Uncapped #37 | Saam Motamedi from Greylock Partners

[00:00] Palo Alto and Workday both started at Greylock at the same year in the same office. 2005 San Mateo office. And Anil, obviously, and Dave Duffield started Workday. Mirzook started Palo Alto. She wrote the first check, was on the board for 18 years. I think it just rolled off recently. And these are $50 to $100 billion companies. I think Palo Alto is like a $140 billion company. Workday is, I don't know, between $50 and $100, right? These are big businesses, right? And by the way, we've started, been a part of starting, Abnormal, Sumo Logic, which one public.

[00:30] several companies. Okay, so Greylock's good. But before we get to Greylock being good, like why is this? [00:35] All right, Tom, I'm happy to be here with you. This will be hard to stay serious, but we'll find our way. You and I talk a lot. [00:40] We text many times a day. I think we're in like, what, 12 different text groups? There was a joke... [00:45] my wife and I had when we were sitting at dinner one time and I was like, I was realizing, I feel like I have so many friends.

It turned out that it was the same configuration of like three people nine times and they're all you. But isn't that, doesn't that make you happy? Yeah. Before we start, by the way, do you have any products you want to plug or things you need to get off your chest? I just got this new standing desk from Design Within Reach. First of all, it's a standing desk that actually looks good. I don't know if the videos can see these, but these aren't what we want. [01:15] It is really good. But the middle is leather.

And so I think the mouse just glides. We do have a mimetic product thing going with our friends where everything that one person buys, everybody ends up with. But I think as a result, we all end up with amazing products. Like this rice cooker you got me? The rice cooker is crazy. [01:30] It's unbelievable. Okay. And it keeps it warm. I'm going to start with a serious topic. I didn't realize this before, but when I did research prepping for you, Greylock started in 1965, 60 years. I can understand like a firm being successful since 2015 and evolving.

I kind of get like even coming from the 90s, although that seems still like a lot to navigate. But in 1965, there wasn't the internet. Like there wasn't like a TI-83. There wasn't like anything. So like what was happening in 1965? It's interesting. [02:00] Our understanding, and like no one keeps an official record of this, is we're the oldest venture firm in the US to have started with multiple limited partners. And we sort of pioneered the GPLP relationship that underpins. Everybody else was like a family office or something. The firms at the time were typically managing capital on behalf of a single family.

Greylock Star is an East Coast firm. It actually moved to the West Coast in the 2000s. And it's gone through generations of partners and generations of investing. And one of the things that's interesting about the firm is like we've navigated completely different sectors. [02:30] Tewine, by the way, it's interesting. We have some of the original partner group is still alive and comes to our limited partner meetings. And they're 90? In their 90s. Yeah. And so I talked to them about like how was Venture in the 60s and the 70s? Well, the first thing is like there's no internet.

Yeah. So how do you find companies? Yeah. [02:45] It turns out they would buy newspapers of different cities, look in the classified sections for job postings because that was an indication that a company was emerging and hiring. And then they'd fly to the city, show up at the office and meet the entrepreneur, you know. [02:59] decisions today move pretty quickly. Term sheets happen in days. They have like a year. Six months. And by the way, what was the investment size they were contemplating? A million dollars. $200,000. Yeah, that's crazy. So you take six months to make a $200,000 investment decision.

How big was the first Greylock fund? Do you know? I don't know. Like small. Small. And what were they investing in? So one of the first major wins for Greylock was a company called Continental Cablevision, which underpinned a lot of cable in the US. It eventually became AT&T and then Comcast. So the underlying kind of cable networks that power a lot of the US, that was one of Greylock's first large successes. [03:29] but we were investing in all sorts of different companies. I mean, Neutrogena, the skincare product, I'm sure you use some of it, was an early Greylock investment.

So that was like an initial era. Then there was an era that was more health and bio-focused. And Greylock was, you know, initial investment companies like Millennium, Vertex, Striker. These are all like publicly traded $100 billion companies today. $100 billion. Yeah. And like, you know, Greylock was early in them. And today we do very little in healthcare and bio. So it's like this firm is kind of [03:59] source era and we did red hat which is the largest outcome in open source software yeah and then the internet and social network area with the era with like facebook linkedin instagram marketplaces with airbnb now you know enterprise software so what i'm curious about is like we were talking about this a little bit yesterday that like venture firms for the most part have like a run and then they mostly don't make it yeah there's a small number yeah that do yeah gray locks obviously like i think like the oldest i can think of basically what is consistent [04:27] from 1965 till now.

Do you think there is a thread that stuck or is it just constant reinvention? And it's like the whole thing's different at this point. There are some core dimensions that have persisted since 65. And then I think critically, the firm has continued to reinvent itself. And I think absent both those things being true, like Greylock wouldn't be Greylock in 2025. What do you think stuck? Like what sticks? I think the number one thing is just the core values and ethos of the firm, right? And this is a firm that was founded on a service mindset.

[04:57] wrote to the partnership that I found like a few years ago and I read it. And he was, I think he wrote it as he was like leaving, you know, sort of graduating. It was sort of a reminder to the partners of what the core ethos of Greylock is. And in it, there's a line I love, which is that the ambition of every Greylock partner should be to win the Oscar for the best supporting actor to the entrepreneur. And in that is the ethos of the firm, which is we're a service oriented firm.

We're a people oriented firm. We don't, we're not the stars of the show. We do very little press. [05:27] person who is in the founder's corner and the first call when something's going wrong. And that core ethos of like, this is a service job has persisted throughout the generations and decades. And that people orientation has also persisted. Many other things have evolved, like the sectors we invest in. We're now a Bay Area based firm. We used to be an East Coast based firm, right? The things we look for in partners, the speed at which we operate, like all of this has been very fluid and we've reinvented ourselves.

But I think that core ethos and guiding North Star has not [05:57] not [05:58] loud and external and brand and press, is that core or is that a evolving thing? It is our core ethos and we will never be the loudest. But I think if you put, if you built like a spectrum, right. And a one was like, you know, there's no website. [06:13] And there's no firm-related marketing ever. And a 10 is the firm's a marketing machine. And it has an investment arm appended onto it. I think you have to question, like in the current environment, can you stay at a one?

