack Altman 1:04:34 It's an interesting thing because I think in sort of like the twenty ten SaaS era, I think the common wisdom was vertical SaaS is not as likely to get huge as horizontal. And people basically were like, ver- there, you know, there's a few verticals that really go far, like, Viva is a good example. For the most part, the horizontal things like Workday, ServiceNow, Salesforce, et cetera, go a lot further. At the moment, it seems like there's a ton of comparative interest in vertical SaaS.

Saam Motamedi 1:05:02 Yeah.

Jack Altman 1:05:02 I think the contra on that would be something like what you just described, where, you know, it all just gets pulled forward, but the markets aren't actually that big. I suppose the bull case on it would be something like, it's easier to replace labor in specific areas, and so there's actually much more market there than there ever has been before.

Saam Motamedi 1:05:17 Exactly, and, and, um, and again, these things are not binary. And so, like, the real- the question to me is, like, [clears throat] not like, is it great to... I think there are gonna be amazing outcomes in legal AI, just to be clear. Now, are they gonna be three billion dollar revenue businesses, five billion dollar revenue businesses, ten billion dollar revenue businesses, one billion dollar revenue business? I, I, I think the jury's still out.

Jack Altman 1:05:35 Yeah.

Saam Motamedi 1:05:35 And, like, the pro case, the constructive case, would be labor replacement-

Jack Altman 1:05:38 Yeah

Saam Motamedi 1:05:39 ... labor goes to software, the TAM's much larger.

Jack Altman 1:05:41 A firm doesn't pay you a hundred thousand a year, they pay you three million a year.

Saam Motamedi 1:05:43 Correct, and, and the early price points actually support the, the bull case.

Jack Altman 1:05:46 Yeah.

Saam Motamedi 1:05:46 And the contra case would be like, there's this pull forward. Also, these companies are overearning, 'cause right now, like, people are not discriminating their spend, but at some point, they're- the comparison is not gonna be the cost of the paralegal, it's gonna be the other AI solution that's willing to do the same thing for half the price. By the way, software pricing has never persisted-

Jack Altman 1:06:02 No

Saam Motamedi 1:06:02 ... based on labor.

Jack Altman 1:06:03 No, and based on cost.

Saam Motamedi 1:06:05 Always.

Jack Altman 1:06:05 Yeah.

Saam Motamedi 1:06:05 Email's free.

Jack Altman 1:06:06 Yeah.

Saam Motamedi 1:06:07 I mean, what's the value of labor that email has replaced?

Jack Altman 1:06:09 Yeah, a lot.

Saam Motamedi 1:06:10 Now, I'm picking, like, an extreme trite example, but, like, I- it's not obvious to me that, like, all these companies are gonna pr- like, right now, it's great 'cause their ROI is so strong relative to human labor, but at some point, they're gonna have to rationalize their ROI relative to the next best software alternative.

Jack Altman 1:06:23 Mm-hmm, mm-hmm.

Saam Motamedi 1:06:23 And by the way, here's the mega bear case. The mega bear case is, like, software's cheaper and cheaper to build. There's less product differentiation. You'll have fifty companies all doing kind of modular the same thing, and pricing will completely compress to the inference margin-

Jack Altman 1:06:36 Right

Saam Motamedi 1:06:36 ... that the underlying. I don't believe that, but, like, there's, th-that could... One could make that argument.

Jack Altman 1:06:41 For sure. I mean, there's also obviously a lot of examples, like Salesforce is an example, AWS is an example, where there's tons of competitors, and they still maintain-

Saam Motamedi 1:06:49 Correct

Jack Altman 1:06:49 ... a lot of pricing power.

Saam Motamedi 1:06:50 A- a- and because they build true moats.

Jack Altman 1:06:51 Yes.

Saam Motamedi 1:06:52 And so-

Jack Altman 1:06:52 From some other way.

