Inside a16z’s $15M Bet on Cluely: Lead Investor Bryan Kim Reveals All

Bryan Kim https://x.com/kirbyman01⁠, Partner at Andreessen Horowitz (a16z), focuses on early-stage investments in consumer and application-layer AI. He has invested in some of the most prolific consumer companies like: Captions, ElevenLabs, BeReal, Function Health, and more. One of his recent investments is viral phenomenon, Cluely, a controversial San Francisco-based AI startup founded by Roy Lee. Cluely has raised over $20M to date, with their most recent $15M investment from Bryan at a16z. Cluely is building an invisible desktop assistant to help you “cheat on everything.” We talk about: • The wild backstory behind investing in Cluely & ElevenLabs • Why he calls momentum “the moat” in the AI era • What it takes to raise a Series A today • How context makes AI products infinitely better, and harder to replace Brought to you by: Brex—The modern finance platform, combining the world’s smartest corporate card with integrated expense management, banking, bill pay, and travel. As a Sourcery listener, you can unlock up to $500 toward Brex travel or $300 in cash back, plus exclusive perks to help you move even faster: https://brex.com/sourcery Kalshi—The largest prediction market and the only legal platform in the US where people can trade directly on the outcomes of future events: https://kalshi.com/sourcery Fourthwall—The #1 way to sell merch online — Fourthwall is the easiest way to launch a fully branded merch store—used by big brands like MKBHD, Acquired, & even the Smithsonian. 100+ products. No upfront cost. Visit Fourthwall to start today: https://fourthwall.com/ Follow Sourcery for the latest updates! https://www.sourcery.vc/ Connect with us: 1. Bryan Kim: https://x.com/kirbyman01 2. Molly O’Shea: https://x.com/MollySOShea 3. Sourcery: https://x.com/sourceryvc (00:00) Trailer (01:04) Welcome Bryan Kim & Cluely Intro (02:26) How Bryan Met Roy Lee (07:00) The $15M Bet On Cluely (09:58) Cluely’s Hype Media Strategy (14:18) Momentum Is The Moat (20:37) Brex’s Full-Stack Product Suite (22:26) Chasing ElevenLabs Across the Globe (26:04) Function Health & Preventive AI (32:39) Why Creative AI Tools Are Exploding (34:54) Deepfakes, Risks & Regulating AI (38:08) Startup Exits, Liquidity & What’s Changing (43:50) Do Post-2024 Startups Scale Faster? (49:04) OpenAI Usage beating Social Media? (51:58) The 3 Metrics Bryan Looks For (58:07) Growth vs. Profitability: Where We Are Now (01:02:00) Will Tech Layoffs Keep Rising? (01:04:35) What’s Next for Consumer AI (01:05:49) Will Roy Lee Become a Billionaire? (01:06:57) Jony Ive × OpenAI: New Ambient Device? (01:09:56) Waymo, Robotaxis & the Future of Cities (01:11:47) Final Thoughts: It’s Time to Build

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  Bro, how'd you meet bro? Bro, you gotta see it with an exclamation like, "Bro!" "How'd you meet bro?"

• 0:05Speaker 01

  Bro, I'm waiting for the after-party.

• 0:07Speaker 00

  What after-party? Bro, what do you mean? I met bro through Paul at 20BC. And it was this weird energy where there's these people working feverishly, marketing like ideas on one side and Roy going, "Oh my God, crazy."

• 0:20Molly O'Shea?

  In the comments section, the biggest question people had was, "Why would an investor put $15 million into this company?"

• 0:26Speaker 00

  People ask like, "How do you build conviction over time?" It's over time, right? It's people, it's the first call where we just talk life to actually seeing in person and seeing the effect that he has on other people and just seeing it translate into numbers, which I love. If you're building something, build it for the entire world. And 11 Labs is an example where the initial market when it was pitched, it was people were like, "Oh, dubbing."

• 0:47Molly O'Shea?

  Yeah.

• 0:48Speaker 00

  And one of the questions that we had was like, "How big is dubbing market?" Lovable has this quote, "Last piece of software, cheat on everything." What does that mean?

• 1:04Molly O'Shea?

  Brian Kim, welcome to Sorcery.

• 1:07Speaker 00

  Molly, thank you so much for having me.

• 1:09Molly O'Shea?

  Well, we have so much to cover today.