Or do you need to go to like a three or four? And I think that's a debate we have internally. But... [06:28] I don't think we would ever change that core ethos of like, there's no Greylock partner or individual that should ever be larger than the companies and founders that were in business. Venture got loud basically when interest in Horowitz came around, right? [06:41] I think that's in that period. That's right. And that basically like prisoner's dilemma forced everybody else to get loud. There is a dynamic where if you if you're you're in a really competitive marketplace and if you're competing against people who are very loud and have presence all over the place, how do you ensure that you continue to see the best opportunities?

Yeah. And you have to have some strategy around that. And like at the end of the day, you've got to play the game on the field. Yeah. You can't not react to what's happening on the field. Can we talk about like just your own experience of like the handoff that, you know, happened with you and is [07:11] You became a partner very young. Now you work really tightly with Ashim and the rest of your partnership. How did you get set up for success to the degree that you did as young as you did?

I think one of the core things that's unique about our talent model is we're a very sort of apprenticeship-focused talent model. And by the way, if you rewind the clock, and I think this is true for most of venture, but it was certainly true of Greylock. Like you go back to the original generations, people joined Greylock in like their mid-20s to mid-30s, and they built their entire careers at the firm. [07:41] gay tenures at Greylock, right? And then I think what happened as venture evolved is like in the early 2000s, there was a shift towards hiring people who were much more senior, came out of really rich operating backgrounds, people who were founders, CEOs, et cetera.

And at one point, actually a lot of the industry fully rotated that way. And now I think there's a mix, right? And if I look at Greylock today, we have a mix. We have people like myself. I joined the firm at 23 years old. And we have people who joined like Ashim or Jerry who had significant operating tenures or [08:11] But independent of when anyone joins the firm, we take the approach to talent that ventures a very different business than whatever business you were doing previously. We're going to hire people who have a beginner's mind, and we're going to develop them in a very, very deep and intricate way.

And so, for example, I joined the firm at 23. I immediately joined a number of boards alongside my partners. I was in – [08:33] every conversation with them, right? Ranging from the board meetings itself, the follow-on conversations with the CEOs, when they were interviewing executives, I was sitting next to, you know, the partner during the interview. And then after the interview, there'd be a discussion of like what that person detected in learning, right? And so you have this like osmosis that happens and this level of immersion that's, I'm not sure happens at many firms and it may be hard for others to appreciate.

And that enables our younger talent to get sort of developed. [09:03] partners have to, by senior, I mean older partners have to have like a generous mindset to the younger partners. Like if you're not willing to say, I know this company is really good, but I'm actually not going to bear hug it. I'm going to let my younger partner take a lot of that relationship on, like it won't work, right? Exactly. This all comes back to even like how we run the firm, right? So for example, like, you know, many firms, when they think about investments and attribution, they think a lot about who sourced the opportunity, right?

And the person who sourced it is the one who does it and the one who gets the credit. And if you're a [09:33] firm as you source amazing opportunities. We don't use that language at Greylock. We use the language, were you causally impactful to a successful investment? [09:42] That could mean you sourced it. It could mean you built a prepared mind, which enabled us to make a quick decision. It could mean you helped us win the opportunity. It could mean after we got into the opportunity, you were on the board and did a bunch of great work.

Everyone strives to be causally impactful on successful investments. And what that does is it creates the right set of incentives and orientation. Literally, like if you were in our partner meetings, right? When a senior or more tenured partner intersects an opportunity, their first reflex is, you [10:06] can I get one of my younger partners into this opportunity as the primary alongside me? Because at the end of the day, like that's, what's going to make that person successful, which is what's going to make the firm successful. Does it require like a big enough gap then?

Like, I feel like one of the things that can be hard is like, if somebody's only X number of years in, it's hard for people to hand things off to somebody who's just like a little click below. Like it's almost easier when you have these partners that are wildly successful already, who have been doing it for a long time. Like, does that, [10:32] Is that part of the way you think about it? Is it easier to hand it off to somebody 20 years younger than five years younger? I don't think so.

I think the orientation for us is, well, first is, should we make the investment? That's the number one question. Independent of any individual dynamics, should Greylock try to earn this founder's trust and right to invest? And then the second question is, what does the founder want? And in everything, that's how we approach sponsorship, if you will, which is if you're the founder, we're like, hey, Jack, what do you want? And here's what we think that different people can offer. [11:02] but then let's put those two aside. Now let's say, okay, those two things check out.

Our orientation is always like at any moment in time, [11:09] who on the team is best suited to take on this project. And it's not about like, is the gap, you know, 10 years or five years? It's like, hey, if this person has more capacity and has the time to go dedicate to this company and work in service of this company and they didn't source the opportunity, great. Like, let's have them go do it. If this person is the one who built a prepared mind on this market area and, you know, happened that this other partner sourced the opportunity, it makes more sense for the person who actually understands the space to go sponsor the investment.

When you think about like a venture firm persisting over [11:38] let's forget six years, let's just take like a decade. When you think about that, what do you think are the actual components that are like durable? Like what are the things that hang on through teams and from fund to fund? Like what persists in a venture firm? So I think a couple of things. One is what we started with, which is what are the core values and ethos of the firm? I think that gets embedded in the DNA and persists.

And part of that is also what's the approach to the job? What does it mean to be a venture capitalist? What does it mean to [12:08] generation of people and that does get passed on. So that's one dimension. The second dimension is the firm's brand, right? And at some level, my mental model on firm's brand is the following, which is you're a new company. Nobody knows who you are. [12:19] You come raise money from Greylock. We stake our credibility on you. You now go to customers and now you're like, hey, I'm Greylock backed.

Now the CIO of this enterprise company is like, great, I'll take a risk because last time I took a risk on a Greylock backed startup, it worked for me. The engineer is like, oh, I'll take a risk because look at all these other great companies this firm has been in. For sure. And eventually your brand becomes bigger than Greylock's and it accrues back to the firm. And now the firm goes and stakes that on the new entrepreneur. Yep. That flywheel, I think, persists. It can erode if you don't keep making terrific investments.

Yeah, but it has some amount of time. [12:49] amount of time. And then the third is the network. And there's a two-sided network. There's the sort of industry network, the companies you're a part of. And I'll come back to that in a moment. And then there's the limited partner relationships. It's so interesting how much compounding there is in the network and what we do. And there's so many stories I could tell you, Jack, but I'll tell you one that I think is interesting. Rewind the clock. Greylock moves to the Bay Area base in the mid 2000s.