Saam Motamedi 1:06:53 Yeah, they become the system of record, they are doing something operationally that's very difficult, and that's why I, I, I take the bullish view on these vertical companies, 'cause I think these are amazing teams that are gonna keep innovating and building net new products and figuring out new and new things to do and, like, keep moving up the waterline. But it's not as easy as I think the current revenue ramps imply.

Jack Altman 1:07:11 Are you more excited about horizontal over the long term?

Saam Motamedi 1:07:13 Look, I, I, I'm a student of history. The largest outcomes in enterprise software have been horizontal. A framing that Ashim often uses internally that I really like, and it's very simplistic, is the following: I think there's, like, one point four, one point five trillion of IT spend worldwide, okay? There's twenty-two thousand companies in the world that make m- north of a billion in rev, okay? Those twenty-two thousand companies control, like, ninety-three percent of IT spend. If you look at the biggest businesses in the world-... that are software businesses, they have built products that can be consumed by most of those twenty-two thousand. Workday, ServiceNow, Salesforce, Palo Alto Networks, CrowdStrike, Microsoft 365, and Microsoft Business, right?

Jack Altman 1:07:49 It's horizontal enterprise software.

Saam Motamedi 1:07:50 It's horizontal enterprise software. Like, I think, yes, there's gonna be great vertical AI companies built, and, like, verticals are way better than they were in the past, but, like, I do think the largest outcomes in this generation of software will be exactly like they were in the prior generations, which, which they, which is they will be horizontal. And candidly, Jack, I feel like we're still so early, and we're just beginning to see, like, the interesting company

Saam Motamedi 1:08:10 concepts emerge. It's interesting, so Aneel Bhusri is the founder and CEO of Workday, and also is a very successful partner at Greylock. He came to a partner meeting in twenty seventeen, a year after I joined the firm, and he said sort of tritely, like: "Guys, why are we looking at horizontal software?"

Jack Altman 1:08:23 Hmm.

Saam Motamedi 1:08:23 "Like, there's, there's no paradigm shift that will allow us to go take on the incumbents. We'd be better off just buying the, like, public stocks of the horizontal SaaS companies, and we should actually go do vertical software-

Jack Altman 1:08:33 Hmm.

Saam Motamedi 1:08:34 -right? Because that's where, as a VC firm, there's, there's low-hanging fruit." And I remember there was, like, debate and skepticism, and a lot of horizontal software companies got founded. But by the way, fast-forward the clock, you would've been better off buying Salesforce, ServiceNow, Workday, Palo Alto, CrowdStrike in the public markets. That basket would have done better than any horizontal, uh, startup SaaS basket at the time.

Jack Altman 1:08:53 Yeah.

Saam Motamedi 1:08:53 'Cause it turned out that, like, either people were building things for SMB, they were building niche add-ons, but no one really could go build a, a disruptive kind of core company. Now, fast-forward, I was with Aneel at a Warriors game, spring of twenty twenty-three, and he was like... H- his advice to me and Greylock was, "Now's the time to go do new horizontal things." And why is it the time? Because it's the first time since two thousand and five, two thousand and five, Peloton and Workday get started at the start of the cloud boom, where you have the confluence of three things that need to be true in order to build new, disruptive, horizontal companies. One is there's a new pricing model, right? You went from on, uh, licensed to SaaS to now, you know, outcome-based pricing. The second is there's a new abstraction or unit of value for work, 'cause now you can actually complete end-to-end tasks, so you're selling something very different than workflow software that's used by people to complete tasks. And then the third is the data model's different, right? When you went from on-prem to SaaS, you had this multi-tenant elastic architecture that could support new use cases. In a, in an AI world, why does the entrenchment of the system of record even matter? Like, Salesforce has this whole schema that they think about customer objects with. The whole world is standardized on that schema, and I'd argue that gives them a lot of defensibility. Why do you need that anymore? Like, why should you, as a CEO, go hound your reps to, like, update their, you know, account information in Salesforce?

Jack Altman 1:10:06 Yeah.

