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From customer complaint to shipped fix—and learning by making
1 day ago
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2 min read
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110 docs
Jason Lemkin’s Adam Guild case study offers a concrete AI operating playbook, while Patrick O’Shaughnessy’s Vonnegut recommendation supplies a making-first lesson for the AI era.
Standout: an AI operating case study
Adam Guild’s rebuild of Owner
- Type / creator: Video case study; Adam Guild / Owner.
- Link:Watch the linked video.
- Recommended by: Jason Lemkin.
- Key takeaway: Lemkin frames the case around Owner, which he says has passed $100M ARR and now gets 83% of its new customers starting inside an AI product. He distills seven operating lessons: do not make customers log in to fix the software; pair LLM-generated websites with proprietary SEO/CRO and live order data; refresh customer research every 90 days; use an agent to coordinate builders; add builders only when demand supports it; judge AI by revenue rather than time saved; and measure the time from customer complaint to shipped fix.
- Why it matters: This is the most actionable recommendation because it turns “use AI” into tests across product design, data advantage, staffing, revenue, and support speed. Its clearest discipline is to treat time saved as an input, not the outcome: Lemkin points to revenue per rep and complaint-to-fix time instead.
Learning by making
Kurt Vonnegut’s letter to high school students
- Type / creator: Letter by Kurt Vonnegut.
- Link:Jay Alto’s post carrying the letter. The post describes it as Vonnegut’s letter to high school students about the importance of creating things, and carries the letter as an image.
- Recommended by: Patrick O’Shaughnessy.
- Key takeaway: O’Shaughnessy extracts the line, “Make things to learn what’s inside you,” says the advice will become more valuable in the AI era, and argues that schools should increasingly emphasize learning by making.
- Why it matters: For readers thinking about AI and education, this is a compact counterpoint to treating generation as the whole of learning. The recommended loop is concrete: make something, then use the act of making to discover and develop the thinking behind it.
From customer complaint to shipped fix—and learning by making
Research extraction
20VC with Harry Stebbings
Direct answer: No explicit recommendation of an external book, podcast, article, blog, paper, or video appears in the supplied transcript; the closest candidates are mentions or discussion of the guest’s own work, not calls to read, listen to, or watch something.
- Host — TV/social-post mention, not a recommendation: “Dude, did you see I tweeted the other day um when Pat and um Alfred were on TV”
- Host — unnamed reading, not a recommendation: “one thing I read about him was that he actually became obsessed with like medieval lodgings and how people used to travel and stay in group stays and the historian that he is.” The source/title is not identified, and the passage expresses fascination rather than recommending it.
- Host — generic podcast mention, not an external recommendation: “rounds and company momentum it's also transparent thanks to podcasts like this.”
- Guest’s post/article — discussion of his own Sequoia-related work, not an external recommendation: The host says, “you went viral for your post on like the services economy being the next trillion dollar economy,” and the guest later refers to “I can post this article about services being the new software.”
- Guest — positive mention of Demis’ post, not a recommendation: “you know, we just saw Demis' post. Um, and it's great to have these big brains focusing on these problems.”
Jason ✨👾SaaStr.Ai✨ Lemkin
Video — Adam Guild’s rebuild of Owner (shared by Jason Lemkin): YouTube video. Lemkin distilled seven operating lessons: eliminate customer logins when the product can fix issues itself; combine LLM-generated websites with proprietary SEO/CRO and live order data; refresh customer research because it can go stale within 90 days; use an agent for builder coordination; add builders only when demand supports it; measure AI by revenue impact rather than time saved; and track complaint-to-shipped-fix time.
Patrick OShaughnessy
- Kurt Vonnegut’s letter to high school students about the importance of creating things — a letter recommended by Patrick O’Shaughnessy via Jay Alto’s post. O’Shaughnessy highlights its lesson that making things helps people learn what is inside them, argues that this advice will become more valuable in the AI era, and connects it to a broader educational principle of learning by making. Post link
Julien Bek on Lessons from Don Valentine, Doug Leone & Alfred Lin | What Sequoia Sees in Founders
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highlights
0:00Everyone thinks that we're just waiting for the phone to ring for the next anthropic to call us to invest. That's completely false. Everyone at Sequoia is a hunter. If you look at founders you like versus founders who make money as a 2x2 matrix, your job is to figure out in which part of the quadrant we make money. Now, I am so excited for the show today cuz I get to welcome one of my oldest friends. Yeah, he's a partner at Sequoia. He's also an incredible human being. This episode is a behindthescenes glimpse into what makes Sequoia so
0:28special, how they find great companies, how they win them, how they pick them.
0:33This is Sequoa like you've never seen Sequoia before. I think right now if you're not invested in the new Neol, you're basically investing, you know, in the Kora in the Stumble Upon when Facebook X came about. Credits to Sean when he brought in the SpaceX investment. We vote on companies. I think someone voted a one. The best investments in all the funds are always the companies where the sponsor had the highest conviction. We are only as good as our next investment.
0:59Ready to go.
1:11Dude, we have known each other. I was trying to think. I think it's been like 8 10 years.
1:17Almost 10 years. Yeah. You were young back then and now we're getting like I remember Iing yeah you were in Excel and you they're very nice officers and I was just joined at Tomico I think and we were both like very young and we like wow it worked but I want to start because I think a lot of people will hear you now and think wow so quite a partner and wow but there's something in particular about the relationship that you have with your parents and how you look after your
1:45father which I think is an embodiment of what a great human you are. So, can you just tell me a little bit about that before we dive into all the intellectual nerdy [ __ ] because I want people to know you a little bit first.
1:57Yeah, look, um my um my dad is um suffers from a condition um neurological condition that showed up in my early 20s. Um I I have no siblings. So, when that happened um you know, I started looking after him. He he's very unusual. My dad, he comes from a family of four.
2:18uh grew up in rural France. Um stopped school when he was 13 and you know he did that to put money on the table for the rest of his family. Um I saw him uh care for his parents when he was uh when they were aging and I I just looked up to them. Um he's quite unusual. He's a an astrologer. Yeah. Not an astronomer.
2:41Astrologer. Uh so I always saw him kind of take a different path and um when when his disease started showing up I um yeah I I was there for him and I know you've done the same for your parents.
2:55So do you know I I uh I specialize in binary statements that get me you know either loved or hated. Um but I think one of the biggest pieces of [ __ ] advice is you've got to do it for you.
3:06Everyone who says that I think is just talking out their ass. Uh I do most of the things for my mother. I did you know I adore my mom and I actually think you can achieve great things when you do it for someone else and that should be hailed and lorded not do it for yourself always.
3:21My opinion is that if you have very clear values everything else is easy. Um it might be painful in the moment to stick to them but it's just at least you have mental clarity about what you're doing and it doesn't matter how much work you put in. Um you just know you're doing it for the right reasons. Absolutely. The core value that we have is liquidity.
3:45I don't think that's true in venture capital. Dude, did you see I tweeted the other day um when Pat and um Alfred were on TV uh and they said they were asked about Sha Maguire's tweets and I said Alfred's comment was the best I've seen which is well we look at the balance sheet of Sha and I just thought when summarizing someone we look at the balance sheet of X is like the greatest way to discuss like that person. Um I got in a lot of trouble for that.
4:15You did?
4:16Yeah. Yeah. Oh my gosh. Um anyway, I want to dive into Sequoia a little bit. Um you joined from Excel. I want to know what did you not know about Seoia before joining that you now know having been there for several years now.
4:32Yeah. Um yeah, I've been there 3 years.
4:36And but I've been doing venture capital for 10. I think Seoia operates really like a sports team. Maybe you've heard that story before. Um, but this is my first day ever at Sequoia. Um, I'm in California. I've visited the office before, but I wake up early jetlagged and I show up to the office at maybe 4:30, 5:00 a.m., something ridiculous like that. Um, I felt obviously very happy about myself. I slept in the
5:04office that day. And, uh, as I approached the building, um, I see some light inside.
5:12And as about about to push the door, um, I see a man on the other side and he looks at me and with a deep voice, he goes, "What are you doing here so early?"
5:26And I'm I'm a little surprised, but with pride, I tell him, "I'm here to take my first call. What are you doing here so early?" And he's like, "I've already taken my first call." Haha. And then he just walked off and he was just so happy about it. Uh, still, you know, lost the game.
5:44And that was Doug.
5:45That was Doug.
5:46Yeah, of course it was.
5:48Oh, Doug. Is that just like the Americans being built differently? Do you see everyone else at Sequoa do that and feel you have to do the same? Is that it?
5:58I don't think so. We just hire people who are built like that. Um, Doug is Italian. Uh he's he's European um by roots and immigrated to the US when he was very young. And my I've I've only known him for a couple of years, but I'm pretty sure he was always like that.
