Last week, on StrictlyVC At the event in San Francisco, we sat down with two longtime VCs, Mamoon Hameed and Ilya Fushman. Their paths first crossed in Frankfurt, Germany, and about six years ago they brought Kleiner Perkins to reboot the flooring venture.
They seem to have accomplished their mission of burning the brand. Among Kleiner's bets in recent years: Ripling, the workforce management company founded by serial entrepreneur Parker Conrad, valued at more than $11 billion last year; Loom, a video messaging outfit recently acquired by Atlassian for just under a billion dollars; And Figma, the design tool company came close to being bought by Adobe for $20 billion — and is now happily charting a course as an independent company, Fushman and Hamid argue.
Perhaps unsurprisingly, Team Cleaner is also heavily into AI investments, and we've talked about this at length. You can find a video of that chat at the bottom of the page; Meanwhile, excerpts from our conversation, lightly edited for length and clarity, follow.
The last time we sat together in person was four years ago, at an earlier StrictlyVC event. At the time, SoftBank dominated the conversation. It has since been scaled back; How do you think it has affected the industry?
IF: We get a tremendous amount of capital going into the venture three to four years out, and it's not just SoftBank — it's a lot of people who have growth funds, crossover funds. And the capital flood did some things. For one, it created many large companies. Two, some of those companies (became) overfunded and some of them now have to rationalize what's happening to them. Our contrarian approach to when we were here four years ago was to go back to basics and focus primarily on early-stage (startups), where we said, 'Hey, we have a venture fund and a very small team.' We've always felt that it's much more of a boutique business than some of these big players.
Your organization looks bigger than the last time we sat down. You now have investors and experts and advisors from the old guard (at KP) including Bing Gordon and John Doerr.
MH: I think we might actually be younger than the last time we met. I think our total headcount in the organization is in the low 50s.
Will 'everything AI' change anything? Can you do more with less or do you need more people following these AI researchers leaving Google to start companies?
MH: It's incredible to have this tidal wave of technological innovation. I moved to the Valley in 1987 when we were in the middle of the Internet boom, and it seems like a dream to go through another boom twice in your lifetime. So I think there's no better time to be alive and invest in startups than today because, in your opinion, there will be a step-function change in how we all live and experience life, as well as the way we work. Because the step-function change comes in the form of productivity that we all get from AI and in the types of businesses we support — whether it's in legal or healthcare or for software developers. AI is really supercharging the highest paid employees out there. They can do more in less time.
For all these AI engineers, are VCs actively approaching these big companies with offers for stakes? Did you do this?
I think it will definitely happen but the pull factor of AI – the wow factor – is what really pulled them out of these companies. As these tools become more useful and data becomes more accessible, these opportunities are becoming clearer and more accessible. The big thing for us with this first wave of people trying to come out and start these companies is trying to understand: Are they people who actually know how to do this? We rely on our founders (help with these questions); We look for those pedigrees, for those who know how these things work.
If you think about the last 10 years in venture, there have been these waves where technical expertise has become a scarce resource, and we're seeing that right now.
How are your portfolio companies dealing with this challenge in terms of hiring? Meta and Google and OpenAI are offering multi-million-dollar packages for this talent.
IF: We have companies like Harvey that are changing the legal profession. We have companies like Ambiance that are changing healthcare. We have companies like Viz doing automated stroke detection and medical diagnostics. The mission certainly resonates with the people who join those companies; That's a huge part. Second, even though platform companies are building a lot of extraordinary infrastructure, when you get into real-world use cases and get into these niches that get really big over time, you realize that you need to adjust the models and build efficiently. Your own models and potentially your own infrastructure, and it becomes a really interesting technical challenge, which is also very attractive.
From the outside, it's hard to understand how these startups build moats — or how quickly these moats change everything.
IF: It depends on the company. Trenches and overall market size are the hardest things to figure out as an investor; Those are usually the things you get wrong the most.
One thing we've learned in our history is that we always underestimate our biggest winners. The companies that do the best always grow the fastest. They create or expand their market more than anyone can imagine. So we look for some intangibles, one of which is incredible engagement from customers. When a product becomes a part of your daily use, it is very difficult to tear it away.
The more obvious part of the moat is the market segment you're in. A lot of the companies we support, especially in AI, are taking on a big problem space that a company can own and own. Enterprise Assistant, for example, is a big space, and the people who identify first are the people who move fast. If you look at AI, unless you've built an amazing product, you can't distribute it for free like you did with mobile. AI needs distribution and it needs data to improve the product experience, so the first movers that define a product category, in our view, can execute much faster than anyone else.
How many AI-related pitches do you see on a weekly or monthly basis?
MH: From a percentage point of view, I would say more than 80%. Honestly, if you were building a company in 1996 and you didn't mention the Internet, you weren't in your right mind, right? In the same vein, not mentioning or leveraging AI is a missed opportunity.
And how active are you in this realm if we can call it that?
MH: If you were Q1 to Q3 last year, it was the slowest year we've had in 13, 14, 15 years. December, meanwhile, is a really good month.
It was quite a buzz when you led the deal at Together AI. Why are people attracted to this organization?
IF: It's running a platform and set of services for people who want to run their own models. It's an orthogonal bet in some ways to sort out the infrastructure-providing oligopoly (centered on OpenAI, Microsoft, and Google), but it's a company with great customers, really strong growth, and an exceptional nominal team, and the numbers speak for themselves. For them. Again, we're building vertical experiences in healthcare, legal, software, engineering, science, and some of these use cases require fine-tuning and (proprietary) modeling, and that prospect is really exciting because of that.
I understand you've invested in a wearable startup that makes VCs salivate. Tell us more!
MH: I'm not sure I can tell you more today. I don't think they like it. Again and again.
Based on what you see, do you think a wearable AI will win? Do we use a wearable device, just like we carry a phone?
I think we are all asking the question, what is the computing platform beyond the mobile phone? Some wear Oora rings, some wear Fitbits. I am wearing a hoop. These are pretty, basically wearable. They are not all that smart.
It's catching our imaginations as to what the next piece of wearable computing we're all going to adopt that doesn't look like a cell phone. There's Rabbit, there's Human AI Pin, and soon you'll see Vision Pro Vision. Exciting things are happening. But as you know, getting users to adopt a new form factor and a new path is very difficult. It's going to take some great design and low-cost production and beautiful interfaces, and I think we're excited to see all of these things.
Figma cut its valuation in half in a Series B round you led in 2018, from the $20 billion Adobe wanted to pay for it to $10 billion. Where does it go from here?
MH: Figma is one of those once-in-a-decade kind of companies, both from the team, the product they built, the love from its community, the revenue profile, the profitability. It's a venture capitalist's dream. So it is not doomed to chart its own independent course. Agreeing to sell the company in September 2022 was bittersweet for everyone. So I think we're very excited about the future and the company continues to perform incredibly well.