Uncapped #37 | Saam Motamedi from Greylock Partners

Summary

Podcast Summary: Uncapped #37 | Sam (Saam) Motamedi (Greylock Partners)

Podcast: Uncapped with Jack Altman
Host: Jack Altman (Alt Capital)
Guest: Saam Motamedi (Greylock Partners)
Date: December 16, 2025

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Episode Overview

This episode features a deep-dive conversation between Jack Altman and Saam Motamedi from Greylock Partners, exploring the enduring DNA of one of Silicon Valley’s legacy VC firms. The pair dissect Greylock’s history, talent model, evolving ethos, investment approach, and broader lessons for building and sustaining institutional greatness in venture capital. The discussion is rich with insider stories, practical frameworks, and memorable anecdotes about venture, company-building, and personal collaboration in tech.

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Key Discussion Points & Insights

The Enduring DNA of Greylock (01:32–06:37)

• History and Origins: Greylock started in 1965, pioneering the venture partnership model. Originally an East Coast firm, it migrated to the Bay Area in the 2000s and has outlasted most peers by persistently adapting and reinventing itself.
• Navigating Sectors: Early investments ranged from Continental Cablevision (infrastructure, later part of AT&T/Comcast) to Neutrogena, followed by a major focus on biotech (Millennium, Vertex, Stryker), then open source (Red Hat), social and enterprise (Facebook, LinkedIn, Airbnb, Palo Alto Networks).
• Ethos: The foundational "service mindset" remains. Sam shares:

  “The ambition of every Greylock partner should be to win the Oscar for best supporting actor to the entrepreneur.” (05:02)

Reinvention and Consistency (04:35–06:37)

• Balancing Tradition & Change: Core values (people, service, partnership) persist, but the firm continually reinvents sectors, processes, and speed.
• Low-Profile Ethic: Greylock maintains a quiet, “not loud” posture in press/branding even as the industry has shifted to louder marketing (cf. Andreessen Horowitz).
• Modern Dilemma: Navigating competitive visibility versus foundational ethos—a tension the partnership regularly debates.

Talent, Apprenticeship & the Partnership Model (07:05–13:16)

• Apprenticeship Model: Greylock emphasizes “deep and intricate” development—Saam describes joining at 23, shadowing partners, joining boards, and immersive real-life learning.
• Collective Success Over Sourcing: Credit is given for being “causally impactful” rather than just sourcing deals—encouraging collaborative rather than competitive incentives.
• Hand-Off & Growth: Senior partners intentionally sponsor and elevate younger partners, regardless of tenure difference.

The Flywheel of Relationships & Network (11:52–16:29)

• Brand, Network, & Persistence: Greylock’s credibility compounds—backing a company creates a flywheel that rewards both the firm and future entrepreneurs through trust and network effects.
• Anecdote: The circuitous journey from recruiting Josh McFarland to spinning out engineers and eventually funding new companies like Abnormal AI and Cogent shows how deep relationships drive repeat success.
• Board/Intimate Relationships: True flywheel success requires deep, not arms-length, engagement.

Inputs-Driven Performance Management (29:05–33:58)

• Long-Term View: Performance is measured by “inputs” (actions that should, over time, drive great outcomes) rather than just luck or short-term wins.
• Inputs Document:
  • “See” (90%+ of desired dealflow in a sector)
  • Responsiveness/service level
  • Domain leadership (sector reviews, predictions)
  • Contribution to overall firm success
• No Outputs Without Inputs: Luck alone isn’t rewarded; the system is designed for repeatable greatness.

Incubations, 'Initiations,' and Market/Execution Risk (33:58–43:30)

• Not “Incubations”—Initiations: Greylock prefers partnering with founders as early as possible, ideally before the idea forms, but always putting the founder’s vision first.
• Focus on Market Risk:

  “We want zero market risk and a lot of execution risk”—meaning the demand is validated, but solution is hard to build.

• Common Pitfalls for VCs: Taking too much equity or picking undifferentiated ideas undermines long-term success and founder quality.

Breadth vs. Depth in Venture (24:44–29:05)

• Balance: Depth (intimate involvement, small team, concentrated relationships) is Greylock’s core, but exposure to the market and competitive deal-tracking is critical ("Did we see 75% of competitor financings in our sectors?").
• Avoiding FOMO:

  “Having real clarity in what you’re looking for and then the ability to process and make decisions very quickly.” (27:41)

• Investment Criteria: Process and invest rapidly when the right people and markets surface, rather than through exhaustive memo-writing or midwit rigor.

Venture Alpha: Maker vs. Taker, the Barbell, and “The River” (43:50–59:18)

• Barbell Strategy: Alpha accrues at the “first money” (raw initiations, formative) and “last money” (giant private rounds, market-making) ends. The middle—market-taker/index strategies—is more commoditized and less impactful.
• The Capital River (55:52): Companies that get into the “capital river” (continuous access to top-tier fundraising and adoption flywheel) build compounding advantage.
• Kingmaker Rounds: Doing the round that “puts a company in the river” can create some alpha, but the barbell (raw or late stage) is more distinctive.

Patterns, Persistence, and Decay in Venture Brands (48:54–52:38)

• Venture Brand Endurance:

  “It takes a long time to kill a venture brand… but the default trend line is decay… Most people, when successful, aren’t willing to reinvent themselves.” (49:07)

• Greylock’s Strategy: Proactively empowering young talent, biasing toward action and reinvention (e.g., moving HQ to SF, speeding decisions, young partner cohort).

Portfolio Services: Impact over Marketing (52:38–59:18)

• Services as Value, Not Marketing:
  • “Specialist” teams are first-class citizens, impact is measured (e.g., engineers placed), and integrated into the firm's decision-making.
  • Focused on early-stage support—helping portfolio “get into the river.”
  • Analogy:

    “We’re an Ironman suit—the founder plugs in early; later they build their own machinery.” (55:14)

• Most Portfolio Services Fail: Service for marketing/optics rarely work; true value is in hands-on, early-stage intervention.

Macro Trends: Revenue Ramps, Vertical vs. Horizontal AI (59:18–71:33)

• “River” Company Outcomes: Easier early capital helps, but ultimate outcomes depend on durability of growth and differentiation.
• Caveats from 2021: Explosive early growth doesn’t always endure—pull-forward demand and monetization model errors are common.
• Vertical vs. Horizontal AI: History favors horizontal winners (Salesforce, Microsoft, Workday); AI may disrupt underlying data models and workflow conventions, opening new horizontal opportunities.
  • Ashim’s Trilemma: New pricing, unit of value, and data model in AI era could finally make new giant horizontal software possible.

Personal Life, Friendship, and Partnership (71:33–76:29)

• Venture Friendship: Unlike many performative or opportunistic industry friendships, Jack and Sam’s group fosters high context, mutual ambition-pushing, and real support.

  “It’s rare to have people who have high context for your work but also truly want to see you win.” (72:20)

• Joy in Work: Humor, personal connection, and fun are essential to sustaining ambitious work.

Health & Routine (76:29–79:42)

• Focus: Whole foods, daily movement, sleep, and, crucially, unscheduled time for deep work and strategy.
• Avoiding Burnout: Structured calendars, intentional “no’s,” and maintaining room for serendipity.

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Notable Quotes & Memorable Moments

• “The ambition...should be to win the Oscar for best supporting actor to the entrepreneur.” (Saam Motamedi, 05:02)
• "If you're in the carry business, then the only way you do well is if your entrepreneurs do well." (17:53)
• “There’s a flywheel...18 years later, people coming back to start new companies just because of the relationship we built with one person.” (15:00)
• "Depth and intimacy are profound...we care a lot about the people we go into business with." (42:52)
• "We measure inputs...if someone has good outputs but no inputs, that’s not a fit for our system because it’s luck, and we can’t be convicted they’ll reproduce it." (33:58)
• "Venture brand decay—the default trend is decay unless you reinvent. Most successful firms don’t do that." (49:09)
• "Portfolio services are only impactful if they are true value creation, not marketing." (53:24)
• "We’re an Ironman suit—the founder plugs in early; later they build their own machinery." (55:14)
• "Humor is one of the true endless sources of joy in life...if we can bring humor into each other’s lives continually, it makes the work more enjoyable." (75:11)

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Timestamps for Important Segments

• 00:00–01:32 — Anecdotes: Greylock start, Palo Alto & Workday.
• 01:32–03:58 — Greylock history and ethos.
• 04:11–06:37 — Core values, service mindset, low-profile ethos.
• 07:05–10:16 — Talent, apprenticeship, causally impactful model.
• 11:52–16:29 — Brand, network, and the relationship flywheel.
• 17:08–21:43 — Service as a differentiator; carry vs. fee incentive models.
• 24:44–29:05 — Breadth vs. depth in seeing opportunities; dealflow discipline.
• 29:27–33:58 — Inputs-driven performance management (See, Decide, Win, Build).
• 33:58–43:50 — Initiations, execution vs. market risk, pitfalls in VC incubation attempts.
• 43:50–47:25 — Market-maker, barbell strategies, and the capital “river.”
• 48:54–52:38 — Venture brand persistence and decay, the importance of reinvention.
• 52:38–59:18 — Portfolio services as value, not marketing.
• 59:18–71:33 — Interpreting rocket-ship ramps, horizontal vs. vertical AI, history lessons.
• 71:33–76:29 — Friendship and joy in work; blending life and ambition.
• 76:29–79:42 — Health, routine, unscheduled thinking time.
• 79:42–81:03 — Serendipity, the value of keeping open time.
• 81:03–82:23 — Slowing down, lessons from one boom-bust cycle, conviction over hype.