We're in San Mateo. It's 2007. There's a star product manager at Google named Josh [13:19] from it. [13:20] We, this predates me, but we reach out to him to try to recruit him onto the investment team at Greylock. He's like, hey, you know, spent a bunch of time. I don't want to be an investor, but I'm really glad I met you guys because I want to start a company. So we're like, great, leave Google, come be in the IR office and start a company. He leaves Google, comes and sits at the Greylock office, initiates a company at Greylock called Teleport.

It's an ad tech company leveraging, you know, ML techniques for different ad tech use cases. He hires a young engineer. [13:44] from Google named Sanjay as one of his founding engineers. And kind of a few years in, business is progressing. He acquihires a small company called Adstack and has two co-founders, a founder named Evan Reiser and a founder named Thanos Vasquez. Okay. A few years goes by, this company gets acquired by Twitter. [13:58] It's like $500 million acquisitions, largest acquisition Twitter did pre-1990s. [14:03] becoming X. The head of engineering at the company is a guy named Wade Chambers, who leaves and comes and becomes an EIR at Greylock, an exec in residence.

He then introduces Greylock to Sanjay, that founding engineer, and Evan, that initial product manager, who were ending their time at Twitter and beginning to think about what's next. We start working with them nights and weekends and conceive a new company that becomes Abnormal AI. We found that company in 2018. That company is now second fastest growing security company of all time, late stage private, [14:33] In the process of that company getting built out of our offices, we meet two new young, very strong product leaders, a woman named Nicole and a guy named Vanit.

Nicole joins the company as one of the first 10 employees. Vanit is a year or so after her. They both are part of that business until hundreds of millions of ARR. And last year, they decide, OK, they want to go start new journeys. Both of them come back to Greylock. [14:54] And two new companies get started. Yeah. You know, Fable Security and Cogent. And it all kind of starts with the reach out to Josh. Exactly. And it's like, we're now 18 years later. [15:03] Right. And by the way, these two new companies are just beginning to flourish.

Yeah. Tomorrow I'm going to an all hands at Cogent. And I guarantee you there are engineers in that audience who will be founders three to four years from now. We're going to be back in our office starting the next company. That's like an amazing flywheel around our franchise. And I do think that there's a lot of durability. And that's just time. [15:22] time and working closely with the companies. Yeah. And earning people's trust. All of these people could have worked with any venture capitalist they wanted, but they see that firsthand experience of who we are, what we're like to work with.

Can this type of flywheel happen without the board relationships? Let's put the board aside. I think the question is, are you intimately involved? A board level relationship. I think you need a very intimate level, like sort of intimate relationship with the company. Like you can't just invest and have this happen. I don't think so. Because it requires knowing people at the company that aren't the [15:52] should work with you guys. [15:54] Like it requires a few things. And also it requires you having built those relationships. Like I first met Nicole because I got introduced to her by Evan and he asked me to go have coffee with her to convince her to – I think she was at Palantir at the time – to leave Palantir and come to Abnormal.

So she remembered that coffee. Yeah. Right? She remembered the bet she took. And so then – right? And then a relationship got built. Like same with me. And that's one of the things we – one of the things about our model is we have a very small set of very concentrated relationships. And as such, we get to know people inside the companies. Yeah. [16:24] Yeah. [16:28] sort of like knock on effect. Okay, I want to come back to the depth thing and put it in contrast to another thing I know you care about a lot, which is like seeing enough of the market.

Yeah, I just want to pull that open. But before we do, the first thing you mentioned was like the values and ethos and that like that's persistent. Can you describe what it is in Greylock's case specifically? Like, I'm a new hire. I just joined. I'm your Padawan. [16:50] What are you trying to teach me on the brand? Any of those? I think there's like five or six dimensions. [16:54] The first, which I don't mean this to be trite, is like we are in the customer service business. And we have two sets of customers, entrepreneurs and LPs.

But if we do write by the entrepreneurs, we do write by the LPs. So really, we're focused on the entrepreneur. I think you have to have that mindset. It's a hard mindset to teach. Do you think not? [17:09] the majority of people in venture do? I think everybody in the abstract can say they have the mindset. I think [17:15] In Christmas 2024, you know, when... [17:17] We're on six hours of Zooms helping a company navigate a last minute financing. Like that really tests you understand what it means to be in the service mindset.

And our view is like if the entrepreneurs were in business without working, we're working. And like if they need our help, we're on Zoom independent of where we are. That's like hard to actually do day in and day out. And you're saying it's a level that is... [17:35] different than the median venture investor. I am consistently disappointed with what I see from the median venture. Put aside the median. I'm consistently disappointed by what I see from venture investors at firms we would consider top tier firms. [17:48] And you think that it's a lack of effort or you think it's a lack of understanding what needs to be done?

It's an incentive problem. [17:55] and the model has evolved. [17:57] Sorry, now we're like overlooking the topic. But look, I think fundamentally for any venture capitalist, you have to have clarity on what's your core economic engine. [18:08] are you in the carry business or are you in the fee business? And if you're in the carry business, the only way you do well is if your entrepreneurs do well, right? If you're in the fee business, actually your success, it's not completely orthogonal, but it's less tightly coupled. What's happened to a lot of, I'd say, firms that historically we would have viewed as our competitors is they become scaled asset managers that are running very large portfolios.

And by the way, it's not a dumb economic strategy. No, it's the best way for them to make money is to deploy money. Correct. And by the way, they can build an index of companies and then they can [18:38] ones and they can double down and concentrate a lot of capital to those companies. But I'm [18:42] What it means is now when you're the partner on the team and you have – [18:47] I'm just making up a number 25 company relationships, and maybe two of them are of consequence in the way that you think about the world, it may actually be irresponsible for you to jump on the phone with the entrepreneur on the company number seven in your portfolio and help them navigate a financing that's hard to pull together when instead you could be focused on the next thing to go deploy $20 million to.