6:22Yeah.
6:23And they want to play a dodgeball with him. Um what does everyone think they know about Sequoia that they actually get wrong? Everyone thinks that we're just waiting for the phone to ring for the next anthropic to call us to invest. That's completely false. Everyone at Sequoia is a hunter. We're, you know, we were 11 people a couple of months back in the early team.
6:49Um, that's basically what a football team is. And everyone's just scoring on the field. It doesn't matter how long you've been there. Um, everyone expects you to perform. In fact, the younger you are, the the more people expect experienced people to perform because you just need them more. Uh it's very competitive out there and we think that people need to behave exceptionally well as individuals um but win as a team and
7:17that's that's really important. I don't think that people understand that as much. I'll give you a story to illustrate it. uh Constantine Beller uh my partner um helped us lead the investment in Citadel Securities uh Ken Griffin's company. They had never taken outside capital. Um the reason we were able to invest is Constantine built a relationship with Ken since he was a student. Um he had been his mentor for
7:46years and years and Constantine never gave up and just kept asking can we invest? Can we invest? until Ken kindly said yes.
7:56Can I ask you in that case, what does that deal look like? I mean this not super seriously or glibly, but like does Constantine come to IC on Monday and be like, I have a new startup for us. It's called Citadel with Griffin. I think we should put in a $250 million check.
8:13Like, how does that actually go down?
8:15Yeah. I I wasn't there for the Citadel investment. Um, but I've seen it happen with well more recently with Anthropic with special companies like that.
8:25Yeah.$2 and a half billion dollars.
8:27Mhm.
8:28Do you know what I respect so much about that Jack is like I think the hardest thing to do is to turn down a company and then be willing to have the mental flexibility to pay multiples of it later and get over your own ego about turning it down. Do you know what I mean?
8:45Yeah. We call that revisiting our priors. It's very important that you update your priors if the environment's changed. And I think it came from the realization that if AI is going to be so transformative, we are just on the foothill of this incredible exponential. And now we're 3 years into AI and we've seen that exponential starting to play out. And suddenly we realize the mental like the human brain is just not very good at
9:14dealing with exponentials. We we can think very well linearly but not exponentially. And in this case, I think we underestimate the company in the early days. Um, dude, I think we all underestimated outcome sizes being what they are.
9:30Like anthropic and open AAI being a trillion dollars as quickly as they have been. I don't think anyone anticipated.
9:35Do you remember when it was about chasing the billion dollar company?
9:39Oh my god. 10 years ago.
9:40Which which is amazing by the way. I get chastised for this. Um, I get chastised for everything. I talk about [ __ ] Corgi Cafe. You're a hustle porn. It's a [ __ ] cafe. Like, shoot me. Um, I agree. Which is why I say something which gives most people like shivers, which is a billion dollars, could just be the new series A.
10:01If you think about it, we used to do a $50 million post at Series A hoping it become a billion. Now, you do a billion and it becomes a $20 billion company.
10:09Same blunt multiple.
10:10That's extrapolating the power law, right? Um, you have to be in the ones that matter.
10:15Exactly. And picking has never been harder because you have just so much more volume of companies.
10:19Push you on that one. But I think when you are at um a billion dollars in valuation, say, and you're doing 50 million in revenue or 30 million in revenue, choose your number, you're significantly derised. You've got enterprise customers most often. There's real data. I'd much rather do that than the series A where you're 3 4 million in revenue priced at 3 to 500 million.
10:44Yeah, absolutely. I I think the the difference is that some of these billion dollar rounds happen before there's there's anything else. Sometimes you have what the market uh wants you to pay and then um I think founders are also looking for company building partners.
11:00So you can invest if if you build trust with the founders you can invest. Have you done any of the Neolabs?
11:08Personally, I haven't. Uh we we invest in a bunch of them. Um I think right now if you're going to invest in the new Neolab, you're basically investing, you know, in the Kora in the Stumble Upon when Facebook uh X came about. That that's my opinion. Uh it's not shared um you know, with with everyone, but that's the way I I think about it. Um the only way you invested in a truly novel
11:36company is either if you back an N of one founder um you know recently we we backed a company called ineffable here in UK was um a large seed round as as you mentioned David Silver David Silver and he's an NF1 researcher um going after u a very different type of architecture so if it works it's completely massive because they're not trying to do the exact act same thing but better. They're trying to
12:04be different and that's the prerequisite now I think to be one of the successful Neolabs.
12:11Do you agree with me that series A is the hardest place to be investing today given price to progress and then competition?
12:20I think that that goldpost is moving. uh it depends in which sector you're investing in in hardware now for instance which is like the new thing right that's consensus uh physical AI um the the time to get validation is just a lot longer and so you have to invest early hoping that those companies can get through those phases of experimentation um and so instead of measuring these companies of how quickly they get from
12:49zero to a million in AR you have to look at how quickly they get to, you know, a working prototype. U but you're you're moving atoms, not bits. So, it's just a lot harder. It takes more time and they just need a bit more capital. Um so, I actually think that we'll see more collaboration because of that. Um funds will want to work with other capital partners to uh help those companies get to those milestones.
13:16Are you less ownership centric than you were before? You mentioned there the collaborative element. I find that we're able to work more with other people given outcome sizes expanding. You don't need to have the 20% that you used to when it was a capped billion dollar upside.
13:32Yeah.
13:33Are you less ownership centric than you used to be?
13:35No. No. I tell you why. It's simple. It's just the the outcomes are growing. Um, it's also more capital intensive, but most importantly, it's your time. In your career, you can make 20 investments. Some people do more than that. That's just not my style. I partner with two, three founders a year.
13:58And so, in my career, I can expect to do basically be on the board of 20 companies. I'm not going to short myself. I'm going to work really hard for those founders. What I pitch them is that I'm going to be basically their co-founder. um they decide how to run the business but I sit in the passenger seat and I help them close their first customers, close their top hires. I I literally I cannot do that with more than a handful of companies. If you look
14:24at reallet um we met with 17 public company CFOs since the start of the year. Some of them have become customers. How do you do that when you have, you know, 200 companies with 2% in each of them? It just doesn't work. It's it's a different model. It's a totally different model. I completely agree with you. Um, yeah, we're very different. D Harry's like I think I've got 175
14:53investments, dude. How you doing? As long as we go did like two. One was on Twitter DM. One was cuz Constantine messaged me.
15:01There you go. Well, there's different paths to Nirvana.
15:05We start at a dinner the other day and his founders like, "Hey, Harry." I'm like, "Hey, hi." And he's like, "You let my seed and I was like, I did." Yeah. Remind me which company. Turns out they changed their name. I was like, "Just blame the name change."
15:24How was I to know? You changed your name. Um, there are many different personalities within Sequoia.
15:30Who is the best sourcer in the firm?
15:33Like finding companies. Did they need to pick them? Just who is the one who finds really interesting [ __ ] time and time again?
15:40Time and time again. If I have to pick, I'll pick Dean Meyer, my partner who sits in Tel Aviv. Um, but basically lives on plane. He's just um a phenomenal human being. He was a professional football player for multiple years. Um he so he has the competitive juices of Messi but coupled with like the technical depth of someone who's been working in tech his whole career and that's a very dangerous
16:09combo. Um that I I I don't know where that comes from but he's just amazing at reading people. Um he's just got this ability to connect with founders both like the very young spiky people but also some of the guys who sold companies for billions of dollars.
16:26Yeah.
16:27You know people like Dean he's been very very popular. I agree. Um who's the best picker who when they have it in front of them is able to deconstruct companies best.
16:36That one's easy. Luchana Landrew. Um my partner um who actually brought me into Sequoia. uh we worked together at Excel before so I've worked with Luchana for most of my career now um she you know when I met her she had just invested in Deliveroo um then she did framer um then she you know John Sey did penny lane uh Stark more recently it's just banger after banger and if you look at the
17:05pattern there's no pattern it's just across categories she's just been able to reinvent herself across the different um you know from consumer to software to physical AI and defense. That would be my pick.
17:20Does it get really tough when you're at Sequoia because the upside just needs to be bigger than other funds like like you know Sean is bringing like SpaceX and you're like you Neros and like unbelievable companies and you're like you know it's really hard but it's part of the job. It's not meant to be easy otherwise everyone else would be doing it right. Um, our partnership discussions are sometimes very fierce.
17:46We push each other like you have no idea. Um, credits to Sean. Um, when he brought in the SpaceX investment, we we vote on companies. I think someone voted a one. Yeah, I've seen fours, of course. I've seen threes. Never seen a two. I didn't even know we could do one. I didn't even know it was on the scale.