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Conclusion

This episode offers a rare, unguarded look inside a world-class venture capital firm’s mindset, processes, and relationships. Saam Motamedi distills decades of Greylock’s learning into actionable frameworks—emphasizing core values, talent longevity, a service ethos, relationship-driven networks, and relentless curiosity about both markets and people. For anyone interested in venture capital, startup scaling, or organizational endurance, it’s both blueprint and inspiration.

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For deeper dives, reference the timestamps above to jump directly to topics in the conversation.

Transcript

[Sam Altman]

Palo Alto and Workday both started at Greylock at the same year in the same office. 2005 San Mateo office. And Aneel, obviously, and Dave Duffield started Workday. Mirzuk started Palo Alto. Ashim, you know, wrote the first Jack has been. Was on the board for 18 years. I think it just rolled off recently.

[Jack Altman]

And these are 50 to $100 billion.

[Sam Altman]

I think Palo Alto is, like, a $140 billion company. Workdays, I don't know, between 50 and 100. Right. These are big businesses. Right. And by the way, we've started a part of. Starting on the abnormal Sumo logic, which went public.

[Jack Altman]

Yeah.

[Sam Altman]

Several companies.

[Jack Altman]

Okay. So before we get to Greylock being good, like, why is this. 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. We text many times a day.

[Sam Altman]

I think we're in, like, what, 12 different text groups.

[Jack Altman]

There was a joke 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.

[Sam Altman]

But isn't that. Doesn't that make you happy?

[Jack Altman]

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?

[Sam Altman]

I just got this new standing desk from Design Within Reach. First of all, it's a sounding desk that actually looks good. I don't know if the videos can see these, but these are.

[Jack Altman]

These aren't what we want.

[Sam Altman]

These aren't what we want.

[Jack Altman]

By the way, mine already. Mine just arrived.

[Sam Altman]

Yeah, mine arrives Friday.

[Jack Altman]

It is really good, though.

[Sam Altman]

But the middle is leather, and so I think the mouse just glides.

[Jack Altman]

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

[Sam Altman]

But I think as a result, we all end up with amazing products like this rice cooker. You got me.

[Jack Altman]

The rice cooker is crazy.

[Sam Altman]

It's unbelievable.

[Jack Altman]

Okay.

[Sam Altman]

And it keeps it warm.

[Jack Altman]

I'm going to start with a serious topic. I didn't realize this before, but when I did research prepping for. 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 TI83. There wasn't like, anything. So, like, what Was happening in 1965?

[Sam Altman]

Interesting. Greylock turned 60 years old this year. 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.

[Jack Altman]

A family office or something.

[Sam Altman]

The firms at the time were typically managing capital on behalf of a single family. Greylockstar 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. So, like, if you rewind, by the way, it's interesting. We have some of the original partner group is still alive and comes to our limited partner meetings.

[Jack Altman]

And they're 90 in their.

[Sam Altman]

In their 90s.

[Jack Altman]

Yeah.

[Sam Altman]

And so I talked to them about, like, how was venture in the 60s and the 70s? Like, first thing is like, there's no Internet.

[Jack Altman]

Yeah.

[Sam Altman]

So how do you find companies? 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 in hiring. And then they'd fly to the city, show up at the office, and meet the entrepreneur. You know, decisions today move pretty quickly. You know, term sheets happen in days.

[Jack Altman]

They had like a year, six months.

[Sam Altman]

Yeah. And by the way, what was the investment size they were contemplating?

[Jack Altman]

A million dollars.

[Sam Altman]

200,000.

[Jack Altman]

Yeah. That's crazy.

[Sam Altman]

So you take six months to make a $200,000 investment decision.

[Jack Altman]

How big was the first Greylock fund, do you know?

[Sam Altman]

I don't know.

[Jack Altman]

Like, small.

[Sam Altman]

Small.

[Jack Altman]

And what were they investing in?

[Sam Altman]

So one of the first major wins for Greylock was a company called Continental Cablevision, which underpinned a lot of Cable in the US 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. But we were investing in all sorts of different companies. I mean, Neutrogena, the, you know, 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 investor in companies like Millennium, Vertex, Stryker. These are all, like, publicly traded $100 billion companies today.

[Jack Altman]

$100 billion yeah.

[Sam Altman]

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 navigated through different sectors.

[Jack Altman]

Crazy.

[Sam Altman]

And then, you know, we went into like the open source era and we did Red Hat, which is the largest outcome in open source software. And then the Internet and social network area with the era with like Facebook, LinkedIn, Instagram marketplaces with Airbnb now, you know, enterprise software.

[Jack Altman]

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. There's a small number that do Greylocks, obviously. I think the oldest I can think of. Basically what is consistent from 1965 till now. Do you think there is a thread that's stuck or is it just constant reinvention and it's like the whole thing's different at this point.

[Sam Altman]

There's 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.

[Jack Altman]

What do you think stuck? Like, what sticks?

[Sam Altman]

I think the number one thing is just the core values and ethos of the firm. Right, right. And this is a firm that was founded on a service mindset. Actually. Like, there's this really interesting letter one of the original partners wrote to the partnership that I found like a few years ago when 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 are not the stars of the show. We do very little press, we do very little marketing, but we want to be the person who is in the founder's corner in the first call when something's going wrong. And that core ethos of like, this is a service job has persisted throughout the generations and decades. And that people orientation has also persisted. Many other things have evolved, like the sectors we invest in 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 in guiding North Star has not changed.

[Jack Altman]

Is being not loud and external and brand and press. Is that core or is that a evolving thing?

[Sam Altman]

It is our core ethos and we will never be the loudest. But I think if you built like a spectrum, right? And A one was like, you know, there's no website and there's no, you know, there's no formulated 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 1 or do you need to go to like a 3 or 4?

[Jack Altman]

Right.

[Sam Altman]

And I think that's a debate we have internally, but I don't think we would ever change that. Core ethos of like, there's no Greylock partner or individual that should ever be larger than the companies and founders that were in business.

[Jack Altman]

Venture got loud basically when Andreessen Horowitz came around. Right.

[Sam Altman]

I think that's in that period. That's right.

[Jack Altman]

And that basically, like Prisoner's Dilemma forced everybody else to get loud.

[Sam Altman]

There is a dynamic where if 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? And you have to have some strategy around that. And at the end of the day, you've got to play the game on the field. You can't not react to what's happening on the field.

[Jack Altman]

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

[Sam Altman]

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 join Greylock in like their mid-20s to mid-30s, and they built their entire careers at the firm. And there were many peoples who had multi decade tenures at Greylock. Right. And then I think what happened as Venture evolved is like in the early 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 are joined, like Ashim or Jerry, who had, you know, significant operating tenures, or Reid Hoffman before they became venture capitalists. But independent of when anyone joins the firm, we take the approach to talent. That venture is 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 every conversation with them, ranging from the board meetings itself, the follow on conversations with the CEOs when they were interviewing executives. I was sitting next to the partner during the interview. And then after the interview, there would be a discussion of what that person detected and learning. And so you have this osmosis that happens and this level of immersion that 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.

[Jack Altman]

I feel like one of the dynamics that has to happen is the senior 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's 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?

[Sam Altman]

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 young person, the way you progress in the firm is you source amazing opportunities. We don't use that language at Greylock. We use the language, were you causally impactful to a successful investment? That could mean you sourced it. It could mean you built a prepared mind, which enabled us to make a quick decision. It could mean you helped us win the opportunity. It could mean after we got into the opportunity, you 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, can I get one of my younger partners into this opportunity as the primary alongside me? Because at the end of the day, like, that's what's gonna make that person successful, which is what's gonna make the firm successful.

[Jack Altman]

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 ever X number of years in, it's hard for people to hand things off to somebody who's just like, a little click below. Like, it's almost easier when you have these partners that are wildly successful already who have been doing it for a long time. Like, does that. Is that part of the way you think about it? Is it easier to hand off to somebody 20 years younger than five years younger?

[Sam Altman]

I don't think so. Like, I. I think the. The orientation for us is, well, first is, should. Should we make the investment? That's the number one question independent of any individual dynamics. Like, should Greylock try to be earned this founder's trust and right to invest? And then the second question is, what does the founder want?

[Jack Altman]

Right?

[Sam Altman]

And in everything, that's how we approach, you know, 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. But, like, you should make that decision. 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, 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.

[Jack Altman]

When you think about, like, a venture firm persisting over. Let's forget 60 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?

[Sam Altman]

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 be a board member and that gets trained in the new 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. You come raise money from Greylock, we stake our credibility on you.

[Jack Altman]

Yep.

[Sam Altman]

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.

[Jack Altman]

Yep.

[Sam Altman]

That flywheel, I think persists. It can erode if you don't keep making some amount of time, but it has some 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. Right. And there's so many like stories I could tell you, Jack, but I'll, I'll tell you one that I think is interesting. You know, rewind the clock. Greylock moves to the Bay, you know, to be Bay Area based in the mid 2000s. Okay. We're in San Mateo, it's 2007. Okay.

[Jack Altman]

Okay.