Saam Motamedi 1:10:06 I should have an AI system that integrates into email, into my granola, into... Like, there's a recorder in the sales conversation.

Jack Altman 1:10:12 Yeah.

Saam Motamedi 1:10:12 And it's just implicitly on the fly, creating the data schema that I exactly need to power the use case I want. If I want to do a pipeline forecast, w- wouldn't it make more sense for that to be substantiated based on the texture of the actual customer conversation than what my Salesforce instance says?

Jack Altman 1:10:25 Yeah, I mean, the data needs to live somewhere, but it doesn't have to be in a-

Saam Motamedi 1:10:29 In a structured schema. It's... I would argue-

Jack Altman 1:10:31 Yeah, it doesn't have to be structured.

Saam Motamedi 1:10:31 Exactly. It, it-

Jack Altman 1:10:32 But it needs to exist.

Saam Motamedi 1:10:33 It needs to exist, but I would say that a lot of what makes these systems of record that we look at today defensible is they have defined the ontology, and they have done the structuring.

Jack Altman 1:10:41 Yeah, exactly, and then if you wanna plug in and you wanna integrate with this thing, you have to match it.

Saam Motamedi 1:10:45 Correct, and that's why a whole ecosystem has been built around that. And by the way, you, you as a rep, have learned how to use Salesforce.

Jack Altman 1:10:50 Yeah.

Saam Motamedi 1:10:50 And what I would argue t- now in AI is it's all dynamic, it's all generative, and so all of that work that you've done is no longer needed. So the confluence of those three, three, three things, it means you can go after CRM, you can go after service management, you can go after observability. By the way, there were, like, head fakes. I mean, you remember when mobile started, right? There were these mobile CRMs, but none of them became large 'cause mobile was just a UI on top of the existing model. There's no change in pricing, no change in data model, no change in atomic unit of work. I think with generative AI, that's all changed, and I think we're gonna see, like, really, really large horizontal companies get found- that, like, we'll look back in a decade that were founded in twenty twenty-five, twenty twenty-six, that went after these large markets, sold to everyone in the world, and that's how you'll build ten, twenty, thirty billion dollar revenue businesses and multi-hundred billion dollar market cap application

Saam Motamedi 1:11:34 businesses.

Jack Altman 1:11:35 To sort of, like, wrap up, I thought it'd be fun to go into, like, some other not exact venture topics. I think one, like, I think our friend group is, like, a very big part of our lives, and hopefully I'll get everybody to come on at some point. We already had our boy Greg Rosen. We'll get everybody. But, like, how have you thought about that? Like, obviously there's, you know, ninety-nine percent of it is about, like, the personal joy of the friendships, but, you know, many of us are in venture, we're all in tech. Like, how do you, like, think about how it plays into your professional life, if at all, and, like, has it surprised you in any ways, or, like, what has it sort of been like for you?

Saam Motamedi 1:12:10 It's funny, right? 'Cause, like, we... You know, there's this whole concept of, like, venture friends, which are not friends at all-

Jack Altman 1:12:14 Yeah

Saam Motamedi 1:12:14 ... or, like, you know-

Jack Altman 1:12:15 Yeah

Saam Motamedi 1:12:15 ... like, these, like, kind of transactional relationships.

Jack Altman 1:12:17 It's like acquaintances you like-

Saam Motamedi 1:12:18 Yeah

Jack Altman 1:12:18 ... and you have some. You see them periodically, but it's not like-

Saam Motamedi 1:12:20 Ex- exact- and, I mean, that, that's the thing about the venture business is, like, social and professional are so overlapping.

Jack Altman 1:12:25 Yeah.

Saam Motamedi 1:12:25 And the thing that I find so remarkable about our friend group is, like, it didn't start at all around a work pretext. It started purely around, like, just personal joy and, and, uh, u- of spending time together. Coincidentally, most of the friend group i- i- is investors, and we're all very different, like, in the way we practice the business.

Jack Altman 1:12:42 Yes.