So it's not that you're not working hard. It's just like the incentives have changed. There's also an incentive problem if you don't think [19:17] of like how one thing flows to the next, flows to the next. But those all stayed under the Greylock umbrella more than the person. I mean, you're probably the person's relationship was the thing, you know, like you met with this person to try to convince them to join. You know, you could have probably not been at Greylock and that would still exist. But like, you know, a lot of it endures with the brand.

If you're at one of these firms and you're coming up as like a junior partner or something like that, and you don't think you're going to be there in seven years, your incentives are to just find a winner more than to help an existing company. Totally. And there are... [19:46] Many examples now of people basically [19:49] There's like this principal agent problem where the new young partner is like, I just want to put as many shots on goal as I can. Because if I hit one thing. Yeah, I'll just get it.

And then I'll just switch firms. Totally. I'll switch firms. I'll wipe the slate clean. I'll come in at a more senior level and I'll start from scratch. And I'll have been an investor in X and that's all that matters. And I mean, we all know tons of people are doing this, right? And it's great. And by the way, it's really bad for founders. Like we were talking about this before the show, right? But like, you know, I've had a few. We both have had a bunch of companies raise follow-on rounds recently, right?

And, you know, these companies get multiple term sheets. [20:19] what do you want to optimize for? It's the first time this year where I've been like, guys, the number one thing we need to optimize for is is the person who's joining the board of the company likely to still be at their firm in five years? To me, that's more important than like [20:31] brand, you know, experience, track record, because fundamentally it's a people business. It's so disruptive. And it's so disruptive. And it happens so frequently now. And the person who comes on next doesn't care in the same way because they're never going to get credit for it.

So they're never going to care in the same way. Well, not only that, like you have like, I think one thing that founders don't fully appreciate is like you go into a business with the firm. Do you really understand how decisions at that firm get made? You have your partner, but is your partner a decision maker? Are they trusted by the decision makers? Do they have influence? Are they going to be there? Because as you know, like these journeys are not all up and to the right. [21:01] Many of, by the way, it's really interesting.

We were looking at the data recently. Many of our biggest successes had years where the businesses were in complete turmoil, like flat years, financings that couldn't come together. And so the question is, who's going to step up when that happens? And the problem is already, if you're a board member, you don't really understand the company as well, like super well at all, because all the context is inside the organization. But now if you're the board member and I'm your partner and we're two partners in a firm, I really don't understand what's going on.

And so if you're somebody who's not high trust inside [21:31] Thank you. [21:31] isn't a real decision maker and isn't there. Now the company is in a really jeopardized position because one of their major insiders, [21:38] is not really supporting them in the way they need. And we see this happen time and time again in our companies when we work with other firms. As firms get bigger, which they obviously are, does that naturally lead to more turnover? Like, are those two things like inextricably linked? I think it depends on the strategy of the firm.

Like, I think you could imagine firms that get larger, but [21:57] maintain a very concentrated approach, a small set of relationships. So what about a large partnership? Absolutely. Yeah. And I think empirically, that's what the data would show. Like the turnover in venture today is much more dramatic. And let's just take whatever, top eight, top 10, top 15 firms. The turnover at the partner level is much higher than it's ever been. And I bet you it's correlated with size of partnership. I think that's a big dynamic. It all comes back to this principal agent problem, which is you have people who the only way they can progress inside their firm is showing momentum [22:27] lot of [22:27] short-term oriented shots on goal, a lot of that blows up in their face.

And so then they sort of need to leave as one. By the way, let's say you're a strong performing partner. You don't want to be deluded by all these people. Of course. [22:39] Right. Because like that's all going to dilute your terminal carry. Yeah. So at some point you you pick your head up and like, wait a second, like, why am I in the structure? And so then you leave for that. So there's all these different reasons why why these turnovers, these turnovers happen. And it's bad for the firms. But again, it's really bad for the entrepreneurs.

It's actually interesting, like, you know, between, let's say, like. [22:57] amongst firms that are in the $5 to $10 billion range, the dispersion in number of partners is crazy. It's like 10x dispersion or something like that. Yes. Like some have 5 and some have 50. Yeah. Yeah. [23:09] Just on that metric alone, do you believe more in one over the other? Maybe there's two parts to that. One is like, what do you personally want? And like, what do you think leads to the best work environment? I think our view is we think above some group size, it gets really hard to make cohesive decisions, right?

And like at Greylock, again, because one thing that I think is interesting about our talent model is if we hire you at Greylock at any role, we're only hiring you if we believe you have the potential to be a long-term partner and could literally spend the next 20, 30, 40 years at Greylock. [23:39] or you're a 45-year-old CEO. How do we actually implement that? Well, there's no hierarchy inside the firm. Every single conversation is with the entire group. There's no concept of like a subgroup, an investment committee. It's like all the partners sit in a room and we make decisions together.

We talk about strategy together. We talk about the portfolio together. And so we do believe there's some size limit of which like that conversation begins to degrade. Now, whether that's eight, 10, 12, 13, like we could debate that, but it's sort of in that range, right? And so I think it's hard to consistently [24:09] when groups get beyond that in size. You also have this dynamic where it's easy to hide. Like you don't want to allow low performers. When it's big. When it's big. Yeah. You know, because like when it's small, like at the extreme, if it's just you and I.

Yeah. [24:21] Like you're going to know if I'm carrying my weight or not. You probably wouldn't, but that's fine. [24:28] And so I think what's happened at a lot of these larger firms, the way they solve this problem is they create these subgroups and subcommittees and sub funds. And so like, you know, there's an eight person team that's focused on this and a person team that's focused on that. But it still leads to all sort of degradation and conflicts inside the organization. Okay. I want to talk about breadth and depth in venture.

Yeah. [24:48] Everything you've talked about so far is sort of, you know, you advocating for depth in a sense. And you're talking about these examples where the close relationship with the company leads to more of the small team, which, you know, sort of implies a small portfolio and all these other things. But I also know from knowing you well that you care a lot about seeing a lot of the market and about not sort of missing out on kind of like what's happening and having a pulse. And I'm just curious how you think about those two because they seem at odds.

[25:18] at Greylock, what do we care about? We care about being [25:22] meaningful partners to the most meaningful companies in every vintage, right? And we don't need to be in every company, right? And a given fund will do something like 20 to 30 core relationships. And the math would suggest that, you know, [25:34] if [25:36] three to seven of those go on to become really important companies, will have very successful funds. So by definition, we don't need to be in every company. [25:44] That said, we have to be extremely paranoid about are we seeing the best entrepreneurs and seeing the best opportunities.