[Sam Altman]

There's a star product manager at Google named Josh McFarland. 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, spend 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 eye on our 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 ML techniques for different ad tech use cases. He hires a young engineer from Google named Sanjay as one of his founding engineers and kind of few years in business is progressing. He aqua hires a small company called AdStack and has two co founders. A founder named Evan Reiser and a founder named Thanos Bakus. Okay. A few years goes by, this company gets acquired by Twitter. It's like $500 million acquisitions. Largest acquisition Twitter did pre 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 fund that company in 2018. That company is now, you know, second fastest growing security company of all time. You know, late stage private, you know, could be a public company. In the process of that company getting bullets out of our offices, we meet two new young, very strong product leaders. A woman named Nicole and a guy named Vineet. Nicole joins the company as one of the first 10 employees. Vineet 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, okay, they want to go start new journeys. Both of them come back to Greylock and two new companies get started. Fable Security and Cogent.

[Jack Altman]

And it all kind of starts with the reach out to Josh.

[Sam Altman]

Exactly. And it's like we're now 18 years later, right? And by the way, these two new companies are just beginning to flourish. Tomorrow I'm going to an all hands at Cogent and I guarantee you there are engineers in that audience who will.

[Jack Altman]

Be founders that three to four years.

[Sam Altman]

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 to that.

[Jack Altman]

And that's just time, time and working closely with the companies yeah.

[Sam Altman]

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. Of who we are, what we're like to work with.

[Jack Altman]

Can this type of flywheel happen without the board relationships?

[Sam Altman]

Let's put the board aside. I think the question is, are you.

[Jack Altman]

Intimately involved level relationship?

[Sam Altman]

I think you need a very intimate level, like, sort of intimate relationship with the company.

[Jack Altman]

Like, you can't just invest and have this happen.

[Sam Altman]

I don't think so.

[Jack Altman]

Because it requires knowing people at the company that aren't the founders. It requires the founders saying, hey, anybody who leaves should work with you guys. Like, it requires a few things.

[Sam Altman]

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

[Jack Altman]

Yep.

[Sam Altman]

Right. She remembered the bet she took. And so then. Right. And then a relationship got built. Like, same with Vinnie. And that's one of the things we. One of the things about our model is we're. We have a very small set of very concentrated relationships. And as such, we get to know people inside the companies.

[Jack Altman]

Yep.

[Sam Altman]

And there's a depth and intimacy to it that I think is very profound and, like, leads to this sort of like, knock on effect.

[Jack Altman]

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.

[Sam Altman]

Yeah.

[Jack Altman]

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. What are you trying to teach me on the brand and ethos?

[Sam Altman]

I think there's like five or six dimensions. 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 lp. So really we're focused on the entrepreneur. I think you have to have that mindset. It's a hard mindset to teach.

[Jack Altman]

Do you think not the majority of people in venture do?

[Sam Altman]

I think everybody in the abstract can say they have the mindset. I think in Christmas 2024, when we're on six hours of Zooms, helping a company navigate a last minute financing like that really tests do you understand what it means to be in the service mindset? And our 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.

[Jack Altman]

And you're saying it's a level that is different than the median venture investor.

[Sam Altman]

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.

[Jack Altman]

And you think that it's a lack of effort or you think it's a lack of understanding what needs to be done.

[Sam Altman]

It's an incentive problem.

[Jack Altman]

Right.

[Sam Altman]

And the model has evolved. Right. And sorry, now we're like overloading the topic. But look, I think fundamentally for any venture capitalist, you have to have clarity or on what's your core economic engine. Are you in the carry business or are you in the fee business? And if you're in the carry business, then the only way you do well is if your entrepreneurs do well. Right. If you're in the fee business, actually your success is, it's not completely orthogonal, but it's less tightly coupled. What's happened to a lot of I'd say firms that historically would we we would have viewed as our competitors is they've become scaled asset managers that are running very large portfolios. And by the way, they're not. It's not a dumb economic strategy. No.

[Jack Altman]

The best way for them to make money is to deploy money.

[Sam Altman]

Correct. And by the way, they can build an index of companies and then they can track those companies and they can see the top ones and they can double down and concentrate a lot of capital into those companies. But what it means is now when you're the partner on the team and you have 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 the incentives have changed.

[Jack Altman]

There's also an incentive problem. If you don't think you're going to stay somewhere for 15 years. You gave this example of, like, how one thing flows to the next flows to the next. But those all stayed under the Greylock umbrella more than the person. I mean, you know, probably the person's relationship was a 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.

[Sam Altman]

Totally. And there are many examples now of people. Basically, 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. And then I'll just switch firms.

[Jack Altman]

Totally.

[Sam Altman]

I'll switch firms. I'll wipe the slate clean. I'll come in in a more senior level and I'll start from scratch and.

[Jack Altman]

I'll have been an investor in X, and that's all that matters.

[Sam Altman]

And I mean, we all know tons of people who 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, and then, you know, you get in a room, you're like, okay, what do. 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, 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.

[Jack Altman]

The person who comes on 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.

[Sam Altman]

Well, not only that, I think one thing that founders don't fully appreciate is you go into a business with a firm, do you really understand how decisions at that firm get made. You have your partner, but is your partner a decision maker? Are they trusted by the decision makers? Do they have influence? Are they going to be there? Because as you know, these journeys are not all up and to the right. 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 the organization isn't a real decision maker and isn't there now the company's in a really jeopardized position because one of their major insiders is not really supporting them in the way they need. And we see this happen time and time again in our companies. When we work with other firms.

[Jack Altman]

As firms get bigger, which they obviously are, does that naturally lead to more turnover? Are those two things inextricably linked?

[Sam Altman]

I think it depends on the strategy of the firm. I think you could imagine firms that get larger but maintain a very concentrated approach, a small set of relationships.

[Jack Altman]

But what about a large partnership?

[Sam Altman]

Absolutely.

[Jack Altman]

Yeah.

[Sam Altman]

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 8, top 10, top 15 firms. The turnover at the partner level is much higher than it's ever been.

[Jack Altman]

And I bet you it's correlated with size of partnership.

[Sam Altman]

I think that's a big dynamic. It all comes back to this principal agent problem, which is you have people who the only way they can progress inside their firm is showing momentum in their portfolio. So they put a lot of short term oriented shots on gold. 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 diluted by all these people, of course. Right. Because like that's all going to dilute your terminal carry. So at some point you, you pick your head up, you're 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 turnover. These turnovers happen and it's bad for the firms, but again it's really bad for the entrepreneurs.

[Jack Altman]

It's actually interesting like you know, between, let's say like 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.

[Sam Altman]

Yeah.

[Jack Altman]

Like some have five and some have 50.

[Sam Altman]

Yeah.

[Jack Altman]

Just on that metric alone, do you believe more in one over the other?

[Sam Altman]

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 what 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 are 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. Whether you're a 23 year old, sort of with one year of work experience or you know, 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 at which like that conversation begins to degrade. Now whether that's 8, 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 make very good decisions when groups get beyond that in size. When also have this dynamic where it's easy to hide. You don't want to allow low performers when it's big, when it's big, because when it's small at the extreme, if it's just you and I, you're going to know if I'm carrying my weight or not.

[Jack Altman]

You probably wouldn't, but that's fine.

[Sam Altman]

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 there's an eight person team that's focused on this and an eight person team that's focused on that, but it still leads to all sorts of degradation and conflicts inside the organization.

[Jack Altman]

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

[Sam Altman]

Yeah. So taking a step back, like, you know, at Greylock, what. What do we care about? We care about being meaningful partners to the most meaningful companies in every vintage. Right. And we don't need to be in every company. Right. In a given fund, we'll do something like 20 to 30 core relationships. And the math would suggest that if 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. That said, we have to be extremely paranoid about, are we seeing the best entrepreneurs and seeing the best opportunities? And so that's why, despite the, let's say, focus and depth of relationship, we care a lot about our capital competing against the opportunity set in the marketplace. And so, for example, one of the things we were talking about before is, is like we every single week, there's six core sectors we invest in at Greylock. For all of those sectors, we have a list of the competitors we most admire, firms and individuals. And every week, we track all the financings that have gone and done by those groups. And we ask ourselves the question, did we see or have the right to do that financing? Not like, did we meet it with eight hours to go before decision got made? But were we there 10 days before decision got made, in position, in position, real shot to win the opportunity. And if that number is like not 70 to 75%, like, 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, it's really arrogant to assume that we are seeing the best opportunities. And so you need to see that cross set. 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.

[Jack Altman]

So I get sort of like logically 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 benchmarks smart but like, we really should like continue working quietly on this, you know, new company we're initiating with this person. We've had a relationship for six years and going and spinning our wheels this week on something just because we heard some top tiers chasing. How do you not get lost by.

[Sam Altman]

Having real clarity in what you're looking for and then the ability to process and make decisions very quickly. So it's interesting, over my tenure at Greylock, I've been at the firm for nine years. There's this pendulum that swings on everything because we're constantly reinventing ourselves. So there's periods when we wrote these really long investment memos, these 15 page memos, all this work and then there's periods where we have no investment memo and it's two paragraphs and the midwit take would be like, oh, well, investment memos are more rigorous. If you write an investment memo, you're making a better investment decision. But it's not really because we're primarily doing first check investing.

[Jack Altman]

You're betting on people.

[Sam Altman]

We only care about two things. One is who's the person and the second is what's the general area in which they're building it. And like, if those two things are bright green, we're ready to invest and we've made decisions in hours. And if those two things are not bright green, like, yeah, we can go call a bunch of customers and like call the design partners and like, you know, learn some stuff about, you know, 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. We want to talk to a few people who 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.