Saam Motamedi 1:12:42 But... And then we spend too much time together, [chuckles] right? Um, and for me, like, I think one of the things that I really appreciate about it is it's really rare in life to have people who have high context on your work but truly want to see you win. Like, there are people who truly want to see you win but don't really understand, like, the true nuances of your work. There are people who truly understand the nuances of your work, but, like, they don't necess- they might not want you to lose, but they don't really care if you become the best version of yourself. I think what's so special about our crew is, like, we all know each other super well, we make fun of each other continually-

Jack Altman 1:13:15 Yeah

Saam Motamedi 1:13:15 ... and we push each other to be, like, the best version of ourselves. And I'd say f- I, I can certainly point to moments where I've made decisions because, like, you or Greg or Brett has pushed me to, like, be more ambitious or, or, or to expect more of myself, and I feel like vice versa. I think that's true for you.

Jack Altman 1:13:29 Totally.

Saam Motamedi 1:13:30 And that's a very, very special thing.

Jack Altman 1:13:31 Yeah, totally.

Saam Motamedi 1:13:32 And I... And by the way, I- that is a little bit how old school venture worked.

Jack Altman 1:13:35 Mm-hmm.

Saam Motamedi 1:13:36 I think if you rewind the clock to, like, the early two thousands, there was a lot more friendship and collaboration in the venture business.

Jack Altman 1:13:41 Yeah.

Saam Motamedi 1:13:41 And there were pockets of true friends. They would work together, they would push each other, they'd play golf together.

Jack Altman 1:13:46 Got a little bit of that. Yeah.

Saam Motamedi 1:13:47 Yeah.

Jack Altman 1:13:47 We got a little bit of that going. Well, it's funny because there's like, you know, there's this group that we spend, like, an inordinate amount of time with, and then I do think there's this, like... You know, there are venture relationships where, I think Greg made this point when we did the podcast, where he was like: You know, it got really hard to have any sort of relationships at like, you know, the peak of COVID, and now you're back to a zone where you can kind of have these, like-... relationships up the stack. Like, if you're a Series A investor, you know, you've got, like, these kind of, like, preferred relationships, Series B-

Saam Motamedi 1:14:15 Yeah

Jack Altman 1:14:15 ... and so on, and some of that exists. But it's still, there's this different thing, which is very lucky to get in adulthood, where it's like, if you have people who are thinking about your own life, like, you know, it's like they care about it like, like your family or something like that.

Saam Motamedi 1:14:28 Yeah.

Jack Altman 1:14:28 It makes a huge difference.

Saam Motamedi 1:14:29 Makes a huge difference.

Jack Altman 1:14:30 Yeah.

Saam Motamedi 1:14:30 And I think particularly for people who spend most of their time working, like, I'm thinking when we went to Santa Barbara with our families for a couple of days, I mean, we spent a lot of the time talking about work-related topics.

Jack Altman 1:14:40 Totally.

Saam Motamedi 1:14:41 And I, I think it's so unique to be able to have people who feel like family, but also are people you look up to and admire in a work context and learn from.

Jack Altman 1:14:48 Yeah.

Saam Motamedi 1:14:48 And that's what we have with the crew.

Jack Altman 1:14:49 It also just makes it feel light, where like... Because, like, you know, I think there's so many ways where work can feel really heavy.

Saam Motamedi 1:14:55 Yeah.

Jack Altman 1:14:55 You know, in all sorts of different ways. But, like, if you've got a group that is just incessantly making fun of everything about you [chuckles] and what you're doing, I actually think it's really important to, like, get that. Like, I value that specific thing, where, like, nothing is too serious to be made fun of a lot.

Saam Motamedi 1:15:11 And I also think, you and I talked about this once, but, like, if you're gonna work really hard for really long periods of time-

Jack Altman 1:15:16 Yeah

Saam Motamedi 1:15:16 ... maybe decades, you should laugh while you're doing it.

Jack Altman 1:15:19 For sure.