18:10Um but what happened is after that um proposition um occurred, he didn't give up. He just kept pushing. Um he forced all the partnership to fly over to seal with their own eyes. Um we ended up doing a smaller investment that led to big investment and now couple of years later that's one of the best investments in the history of the firm. So the point is
18:38it's all about conviction. Every offsite we look at our fund returns dating back from you know decades ago and it's very intimidating. You're looking at this sheet with those phenomenal returns and you think how am I going to contribute to the same degree or more. Um, and every time we try to be cute to look at the numbers. Oh, maybe if we increase the ownership there and the dollars there. But as we're always reminded, the
19:07best investments in all the funds are always the companies where the sponsor had the highest conviction. That's just the the one thing that's been so um that happened time and time again across funds.
19:20Were the best deals controversial when you look back across them? Is it like ah actually no they were largely consensus or they were controversial?
19:30Not all of them.
19:31I think the where you turn small dollars into big dollars they have to be controversial. I I wasn't there, but I I heard the Airbnb story multiple times over where um I think Brian Chesky had been turned down by most other firms and um he came to Sequoia and Sequoia led a seed investment that was I think one of the the highest money on money return that we've made. It it was controversial.
20:06Sleeping on air mattresses on people's floor um in turn marketplace sounded like a pretty bad idea. Um but that turned out to be something very different and um and actually having conviction not just at the beginning but to keep investing in those companies.
20:23You know what? We're going to talk about like unpacking founders, but one thing I read about Brian, I don't know him, um, but one thing I read about him was that he actually became obsessed with like medieval lodgings and how people used to travel and stay in group stays and the historian that he is.
20:39And I actually found that fascinating. I find actually when you look at like the Collisons as well, they're real historians and truly great founders are often historians of their sector.
20:48Yeah. I didn't know that story, but that doesn't surprise me.
20:51Yeah. Um, listen, before we dive into a couple of lessons from each, I'm going to say two statements and you can discuss them with me. Sequoa just pays up for deals.
21:02That a wrong statement. Do you find yourself paying the most? Do you get discounts? What do you think? I was very surprised to hear that question. Um, you know, we try to partner with founders as early as possible. And in fact what you find is because of this high bar we partner with only so many uh companies every year and when we do what I see in practice is that there's often
21:32capital that's happy to pay premium uh to that valuation. Uh we're early investors early stage investors at heart and so for us trying to partner as early as possible remains the priority. Um, but there are, you know, other firms that may be investing later stages that like to come in early that are willing to pay a premium.
21:55Interesting. Aligned to that, one of actually found that I back, Brandon from Mccor, he went like quite viral with this, which I thought was [ __ ] brilliant for Square Marketing, and I don't know why you guys didn't do more with it. um uh where basically he said like oh no one talks and I'm not dissing Brandon here like it's it's true um like people don't talk enough about the trance rounds that Sequoa keep doing where Sequoa get in at one price and then there's an inflection and there's like a
22:23next round done at the same price like to me that's just a phenomenal way to lock in ownership and money for the company. Is that how you guys see it and you're like yeah we want to push that more. I mean, f first, I've only seen that happen uh a handful of times, and I think that's probably giving us too much credit. Uh you know, in his case, Brendan's built a phenomenal business.
22:49Um we haven't had the chance to partner with him, but in some of the cases where we uh did invest, it's a supply and demand problem. Um the founders are building a special company. Why would they not commend premiums after someone has invested? Um, yeah.
23:06I I by the way, I think this is a great thing. Like I I I would retweet it with like yes, the power of brand if I was Sequoa because I've done like five deals with you where I'm either in the first round with you and I'm grateful or I'm in the second round afterwards where I'm slightly less grateful but I'm still happy to be in the company. But I don't think it's like a bad thing.
23:26Yeah. Look, I think the difference is also people are conflating different things are happening. Um there there are multiple rounds that happen and you know we used to have C then series A series B and um I think the milestones to get from one to the other used to take you 18 months. Now you can move so fast with AI that things happen so quickly and so it's only normal that you command a much higher valuation in a short amount of time if you've proven yourself to to be
23:54right. Can I ask is the triple triple double double debt? You know, before we used to do one to three, three to nine, 9 to 18, 18 to 36 and that was good. Now that's still great for a company and we're not at all belittling that. But you have a lovable, a Lorra, you name it and they go to 100 million in a year.
24:14Yeah. Okay. So on that one, I have a strong view. Um I don't know if it'll be three years, maybe five, but this will come back. Uh I tell you why. First people are conflating again two things.
24:27Uh some are new markets and some are replacement markets. In the case of um you know a CRM company uh they might be AI native but they're still having to replace a core system of record for a business and some of them are growing really quickly but they still have to replace something. Here you're talking about companies that are in a complete green field market. Three years ago there was nothing and suddenly you have the capabilities that can replace
24:55basically what a human can do. Um and so naturally those companies are growing vertically in a few years from now. Um most of the customers out there will have a solution and we'll hit a replacement market and so you'll compare those companies with these other ones apples to apples but right now it's apples and oranges and no one's really paying attention to them. But our job is to play the game on the field and we can put money in one home or another home.
25:24And if we can put our money in a home which is much faster growing in a new market, we have an opportunity cost of that capital. Which is why I want to put it there. Wrong. I disagree with that. I'll tell you why. Um the outcomes will be crystallized in 10 years on average, maybe more. The best companies tend to stay private longer. That's what the data suggests.
25:46um but you're making a decision that will impact the business over the next three years. So it may be true that they can attract more capital on the short term, but ultimately what matters to you is how much ownership you have and how big the company can get. And that will be true only when that investment crystallizes and I almost guarantee that will happen for the biggest outcomes in uh markets that are more mature uh as opposed to markets are completely green
26:15field.
26:16I get you and I think this is actually the joy of venture though where we can be different. What I see is a more liquid secondary market than ever before which is also extremely frothy and because of my not being sequoia rare moment of humility from me I can sell much more easily than you right and so I can sell into a liquid secondary market at a very exuberant price I think in a way that you can't in a shorter time frame
26:44that may be true but you have you have 500 million fund that that's a lot of money to do secondary There have been multiples. So I'll challenge you back on that.
26:54My my dear friend, we are just a humble podcast that also happens to partner with great founders.
26:59Exactly. Exactly. Let's not get a good story.
27:03Let's not let numbers ruin a good story.
27:06Um final one before we touch on like founder reading and assessment. I do just want to go into like there's so much mysticism opacity on how a deal gets done at a sequoia. You have a weekly IC meeting. Is it global? Does everyone come? Is everyone invited? Is there a meeting for like just Pat and Alfred to like sit by a fireplace and pontificate um or you strategize? How does it actually work to get a deal
27:34done? It's funny because you know we're well into uh it's our like fifth decade running and probably for five decades we've been doing Monday IC's um in person or on now on Zoom. We've been adapting the same recipe. What's interesting is that we're actually experimenting with new approaches. Um we're trying to do things a bit more asynchronously and um well first yes everyone is
28:01invited but what's interesting is uh we're experimenting with a new approach where uh we actually each have to contribute asynchronously after a memo gets shared um and everyone can call up an IC if they want to um get everyone's opinion. The reason for that is an IC is a great format for um fast thinking. Uh speaking asynchronously is great for slow thinking. And so if you can get the
28:30benefit of both, you're hopefully going to make better decisions. And in an IC format, we're each contributing one after the other. It's kind of a sequential kind of rhythm. Whereas you know in in this case we contribute each of us in a document and at the end we reach a decision altogether you can call an IC but that helps us get the best from the partnership.
28:55Does every entrepreneur pitch the IC?
28:58How do you make sure that the partners have enough data to have an informed opinion?
29:03Yeah. Yeah. The founders still pitch.
29:05It's very important.
29:06So they will still pitch the entire IC.
29:08Yeah. But the entire quite [ __ ] nerve-wracking. Sounds crazy, but I told you we're we're now 12 people in the early team, about the same number in a growth team. So, it's not that big.
29:20So, you'll say to an entrepreneur, "Hi, Nick. Um, your pitch with the IC's at 6 p.m., you know, here to help beforehand. This is how I'd orient it." You give them the prep.
29:32Yeah. I try not to prep them too much.
29:34You need to see the essence of the people. If they if you give them a script, no one's going to see what you're seeing. Do you see a really wide variance in what you saw before versus the IC? In other words, do people get super nervous and change much? Do you do you see what I mean?
29:49Yeah. Sometimes we joke maybe uh maybe you should make decisions without the IC.
29:54Yeah.
29:54Um it Yeah, it is true. It does change, but it also it's a signal and then you decide as a sponsor what you do with that signal.