[Jack Altman]

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

[Sam Altman]

It's really hard. We in the last several years have adopted what we call like an inputs based approach to performance management. So we got together as a full partnership. It was right after Covid, so I 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 5 years, 3 years, 10 years? Hard to predict. There's luck 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 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.

[Jack Altman]

What are the inputs?

[Sam Altman]

So we have a document that has 18 inputs and it's across the dimensions of the job. So it's across C. 18's a lot. 18's a lot. But we want these things to be.

[Jack Altman]

Is it bucketed?

[Sam Altman]

Yeah, it's bucketed. So there's four components of the job which is see, decide when, build and then there's internal partnership. Right. And so for example, like on C, one of the dimensions is did you see 75% of the seed and series A opportunities that were done by your competitors in the sector that you're responsible for.

[Jack Altman]

This is getting maybe a little too like fine tooth comb but like at the individual level, do you care that they saw a certain percentage or that they were doing the inputs that led this. That would lead the scene.

[Sam Altman]

I think a bit of, like. I think what you're asking is, like, okay, well, if someone's going and, like, pounding the pavement and hosting great events and outbounding to entrepreneurs, is that what matters? Or is it the 75% number that matters? We measure the SE. We measure the number. But then there's a qualitative sense of, like, are you doing the right setup?

[Jack Altman]

If it's going wrong, you kind of dig into what the inputs to that output. Correct, correct.

[Sam Altman]

Another one that's, like, really basic is like, we have a. 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 to the entrepreneurs we're in business with and internally.

[Jack Altman]

How can you measure that? You're not, like, going through someone's phone. So I'm like, we're not going through.

[Sam Altman]

Someone'S phone, but we collect feedback from the CEOs that people partner with. And then we also 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.

[Jack Altman]

Oh, gosh, there's like a 360 going on.

[Sam Altman]

Yeah, exactly. 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's gonna happen in the next 12 months? And then we look, oh, wow.

[Jack Altman]

And we're like, hey, Jack, your idea was terrible. Yeah.

[Sam Altman]

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

[Jack Altman]

That's not me specifically.

[Sam Altman]

No, not you specifically, Jack, but, like, in the abstract.

[Jack Altman]

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

[Sam Altman]

What we have people do is 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, 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 that this is a red hot area.

[Jack Altman]

You've thought about the space, you thought about the wedge, you've thought about what are the weaknesses and the competitors.

[Sam Altman]

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 if you weren't, and that consistently is the case, then how can you be a leading investor in your domain? So 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 to make 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, DHS 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, if someone has good outputs but no inputs, that's also not a fit for our system because it's luck, because we can't be convicted that they're going to reproduce the outputs.

[Jack Altman]

Right. You have no reason to think it'll happen again. Okay, I want to ask you a little bit about incubations, which I know you call initiations, but Greylock is extremely good at starting companies. We were talking before about this, but you've had several that are really big, like Palo Alto Networks Workday. Like, people maybe don't realize that those were like started Like, I don't know if they were started in your offices or with your partners, but like, they were like Greylock incubations, more or less. Can you talk about first? Like, why is it so hard? 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?

[Sam Altman]

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. 2005 San Mateo office. And Aneel, obviously, and Dave Duffield started Workday. Nir Zuk started Palo Alto. Ashim, you know, wrote the first check has been. Was on the board for 18 years. Yeah, I think it just rolled off recently.

[Jack Altman]

And these are 50 to $100 billion.

[Sam Altman]

I think Palo Alto is like $140 billion 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 went public.

[Jack Altman]

Yeah.

[Sam Altman]

Several companies you made the joke of like we don't use the word incubate but. But we actually don't like that. And the reason is like it comes back to who is the core of the company. Is it the founder or is it the VC firm?

[Jack Altman]

It's the VC firm, obviously. Go ahead.

[Sam Altman]

And like our view is to state the obvious, it's the founder. 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 a person with no idea. 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 develop the idea together. There are cases where they have an idea but there's no team. There are cases where they have a team but no product. And I was checking this over the weekend. In our current fund billion dollar vehicle, we're about 80, 85% allocated. 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 partnered with someone post idea and like really help support them. Right. So like I think that's this 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. 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 sort of when you think about a company, you could think of two broad vectors of risk. There's market risk and there's execution risk. And what we want to do is pick opportunities where there's zero market risk and actually a lot of execution risk. Because in the execution risk you build your moat. Product's hard to build. There's Real technical ip, it's hard to take to market. So like if you believe that the founders you back and the teams that are built around them are going to be the best executing it's actually good for there to be executioners.

[Jack Altman]

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.

[Sam Altman]

Correct. And not just like will it be valuable but then there's a lot of nuance like okay, who's the end customer you're selling it to? Can that customer base be serviced by go to market motion? That's 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 like from very, very early they all have a shared DNA which is they have unbelievably customer centric founders and are a place where there's very little market risk. Right. Workday like replatforming hris for the cloud. Palo Alto Networks was like by the way, when Palo Alto Networks started There were like 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 started abnormal AI based email security company. 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 these more advanced social engineering attacks, there would be a business. The question was, could you build 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 they view themselves as the core of the company. And by the way, I don't mean that in a trite sense, but 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 or I'm going to take 40% of the company for $10 million.

[Jack Altman]

It's like it's too much, it destroys.

[Sam Altman]

You're not going to get the best founders. Yeah. Like we view it as we want a market fair. Like we just want market terms. Yeah, we might write a bit more capital and so maybe we'll get a little bit more ownership. But you, if we're working together, you should view the investment proposal as a fair proposal.

[Jack Altman]

Yeah.

[Sam Altman]

And why do we care about that because the most important thing is the founder and the founder of quality. And so if you have any negative selection skew in the founder, you're in trouble. And so I think that's one huge mistake. And almost all the firms that try to do this kind of fail on that. And then the second is I think they pick areas and ideas where it's less deterministic. And so you can't engineer your way to success the way that you can when you pick these markets that have no market risk.

[Jack Altman]

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

[Sam Altman]

I think there's very few people who can consistently do this. By the way, there's the firms, including the ones you mentioned. There's also individuals like, I think Zack 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 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 two things, right. 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 abnormal. I don't remember the exact statistic, but I think we sourced like 30 to 40% of their initial pipeline to 10 million of revenue. So we are going to go in there and be costly, impactful to come back to that phrase. And then together we're going to get the company to a place where now it kind of can be off to the races. That's a type of work that I think most venture capitalists don't know how to do, nor do they want to do.

[Jack Altman]

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 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 get just so attached to the company. Is that the idea?

[Sam Altman]

Yes. And also, I think again, it would be very arrogant for us to say that we are going to intersect 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, and it's definitely, definitely won't be true, then how do you know if the person that you're working with or the company you're backing on a relative basis is likely to be one of the best in this vintage? The only way you know is if you've met other companies and other opportunities. And we don't start with a we want to 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 take a lot of time and a lot of work.

[Jack Altman]

Yeah.

[Sam Altman]

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 and we take the same mindset that we take very early on and we end up meeting some situations. We're like, wow, this person and this idea is better than anything we've seen this year. And yeah, 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. We're working on investment right now where we're writing a $36 million pre seed check. Right. I mean, we've, in this fund alone, we're in multiple 20 to $30 million checks behind an individual with no code and no idea. Like a general sense of like, we're going to go explore this area.

[Jack Altman]

Yeah. And prepared mind. You know the area well, I'm sure.

[Sam Altman]

Exactly. And they know the area well. And often they might come from the.

[Jack Altman]

Domain and you know the person previously.

[Sam Altman]

Probably 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.

[Jack Altman]

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.

[Sam Altman]

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, disproportionate best investments, not all. There are actually a couple of very key exceptions. But 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.

[Jack Altman]

Makes sense.

[Sam Altman]

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

[Jack Altman]

As you look around 20, 26 and next year and you think about where there's alpha and 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. Like, what do you think are the strategies that you bet behind? Like, let's say you're an lp. What strategies do you believe in right now or setups do you believe in?

[Sam Altman]

Yeah, so I'll give you a couple frames that I think about. One is, are you a market maker or are you a market taker?

[Jack Altman]

Right.

[Sam Altman]

And by the way, market maker doesn't mean you create something, but it just means did you create some proprietary opportunity or are you part of an auction process? And I'd say if you're a market maker, there's structurally more alpha than if you're a market taker. And like we talk about this in our friend group, you know, we have this like first money and last money.

[Jack Altman]

The barbell.

[Sam Altman]

The barbell.

[Jack Altman]

Let's talk about the what's.

[Sam Altman]

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 person.

[Jack Altman]

I think there's also something that at the, at that front of the barbell where you take something that's really raw and you make it unraw. And the first person to sort of turn those ingredients into something that looks like a meal.

[Sam Altman]

Yes.

[Jack Altman]

There's a huge jump that happens.

[Sam Altman]

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. Yeah, right. There's the capital. Yeah. And there's like that the whole thing has got to sing.

[Jack Altman]

And when they're all disconnected, the whole price on that situation is way lower.

[Sam Altman]

Correct. And often you're doing like, you are doing contrarian investing in the sense that like that's not something that goes to 10 firms and gets eight offers.

[Jack Altman]

It's also very easy to write that situation off and just 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.

[Sam Altman]

And by the way, it's not said. No, but we were, you know, we, I mentioned we do these competitive reviews. Right. So we, we were doing one two weeks ago and we saw all these great investments that we, you know, that we didn't make. But we saw them and we're like. And our number one takeaway was we met things when they were too raw. And by the way, often we invest when it's very raw. But even still, I'd say Greylock is really oriented towards the raw stuff. And still that's where we make a lot of mistakes.

