Last week, on a StrictlyVC event in San Francisco, we sat down with Mamoon Hamid and Ilya Fushman, two years of VC whose paths first crossed as children in Frankfurt, Germany and were brought to restart the famed venture firm Kleiner Perkins about six years ago.
They seem to have fulfilled their mission of promoting the brand. Among Kleiner’s bets in recent years: Rippling, the workforce management company founded by serial entrepreneur Parker Conrad, which was 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 tools company that came along this close to be acquired by Adobe for $20 billion – and that Fushman and Hamid argue is now charting a course as an independent company.
Perhaps unsurprisingly, the Kleiner team also leans heavily into AI investments, and that’s what we spent the most time talking about. You can find video of this conversation at the bottom of the page. In the meantime, here are excerpts from our conversation, lightly edited for length and clarity.
The last time we sat down together in person was four years ago, at a previous StrictlyVC event. At the time, SoftBank dominated the conversation. It has since declined. what do you think his impact was on the industry?
IF: We’re coming out of three to four years with incredible amounts of capital coming into venture capital, and it’s not just SoftBank – it’s a lot of people who have had growth funds, crossover funds. And this flood of capital has done a few things. First, it created many large companies. Two, some of these companies [became] they are overfunded and some of them now have to rationalize what is happening to them. Our opposite approach when we were here four years ago was to go back to basics and focus on the early stage [startups] mainly, where we said, “Hey, we’re going to have a venture fund and a very small team.” We’ve always felt that this is much more of a boutique than some of these bigger players.
Your company seems bigger than the last time we sat down. Now you have investors and experts and advisers from the old guard [at KP]including Bing Gordon and John Doerr.
MH: I think we may actually be smaller than we last encountered. I think our total number of employees in the company is in the 50s.
Does “everything AI” change anything? Can you do more with less, or do you really need more people chasing all those AI researchers who keep 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 to be able to experience another boom like that twice in your life seems like a dream. So I think there’s no better time to be alive than today and invest in startups because in your view, there’s going to be a step change in how we all live and experience life and how we work because the incremental change will come in the form of productivity that we will all gain through AI, and I think we’re already seeing that in the kinds of businesses we support – whether it’s legal or healthcare or software developers. AI is really putting a strain on the highest paid types of workers out there. They can do more in less time.
With all these AI engineers popping up, are VCs actively approaching these big companies with offers to bet on them? Have you done this?
Image Credits: TechCrunch
I think that’s certainly the case, but the pull factor of AI—the wow factor—has really pulled people out of those very companies. As these tools become more useful and data becomes more accessible, these opportunities become much more apparent and much more accessible. The big thing for us with that first wave of people trying to go out and start these companies was trying to figure out: are the people who actually know how to do this? We rely on our founders to [help with these questions]; we’re looking for that pedigree, the people who know how these things work.
If you think about the last 10 years in the venture, there are these waves where technical talent becomes the scarcest resource, and we’re seeing that now.
How are your portfolio companies addressing this recruitment challenge? Meta and Google and OpenAI are offering multi-million dollar packages to keep this talent.
IF: We have companies that like them Harvey are transforming the legal profession. We have companies like Atmosphere that are transforming healthcare. We have companies like I mean that make automated stroke detection and medical diagnoses. The mission certainly resonates with the people who join these companies. this is a huge ingredient. Second, while platform companies build a lot of amazing infrastructure, but when you get into real-world use cases and get into these niches that turn out to be very large over time, you realize that you have to modify the models and potentially build your own models and potentially your own infrastructure, and that becomes a really interesting technical challenge, which is also incredibly attractive.
From the outside, it’s hard to understand how these startups are building moats — or how strong these moats can be given how quickly everything is changing.
AN: It depends on the company. Moats and overall market size are the most difficult things to find as an investor. it’s 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 far more than anyone could have predicted. So we look for some intangibles, one of which is incredible customer engagement. Like, when the product becomes a part of your daily use, it’s really hard to tear it off.
The most obvious part of the moat is the part of the market you are in. Many of the companies we support, especially in AI, occupy a large problem space that a company can and should have. Business assistant, for example, is a big space, and the people who understand it first will be the people who move the fastest. If you look at AI, unless you’ve built an incredible product that flies off the shelves, you’re not giving away for free like you did with mobile. AI requires distribution and requires data to improve the product experience, so the first movers to define a product category can, in our view, run much faster than anyone else.
How many AI-related presentations do you see on a weekly or monthly basis?
MH: From a percentage point of view, I would say over 80%. To be fair, if you were building a company in 1996 and didn’t mention the Internet, you wouldn’t be out of your mind, right? In the same vein, not mentioning AI or leveraging it would be a missed opportunity.
And how active are you in this field, if we can call it that?
MH: If it looked like last year from Q1 to Q3, it was the slowest year we’ve had in 13, 14, 15 years. December, meanwhile, was a very good month.
It’s about when you led to an agreement in Together AI, a lot hum agreement. Why are people so fascinated with this company?
IF: Runs a platform and set of services for people who want to run their own models. It’s a little bit of an orthogonal bet to classify oligopoly [centered on OpenAI, Microsoft and Google] that provide infrastructure, but it’s a company with incredible customers, really strong growth and an amazing name team, and the numbers speak for themselves. Again, we’re building vertical experiences — in healthcare, legal, software, engineering, science — and there will be fine-tuning and [proprietary] modeling that might be required for some of these use cases, and this opportunity is really very exciting because of that.
I understand you’ve also invested in a wearable startup that would make VCs drool. Tell us more!
MH: I’m not sure I can tell you more today. I don’t think they would like that. Next time.
Based on what you see, do you think a wearable AI will win? Just like we carry a phone, will we use a mobile device?
I think we are all wondering what is the computing platform beyond the mobile phone. Some wear Oura rings, others Fitbits. I’m wearing a Whoop. These are beautiful, basic wearables. They’re not that smart.
What’s capturing our imaginations is what’s the next laptop we’ll adopt that doesn’t look like a mobile phone. There’s Rabbit, there’s Humane AI pin, and soon you’ll see Vision Pro vision. Exciting things are happening. But as you know, it is very difficult to convince consumers to adopt a new form factor and a new way of doing things. It needs incredible design and a low-cost product and beautiful interfaces, and I think we’re excited to see all of those things.
Figma, whose Series B round you led in 2018, just halved its valuation, from the $20 billion Adobe planned to pay, to $10 billion. Where does it go from here?
MH: Figma is one of those once-in-a-decade companies, both from the team, the product they built, the love from their community, the revenue profile, the profitability. It’s a venture capitalist’s dream. So it’s not sad that she’s charting her own independent path. It was very bittersweet to agree to sell the company for everyone around the table in September 2022. So I think we’re very bullish on the future and the company continues to perform incredibly well.