30:02Um is did you have questions about the founder being commercial, a good communicator? um if you bomb the IC maybe your questions were founded and so that IC then happens and you said there about signal then we and cool like entrepreneur goes away continues to build his business um or her business and then we vote a yes or a no we give it a 1 to 10 what happens now well first we we give feedback uh independently
30:31uh of the discussion and um so that we know before the discussion where people are like the false and um and so that's a vote and then we have a discussion. After the discussion, everyone votes and the sponsor is equipped to make the decision they want with that information. And so you can still do it.
30:52You can still do it.
30:53So Alfred votes one terrible uh one of the worst presentations I've seen. And you can still press green.
31:01Yeah, if you press green, it's a bad investment. We'll see how long you're sticking around. You've got to have some serious conviction.
31:11It better be it better be a good investment.
31:13Wow.
31:14Yeah. But it's not an Alfred voted one thing. It the reality is is a bit different.
31:19Do you know who voted what?
31:20Yeah. Yeah. You know the the reason. But that's super important. I tell you why. Because if you want to be a good company building partner, it can't be Harry's investment or Julian's investment. It needs to be a SEO investment in this case. Uh, I need to be able to call up um Luchana. I need to call be calling up George or Stephanie to say, can you make that introduction to that amazing connection you have? Uh, that you know
31:49is quite cherished. It's big bullet for them. Um, they're going to make that introduction in a heartbeat.
31:58Is there any politics? Like maybe I'm just I mean I am insecure and weak. Um, but like You know, someone Okay, so someone said the the term front stepping, which is the opposite of backstabbing.
32:13And I love that. I think that's just the way you're being very direct with your partners.
32:18Does anyone take it personally? Like, do you have to caveat it a bit? Like I always try and say to our partners like, "Hey, in the IC there's no emotions, but when I say this is a, you know, like they all face sunk take it personally." How do you remove the emotion? Is there emotion? Do you have to call people up afterwards? I'm sorry.
32:37I didn't um We definitely have heated discussions. Yeah. Uh for sure. People can violently disagree, but ultimately again I go back to this is all signal for the per person who's sponsoring the investment to decide how much conviction they have in the investment they want to make. And ultimately, you know, yes, the feedback may be tough, but that's not an easy job. If you want an easy job, you go do something else. Um, and and it's a
33:06feature. It's not a bug. You want people to come in with courage. And if they don't have courage, they won't take risk and we'll have mediocre investments in the portfolio.
33:17I I think it's important that it shows that like um representative and honest, but I don't ever want to do a founder bashing for sure. And so I like to do a founder praising on the flip side. So if you think of an IC where a fan has just come in and just crushed, what one comes to mind?
33:33That happens. What we do in those cases, we find it weird. First, if everyone's a seven or eight, it's quite dangerous because look, founders know what we want to hear. The best founders are able to uh, you know, retrofit the narrative that they think is going to land with investors and that can be dangerous. So in in those cases we try to have a devil's advocate. So we ask someone to
34:02play the devil's advocate and say okay what is wrong about that investment like what are the things that if it goes wrong we try to write the premortem of that investment before before we make it. Um and we try to spar around that conversation because you know in a couple of years time we one of us may have to to deal with the you know consequences of that. I want to go back a step though because that's like assuming that a sponsor likes a deal enough to take it there. If you go back
34:30to like unpacking what makes a great founder and like founder reading you've said before that reading founders has well to be fair your partner said this reading founders has quickly become a superpower.
34:42Mhm.
34:42What do you do you think that makes you good at reading founders? Help me.
34:49Well, first you have to be vulnerable with founders. um otherwise they won't open up and that's all the signal you need and you do that very well actually um my job is in 30 minutes I have to figure out what's special about this person and what might make them exceptional and I cannot make a mistake because this job is so unforgiving not when you invest in the wrong company but when you when you when you don't invest
35:17in the right companies um so it's you know emission mistakes not commission mistakes and basically you have 30 minutes to figure out what's their spike and my way of doing this is to open up first um they all expect to be pitching sequa and they want to tell the story of their company but what I want to hear is the story of the individual and for that I start sharing about my story um I tell
35:45them how it was like growing up with parents who split up um were My mom was the successful businesswoman um with a nice view over Lake Geneva, but I was doing a week there and then a week back with my dad where, you know, we slept on a mattress in a one-bedroom apartment.
36:04Um and how it was fine, you know, it was fine. Um I tell them how when my mom um had cancer um when I was 6 years old, I remember having to put myself to sleep cuz she was just too tired. But you know what? A year later, she beat the disease and kept running her business. Um, you know, all these things are just like everyone has a story like that. I know you have many of them yourself. So, I I
36:33don't want to use that to weaponize it, but it's more that I think that's the beauty of the job. Otherwise, you're just in a transaction all the time.
36:41Here, I'm just so curious to understand what makes that person who they are uh that I just want to ask all these questions. So I completely agree and I think you you have to bring that vulnerability to expect it back. Uh my question to you is we're in such a transactional world where rounds and company momentum it's also transparent thanks to podcasts like this.
37:05Um people can game it and I've said before about what do I look for? It sounds awful but like great gamers often broken relationships with parents. How how do you actually determine if it's kind of genuine?
37:19Yeah.
37:19Or not?
37:20You just have to ask why multiple times.
37:23I remember this year is the first year I uncovered a fraudulent founder and um it was very interesting because I remember in the first meeting um that person said um you know our numbers are going from zero to seven of AR in basically 6 months um in pretty hot category and um and you know in his introduction he told us how he came from a small village and um you
37:53unfavorable country and how he got an offer to go study at Stanford then um decide to turn it down to go study at another university and you just have to ask why why did you do that? It's amazing. You you got the grades to get accepted in one of the most competitive programs on the planet and yet you decide to leave it to do something else.
38:20Why? and and they may be very good reasons, right? But what's interesting is just seeing the body language, the tempo of the conversation accelerating, um the fan being nervous and just think, oh, okay, that's that's strange. So, you just register. You don't end the call.
38:37Um you give them the benefit of the doubt. But it turns out a couple of days later that founder uh my partner George and I are uh on our way to the airport at 5 in the morning to go see that founder and on the way to the airport he tells us that um he had something happen um in he had a family emergency and he had to cancel our meeting. Um later uh that day we received messages from very
39:06respectable investors who were investors in the company who told us that he had come out as a fraud. Um I remember that day I sent a message to all our competitors um about that because I I do think it's important that you know in those times where where there's so much opportunity you also have people who take advantage of it for the wrong reasons and that was for me a clear case you know and they it's exactly what you said they know what to expect they they know what you want to hear and they're
39:35just going to say it to you in a very pragmatic way. So that's why ask why five times and you'll get to the bottom of it. It it is hard especially when we are as open as we are about what what we look for. Um so I totally get that. Is arrogance bad? It's one that I just I'm not sure cuz you can just This sounds awful but sometimes the douches are actually really good.
39:56Is it bad?
39:58Uh I'll go back to the Don Valentine quote. Um if you look at um founders you like versus founders who make money as a 2x2 matrix. uh your job is to figure out in which part of the quadrant we make money and he he used to tell that to many of our partners and it's not because you don't like the founder that they won't make you money. Um and arrogance might not be something you like but it might make them very good at what they do.
40:25It's maybe the cost of their spike but that's why you have to go back to their spike first. If there's no spike and you're using that to hide a weakness that's the sign you want to look for. Can you tell me about a founder misread that you have which maybe changed how you think about founder reads? So like I got introduced to Chris at Granola, the first ever investor that he met.
40:48Um and honestly he wasn't that articulate and he wasn't a great saleserson and it was a loose idea. The references were the most unbelievable ever from working with him but I just couldn't get behind something where it was very loose and there wasn't much of a sales Yeah. presentation or careers more anything. I learned to focus more on references than almost anything else at Preed.
41:11So, first I really agree with your last statement about references. We do that extensively. Um, I'll come back to that in a second because I think there's an important point there.
41:19Yeah.
41:20On your question around a founder misread. I had lunch with Anton Oika from Lavable before he founded the company and I just didn't see it. And I'll tell you one thing that I learned from that is I didn't come to the meeting with a plan. I just had lunch with him and it was three of us and him and we were just chatting and I was not
41:48intentional about asking the right questions to figure out what made made him special and um and I underestimated him at the time.
41:57It's hard. You know what's also hard though actually which I think is important he's Swedish um and he's a thoughtful Swede and what I mean by that is like Max at Lagora um I know you're in Sequoia so we're team Harvey at Sequoa but um Max is like an aggressive Swede he's like an American Swede and Anton is a thoughtful Swede a product oriented Swede and so he's less declarative in his opinions but this was earlier how
42:26does your read change for country. French are not very good sales people generally speaking. They don't push with the same marketing showbiz of Americans.