[Jack Altman]

Yeah.

[Sam Altman]

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.

[Jack Altman]

They moved to a great area. They moved to a great area and now it's great.

[Sam Altman]

And now it comes back to us for series A at 5 times the price.

[Jack Altman]

9 times, 10 times the price.

[Sam Altman]

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 to price around, you have to write a billion dollars.

[Jack Altman]

The Thrive rounds.

[Sam Altman]

Thrive is doing a great job here. Founders Fund, Green Oaks. Right. Again, they're market makers. They construct the round, they bring it together, they set the price. And there's alpha on that.

[Jack Altman]

Well, simply by virtue of there not being many competitors who can create those rounds.

[Sam Altman]

Correct.

[Jack Altman]

So it's like one's driven by Scarcity at the big end and then one's driven by like squinting at the early end.

[Sam Altman]

I'd say both also have an element of capability like on, on, on, on, on the kind of late stage stuff. It's like do you have the capability to look at something at a $50 billion price and imagine it being a $500 billion company?

[Jack Altman]

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.

[Sam Altman]

Exactly. No, they're incredibly high conviction, high investors.

[Jack Altman]

Yeah.

[Sam Altman]

And then on the other hand 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 them shape the company? For sure. A lot of people don't have that capability.

[Jack Altman]

Or the patients.

[Sam Altman]

Or the patients. So I think that's one sort of source of alpha. It's like be at one of those two bookends. The other like I think kind of consensus approach right now, which I think is bad for founders and I think will net lead to worse returns than the prior but still could lead to decent results. Is the indexing model where you just.

[Jack Altman]

Do a company that I'm going to.

[Sam Altman]

Do 80 investments 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, write off the others. The founder calls me, I'll pick up but otherwise I don't have anything to do with the business. That probably, I don't think it's going to generate 5, 8, 10x funds. Could that generate 2, 3, 4x funds? Possibly.

[Jack Altman]

So basically you just believe early, late. For the most part.

[Sam Altman]

For the most part. But then, 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.

[Jack Altman]

Say a little bit more.

[Sam Altman]

You know, at some level it's just like you get judged by what you invest in.

[Jack Altman]

Yeah.

[Sam Altman]

And like, you know, 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.

[Jack Altman]

It's just like what was in the fund?

[Sam Altman]

Yeah, just like, okay, great. But they weren't like four great companies. They worked really hard on those companies. And then amazing fund.

[Jack Altman]

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?

[Sam Altman]

Well, I think it depends on like, what circle of perception. Right. I think in the kind of X zeitgeist.

[Jack Altman]

Yeah, I'll say that one.

[Sam Altman]

I think it's like very, like nearly.

[Jack Altman]

Nothing, it seems like.

[Sam Altman]

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 do you own it? At what price? Because, like, not all these companies are going to be $100 billion companies. So yeah, like, you got into this great AI app, but you got in at a billion dollars and you own 6% of the company, and 10 years later it's worth 4 billion. And you know you're in your fund is 2 billion. And like, you know, you've been diluted. So now you own 5%. And so like, you know, you made $200 million on a $2 billion fund. It's not great. It's not great.

[Jack Altman]

Do you think in general that venture firms, like, take like, you know, well, branded venture firms? Do you think the tendency is to get weaker or stronger over time?

[Sam Altman]

It takes a long time to kill a venture brand, right? Because you, you have this brand that's been accrued through the relationships that you've built. And there's some persistence, like inherent persistence in that. Right. And tomorrow when you meet a new entrepreneur versus a brand new franchise, you.

[Jack Altman]

Have more things to rest on much easier.

[Sam Altman]

But I still think the default trend line is one of the K. Why? Because 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 one example is like our team today is a lot younger team has skewed young versus 10 years ago or something versus 10, 15 years ago. One big reason why is the world's changing very quickly. A lot of companies are being started by younger people. I think that in this AI era, first principle thinking and approach to company building is is more in some ways more important than experience. So you have to have a team that can, like, meet the entrepreneurs where they are and also support them where they are. But we're not afraid to go make that change to team composition or we're not afraid to say, hey, we have a new partner. And yeah, they haven't had, like some huge win yet, but the inputs are amazing. And so we're going to empower this person to do more and more. Like, we bet, like, we almost preempt our own talent, if you will. I think that enables us to stay very relevant and like, you know, not decay. But I think at many firms that's not what happens.

[Jack Altman]

Totally. It's also like you have to keep a, 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, 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.

[Sam Altman]

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 firm, every vintage, they see and truly see in a position to win enough things to have a 10x fund. But many of them don't. And so something between the top of the funnel and the bottom breaks. And so if you're not 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 supporting? And that's going to change every era. You are more likely to make the wrong decision.

[Jack Altman]

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.

[Sam Altman]

Yeah, well, like, that's great. If you saw, like in this last period, if you saw everything and you didn't see the early rounds of OpenAI 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 things will be great. But like it might be that those two companies end up being a lot of Funny.

[Jack Altman]

You and I were texting about this last night, but we looked at like who were like the top firms in the year 2000. You recognize them? I didn't recognize like most of them. You know, it's just like, it's crazy. And so it's basically like a game of how do you, you know, for you, I'm sure you're thinking about this where you've got this like storied history and you're like the features, you know, we've got these advantages and you know, the way I see it basically is like if you're an existing brand with application of force, you're better off than somebody who doesn't have the brand. But there's all these things that work against you naturally too, just over time.

[Sam Altman]

Exactly. And so you have to be willing to change everything about how you work. And so for like, you know, we moved the firm HQ to San Francisco because that's where the air is. It's not in Menlo Park. We have partner meetings multiple times a week. We don't. We can make an investment decision without bringing an entrepreneur into a full partner meeting. I think if you interact with us, you would feel like you're interacting with a brand new firm and the speed and velocity and sort of that we work. But then it rests on the foundation of all the learning experience, institutional knowledge, network and relationships of the company we've been a part of.

[Jack Altman]

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

[Sam Altman]

Yeah.

[Jack Altman]

What do you do to make them work? Because I agree. I mean, I take the view it's rare that they work is my perception.

[Sam Altman]

Well, you didn't work with Graylock.

[Jack Altman]

I haven't worked with Gray. I would. It's a mistake.

[Sam Altman]

It would have been special to work together.

[Jack Altman]

Maybe it's not too late. Yeah.

[Sam Altman]

Are you going to start another company?

[Jack Altman]

Yeah. You can be on the board of AltCap.

[Sam Altman]

I'd love that. I won't name the firm, but one of the major firms that invest along portfolio services once asked me a question I was catching with someone there and they're like, do you view portfolio services as in service to the company or in service of marketing for the firm.

[Jack Altman]

Yeah, exactly.

[Sam Altman]

I was like, obviously the former. And they were like, you're thinking about it absolutely wrong. It's only marketing if I have all these people running around and doing these services. I'm doing them because I want to convince the next entrepreneur that like I will be able to help them.

[Jack Altman]

By the way, it's also I want to convince my LPs that we are scaling and it's appropriate.

[Sam Altman]

Exactly.

[Jack Altman]

It's both.

[Sam Altman]

I think again, it comes back to like, what's the ethos? And like, do you view it as marketing or do you view it as like, I'm going to go create value for the founders I'm in business with.

[Jack Altman]

Yeah.

[Sam Altman]

And I'd say for us we view it as the latter, not the former. And that changes everything about how you approach it. Like, I'll give you a couple of examples about how we do it, right? One is we call them specialist teams. They're not portfolio services, they're specialists because they're like extremely good at what they do. Like, like Glenn Evans, who runs our engineering recruiting, ran all of recruiting for Slack and before that infrastructure recruiting for Meta in the heyday, right. He's got a team of like amazing recruiters, right. We have the same and exact. And so we treat people like first class citizens. They sit in our weekly partner meetings. They're like a key part of every firm decision we make. And so there isn't this first class, second class culture. I tell them, I tell our team that like, I would not be successful as an investor if I did not have the specialist support I have across, you know, recruiting, customer development, marketing and the rest. So that's one dimension which is just like, how do you actually approach them? How integrated are they into the firm? And then the second is like, what's the impact they go have and how intimate is the relationship they go build? And so, for example, like, and I don't want to create a commercial for our specialists, although I'd be happy to.

[Jack Altman]

We'll chop this in post.

[Sam Altman]

Yeah, yeah. But like the level of impact, like we measure the impact. Just like we measure the inputs, we measure the impact very quantitatively. By the way we measure things like how many engineers did we place at our portfolio companies? Like, we backed Resolve when it got started last year. In the last 14 months we've been in business with them, we've placed 19 engineers.

[Jack Altman]

Can you make more progress with a company early in its life?

[Sam Altman]

Exactly.

[Jack Altman]

So it is also connected to the strategy.

[Sam Altman]

Yes. And actually the way I, the Mental model I use is like we're an ironman suit. You as a new founder, you don't have any of your own machinery. You plug into our iron man suit. Right now we're recruiting for you, we're helping you find customers. Right.

[Jack Altman]

By the time I'm 100 people, I have my own recruiters, I've got my own sales team.

[Sam Altman]

Exactly. And so that's actually informs how we prioritize our talent, our resources, which is we're not spending time on the late stage companies. I mean we will on a very high leverage thing. You know, you're hiring a CRO that's high leverage but like 90% of their effort are on the companies that are just getting started. And if I can help that company get into the capital river faster. Yeah, like that's a huge win for the company, is a huge win for us.