Saam Motamedi 1:15:20 I think humor is just such-- it's, like, one of the true endless sources of joy in life.

Jack Altman 1:15:24 Yeah.

Saam Motamedi 1:15:24 And, like, if we can bring humor into each other's lives continually, uh, it makes, it makes the work more enjoyable.

Jack Altman 1:15:29 There's this funny thing... You know, like, I remember when we were, like, talking about, you know, like, you wrestle with all of these things about, like, you... 'cause we're, like, ev- you know, ambitious people, and it's so... You're like, "What trade-offs do I have to make?" And so, like, I think over the years, we've asked, like: Do you have to trade family for work?

Saam Motamedi 1:15:45 Yeah.

Jack Altman 1:15:45 Do you have to trade joy for success? And, like, there's all these questions, which, you know, there's, like, truth in all of them, but even, like, exploring all of those concepts, and then you, like, think about it, and you're like, actually, no, like, you don't have to trade joy for professional... And in fact, I think in order to, like, be your best, you have to, like, have fun doing it.

Saam Motamedi 1:16:02 I really believe that. And I think it's in the friend group, it's in the, you know, companies you partner with, and it's also in your teams.

Jack Altman 1:16:07 Yeah.

Saam Motamedi 1:16:07 Like, one of the things I'm most proud of is Corinne got married this summer. Every single partner at Greylock on the investment team was at the wedding, and it-

Jack Altman 1:16:13 Yeah

Saam Motamedi 1:16:14 ... not because they had to be-

Jack Altman 1:16:15 Yeah

Saam Motamedi 1:16:15 ... but because it was, like, super fun. And we, like, spent the four days together, and we went out to meals, and-

Jack Altman 1:16:20 Hmm

Saam Motamedi 1:16:20 ... we laughed, and we told stories.

Jack Altman 1:16:21 And the whole thing's a fund expense at that point, and it's great.

Saam Motamedi 1:16:23 Hmm, not, not the case-

Jack Altman 1:16:24 You just need to bring everyone over

Saam Motamedi 1:16:24 ... uh, but [chuckles]

Jack Altman 1:16:26 Another topic, just more about your life, that I wanted to get into is your health routine. You have a biological age in the teens.

Saam Motamedi 1:16:34 Seventeen point six.

Jack Altman 1:16:35 But you never exercise. [laughing] And I'm just curious how... Like, listen, do you wanna, do you wanna say anything?

Saam Motamedi 1:16:44 Yeah, yeah.

Jack Altman 1:16:44 I think Ashim wanted me to ask you about this.

Saam Motamedi 1:16:46 Yeah, yeah, yeah. For me, like, it all starts with diet. The number one thing, and, uh, Jack, I'm being very serious, you're laughing, is-

Jack Altman 1:16:54 Go ahead.

Saam Motamedi 1:16:54 I source food from as close to the farm-

Jack Altman 1:16:57 Oh

Saam Motamedi 1:16:58 ... as is humanly possible.

Jack Altman 1:16:59 Here's a good bit. Saam recently said, "I bought these unbelievable, this unbelievable [chuckles] produce from the farm this morning." I go: "Where did you buy it?" Turned out it was a grocery store, and they sourced it [chuckles] from the farm.

Saam Motamedi 1:17:09 It was a farmers' market. But, but, you know, I think in all... Like, my couple tips, and Jack, I think you've learned from this, is eat whole foods, exercise daily.

Jack Altman 1:17:18 You don't do-

Saam Motamedi 1:17:19 I like to swim.

Jack Altman 1:17:19 You don't [chuckles]

Saam Motamedi 1:17:20 [chuckles] And, and make sure you get eight hours of sleep.

Jack Altman 1:17:23 Okay, that's good.

Saam Motamedi 1:17:24 What's your biological age?

Jack Altman 1:17:26 It was, like, twenty-six.

Saam Motamedi 1:17:27 Yeah, okay, so I'm nine years younger than you.