And so that's why... [25:53] Despite the, let's say, focus and depth of relationship, we care a lot about our capital competing against the opportunity set in the marketplace. And so, for example, one of the things we're talking about before is like we every single week, like there's six core sectors we invest in at Greylock. For all those sectors, we have a list of the competitors we most admire, firms and individuals. And every week we track all the financings that have gone and done by those groups. [26:23] Not like did we meet it with eight hours to go before a decision got made.

But we were there 10 days before a decision got made. In position. In position, real shot to win the opportunity. And if that number is like not 70% to 75%, that's a big problem, right? Because we respect our competitors in the business. If we're fundamentally making investments in a set without seeing the things that they're seeing. [26:44] Thank you. [26:45] It's really arrogant to assume that we are seeing the best opportunities. And so you need to see that cross that. But then you have to remind yourself, and it's really hard, but you have to remind yourself that so few companies matter.

So few founders are truly iconic. So few markets can support and have the characteristics to support these outliers. And so most things that top tier venture capital fund will not go to successful outcomes. So I get sort of like logically. Yeah. [27:13] But like emotionally, it seems like a very different headspace. How do you avoid the FOMO chasing of deals where, you know, you heard benchmarks looking at something. So we should be looking at something because benchmark smart. But like we really should continue working quietly on this, you know. [27:30] new company we're initiating with this person.

We've got a relationship for six years and going and spinning our wheels this week on something just because we heard some top tiers chasing. How do you not get lost? By having real clarity in what you're looking for. [27:43] And then the ability to process and make decisions very quickly. So, you know, it's interesting, like over my tenure at Greylock, I've been at the firm for nine years. There's this pendulum that swings on like everything, right? Because we're constantly reinventing ourselves. So there's periods when we wrote these really long investment memos, these like 15 page memos, all this like work, right?

And then like there's periods where we have like no investment memo and like it's two paragraphs and like, you know, you know, like. [28:07] The midwit take would be like, oh, well, investment memos are more rigorous. Like if you write an investment memo, you're making a better investment decision. But it's like not really because like we're primarily doing first check investing. Yeah, you're big on people. We only care about two things. One is who's the person. Yeah. And the second is what's the general area in which they're building it. [28:23] And like, if those two things are bright green, we're ready to invest.

And we've made decisions in hours. And those two things are not bright green. Like, yeah, we can go call a bunch of customers and like call the design partners and like, you know, learn some stuff about, you know, what they're building. But like, we're not going to get to a yes on the decision. So I think a big thing for us over the last few years has been continually refining what is it that we're looking for. And then if we if we intersect an entrepreneur who's in market and, you know, going to get seven or eight term sheets, we want to process that opportunity.

But we want to spend a few hours with the entrepreneur. [28:53] know him or her. We want to understand the area they're building in. If those things are really bright green, then we'll run really hard to earn their trust and right to win. And if not, we don't have the FOMO of passing and knowing that one of our top tier competitors is going to do the deal. How do you sort of manage people to this? I think performance management and venture is just like probably way under discussed, under thought about.

It's thought about much more in operating companies, I think. Some of it's because it's really hard. It's like on some level, the only [29:23] There's like all this complicating stuff. It's like, how do you understand if somebody's doing a good job? It's really hard. [29:28] We, in the last several years, have adopted what we call like an inputs-based approach to performance management. So we got together as a full partnership. It was right after COVID. So I want to say in like 2021. And we sat together in Napa for two days and we said, let's build a set of inputs that we would all agree.

We hired a new partner, Sally, tomorrow, and she excelled on all these inputs. She's highly likely to have strong outputs over time. Will it be in five years, three years, 10 years? Hard to predict. [29:58] Because at the end of the day, what's a partnership? You and I are pulling together and saying, hey, we want to share in each other's investment interests, right? And so if we need to agree on what it means to be a good investor, and then if we agree on that and someone's performing on those things, we can take a long-term view on people.

And hopefully people get lucky early on. But if they don't and they keep executing the inputs, we'll take the bet that luck will come their way and the outputs will follow. What are the inputs? So we have a document that has 18 inputs, and it's across the dimensions of the job. So it's across C. [30:28] a lot. [30:29] 18 is a lot, but we want these things to be bucketed. Yeah, it's bucketed. So there's four components of the job, which is see, decide when build. Yeah. And then there's internal partnership.

Right. And so, for example, like on C, one of the dimensions is did you see 75 percent of the seed and series A opportunities that were done by your competitors in the sector that you're responsible for? This is getting maybe a little too like fine tooth comb, but like at the individual [30:59] percentage or that they were doing the inputs that led this that would lead the scene i think a bit of like i think what you're asking is like okay well someone's going and like pounding the pavement and hosting great events yeah and outbounding to entrepreneurs is that what matters or is it the 75 number that matters yeah [31:13] We measure the number, but then there's a qualitative sense of like, are you doing the right set of activities?

And if it's going wrong, you kind of dig into the inputs to that output. Correct. Yeah, yeah, yeah. Another one that's like really basic is like we have a responsiveness SLA because if you're in the service job, you've got to be incredibly responsive. And so we literally measure each other on how long does it take to us to respond, both the entrepreneurs we're in business with and internally. How can you measure that? You're not like going through someone's phone. We're not going through someone's phone, but we collect feedback from the CEOs that people partner with.

[31:43] internally have a sense of this. And so what we do is we score each other one to five on these dimensions. So it's not like, you know, I know, hey, you're six hours. There's like a 360 going on. Yeah, exactly. Yeah. There's another one around domain leadership, right? Which is, are you, we do a lot of, internally at Greylock, we do these things called sector reviews. Two to four times a year, we present internally on like, okay, if I'm covering AI applications, what do I think is going to happen the next 12 months?

And then we look. Oh, wow. And we're like, hey, Jack. Your idea was terrible. Yeah. Did you actually understand what's happening in your [32:13] was reinvented and you were asleep. That's not good. That's not me specifically. No, not you specifically, Jeff, but like in the abstract. That's interesting. So you basically like make people write down what they think is going to happen. What we have people do is... [32:25] build a point of view on what's going to happen in their sector, present that point of view to the partnership. We debate that.