[Jack Altman]

Can we talk about the capital river? What's the capital?

[Sam Altman]

So you and I have talked about this, but I think it was my friend Kevin Kwok who first gave me this analogy. I hope I'm not misattributing but one way to model what's happening in venture right now is there's this river and there are companies that get into the river. And if you're in the river, the currents behind you and everything is flowing every six months you have the ability to raise capital at three times your last price. That more capital enables you to hire better engineers. They come to you because also your value valuations higher, you're perceived as a winner. That enables you to build better product which then gets more customers, which enables you to raise more capital and all these things as a new company you need to get into this river. And by the way, it's this really funny dynamic because in every category there's like 10 or 12 companies and 1 to 2 get in the river and companies 3, 4, 5 are super pissed and they're like why am I not in the river? That company has less ARR than I have.

[Jack Altman]

Do you think the river company usually wins?

[Sam Altman]

I've changed my mind on this. 5 years ago I did not believe that to be the case. I don't think it will always be the case that it's the case. I think we will look back in 10 years and there will be ones in the river.

[Jack Altman]

That helps.

[Sam Altman]

I think it helps a lot.

[Jack Altman]

So do you believe in these king making rounds is like, is that like a thing that works?

[Sam Altman]

Again, works is not a binary. And you don't mean in a binary sense.

[Jack Altman]

It's hugely It's a creation of alpha.

[Sam Altman]

It's a creation of alpha and it's, it's hugely accretive to the.

[Jack Altman]

Would you say that's like a third bucket? You know, we talked about the initiation, we talked about like the far end of the barbell. Would you say that there's the people who can put you in the river, whether it's at series A or B or whenever it is like, is that another moment that you'd count?

[Sam Altman]

It depends on. It's interesting. Part of me says yes, because the argument for yes would be if I'm the firm that does that king making round and now that company's successful, then there's a pricing advantage on downstream. But then the flip is like, are those firms getting real price alpha when they're doing the king making round? And I think in some cases they are and in some cases they're not. And it connects also back to what's the terminal outcome size for these businesses. It's probably a minor source of alpha, but I'm not sure. I think it's way less alpha than the prior month pockets we were talking about. And also because I think there are many firms that can do the king making five probably.

[Jack Altman]

Right.

[Sam Altman]

I would guess it's closer to 10 than five, but yeah, it's in that range. Right. And what typically happens when these companies get Kingmade is like all of them compete and then no one gets picked and then the ones that lose, they do the next round 90 days later.

[Jack Altman]

It's kind of funny to your point because you're right, there's probably 10, not five. Yeah. So once one happens, someone else is like, well, I can do it too.

[Sam Altman]

Exactly.

[Jack Altman]

And then maybe you get two or three happens.

[Sam Altman]

And that's why in most categories you should expect there will be two to three companies in the this quote unquote river. But the reason why I bring it up is I think if you're a new founder and then also you do seed investments, we do a lot of seed pre seed work. You do need to get into the river. This connects full circle back to the specialist team, which is like, okay, well what's one of the things that leads to companies getting in the river? I believe it's like slope of early customer adoption and quality of customer taste. Right. It's like if you're building a new applied AI company and you get notion and cursor and figma to use your product, the odds of you getting in the river are much higher.

[Jack Altman]

I think the logo quality matters to.

[Sam Altman]

So much If I, as your investor, can go help make that happen, you know, because like, Figma's a portfolio company, like, then I can. I can meaningfully dent the odds on you getting into the river. Same true on talent. Like, okay, if you go hire a bunch of really strong AI folks out of, you know, DeepMind or Open, it's hard to do. But if you can get that talent into the business, there's a perception that you're likelier to build a winning product and therefore likelier to get into. River. There's all these subtle things around company design that you got to get right in that first year. And if you get them right, like the trajectory, even though the business doesn't look that different yet, like, it's not yet in significant revenues or anything like that, the underlying foundational architecture of the business is set up to be massively accelerated by getting in this river.

[Jack Altman]

How do you read these companies that are, you know, having these wild revenue ramps and, like, you know, obviously those, like, correlate with this river. But, like, you also see just like, forget the capital. You see these companies going, like, 0 to 100 in, like, no time. I know you've never. None of us have ever seen this before. What is sort of your, like, zoomed out sort of assessment of the situation?

[Sam Altman]

I think that you have to, like, really decompose these businesses into, like, their underlying components and then measure their revenue and, like, think about their revenue in that context. So, for example, one misnomer they see happening a ton is people are like, oh, this company's going 0 to 100. We've never seen that happen before. And it's like, that's true. If you think about it as an enterprise company. What if you think about it as a consumer subscription company, there are many consumer, you know, apps and like, when Facebook Marketplace got started, the App Store went live, there were many consumer utilities that went like, I don't know, about 0 to 100, but 0 to, like, tens of millions of quote, unquote, ARR very, very quickly. But they were not ARR businesses. They were like monthly, monthly recurring businesses. They had very low gross, you know, low gross retention. The very reason they were able to grow so fast also was like an underlying weakness in the business, which is like, low switching cost, very easy to adopt. You can swipe your credit card on a monthly deal. Like, it's a low price point. And so when I look at a lot of the companies that are growing on these really terrific revenue ramps, I think there's a lot to be excited by and to be clear, I think some of those companies are going to go on to be exceptional. Right. But I also think you have to like look at it with a lens of is it that like the very reason why you're growing so fast actually implies that you don't really have long term stickiness, product depth, high net dollar retention. And I think for some of these companies that's going to be be the case. And the reason why I'm trying to get this message out is I don't want us as an ecosystem to warp our perception of success. I'll talk to candidates who are interviewing at one of our portfolio companies, enterprise portfolio company, that's going from 4 million to 40 million, or let's say 4 million to 30 million. And they're like, oh, but this other thing went 0 to 100 is like 4 to 30 strong. The candidate's asking me this and I'm.

[Jack Altman]

Like yeah, 4 to 30 is unbelievable.

[Sam Altman]

It's. And by the way, this is like, you know, you're selling to enterprise. High gross margin. We didn't even talk about gross margin. A lot of those businesses don't have healthy margins today. High gross margin, high not demand retention. It's amazing. It doesn't mean necessarily that the 0100 is not also amazing. They're just, they're different businesses, they have different shapes. And so I would suspect when we look back in a decade from now and we look at the mega winners in let's say in the AI application category, there will be some that will have been these like zero to hundred to billion dollar kind of things. Some of those will also peter out very quickly. Right. But there will be many. Like the modal outcome, if you will, will be things that like let's say in the past, like when you were building lattice, like, I don't know, a great ramp was like 1 to 4 to 12, 12 to 25. Yeah, like maybe that's not 1 to 10 to 30 to 75, that's way stronger. If you play out that curve, that business is worth a lot more. But it still looks like the laws of physics still apply to it.

[Jack Altman]

It's going to be kind of interesting because I, you know, like a couple of years ago there were like a bunch of these AI apps where like these things are promising but not that many things have made it to 10. Then it became not that many have made it to fifth, you know, and like it's moving up. It'll be interesting to see how many of these actually make it to 500 or a billion and are still growing at these rates, I suspect will be a lot more than they've ever been in the past. It's just gimme a new interesting thing.

[Sam Altman]

I also have the positive view, but I'll give you the counter for a second. I'll come back to the positive view. So what's the mistake we all made in 2021?

[Jack Altman]

Many, many.

[Sam Altman]

So one mistake is we took growth rate to mean growth rate durability. And these are two different concepts. A major venture firm wrote this piece in 2021 and I think listeners can go look up the piece. It was something like 100x ARR. Multiples are not actually expensive. And the core argument in the piece was very reasonable, which is if I'm investing in a company that let's say grew from 1 to 5, so it grew 5x and let's say they're projecting 3x the next year and 3x the following year, then if I'm paying 100 times today, I'm only paying 10 times in two years. That's a cheap price. And they're right. But then the question is like how many companies that went 1 to 5 actually go 5 to 50 in the next two years? And even the more interesting question is how many companies that got to 50 get to 500 and how many companies that got to 500 get to 5 billion? And I think what happened in 2021 is there was this pull forward of demand because of digitization, all this stuff. And like you remember all the like video conferencing, related tools, they were growing at unbelievable rates. Yeah. But like they very quickly saturated the market demand. They pulled it all forward and then growth fell off a cliff.

[Jack Altman]

It's like everybody who was interested in them heard about them at the same time. Basically all the demand got expressed immediately.

[Sam Altman]

Exactly. So now, now connect that back to the current moment in time. Like why are these businesses growing so fast?

[Jack Altman]

Maybe it's the same reason.

[Sam Altman]

But with AI, one view would be like, okay. And I'm just, I love these companies. I'm just going to pick on a sector. Like if I'm a law firm, the managing partner of the law firm has probably come and said we have to buy an AI solution this year. Right. AI is going to transform business.

[Jack Altman]

It all gets evaluated right away.

[Sam Altman]

Yeah. And everybody's buying. And these AI legal companies are growing at rates we've never seen in vertical software. But now the question is like okay, cool. So they get to 100, they get to 200, they get to 300. But are they going to go from 300 to 3 billion in revenue or is it that all the demand got pulled forward, everyone got their solution and everyone's like, we're good. And maybe that company that got to 300 really quickly now completely atrophies growth.