Jack Altman 1:17:29 Okay. Anything else in the daily routine and stuff that we should talk about?

Saam Motamedi 1:17:31 Yeah, actually, one thing that I, I, I've learned from Ashim, I think you do this, I actually think a number of, like, people who've had longevity in venture, uh, do this, is making sure you have a lot of unscheduled time on your calendar. I try to keep, uh, one day a week completely unscheduled, and then I try to keep my mornings unscheduled until, like, eleven. Because once you have a portfolio and a team, like, at some point in the day, your day becomes entirely reactive, and so you have to be incredibly intentional about scheduling time to do, like, long-term thinking, long-term work, um, and also to give yourself the energy to sprint. Like, because I think this jo... Like, a lot of being good at this job, in my opinion, is very quickly being able to detect when you need to go a hundred ten miles an hour-

Jack Altman 1:18:14 Yeah

Saam Motamedi 1:18:14 ... and then getting to a hundred and ten miles an hour really fast. And if you do that every single day, you're not, you're not truly at a hundred ten miles an hour.

Jack Altman 1:18:21 It's also really, uh, ke- keeping the open day or the open mornings is so hard, 'cause there's always, like, the, "Hey, I'm in town for these-

Saam Motamedi 1:18:27 Exactly

Jack Altman 1:18:27 ... three days. Are you free?" It's like, well, yeah, I am.

Saam Motamedi 1:18:29 Yeah.

Jack Altman 1:18:29 But that was supposed to be a quiet time.

Saam Motamedi 1:18:31 A hundred percent.

Jack Altman 1:18:31 Yeah.

Saam Motamedi 1:18:32 And that, like, if you ask me, what have I gotten better at over the last nine years? 'Cause in many ways, there are many more pulls on my time today than there were nine years ago.

Jack Altman 1:18:39 Just better at not saying yes.

Saam Motamedi 1:18:39 But I'm, I'm just very good at saying no.

Jack Altman 1:18:41 What do you do to make sure you're still, like, exposed to, like, serendipity that you had earlier, or do you think that that's just, like, a trade and now there's less of it?

Saam Motamedi 1:18:47 I think one of my, the things I'm unhappy with is I do think there's a little bit less of it, and I worry about that. Because when I think about some of the early relationships I built, they really were so random in how they, they were built, right? Like, a, a good example is this week is AWS reInvent. It's my first year missing it because I have three board meetings this week.

Jack Altman 1:19:04 Yeah.

Saam Motamedi 1:19:04 But there's so many, like, random events I went to at reInvent where I met someone-

Jack Altman 1:19:08 Yeah

Saam Motamedi 1:19:08 ... that four years later ended up being someone we hired into the portfolio or... I think I have less, less serendipity surface area today than I had in the past, but I try to very intentionally do things every week, every month, to maintain some serendipity. One is, like, I try to go to at least an event every week, and then I also try to make sure I meet some founders every month who are completely out of network. And I don't get caught in the, like, oh, well, I have a good network now, and I'm just gonna meet people through very strong referrals, because then you become really insular, and I think insularity is the death of this business. You have to, like, maintain a beginner's mind and keep the serendipity, as painful as it is to go to, like, an event in San Francisco.

Jack Altman 1:19:42 It is, and actually, maybe, maybe, maybe to wrap on that topic, you, like me, now as a, as a recent father, have left, left the city for, for the suburbs. Any, like, things about that that have, like, hit you as reflections?

Saam Motamedi 1:19:54 The weather's incredible on the Peninsula. [chuckles]

Jack Altman 1:19:55 It's really good.

Saam Motamedi 1:19:55 Um, it's so good. But putting that aside, look, I think, first of all, I'm in San Francisco a ton.

Jack Altman 1:20:01 More days than not, right?