42:37How does your read vary by country?
42:39Yeah, I think that that part is very important. I remember the first ever diligence I did at Sequoia uh was for a company called Tactto in our portfolio and I called up a bunch of um their customers who were what we call middle and um those are you know small businesses that compos most of the um company's economy right and um we always ask the NPS question at the end on a
43:07scale of 0 to 10 what do you think of the product And they were just so consistently saying seven. And I remember asking, "Oh, why not more?" Uh because we can always do better. You know, uh very German. And I remember when the the memo came out, um one uh one of my partners said, "Oh, um um why do you think the references are not more positive?" And I said, "Well, they're German customers."
43:35And basically I remember telling my partners if they're French or German um you add one or two points um if they're Americans usually you want to retract one or two points on the other hand and uh yeah so that that's also the beauty of investing here is that uh you just got to take the local nuances into account.
43:57Do you find any commonalities in childhood? Again, maybe I have a unhealthy tail bent towards like childhood trauma, broken relationships with family, fat kids. I was a fat kid. Uh, everyone loves Augustus Gloop. You ripped a dot.
44:16Um, and do you have any preferences?
44:20The problem is if you try to pattern match people, you you will just not invest in the right people. That's what I found. Your job is just to figure out where does this person sit on the intercept and what is their future-looking trajectory.
44:37If you meet a very young founder, you cannot compare them to an experienced operator. That's apples and oranges. And the best thing you can do to figure out their future trajectory is understand on what trajectory they're on. So going back to their past if you stop just at their professional history you you know in some of these cases they've been working 2 years but you have so much richness if you go back you know the first 15 or 20 years of their life and I I'll give you an example I met two
45:06founders uh French founders both went to poly technique most competitive uh technical program in France and um you know I could have said oh these two guys are equally good um What was interesting is when I started digging into their childhood story, one of them uh was the son of private equity tycoon who had also gone to poly technique while the other one had been abandoned by his
45:33parents when he was born and spent his childhood going from like one care home to the other. Um that's terrible, but at the same time it just shows you how much distance that person traveled to get where they are. And it doesn't mean that they'll continue on that path, but at least it tells you a lot about their existing trajectory and um and so your job is just to figure out if they're going to continue on that path or not.
45:57I I totally agree with you. Um distance traveled and like the [ __ ] they have to go through to get to where they were today is materially just more. I totally agree with you. I always love it then when you check the kind of name of the library and you're like, "Oh, it's also your father's name on the library."
46:14That helps usually. I did think Charles that you were you know whatever. Um okay. Um there's Doug Leone, there's Pat Grady, there's Alfred Lyn, there's Sha Maguire. I'm going to choose one lesson from each. Start with Doug.
46:28What's the one lesson you learned from Doug?
46:30The one lesson from Doug is a question he asks in interviews. He starts by asking, "Who is your best reference and why?" What's interesting there is usually founders tend to say uh you know there's this person and this person and they're they're very happy um to share all the great things these people have to say about them and as they finish you ask the counter question which is who
46:57would be your worst reference and why and see their calls change. Do people answer that? Honestly, that honestly what's interesting is how they answer the question. Um, I've had founders be very direct about who their worst references were. And what was amazing is then I called those people and you just get a lot of texture. I'm not looking for perfection. I'm just looking for clarity.
47:20Do you know who your worst reference would be?
47:24I have so many.
47:26That sounded so like um the GFC guys. Ah, I think mine would be Nicholas at Atomico.
47:33Oh, really?
47:34I think he'd say I was like useless.
47:36Uh-huh.
47:37And I was, by the way, like when I was at You were also 17 years old.
47:40I know, but I just couldn't understand like why am I on a call at midnight when it's not my firm. Like, this makes no sense to me.
47:49Exactly. But, you know, the the worst employees make the best founders. You became a founder.
47:53Which is why references are really hard.
47:56Yeah. actually for me.
47:58Um, okay. I love that. I'm gonna steal that. Um, ju just just on the reference point.
48:03Yeah.
48:04Um, well actually I can you you know you asked me about Sean. He has this ELO um methodology framework where if you've played chess, you know, ELO is the score you get attributed depending on how good you are. And it's exponentially harder to get uh to a higher score because you have to beat better and better people to get there. And so his point is that if you know you're 2400 rated player, which is, you know, extremely good outlier
48:33territory, you're much more likely to be able to judge who another outlier is.
48:39Um, and I think in the case of chess, in 10 moves, you can tell a 2400 rated player can tell another one. Um, but if you ask someone who's a two 200 uh 2,000 rated player, uh, will be unable to tell the difference. It's the same with references. Um, you want to ask exceptional people if someone is exceptional, not good enough people. And that's often the problem with references.
49:05I get you, but I'm again I don't think these people will mind cuz I'm saying they're so exceptional. But like when I speak to Torston at Helsing or Allan at Fuse, they're obviously two exceptional entrepreneurs.
49:17I've never met anyone they like. They never anyone where they're like they're amazing, you have to do it. They're like at best, yeah, they were okay. That's really hard. Like, do you not find that where like the best people just have just I don't know. I can't get it.
49:33You have to untangle their personality from their accomplishments and maybe in those cases the personality got in the way of the accomplishments.
49:43Okay. Yeah, Doug is great. Love that. What about Pat?
49:46Oh, Pat has got this great framework. Um people are like vectors and vectors are the product of their direction and magnitude. Direction is why are you doing this? Um why are you so motivated about that? Uh where are you going? And uh the magnitude is how ambitious that person is. Um are they going to go through the pain to keep doing what they're doing? And I find that framework
50:15just so simple. uh as always with Pat um because if you try to understand the person's direction and their magnitude uh it's going to help you a lot just to predict where they're going next and their trajectory.
50:28I really like that.
50:30You know, one thing I always remember Pat telling me, he's like, "People think that we're so great. Every single company that goes public, we have seen at some point in their journey."
50:40Mhm.
50:41That just shows you how many we've missed. We must always bring energy, bring preparation to every single company meeting we have. It's never enough. I just love that humility. Like this is this [ __ ] Pat Grady lead Sequoia. Now to have that humility, I just thought it was awesome.
50:58Um again, my first day at Sequoia, uh we were all asked to write this one sentence, we are only as good as our next investment. And we have that printed on the wall now. Um, it was very intimidating to write that the first day at Sequoia and very humbling.
51:17Um, so that's the focus and I I think you can just see it and the way people behave. God, you'd be pissed if you're Sean McGuire, aren't you just being like, I just did SpaceX. Come on, give me give me a break. Come on.
51:30He's definitely not on the break. Uh, Alfred Lynn.
51:34Alfred Lynn. Uh the latest piece of wisdom that I loved from Alfred was do not mistake an outlier operator for an outlier founder. And that's very easy to make. You think someone did really well at this company. They've done so many things. They've launched these new products. Everyone liked them. Um that might make them an outlier operator. Um it might not make them an outlier
52:04founder. very difficult when the CV is as goldplated as your open AI, your deep mind. And I think we're all falling for the CV trap in a lot of ways today, especially with a lot of the heavy AI plays like that. Final one is Sean the Elo one or is there another one?
52:20Oh, the ELO one. Yeah. Yeah, I'll give you another one from Sean that I liked.
52:24Um, everyone thinks of people as either IQ or EQ. IQ is the intellectual horsepower. EQ is the emotional horsepower. Uh he has these two other dimensions. One is judgment. Uh the other is political coefficient. Um and basically if you think uh of judgment is how you're able to find solutions in complex
52:52systems and same with PQ, it's the ability to navigate politically complex systems. And his argument is that judgment is actually more important than uh IQ. And um PQ is more important than EQ. He's got amazing PQ. I go back the balance sheet of Sha is relatively undeniable. Um very funny. Um I love that.
53:22Which of those four is the best reader of founders?
53:25Well, it depends on the founder. If it's a young technical founder, I would u ask Alfred Shawn. If it's a more commercial founder, I would actually ask um Doug or or Pat. But again, you you mentioned those four names, but we have 11 people and um actually think for instance like Burger Mill might be is amazing at reading people. Um so for some founders, I would definitely bring Burger Mill. Uh
53:55if it's a company in fintech, I would bring George because he just knows all of them. He's very calibrated.
54:00I totally get that. Listen, we've covered a lot about Seora and what makes Seora what it is. In terms of like where we invest, you said something to me before um and I want to spend some time on it. You said agents are the new customer. What does that fundamentally mean? What should we take away from agents being the new customer?