[Jack Altman]

But it's an interesting thing because I think in sort of like the 2000 and tens SaaS era, I think the common wisdom was vertical SaaS is not as likely to get huge as horizontal. And people basically were like, there's a few verticals that really go far. Like Viv is a good example. For the most part, the horizontal things like Workday, ServiceNow, Salesforce, et cetera go a lot further. At the moment it seems like there's a ton of comparative interest in vertical SaaS. I think the contra on that would be something like what you just described where you know, it all just gets pulled forward. The markets aren't actually that big. I suppose the bull case on it would be something like it's easier to replace labor in specific areas and so there's actually much more market there than there ever has been before.

[Sam Altman]

Exactly. And, and again these things are not binary. And so like the real the question to me is like not like is it great to. I think there's going to be amazing outcomes in legal AI. Just to be clear now, are they going to be $3 billion revenue businesses, $5 billion revenue businesses, $10 billion revenue businesses, $1 billion revenue business? I think the jury's still out. And like the pro case, the constructive case would be labor. Replacement labor goes to software. The TAM's much larger.

[Jack Altman]

A firm doesn't pay you 100,000 a year, they pay you 3 million a year.

[Sam Altman]

Correct. And the early price points actually support the bull case.

[Jack Altman]

Yeah.

[Sam Altman]

And the contra case would be like there's this pull forward also these companies are over earning because right now like people are not discriminating their spend. But at some point the comparison is not going to be the cost of the paralegal. It's going to be the other AI solution that's willing to do the same thing for half the price. By the way, software pricing has never persisted based on labor no end, based on cost, always. Yeah, email's free.

[Jack Altman]

Yeah.

[Sam Altman]

I mean, what's the value of labor that email has replaced?

[Jack Altman]

Yeah, a lot.

[Sam Altman]

Now I'm picking like an extreme trite example but like it's not obvious to me that like all these companies are going to like right now. It's great because their ROI is so strong relative to human Labor. But at some point they're going to have to rationalize their ROI relative to the next best software alternative. And by the way, here's the Mega Bear case. The Mega Bear case is like software's cheaper and cheaper to build. There's less product differentiation. You'll have 50 companies all doing kind of modulo the same thing and pricing will completely compress to the inference margin that the underlying. I don't believe that. But like there's. That could. One could make that argument for sure.

[Jack Altman]

I mean, there's also obviously a lot of examples like Salesforce is an example, AWS is an example where there's tons of competitors and they still maintain a.

[Sam Altman]

Lot of pricing power and. Because they build true moats.

[Jack Altman]

Yes. And so some other way.

[Sam Altman]

Yeah, they become the system of record. They are doing something operationally that's very difficult. And that's why I take the bullish view on these vertical companies because I think these are amazing teams that are going to keep innovating and building net new products and figuring out new and new things to do and like keep moving up the waterline. But it's not as easy as I think the current revenue ramp supply.

[Jack Altman]

Are you more excited about horizontal over the long term?

[Sam Altman]

Look, I'm a student of history. The largest outcomes in enterprise software have been horizontal. A framing that Ashim often uses internally that I really like, and it's very simplistic, is the following. I think there's like 1.4, 1.5 trillion of it spend worldwide. Okay. There's 22,000 companies in the world that make north of a billion in rev. Okay, those 22,000 companies control like 93% of it spend. If you look at the biggest businesses in the world that are software businesses, they have built products that can be consumed by most of those 22,000 Workday. ServiceNow, Salesforce, Palo Alto Networks, CrowdStrike, Microsoft 365 and Microsoft's business. Right.

[Jack Altman]

It's horizontal enterprise software.

[Sam Altman]

It's horizontal enterprise software. I think, yes, there's going to be great vertical AI companies built and verticals are way better than they were in the past. But I do think the largest outcomes in this generation of software will be exactly like they were in the prior generations, which is they will be horizontal. And candidly, Jack, I feel like we're still so early and we're just beginning to see the interesting company concepts emerge. It's interesting. So Emil Boucher is the founder and CEO of Workday and also is a very successful partner at Greylock. He came to a partner meeting in 2017, a year after I joined the firm. And he said sort of tritely like guys, why are we looking at horizontal software? Like there's, there's no paradigm shift that will allow us to go take on the incumbents. We'd be better off just buying the like public stocks of the horizontal SaaS companies and we should actually go do vertical software. Right? Because that's where as a VC firm there's, there's low hanging fruit. And I remember there was like debate and skepticism and a lot of horizontal software companies got founded. But by the way, fast forward the clock, you would have been better off buying Salesforce ServiceNow Workday Palo Alto crowdstrike in the public markets. That basket would have done better than any horizontal startup SaaS basket at the time because it turned out that either people were building things for SMB, they were building niche add ons, but no one really could go build a disruptive kind of core company. Now fast forward. I was with Aneel at a Warriors game spring of 2023 and he was like his advice to me in Greylock was now's the time to go do new horizontal things. And why is it the time? Because it's the first time since 2005. 2005 Palatone and work to get started at the start of the cloud boom where you have the confluence of three things that need to be true in order to build new disruptive horizontal companies. One is there's a new pricing model, right? You went from license to SaaS to now outcome based pricing. The second is there's a new abstraction or unit of value for work because now you can actually complete end to end tasks. So you're selling something very different than workflow software that's used by people to complete tasks. And then the third is the data model's different. When you went from on prem to SaaS, you had this multi tenant elastic architecture that could support new use cases. In an AI world, why does the entrenchment of the system of record even matter? Salesforce has this whole schema that they think about customer objects with. The whole world is standardized on that schema. I'd argue that gives them a lot of defensibility. Why do you need that anymore? Like why should you as a CEO go hound your reps like update their account information. In Salesforce I should have an AI system that integrates into email, into my granola, into like there's a recorder in the sales conversation and it's just implicitly on the fly. Creating the data schema that I exactly need to power the use case I want, if I want to do a pipeline forecast, wouldn't it make more sense for that to be substantiated based on the texture of the actual customer conversation than what my Salesforce instance does?

[Jack Altman]

Yeah, I mean the data needs to live somewhere, but it doesn't have to.

[Sam Altman]

Be in a, in a structured schema.

[Jack Altman]

It's, I would argue it doesn't have to be structured.

[Sam Altman]

Exactly.

[Jack Altman]

But it needs to exist.

[Sam Altman]

It needs to exist. But I would say that a lot of what makes these systems of record that we look at today defensible is they have defined the ontology and they have done the structure.

[Jack Altman]

Yeah, exactly. And then if you want to plug in and you want to integrate with this thing, you have to match.

[Sam Altman]

Correct. And that's why whole ecosystems built around that. And by the way, you as a rep have learned how to use Salesforce. And what I would argue now in AI is it's all dynamic, it's all generative and so all of that work that you've done is no longer needed. So the confluence of those three things, it means you can go after CRM, you can go after service management, you can go after observability. By the way, there were head fakes. You remember when mobile started there were these mobile CRMs, but none of them became large because mobile was just a UI on top of the existing model. There's no change in pricing, no change in data model, no change in atomic unit of work. I think with generative AI that's all changed and I think we're going to see really, really large horizontal companies get found that we'll look back in the decade that were founded in 2025, 2026 that went after these large markets, sold to everyone in the world and that's how you'll build 10, 20, $30 billion revenue businesses and multi hundred billion dollar.

[Jack Altman]

Market cap application businesses to sort of like wrap up. I thought it'd be fun to go into some other not exact venture topics. I think one, I think our friend group is a very big part of our lives and hopefully I'll get everybody to come on at some point. We already had our boy Greg Rose and we'll get everybody. But how have you thought about that? Like obviously there's you know, 99% of it is about like the personal joy of the friendships but you know, many of us are venture, we're all in tech. Like how do you like think about how it plays into your professional life? If at all. And, like, has it surprised you in any ways? Or, like, what has it sort of been like for you?

[Sam Altman]

It's funny, right? Because, like, we, you know, there's this whole concept of, like, venture friends, which are not friends at all, or, like, you know, like these, like, kind of.

[Jack Altman]

Transactional relationships you like, and you have some. You see them periodically, but it's not like.

[Sam Altman]

Exactly. And I mean, that's the thing about the venture business is, like, social and professional are so overlapping. And the thing that I find so remarkable about our friend group is, like, it didn't start at all around a work pretext. It started purely around, like, just personal joy and of spending time together. Coincidentally, most of the friend group is investors, and we're all very different, like, in the way we practice the business. And then we spend too much time together. Right in. For me, I think one of the things that I really appreciate about it is it's really rare in life to have people who have high context on your work but truly want to see you win. There are people who truly want to see you win, but don't really understand the true nuances of your work. There are people who truly understand the nuances of your work, but they might not want you to lose, but they don't really care if you become the best version of yourself. I think what's so special about our crew is we all know each other super well. We make fun of each other continually, and we push each other to be the best version of ourselves. And I can certainly point to moments where I've made decisions because you or Greg or Brett has pushed me to be more ambitious or to expect more of myself, and I feel like vice versa. I think that's true for you.

[Jack Altman]

Totally.

[Sam Altman]

And that's a very, very special thing.

[Jack Altman]

Yeah, totally.

[Sam Altman]

And by the way, that is a little bit how old school venture worked. I think if you rebound the clock to the early 2000s, there was a lot more were friendship and collaboration in the venture business.

[Jack Altman]

Yeah.

[Sam Altman]

And there were pockets of true friends. They would work together, they would push each other, they play golf together.