And it drives a lot of good things. One is it forces the person to be proactive. Two is it drives a prepared mind in the entire partnership. Because now if I know that, like, for example, we're very interested in service management and IT service desk and disrupting it with AI. And so the next time we meet a company that's doing that, there's a prepared mind. It's not just the two or three partners who are pursuing that, but all 11 of us know [32:55] this is a red hot area. You've thought about the space.

You've thought about the wedge. You've thought about like, what are the weaknesses and the competitors? Yeah. And so that's what enables you to decision quickly, but still have rigor. And then there's the accountability piece, which is, okay, were you focused on the right themes in your sector? And, um, and if, if you weren't, and that consistently is the case, then how can you be a leading investor in your domain? So like, that's another input that we would measure. Another one we care a lot about is, did you do things that were impactful to the firm independent of your own personal investments?

So for example, you helped us recruit someone amazing. You, you know, [33:24] Corinne, who you obviously know well as well, helped build the Greylock Edge program, which is sort of a formalization of all the company initiation. It's just change agents. Those are amazing initiatives. Are those directly responsible for an investment Corinne's worked on? Well, now they are, but those were in the service of the firm, not in the service of Corinne as an individual. So we look at all these dimensions. And then another thing that's interesting and I think could be controversial is like

[33:49] If someone has good outputs, but no inputs, that's also not a fit for our system. Because it's luck. [33:54] Because we can't be convicted that they're going to reproduce the outputs. Right. You have no reason to think it'll happen again. Yeah. Okay, I want to ask you a little bit about incubations, which I know you call initiations. But, like, Greylock is extremely good at... [34:07] starting companies. We were talking before about this, but like you've had like several that are really big, you know, like Palo Alto Networks, Workday, like people maybe don't realize that those were like started.

Like I don't think they're starting in your offices or with your partners, but like they were like Greylock. [34:22] incubations more or less. Can you talk about first, like, why is it so hard? Because like so many VCs do try to do them. And there's not that many good examples of them working, even though there's lots of attempts. So why are they hard? Yeah, by the way, as you were speaking, I was reminded that Palo Alto and Workday both started at Greylock at the same year in the same office. [34:42] 2005 san mateo office and anil obviously and dave duffield started workday near zook started uh palo alto she you know wrote the first jack has been on was on the board for 18 years yeah i think it just rolled off recently and these are 50 to 100 billion dollar companies i think palo is like 140 billion dollar company workdays i don't know between 50 and 100 right these are big businesses right and by the way we've started we've been part of starting other abnormal sumo logic which one public yeah uh several companies you've made the joke of like we don't use the word incubate [35:12] word, right?

In... [35:14] The reason is like it comes back to who is the core of the company? Is it the founder or is it the VC firm? [35:21] It's the VC firm, obviously. [35:24] Okay. [35:27] Go ahead. And like our view is – [35:31] to state the obvious, it's the founder. And like, and like, really the way I think about it is there's a spectrum. Okay. And on one bookend, you have like a company that's in momentum, you know, 5 million of ARR raising a series A or series B. And on the other bookend, you have like a person with no idea.

Right. And what we want to do is we want to intersect people as close to this left bookend as possible. Now, in some cases, they literally have no idea. And we co-developed the idea together. There are cases where they have an idea, but there's no team. There are cases where they have a team, but no product. And I was checking this over the weekend in our current fund, [36:01] Thank you. [36:01] billion-dollar vehicle. We're about 80, 85% allocated. [36:05] 93% of our dollars are in companies where we back them at that stage.

Like we were the first institutional capital in the company. And then our approach does not necessarily vary a lot based on whether or not we develop the idea or we just partner with someone post idea and like really help support them. Right. So like, I think that's the kind of area we're focused on. And then I would say the founder is the core. And then we're very focused on taking out the market risk before the company starts. Yeah. [36:30] And so like we think about things in and actually this is a model.

Ashim, I think, has perfected in his investing career. And I and others have learned from which is when you think about a company, you could think of two broad vectors of risk. There's market risk and there's execution risk. And what we want to do is pick opportunities where there's. [36:47] zero market risk and actually a lot of execution risk because in the execution risk you build your remote products hard to build there's real technical ip it's hard to take to market so like if you believe that the founders you back and the people the teams that are built around them are going to be the best executing it's actually good for there to be execution all you need to believe is that they can do this hard thing correct but you don't have to wonder if it's done whether it'll be valuable correct and and not just like will it be valuable but like then there's a lot of nuance

[37:17] that customer base be serviced by go-to-market motion, that sort of unit economic attractive, how secular is the area? There's a lot that goes into no market risk. But if you look at these companies, Greylock's been a part of either helping initiate or from very, very early. They all have a shared DNA, which is they have unbelievably customer-centric founders, [37:39] and are pleased where there's very little market risk, right? Workday, like re-platforming HRIS for the cloud. Palo Alto Networks was like, by the way, when Palo Alto Networks started, there were like 10 or 11 firewall companies.

It started as a small add-on to the firewall, then displaced the firewall. Today, firewall is a small part of their business. We started abnormal AI-based email security company. [37:59] There's $2 billion of email security, TAM, and two public incumbents. There's no question that if we delivered a new innovative approach that could solve kind of these more advanced social engineering attacks, there would be a business. The question was, could you build like an AI machine that could actually detect these attacks? Could you actually scale? Those are the shapes of opportunities we look for.

And I think many other firms, when they try to operate at that stage, they make two fatal flaws. One is... [38:20] They view themselves as the core of the company. And by the way, I don't mean that in a trite sense, but like one example of that is they do investments that are not economic. They're like, I'm going to take, you know, half the company. I'm going to take 40% of the company for $10 million. It's like- It's too much. It destroys- You're not going to get the best founders. Yeah.

Yeah. [38:36] We view it as we want to market fair. We just want market terms. We might write a bit more capital. And so maybe we'll get a little bit more ownership. But if we're working together, you should view the investment proposal as a fair proposal. And why do we care about that? Because the most important thing is the founder and the founder equality. And so if you have any negative selection skew in the founder, you're in trouble. And so I think that's one huge mistake. And almost all the firms that try to do this kind of fail on that.