54:19Yeah, I mean we're three years into AI. We're already at par in terms of agent traffic to human traffic. Um I think it was Cloudflare this morning um said that in five years from now we'll have 1,000 times the amount of agent traffic to human traffic. Again, we're not good at thinging exponentials, but if we're on the foothill of the exponential, we better act uh as you know it will be.
54:46And my thesis is that on the you know on the demand side you have a new customer that we're not treating as good as human customers as the agent. Um you know today we have agents delegating tasks mostly out of convenience but tomorrow as the AI gets smarter it will be because they're just making better decisions. If you have a 500 IQ AI, of course they're going to make the decision on your behalf because that's
55:15just a rational thing to do. And today we've basically built these interfaces whether it's on uh desktop or mobile that are in basically a layer that sits between your business and the customer intent and you're trying to translate that customer intent into dollar for your business. But if you abstract it, it's just a layer, right? What we've been extremely good at is optimizing that layer for 20 years and right now
55:45UI, better on boarding, better sign up, better payments workflows, 100%.
55:50And so you have you end up with like a pixel perfect website uh that's amazing at converting humans. Um but now we need to think of like a bits perfect u platform that's good at converting agents.
56:03What changes then in that world? like what what should founders take from that and what do what do we look for that changes like does UI become completely irrelevant then how do we think about that yeah UI is obviously the first thing that people think about um but there's the thinking fast answer and then this thinking slow answer the thinking fast answer is UI is going to zero um agents are able to swap your product in a minute and there will be no brand
56:32loyalty and it'll be a race to the bottom.
56:36Yeah, the thing in slow answer is quite different. Agents are very similar to humans. They have biases. They have biases in their pre-training based on what data they were, you know, was scraped. Um, they have biases in their post-raining because they were post-trained by humans who were annotating. Um, and so what you see is that the agents are already very biased. They go to Cloudflare and Versell when they're looking for a hosting solution.
57:03Uh in fact you have uh hedge funds who are buying data to understand how agents are making decisions because that may influence the stock price of these companies. And so we need to understand just like we did for customers what are those biases and how do agents make decisions and how that may differ across the different model providers but also uh depending on what product or service you're you're trying to sell. And we're just at the very beginning of that um of
57:31that transition. We have like you know in the portfolio we have a company called profound that's the answer to SEO um for the modern marketer they help you um they help you make your business visible to people who are using chat interfaces um AEO answer engine optimization right um is the AE so we have a business too peak AI um uh in Europe um and my question to
58:01you is is the AEO answer engine optimization business the same as agent to human in terms of traffic when you compare AEO to SEO like will AEO be a significantly larger market than the SEO market?
58:14Oh, I see. Um, what I would say is just we have to consider that it's not just a new category. It's a new economy and you're you're just going to have a parallel economy for agents. Uh, just like you have a parallel economy for humans. And in that new economy, you will have new categories created. The EU is one of them.
58:34How do you determine what is in that new economy versus what is not? Cuz I would have traditionally said a honeymoon for my my wife would be in the I'm going to keep it in the old economy.
58:45I don't know, dude. I invested in Adessia with you guys um with Constantine uh and Francis from Sonda.
58:52Mhm.
58:53I don't think they're that far away from making an amazing agent experience that could do everything that I would want to do.
59:00Yeah.
59:00So, how do you determine which is in which?
59:03Yeah, you still have a human in the loop when you're booking your uh holiday. Um but very quickly, agents will just make their own decisions. You still want to decide where you're going on holiday. They might have made the best plan, but if you uh are the one who's going on that holiday, you want to have a say. The difference is right now there's 80% of the databases are written by agents.
59:28So why would humans have a say as the AI has become so good that they can pick better than humans? So that's the distinction I would have.
59:36Totally get that. So does that destroy software margins then? If everyone's able to switch super quickly and it could be uh race to the bottom on price, agents are optimizing for a load of different preferences, do we just lose margin as providers? Like what happens there?
59:54I I don't think that's true because that's assuming that you can you have no uh switching cost. And the reality is you may have no switching costs for very menial things like okay you might want to book a different plane tickets that that's easy to swap uh provider but if you've picked a database you're you've been building in that database there's data gravity there's enterprise controls there's all the things that enterprises care about um
1:00:23that will remain something you build with trust and trust you build it over time um that will remain true no matter matter what when you look at like a a riot, it sells to large enterprises, some of the biggest in the world. The way that they buy, is that really going to fundamentally change? And is it going to fundamentally change as quickly as we think? You know, I'm always conscious of being I'm not that young anymore.
1:00:47Neither are you. Sorry, mate. Uh but like I'm always conscious of being exuberant. And then I'm always reminded you always, you know, overestimate what happens in a year and underestimate what happens in 10.
1:00:58Enterprises won't move that fast. They don't buy as quickly as we think they do. Yeah. Agents buying and no no just like they don't have slack mostly. How do you think about like agent willingness to engage in that new buying behavior? Yeah. I mean like everything in the adoption curve this will sit somewhere else on on that one. Um right now what you're seeing is agents are very good at picking tools that are uh connected with coding because that's
1:01:26where aentic applications have really reached human parity but you haven't reached that level in other functions as much and yeah to today I think that will be probably just further help the spectrum.
1:01:39I I'm going to be humble again maybe D is D this is this is becoming a bad bad habit. Um I don't know in a lot of cases which is durable, which application provider will survive. It's it feels so transient and um I feel a lot more certainty when I invest in Fireworks, when I invest in Mccor, when I invest in click the infrastructure that I know whoever wins at the top layer in the app layer wins.
1:02:08Yeah.
1:02:09But they're going to use Fireworks.
1:02:11They're going to use Click House. They're going to use Mort to get there.
1:02:15Do you not just sit around the table as a partnership and go, "God, the infrastructure is much easier and better." We want to be there. We we invest in both. I think the human brain is not very good with exponentials, but is also not very good at understanding that truth that holding ideas in tention. You can hold opposing ideas in tension and still be correct because those um truths will materialize at different times. In the case of
1:02:44fireworks, they're ripping and they're ripping because we're just at the beginning of the AI revolution. They built the best product and they appeal to the best customers. Um so they're running away with the market. Um, at the same time, you know, you mentioned real before, they're signing up the next generation of software companies now outside of software and those companies will build their entire finance teams on
1:03:11top of real. Um, in a couple of years from now, this will compound into a very large and sticky business. And so, do we invest in one or the other? No, we invest in both because we think that both companies can be really big. It's funny, one of the things that I love to see when I'm investing is the percentage of customer base that is non-startup or non-traditional like tech oriented cuz when you have like Ford Motors in Idaho using it and you're like, "Wow, that's a
1:03:40that's a weird one. How did they find out about you? Huh? What's their usage like?" It's a really really good sign for me. It's funny you say that because in the case of really we had a board meeting recently and they have this thing they called um project Iowa um and it's basically appealing to companies uh outside of tech and we this is the fastest growing segment in the business and we have car washes and um you know
1:04:09regular uh auction companies signing up um so that was that was a very interesting turning point in the company that they're both able to appeal in the taste makers in AI but also to uh the company that your uncle is running um you know with his wife um and that's really important because you want to participate in the real economy just not just in the AI economy the margins matter less today given the expansion of outcome sizes whether we
1:04:37look at fireworks or Lora Harvey and putting them together like lovable rap all margins are lower right now than they were traditionally in more mature software markets do we just not mind because markets are bigger?
1:04:52Yeah. Uh so on that point very important um we're in transient phase where um most of the human facing applications still benefit from operating at the frontier. at some point uh your customer support agent does not need a 200 IQ agent to change your plane ticket to uh Hawaii, right? Um what will remain true is that machine to machine interactions
1:05:21still benefit from 500 IQ AIS and as we shift from um customerf facing applications to machinef facing applications operating at the frontier will matter less and less for the first group and more and more for the the second and I think right now everyone's wondering what should we do with um openw weight models um for some of these applications where the frontier uh of what open source uh gives us is already
1:05:51good enough and they should absolutely start thinking about that and we're encouraging portfolio companies to do that. Um for the ones where we're still not at human parity, you absolutely want to be operating on the frontier and it might be worth um you know investing at even negative gross margins to earn the customer's trust and build a superior product to your competitor.
1:06:16Speaking about kind of margins, building superior products to competitors, you you went viral um which which is very exciting to you. uh you went viral for your post on like the services economy being the next trillion dollar economy and you're my dear friend and I love you and I read it and thought my word what a load of word wank. Um
1:06:38which is just like a power account with GBT make them more efficient. I'm like well done. Um what am I missing?
1:06:47Like I love the way I have it written down in much more articulate ways. What am I missing when it's like services of the next trillion dollar economy that we should pay attention to?