Saam Motamedi 1:20:02 More days than not. I always meet founders, n- especially new founders, in person-

Jack Altman 1:20:07 Yep

Saam Motamedi 1:20:07 ... and disproportionately, they're in San Francisco. But I will say that there's a little bit of, like, having a clear mind that is very useful-

Jack Altman 1:20:14 Yeah

Saam Motamedi 1:20:14 ... because you could spend your entire day meeting founders.

Jack Altman 1:20:16 Of course.

Saam Motamedi 1:20:17 And-... you could feel good and go home and be like, "I met 12 new companies t- today." But the real question is, like, were you awake in the meetings?

Jack Altman 1:20:23 I mean, for me, when I like finish a week where I just had like a zillion meetings-

Saam Motamedi 1:20:27 Yeah

Jack Altman 1:20:27 ... all week, I don't think that, like, I don't come out of that week feeling like I crushed it.

Saam Motamedi 1:20:31 Yeah.

Jack Altman 1:20:31 Like, I feel like scrambled.

Saam Motamedi 1:20:33 And, you know, I think about, like, the last 18 months, I've made four new investments that I'm really excited about. How many f- net new opportunities do you think I met in that 18-month period?

Jack Altman 1:20:40 I don't know.

Saam Motamedi 1:20:41 I would suspect it's on average th- three a week.

Jack Altman 1:20:44 Okay.

Saam Motamedi 1:20:45 I mean, if I compare that to myself three years ago, I was probably meeting 20 opportunities a week. Now, are there some opportunities I didn't meet that I should have? Almost for sure, right? But again, the question is, like, how do each of us equip ourselves to make a couple of really high-quality investments every year? I like being in the city, and then also, you know, being in our Menlo Park office and having more clarity on, like, okay-

Jack Altman 1:21:04 It's just quieter, and you can think more.

Saam Motamedi 1:21:05 Yeah. And it's like, who are the people who are gonna start companies in 2026?

Jack Altman 1:21:08 Yeah.

Saam Motamedi 1:21:08 That I should go make sure I build relationships with today.

Jack Altman 1:21:11 There have been a bunch of these, like, Charlie Munger clips going around recently.

Saam Motamedi 1:21:14 Yeah.

Jack Altman 1:21:14 Obviously, it's not the same thing as venture, but I do think a lot of what he says... Like, you can probably apply some percentage of it, where it's like you shouldn't be chasing everything. There's very few things that matter. Like, you should be thinking and studying a lot, and not, like, talking all the time.

Saam Motamedi 1:21:27 Yeah, and I, um-

Jack Altman 1:21:28 You talk so much. [chuckles]

Saam Motamedi 1:21:32 And I will say that, like, going through one boom-bust cycle has really reinforced that for me. Because I can't tell you the number of companies I looked at in the 2020- the 2019 to 2021 period, where we decided not to invest, and they became super hot, and like, you know, the valuations ran up to unicorn, and then they terminally are now exiting for less than preference staff.

Jack Altman 1:21:50 Yeah.

Saam Motamedi 1:21:51 But it's so hard in the moment. Like, we have, you know, newer partners who joined our team a year into venture, and it's so painful. They're like: "We didn't do this, and just got, you know, three new rounds got done." And it's like, okay, well, did the fundamentals change? Like, maybe we were wrong. In their case, we were wrong.

Jack Altman 1:22:04 Yeah.

Saam Motamedi 1:22:04 Like, we underestimated the person.

Jack Altman 1:22:05 Of course.

Saam Motamedi 1:22:05 We underestimated the market. But there are gonna be many cases where our initial read was right, it's just gonna take time for it to play out. And, I mean, Charlie Munger and Warren Buffett are, like, the best of the best at this, but how do you have that patience and that conviction in your own framework to, like, not get caught up in that race? 'Cause I... Everyone who gets caught up in that race, I think, fails.

Jack Altman 1:22:23 Yeah. It's a great place to end it. Saam, I'm grateful for you. This is very fun.

Saam Motamedi 1:22:26 Jack, it's so special to do this.

Jack Altman 1:22:27 What a pleasure. [upbeat music]