[39:06] optimistic. And so you can't engineer your way to success the way that you can when you pick these markets that have quote unquote no market risk. Is it a learnable thing by most firms or do you think actually most people are wasting their time? Is there something that is extremely nuanced about a small number of firms who are able to do this? Maybe it's you, Sutter, Founders Fund, but then you see so many other examples where people try, spin wheels, I think spend a huge amount of calories on it.

I think there's very few people who can consistently do this. By the [39:34] the ones you mentioned. There's also individuals. Like I think Zach Frankel's some version of this and he's like incredible at it. Right. So, but you know, we could build the list. It's like, I don't know, between five and seven entities. Right. I think it is a very, very hard to do. It requires the ability to detect people and have the right people filter. It requires the right market filter, which I think is very, very hard. Then it requires, okay, let's say you have those things, right?

Like, [39:58] We think of ourselves as company builders, not as investors, right? And so in these companies, we're interviewing and helping closing like the first 20 engineers, the first core executive team, you know, at a normal, I don't remember the exact statistic, but I think we sourced like 30 to 40% of their initial pipeline, you know, 10 million of revenue. So like we are going to go in there and be costly impactful to come back to that phrase. Yeah. Right. And then together, we're going to get the company to a place where now it kind of can [40:24] be off to the races.

That's a type of work that I think most venture capitalists don't know how to do, nor do they want to do. The thing you were saying before was that one of the reasons it's important for you to look at on-market opportunities is because you need to compare it to your initiation set. And so I guess some of the idea there is when you're in [40:40] working with these companies, you've got such a close relationship that you could concentrate like crazy in them, but you need to still make sure that you don't like get just so attached to the company.

Is that like the idea? Yes. And also I think, again, it would be very [40:55] that we are going to intersect with, [40:57] all the best founders of this generation before they've started companies and get the chance to work with them from the foundational stage. And so if you believe that's not true, it's definitely, you know, definitely won't be true. Then how do you know if the person that you're working with or the company you're backing on a relative basis is likely to be one of the best in this vintage?

The only way you know is if you've met. [41:15] other companies and other opportunities. And we don't start with a, we want to, [41:20] initiate a company mindset. We start with a, we want to back the best founders in the best markets mindset. And if we do zero initiations, amazing because they're, they take a lot of time and a lot of work. Yeah. [41:30] But what ends up inevitably happening is we meet some founders who are, you know, often running with great companies. We back them and we help them. We take the same mindset that we take very early on.

And we end up meeting some situations like, wow, this person and this idea is better than anything we've seen this year. And, yeah, it's going to it's really raw, but we're going to really dig in and go do the work. And to your point, because we build that intimacy, we can put a lot of capital behind them. Like we're working on investment right now where we're writing a thirty six million dollar pre-seed check. Right. I mean, we've in this fund. [42:00] alone were in multiple 20 to 30 million dollar checks behind an individual with no code and no idea like a general sense of like we're gonna go explore this area yeah and prepared mind you know the area well i'm sure exactly they know the area well and often they might come from the domain and you know the person previously probably

[42:15] Either we know them previously or we've spent real time to get to know them. And we like intimately understand them at their core. Which is really hard to do in like a market process. Like in a like I'm fundraising, I have two weeks to make a decision. Like you just can't do it really. No. And actually, I was reflecting on my personal investments and, you know, we do portfolio reviews at Greylock and we happen to be in the middle of one now. And so, you know, looking at the funds investments, disproportionately our best investment, not all.

There are good. There are actually a couple of very key exceptions. But. [42:43] For our seed stage or pre-seed stage investments, I'm not talking about things in momentum. Our best investments are when we've gotten to know the person over very long periods of time. Makes sense. And either we've backed them before, like we've had teams where they're on their third company that's been a great lot backed. [42:57] they've worked at our companies before, or they're just people in the industry who there was mutual respect and liking and understanding. And like, I do think that's one thing that delineates Greylock relative to other firms.

We care a lot about the people we go into business with. And these people also become some of our closest friends. [43:12] Because the relationships are so intimate that it's just hard to overstate how deep these connections become. And as such... [43:20] kind of really understanding the person at the core is very, very important. As you look around 2026 and, you know, next year, and you think about where there's alpha in venture right now, you know, we've got obviously all the dynamics with AI behind us. We've got, you know, firms getting really large, got some that have chosen to stay small.

You've got new entrants. You've got some of the big platforms that seem as dominant as ever. What do you think are the strategies that you bet behind? Let's say you're an LP. What strategies do you believe in right now? [43:49] Or setups, do you believe in? Yeah, so I'll give you a couple frames that I think about. One is... [43:53] Are you a market maker or are you a market taker? [43:56] Right. And by the way, market maker doesn't mean you create [43:59] something, but it just means, did you create some proprietary opportunity or are you part of an auction process?

And I'd say if you're a market maker, there's structurally more alpha than if you're a market taker. And like we talk about this in our friend group, you know, we have this like first money and last money. The barbell. The barbell. Let's talk about the barbell. But I think there's truth to that, which is like, where are there real market makers in the current era of venture? One is the people who are investing at the start. And it doesn't mean you initiate, but you invest at the start. There's nothing there.

You stake a lot of capital behind the [44:29] something at that front of the barbell where you take something that's really raw and you make it unraw. And the first person to sort of turn those ingredients into something that looks like a meal, there's a huge jump that happens. Yeah. Actually, a friend of mine gave me this analogy to venture, like that part of entry connected to like movie production, right? And it's like, okay, you know, there's the founder, there's the talent, there's the customer, right? There's the capital. And there's like that, that whole thing has got to sink.

And when they're all disconnected, the whole price on that situation is way lower. [44:59] you're doing contrarian investing in the sense that that's not something that goes to 10 firms and gets eight offers. It's also very easy to write that situation off and just be like, oh, there's nothing there. I'd rather wait for some data. It's like, okay, now you're going to pay seven times more. And by the way, this is not a sign of it, but I mentioned we do these competitive reviews, right? So we were doing one two weeks ago and we saw all these great investments that we didn't make, but we saw them and we're like, and our number one takeaway was we met things when they were too raw.