1:06:56Sure. Yes. So the prediction was that the next trillion dollar company will be uh a software company that masquerades as a service business. It's very important the masquerading because they cannot be a service company.
1:07:10Okay.
1:07:10Um does that make sense?
1:07:11It it does. So what would that look like?
1:07:14Sure. We're in the third year of AI. Uh the first wave was about co-pilots. So it's companies that are helping human workers be better at their job. And now the reason we started there is the models were just not good enough to do the entire job. But as you've seen in coding this year, we're reaching human parity if not more. And so the agents are able to complete tests end to end.
1:07:38And so instead of selling a tool that can help you achieve an outcome, you can sell the outcome directly. And that I think is very interesting. Um to go back to the accounting example um today you might buy u you know QuickBooks for um 2K but you spend you know 15K to close the books with your accountant. So what if you can just sell the outcome of the closed books instead of selling the software alone. And I think that's
1:08:07really important because you have typically across the board a1 to6 ratio um between how much you spend on tool relative to how much you spend on the service. And the question I was asking is how do we figure out the categories that will be able to capture the $6 um where you know others are still focused and competing on the $1. Um and the conclusion is there are some categories that are already getting there. Um people may not realize but customer
1:08:37support is already in this phase. I call it the autopilot category. Um you have already a billion dollar in AR in this category where outcomes are sold. And the way it works is you know we have a company called Sierra. They're an AI for customer support and customer experience. Um a typical way is they go see a customer who has X number of tickets to resolve an airline, right?
1:09:00and they know that today they have human agents that are um answering these tickets and for every ticket resolved they might spend let's say $50. Uh well Sierra comes in and they say well we will uh resolve those tickets for let's say a fifth of the price and at the beginning the customers may want to see how it's working. So it starts as a co-pilot but very quickly it moves to an autopilot and the beauty with that is
1:09:28effectively the AI is running the entire workflow end to end and is able to collect a fee from the outcome it's generating not from the tool that it's selling.
1:09:39Totally get that. I think it's very easy to do in uh customer support based environments where there's very clear resolution or no resolution or TBD. Um what do you do when there's ambiguity?
1:09:51sales tools. It wasn't actually all marketing tools. It wasn't actually that touch point. It was a different touch point. It's only really possible in super clear definable markets. No.
1:10:01Yeah. It's it's very hard. That's why um unfortunately we haven't seen many companies yet uh do that and the combo is one the models are still getting better and better. Um but two as you said there's still a lot of human judgment involved in those decision and so my framework is um you have intelligence which is what the models are really good at things are verifiable um how much do we spend for this and
1:10:29that month um and then you have the human judgment that's people call it taste people call it the sum of the small experiences you have interviewing someone you know the the body language they have uh are they leaning back or into to share uh that may lead you to ask a different question uh that you would have had in your uh preparation.
1:10:50Um that's something that's very hard for an AI to pick up because it was not in their training data, right? But today, what's interesting is those tools that stars co-pilots, they're basically in the judgment loop and if they're building the right product, they will be able to harness that judgment so that the judgment of today is the intelligence of tomorrow. When we say the$1 to6 dollars spent, Microsoft, OpenAI, Anthropic, every freaking provider is putting a huge amount of
1:11:19money into like the services and implementation side of their business.
1:11:23Are we not actually just seeing traditional enterprises more than ever cry out for help to implement AI? Yeah, it's it's interesting you say that because the stat is we've never seen so many system integrators and for deployed engineers being hired in the workforce and that's a direct correlation with the point we made which is you still need human judgment and hands to do a lot of that work and in the case of service now I think they're they've never hired so
1:11:53many system integrators uh you and I are investors um in a company called octar um that's an AI for software implementation and um they work with some of the largest um software vendors where they basically help their employees uh supercharge their implementation team and it's just amazing how how much leverage you can get one person can do the job that 10 person were doing before uh but you still have the human in the loop and I
1:12:21think that point is very important because they I think what people didn't understand from the article is that it's not because you go from co-pilot to autopilot that you remove the human completely. What I'm just proposing is that we can build companies that will have software-like margins even though there are still humans that are making the judgment calls. The difference is that you start with lots of humans, little AI, and you end up with lots of AI, little humans,
1:12:51simple frameworks, you know, incredibly reassuring for humanity. Do you do you buy the we'll have smaller teams argument? Oh, absolutely, absolutely. But but the the thing that people also don't realize is there will be new jobs. You're just shifting the bottleneck somewhere else. Um I do get you, but I do think the speed of transition is faster than it's ever been. Like when you see, you know, the agrarian revolution or the industrial revolution, it took 10, 20, 30 years to buy, train, and then deploy machinery on
1:13:19farms in the middle of France. when an update to, you know, Gemini can remove a whole generation of designers in terms of like movie posters. [ __ ] that's worrying. When, you know, in in 6 months, you know, uh, claw code became from 20% of Andre Capathy's workload to 80%.
1:13:43Speed is uncomfortable.
1:13:45In practice, the data shows that we've never hired more software engineers.
1:13:50That's true. and and so you you see you have opposing ideas that uh can hold true at the same time the the realization is Jeban's paradox you're making building much cheaper and so it turns out that people have lots of ideas and you know we can't underestimate human creativity uh and in this case people are just building more and yeah I find that exciting for you and I who are investing in those companies will you invest in a services business
1:14:19that plans to turn into a software business. I know it sounds crazy, but I was like, "Hey, we're collecting the data. We're understanding workflows. We're clearly getting as close to our customer as possible to build the software product." No.
1:14:31So, I'll always tell you when I have low, medium, and high conviction. What I'm saying here, uh, I between a medium and a high. Uh, I will not invest in one of those companies for the following reason. I think you can make money in that business. The reality is I've only seen it in my career. the best companies are able to concentrate talent and you're just not going to get frontier talent wanting to work for an old service business that's kind of travesty
1:14:59into an AI company. They might have data but not necessarily the data because it's just really hard to harness the right data uh to make these businesses work. So I actually think you should just build it from first principles. The best founders always figure out how to get distribution. Um they will have the talent. So if they can build the best product, customers will vote with their money and buy that product.
1:15:22You sit in Europe, but you work with a US partnership in a lot of ways. Um, do you see the promiscuity of US employees in terms of their willingness to move?
1:15:33You said about people wanting to work at X or Y. I find US employees incredibly promiscuous in terms of jumping hot hot company, hot company, hot company. In Europe, I think we're much more loyal. It's certainly in the labs. I think there's a lot of jumping around in the labs. Um, yeah, people have very short tenures and yeah, we we just don't have that in Europe as much.
1:15:56It must be so confusing for your email.
1:15:59Do you do you update your Netflix every time? Like what?
1:16:02I I think they probably keep the emails just in case because some of them come back.
1:16:06Might come back. Can you keep Karen at OpenAI just in case?
1:16:11Like what the [ __ ] Is traditional private equity [ __ ] I actually think they might do very well by investing um in those companies that have the data and so on and won't be able to hire frontier talent, but they'll build very fine businesses. They just also they're not seeking the same outcomes that we seek. Um we want to back the next trillion dollar company.
1:16:33Um I think it's unlikely that's a private equity backed company.
1:16:37It's true. I think the only thing that will vary is just like do they have the ability to uh do more deals cuz so many of them underwater with [ __ ] deals.
1:16:47Yeah.
1:16:49When you're dealing with five Titanics, are you really willing to like let another flower blossom?
1:16:54Yeah.
1:16:55Tough.
1:16:56Um listen, dude, I want to do a quick fire with you. So I say a short statement, you give me your immediate thoughts.
1:17:01What's the most overfunded category?
1:17:03Um probably um legal. I think there's, you know, there's just so many metos in this category. Uh whereas I think that the winner is already in existence. Um I'm obviously biased, but I think Harvey is very well positioned because they have the widest distribution. Um and yeah, I I just don't understand investors willingness to invest in the nth competitor.
1:17:33Ah, so naive. Uh, no. I I um I will naturally say I think Mora is obviously going to win. Um, but I think going back to your point, I think slope is what's important.
1:17:48Um, I do agree with you on the overfundedness, but I kind of don't in a way actually do cuz I think you legal is a very horizontal broad market. We're in a business called solve intelligence. It's IP law very specific for patent lawyers and the IP market that is so different to a lot of what Harvey and Lagora do to the extent that both Harvey and Lora founders are invested in it.
1:18:11Do you see what I'm saying? And so I I really think it's actually you will see the unbundling of law. Now will solve be as big as Harvey or Lora? No, but still multi-billion really interesting um underfunded category that should be funded more. um they call it BCI, brain computer interfaces. That's where all the smart kids are going. So I'm a big believer that you should just follow where the smartest people are going. Um you know 10 years ago the smartest people were
1:18:41going to ML and AI. Um 10 years from now we'll see those companies probably blossom. That's the next frontier.