[Jack Altman]

Got a little bit of that. Yeah, we got a little bit of that going. Well, it's funny because there's, like, you know, there's this group that we spend, like, inordinate amount of time with. And then I do think there's this, like, you know, there are venture relationships where I think Greg made this point when we did the podcast where he was like, you know, it got really hard to have any sort of relationships at, like, you know, the peak of COVID and now you're back to a zone where you can kind of have these like, relationships up the stack. Like if you're a series A investor, you know, you've got like these kind of like preferred relationships, series B and so on. And some of that exists, but it's still there's this different thing which is very lucky to get in adulthood, where it's like if you have people who are thinking about your own life, like, you know, it's like they care about it, like, like your family or something like that, it makes a huge difference.

[Sam Altman]

Makes a huge difference.

[Jack Altman]

Yeah.

[Sam Altman]

And I think particularly for people who spend most of their time working, like I'm thinking when we went to Santa Barbara with our families for a couple days, I mean, we spent a lot of the time talking about work related topics. Totally. And I think it's so unique to be able to have people who feel like family, but also are people you look up to and admire in a work context and learn from. And that's what we have with the crew.

[Jack Altman]

It also just makes it feel light where, like. Because like, you know, I think there's so many ways where work can feel really heavy, you know, in all sorts of different ways. But like, if you've got a group that's just incessantly making fun of any everything about you and what you're doing, I actually think it's really important to like get that, like, I value that specific thing where like nothing is too serious to be made fun of a lot.

[Sam Altman]

And I also think you and I talked about this once, but like, if you're going to work really hard for really long periods of time. Yeah, maybe decades, you should laugh while you're doing it.

[Jack Altman]

For sure.

[Sam Altman]

I think humor is just such, it's like one of the true endless sources of joy in life. And like, if we can bring humor into each other's lives continually, it makes the work more enjoyable.

[Jack Altman]

There's this funny thing, you know, like I remember when we were like talking about, you know, like you wrestle with all of these things about like, you know, because we're like, you know, ambitious people and it's so you're like, what trade offs do I have to make? And so like, I think over the years we've asked like, do you have to trade family for work? Do you have to trade joy for success? And like there's all these questions which, you know, there's like truth in all of them, but even like exploring all of those concepts and then you like Think about it. And you're like, actually, no. Like, you don't have to trade joy for professional. And in fact, I think in order to, like, be your best, you have to, like, have fun doing it.

[Sam Altman]

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

[Jack Altman]

Yeah.

[Sam Altman]

Like, one of the things I'm most proud of is Corinne got married this summer. Every single partner at Greylock on the investment team was at the wedding in Italy. Not because they had to be.

[Jack Altman]

Yeah.

[Sam Altman]

But because it was, like, super fun. And we, like, spent the four days together, and we went out to meals and we laughed and we told stories.

[Jack Altman]

The whole thing's a fun Dixie expense at that point, and it's great. But another topic, just more about your life that I wanted to get into is your health routine. You have a biological age in the teens, 17.6, but you never exercise. And I'm just curious how, like, listen, do you want to. Do you want to say anything? I think Ashim wanted me to ask you about this.

[Sam Altman]

Yeah, yeah, yeah.

[Jack Altman]

Me.

[Sam Altman]

Like, it all starts with diet. The number one thing, and, Jack, I'm being very serious. You're laughing is. Go ahead. I source food from as close to the farm as is humanly possible.

[Jack Altman]

Here's a good bit. Sam recently said, I bought these unbelievable. This unbelievable produce from the farm this morning. I go, where did you buy it? Turned out it was a grocery store, and they sourced it from the farm.

[Sam Altman]

It was a farmer's market. But. But, you know, I think in all, like, my couple tips, Jeff, I think you've learned from this is eat whole foods, exercise daily. You don't do. I like to swim.

[Jack Altman]

You don't.

[Sam Altman]

And. And make sure you get eight hours of sleep.

[Jack Altman]

Okay, that's good.

[Sam Altman]

What's your biological age?

[Jack Altman]

It was, like, 26.

[Sam Altman]

Yeah. Okay, so I'm nine years younger than you.

[Jack Altman]

Okay. Anything else in the daily routine stuff that we should talk about?

[Sam Altman]

Actually, one thing that I've learned from a Sheem, I think you do this. I actually think a number of, like, people who've had longevity and venture do this is making sure you have a lot of unscheduled time on your calendar. I try to keep one day a week completely unscheduled, and then I try to keep my mornings unscheduled until, like, 11. Because once you have a portfolio and a team, at some point in the day, your day becomes entirely reactive. And so you have to be incredibly Intentional about scheduling time to do long term thinking, long term work, and also to give yourself the energy to sprint. Because I think a lot of being good at this job, in my opinion is very quickly being able to detect when you need to go 110 miles an hour and then getting to 110 miles an hour really fast. And if you do that every single day, you're not, you're not truly at 110 miles an hour.

[Jack Altman]

It's also really keeping the open day or the open mornings is so hard because there's always like the, hey, I'm in town for these three days. Are you free? It's like, well, yeah, I am.

[Sam Altman]

Yeah.

[Jack Altman]

But that was supposed to be a quiet time.

[Sam Altman]

100%.

[Jack Altman]

Yeah.

[Sam Altman]

And that like, if you ask me what have I gotten better at over the last nine years? Because in many ways there are many more pulls on my time today than the warden years ago. Just better at not saying, but I'm just very good at saying no.

[Jack Altman]

What do you do to make sure you're still like exposed to like serendipity that you had earlier? Or do you think that that's just like a trade and now there's less of it?

[Sam Altman]

I think one of my the things I'm unhappy with is I do think there's a little bit less of it. And I worry about that because when I think about some of the early relationships I built, they really were so random in how they, they were built. Right. Like a good example is this week is AWS Reinvent. It's my first year missing it because I have three board meetings this week.

[Jack Altman]

Yeah.

[Sam Altman]

But there's so many like random events I went to at Re Invent where I met someone that four years later ended up being someone who we hired into the portfolio. Or I think I have less, less serendipity surface area today than I had in the past. But I try to very intentionally do things every week, every month to maintain some serendipity. One is like I try to go to at least an event every week. And then I also try to make sure I meet some founders every month who are completely out of network. And I don't get caught in the like, oh, well, I have a good network now and I'm just going to meet people through very strong referrals because then you become really insulin. And I think insularity is the death of this business. You have to like maintain a beginner's mind and keep the serendipity. As painful as it is to go to like an event in San Francisco.

[Jack Altman]

It is. And actually, maybe, maybe, maybe to wrap on that topic, you like me now as a, as a recent father, have left, left the city for, for the suburbs. Any, like, things about that that have like, hit you as reflections?

[Sam Altman]

The weather's incredible on the peninsula. It's so good. But putting that aside, look, I think first of all, I'm in San Francisco.

[Jack Altman]

A ton more days than not.

[Sam Altman]

More days than not. I always meet founders, especially new founders in person. And disproportionately they're in San Francisco. But I will say that there's a little bit of like having a clear mind that is very useful because you could spend your entire day meeting founders and you could feel good and go home and be like, I met 12 new companies today. But the real question is, like, were you awake in the meetings?

[Jack Altman]

I mean, for me, when I like finish a week where I just had like a zillion meetings all week, I don't think that, like, I don't come out of that week feeling like I crushed it. Like, I feel like scrambled.

[Sam Altman]

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

[Jack Altman]

I don't know.

[Sam Altman]

I would suspect it's on average three a week. Okay. I mean, if I compare that to myself three years ago, I was probably meeting 20 opportunities a week. Now are there some opportunities I didn't meet that I should have? Almost, for sure. Right. But again, the question is like, how do each of us equip ourselves to make a couple of really high quality investments every year? I like being in the city and then also, you know, being in our Menlo park office and having more clarity around.

[Jack Altman]

Like, okay, it's just quieter and you can think more.

[Sam Altman]

Yeah. And it's like, who are the people who are going to start companies in 2026 that I should go make sure I build relationships with today?

[Jack Altman]

There have been a bunch of these like, Charlie Munger clips going around recently. Obviously it's not the same thing as Venture, but I do think a lot of what he says, like, you can probably apply some percentage of it where it's like, you shouldn't be chasing everything. There's very few things that matter. Like, you should be thinking and studying a lot, not like talking all the time.

[Sam Altman]

Yeah. And I.

[Jack Altman]

You talk so much.

[Sam Altman]

And I will say that, like going through one boom, bust cycle has really reinforced that for me because I can't tell you the number of companies I looked at in the 2020, the 2019-2021 period where we decided not to invest and they became super hot and like, you know, the valuations ran up to unicorn and then they terminally are now exiting for less than preference staff. But it's so hard in the moment. We have newer partners who joined our team at Yearn to Venture and it's so painful. They're like, we didn't do this and just got three new rounds got done. It's like, okay, well did the fundamentals change? Maybe we were wrong in their cases, we were wrong. We underestimated the person, of course we underestimated the market. But there are going to be many cases where our initial read was right. It's just going to take time for it to play out. And I mean, Charlie Munger and Warren Buffett are the best of the best at this, but how do you have that patience and that conviction in your own framework, Mark, to like not get caught up in that race? Because I. Everyone who gets caught up in that race, I think fails.

[Jack Altman]

Yeah. It's a great place to end it. Sam, I'm grateful for you. This is very fun.

[Sam Altman]

Jack. So special. What a pleasure.