And by the way, often we invest when it's very raw, [45:29] And still, I'd say Greylocked is really oriented towards the raw stuff. And still, that's where we make a lot of mistakes. Because it's like, you know, the person met us, we just hated the area they were in. And then we never followed up. And six weeks later, of course, they're a smart individual. They're like, yeah, that area sucks. And they moved to a great area. They moved to a great area. And now it's great. And now, you know, it comes back to us for Series A, you know.

[45:46] Five times the price. Nine times the price. Oh, ten times the price. Yeah. So I think that's one place where you can kind of be a market maker. I actually think the other place is like the last money in and these really late stage private rounds where, you know, to price around, you have to write a billion dollars. The Thrive rounds. Thrive is doing a great job here. Founders Fund, Green Oaks, right? Again, they're market makers. Like they construct the round. They bring it together. They set the price. And there's all fun now.

Well, simply by virtue of there not being many competitors who can create those rounds. [46:16] at the big end and then one's driven by like squinting at the early end i'd say both also have an element of capability like on on on the kind of late stage stuff it's like do you have the capability to look at something at a 50 billion dollar price and imagine it being a 500 billion dollar company that's not easy by the way also i think a lot of people think that they're just like yoloing these checks and they're doing like deep work exactly yeah no they're incredibly high conviction high rigor investors yeah and then on the other end it's just like do you have the capability to take this person who's a 24 year old engineer and partner with him or her and help

[46:46] Or the patients. So I think that's one sort of source of office, like be at one of those two bookends. The other... [46:52] I think, kind of consensus approach right now, which... [46:56] I think is bad for founders and I think will net lead to worse returns than the prior, but still could lead to decent results is the indexing model. Where you just do a company. I'm going to do 80 investments. Yeah. [47:07] Or I'm going to do 100 investments. Catch something. I'm going to catch seven or eight. I'm going to track these things ruthlessly.

I'm going to concentrate a lot of capital on them. Right off the others. The founder calls me, I'll pick up. Otherwise, I don't have anything to do with the business. That probably, I don't think it's going to generate five, eight, 10x funds. Could that generate two, three, 4x funds? Possibly. So basically, you just believe early, late. [47:27] For the most part. For the most part. But then like, you know, and we were talking about this before the show. It's funny, right? Because like there's all this discussion and like you've done an amazing job of bringing a lot of these viewpoints to life on the show.

Say a little bit more. You know, at some level it's just like... [47:38] you get judged by what you invest in. Yeah. And like, you know, [47:41] If you're in a fund and you've got a few great companies, none of this stuff even matters. And it's like, there's so much discussion. Oh, this firm lost this partner, this transition, whatever. It's just like, what was in the fund? Yeah. Just like, okay, great. But they were like four great companies. They worked really hard on those companies. And then amazing fund. How close do you think the connection is between like performance of a fund and like perception of that firm at that moment in time?

Well, I think it depends on like what circle of perception, right? I think in the kind of ex-zeitgeist. Yeah, I'll say that one. [48:11] like nearly nothing it seems like i think there are like you know the classic kind of like big brands that like generally are going to do well but i think it's very loosely coupled and by the way another i mean i'm stating a very obvious fact but it's also like okay cool you're in all these logos but how much you own and at what price because like not all these companies are going to be 100 billion dollar companies yeah so yeah like you got into this great ai app but you got in at a billion dollars and you own six percent of the company and 10 years later it's worth four billion and you know you're in your fund is two billion and like you know you've been [48:41] million on a $2 billion fund.

It's not great. [48:44] It's not great. [48:45] Do you think in general that venture firms [48:48] Take well-branded venture firms. Do you think the tendency is to get weaker or stronger over time? It takes a long time to kill a venture brand. [48:56] Because you have this brand that's been accrued through the relationships that you've built. And there's some persistence, like inherent persistence in that. And tomorrow when you meet a new entrepreneur versus a brand new franchise, you have more things to rest on. Much easier. But I still think the default trend line is one of the K.

Why? Because – [49:13] Almost like there's this weird empirical thing that happens when people become successful, they are not willing to reinvent themselves. And reinvention can mean like different things, right? It doesn't mean like we necessarily radically change our strategy. I don't think Greylock has radically changed its investment strategy in the last 20 years. But we have made a lot of other changes. And I'll give you like one – [49:32] One example is like our team today is a lot younger. It has skewed young. Versus 10 years ago or something.

Versus 10, 15 years ago. One big reason why is like the world's changing very quickly. A lot of companies are being started by younger people. I think that in this AI era, like first principle thinking approach to company building is more in some ways more important than experience. So you have to have a team that can like meet the entrepreneurs where they are and also support them where they are. But we're not afraid to go make that change to team composition or we're not afraid to say, hey, we have a new partner.

And yeah, they haven't had like some huge win yet. But the inputs are amazing. [50:02] and so we're going to empower this person to do more and more. We almost preempt our own talent, if you will. I think that enables us to stay very relevant and not decay, but I think at many firms, that's not what happens. Totally. It's also like you have to keep a [50:19] almost like a like a deranged paranoia despite the fact that you're objectively winning all the time you know like think about if you're sequoia let's just take it as an example they're you know [50:29] in most cases, able to see and win everything.

But they still somehow have this maniacal paranoia that we need, you know, we're only as good as the next thing. I think it's really rare. And it's absolutely necessary because this business is defined by a small set of decisions every vintage. I would take the bet that if you took the top firms, [50:48] Every vintage they see... [50:49] And like truly see in a position to win enough things to have a 10x fund. Yeah. Yeah. [50:54] But many of them don't. And so something between the top of the funnel and like the bottom breaks.

And so if you're not like super paranoid that the default is that's going to happen to you. And so what are the new lenses you need to take on picking or on appealing to entrepreneurs or on like supporting? [51:11] And that's going to change every era. [51:13] you're more likely to make the wrong decisions. But it's also a crazy thing where like, if you're, let's say, let's say you're seeing 90% of the market, but like, you're still, you still need to get upset about the 10% you didn't see versus being like, oh, this is amazing.

We saw 90%. We could have a 30X fund is contained in here. Yeah. Well, that's great. If you saw, like in this last period, if you saw everything and you didn't see the early rounds of opening eye and Anthropic, you missed a lot. You missed a lot of potentially venture gains in this period. And you could have seen all these other great things. And by the way, a lot of these other