1:18:48The best agent company outside of Sequoia. So the best company uh agent company outside Sequoia um is probably cursor um one they're in one of the most important markets um but second where there was a lot of chatter around AI rappers they were the first company to really understand that you could post train models and actually be go deeper into the stack. Um when that $60 billion deal happens, do you guys sit around table and go, "Oh,
1:19:17bucker."
1:19:18Well, they're they join their portfolio company. So, um that that helped.
1:19:23Yeah.
1:19:26Um best angel who doesn't get enough credit.
1:19:29Gloria from Puzzle I think deserves a lot of credit. Um she's um she's got a incredible nose and works extremely hard for her founders.
1:19:39What miss haunts you most? I think probably Trade Republic. Um, so we're in business with Trade Republic, but I looked at the seed before I joined Seoia and I remember uh telling the founder Christian. Um, I don't think you're going to succeed because Revolute is going to smoke you.
1:20:01The the point is like it turns out that they barely compete and they're both building building amazing businesses. Um I I think I was I had I failed to understand that um it was not winner takes all market and I underestimate the size of the category.
1:20:21You know one of the most BS reasons to miss a great company is oh well people will use you at the start but then when they become bigger they'll just build their own.
1:20:30It's like the classic Stripe or search APIs or whatever. It's like they don't for infrastructure in particular it's just painful.
1:20:39Why would I do that?
1:20:41Um, what founder trait do you refuse to compromise on?
1:20:44Intensity.
1:20:45Yeah, intensity is important.
1:20:48Uh, it's too hard to build a big business. Uh, you need you need intensity.
1:20:54Which fund when you hear are competing, do you go, "Oh [ __ ] we need to bring our agame."
1:21:01I don't think we can be condescending and say we don't bring our agame. Uh, no matter who the competitor is. Um but I know you want names.
1:21:09Okay. Can I answer with a story?
1:21:11Yeah.
1:21:11So um I never lost a deal uh an investment in my time at Sequoia, but I've lost investments before. Uh I lost my first investment two weeks into the job uh when I started venture long time ago. Um and that company was revolute.
1:21:29Um incredible incredibly painful. Um I think index in Boulderton did that round if I remember correctly. Um but basically the story is um I'm two weeks into venture like you. I'm like 20 years old. I don't know anyone and I call up the one person I know in venture capital from Seed Camp. Um and he tells me you should come to that uh pitch. We have 10 companies. And I thought oh great 10 companies that's amazing. That was the
1:21:58only criteria that I was given. and I show up to this rundown place in East London in a basement and there's 10 founders pitching. One of them is Nikolai from Revolute. Um, another one of them is Daniel Dyn from UiPath. Um, think about the concentration of EV that was just in that that that day and they're both raising their seat in series A. Um, I think Nikolai was the most obvious
1:22:27founder call I've had in my career. It was just so obvious how intense he was and I proceeded to camp out of his office in Canary Warf and um I just tried to identify him in the crowd every day because he wouldn't respond to my emails. Um my colleague and I ended up having a meeting with Vlad, his co-founder. Um and after trying to convince them to invest, um they said that they would go with a competitor.
1:22:57And I was I was really crushed. Um I I remember thinking this could be bigger than PayPal. Um and you know we we'll see time will tell but it's I think a fantastic business. Um but at that time I tried my chances and I said can I invest personally in the company and they you know begrudgingly pointed me to an SPV. Um, but I was p I was penniless at the time and um, even though I had
1:23:24the opportunity, I I didn't know how to fund the commitment. So, I remember calling my mom on the way back. Um, you know, like like your mom, she's uh she's always been there for me for business decisions. And she said, um, that sounds like a pretty good idea. Um, how about I give you the money, but we'll do 50/50. And uh you know 10 years later, I've only kept buying shares in the business.
1:23:53I haven't sold one, but my mom just sold most of her shares and she just retired uh at 74 years old. And so I always joke with my partners that um they could only hire the second best investor in the Beck family because my mom went all in on Revolute at the series A.
1:24:12What multiple was that? I'm not asking for money but just like well it depends with valuation but um we we entered at 200 no 180 200 million and I think the latest valuation is over 100 billion just tell your mom to have one line on her track record.
1:24:32Exactly pat mic drop.
1:24:36Exactly. Exactly.
1:24:37Well done mom. Now you know what it's not about who finds it. It's about who gets the cash at the end of the day.
1:24:43Exactly.
1:24:43That's unbelievable.
1:24:45Do you know what though? I'm I'm This is why I'll be forever unhappy. You know what I always think in those situations?
1:24:50Only up double my track size.
1:24:51Exactly.
1:24:52Yeah. Um that's amazing. I love Well, I earned 30K at the time. So, you know, it was uh it was really bad.
1:25:01Actually, at the time, I I I I worked for this guy, Ollie Samur, who was the founder of Rocket Internet. And, you know, he's amazing for so many things, but everyone knows he's a very tough negotiator. Um, and so when I I joined u his company, I said uh that I wanted more than 30k and he refused. And so I actually was able to negotiate that I was going to be able to invest in the companies in order to make enough money to survive from the investments. And
1:25:29actually, you know, those angel checks are um, you know, pretty pretty healthy these days. Uh, precedentio, uh, Albert Revolute. Um yeah, but my mom still has the the best track record. She missed all the bad ones.
1:25:45That is that that is fantastic. What do you believe that about venture capital that most of the Sequoia partnership would disagree with?
1:25:53Oh um you you know what the funny thing is people love to say Sequoia believes X and Y but we actually um have very different opinions. There's no house view on AI. Um you can have you know I can post this article about services being the new software uh while simultaneously you'll have David Khan talking about the $600 billion question uh and simultaneously Pat and Sonia saying this is AGI you know
1:26:22does that make it hard then because I'd be annoyed if I believe in the services element and then another one of my partners puts out a piece saying something very different and opposing I'd worry that the founders that I'm trying to attract with mine. They're reading theirs going, "Well, we're not going to go to them."
1:26:38Yeah. But at the same time, you know, you cannot be bland. You you want people to seek you out for who you are. And it's what people forget about a brand, which is like the best brands make you feel something.
1:26:49Exactly.
1:26:50The worst is for or against Nike or Adidas, Apple or Apple or Windows. You feel something.
1:26:57We're trying to invest in spiky people, so we have to be spiky ourselves.
1:27:01Final one. What are you most excited for about the next 5 years of AI? About what will change, what will happen?
1:27:09Again, I think it's what I told you before. Um, we're still in this phase where AI is maybe 120 IQ with the latest test, but when we get to 500 IQ AIS will, you know, maybe find cures for your mom or my dad's disease, um, we'll find things that are just so transformative to humanity that it will make, you know, all these things we worry about today sound completely insignificant. Um, so I'm actually I'm not from the world of science, but I'm
1:27:38I'm very excited about um companies that are, you know, helping push the frontier of life sciences, biology. Um, and the the great thing is actually in London, we have uh a lot of focus on that. Um, you know, we just saw Demis' post. Um, and it's great to have these big brains focusing on these problems. So, I'm actually really excited about that.
1:28:01I couldn't agree with you more in terms of what it could do for chronic conditions. Dude, I've so enjoyed this. I I so appreciate the friendship that we have. It's like again almost 10 years, which is terrifying and makes me feel very old. But you've been an amazing friend to me and I really appreciate you.
1:28:15You're my brother. Thank you, sir.
Insights
Research extraction
20VC with Harry Stebbings
https://www.youtube.com/channel/UCf0PBRjhf0rF8fWBIxTuoWA
Direct answer: No explicit recommendation of an external book, podcast, article, blog, paper, or video appears in the supplied transcript; the closest candidates are mentions or discussion of the guest’s own work, not calls to read, listen to, or watch something.
- Host — TV/social-post mention, not a recommendation: “Dude, did you see I tweeted the other day um when Pat and um Alfred were on TV”
- Host — unnamed reading, not a recommendation: “one thing I read about him was that he actually became obsessed with like medieval lodgings and how people used to travel and stay in group stays and the historian that he is.” The source/title is not identified, and the passage expresses fascination rather than recommending it.
- Host — generic podcast mention, not an external recommendation: “rounds and company momentum it's also transparent thanks to podcasts like this.”
- Guest’s post/article — discussion of his own Sequoia-related work, not an external recommendation: The host says, “you went viral for your post on like the services economy being the next trillion dollar economy,” and the guest later refers to “I can post this article about services being the new software.”
- Guest — positive mention of Demis’ post, not a recommendation: “you know, we just saw Demis' post. Um, and it's great to have these big brains focusing on these problems.”