• 1:11Speaker 00

  We do.

• 1:11Molly O'Shea?

  Obviously, we need to run through Cluely first.

• 1:14Speaker 00

  Let's do it.

• 1:14Molly O'Shea?

  So, Brian, what's up, bro?

• 1:17Speaker 00

  How's it going, bro? We gotta start with bro if we're talking Cluely.

• 1:20Molly O'Shea?

  Bro, how'd you meet bro?

• 1:23Speaker 00

  And I think, bro, you gotta see it with an exclamation like, "Bro!" "How'd you meet bro?"

• 1:28Molly O'Shea?

  Bro, what do you mean?

• 1:29Speaker 00

  I met bro through two tracks. I was reminded, actually. Paul at 20BC

• 1:37Molly O'Shea?

  Oh, wow.

• 1:37Speaker 00

  Had introduced me to this crazy Columbia kid. I have an email to prove it. And then one of my scouts and person I really enjoy working with, Ali Debo, who traffics in young founder community, sort of said, "Look, like you should, like, I'm very excited about Roy." And so I reached out and was like, "Bro, we should talk." He goes, "I don't want to talk."

• 2:03Speaker 00

  He initially says, sure, and then he changes his stance. I don't want to talk. I I'm very early, like, don't want to talk with you. I don't want to talk with the kings of EC or the dens of capital. Let me just do my thing.

• 2:15Molly O'Shea?

  Conqueror of the universe.

• 2:16Speaker 00

  Exactly. So I sort of put on my charming face and say, look, we don't need to talk about fundraising. In fact, I promise we will not talk about it. Let's just you and I meet so that we build relationship and talk life.

• 2:31Speaker 00

  To that, he said, yes. So that weekend or Friday, I forget when, but we get on and we have like a 30 minute chat. And he's like, I walk away thinking like, it's crazy. All right, this this is gonna be fun. And he goes through life story a little bit, like the origin story. Where'd you grow up? What do you do? It wasn't like, I'm building this and it's so exciting. It was more the origin and then the coming of Roy Lee. And I thought that was really interesting. And so I learned that he had moved to SF a few weeks later. And, you know, when I was in SF, I just sort of made a point to say, can I come by? Which he said, yes, just, bro, swing by. Everything's cool. So this actually might be the exact way he said it. And so I come by. And then I see a couple of things.

• 3:16Speaker 00

  There is a, you know, founder that is young founder that are very, you know, well networked in Silicon Valley that is just hanging out. You just at the office or house or whatever it's called. And there's a, there's a engineer who just happened to stop by at the house. Cause he saw it on, I think he saw it on Instagram and said, I just, I was just very curious. I wanted to come talk to you. And it was this weird energy where there's these people working feverishly, marketing, like ideas on one side and Roy going, oh, my God, crazy. And you have like two really accomplished people just coming to talk to him. And I I sort of walked away thinking, there's something pretty special here. It's it's not sort of all, all the noise and jazz.

• 4:00Speaker 00

  There's actually something substantive here and people are reacting to that. The third visit, I I think I came with steak. Cause the second visit, he was crushing a steak. There's nothing on it. There's no.

• 4:15Speaker 00

  Can't tell, I might be from, Costco steak would be good. I'm not sure, but I don't think he had anything on it. No salt, no anything, just steak.

• 4:26Molly O'Shea?

  Yeah.

• 4:27Speaker 00

  And with Coke. And I thought, okay, this is weird, but fun. So I'm gonna come bring steak next time. I did, and he ended up showing some, you know, metrics. Like, oh, like this is how we're growing. And there's a enterprise interest and there's all these like revenue that they're generating. And that's when it clicked where, you know, people ask like, how do you build conviction over time? It's over time, right? It's people, it's the first call where we just talk life to actually seeing in person and seeing the effect that he has on other people. And, and third was really just seeing it translate into numbers, which I like. So that's sort of when it came, came all together.

• 5:07Speaker 00

  And it's funny, we'll maybe talk about later, but things are growing too fast right now. Right? Everything is growing very, very rapidly from the era of momentum. And as we see that, I have this new theory where you need to catch them at a certain time. We did a lot of work to understand where when things are inflecting, you probably have two to three weeks to catch it. And by catching it, I mean convincing the founder, doing the diligence, getting to a handshake. And that's really hard to do. One, if you didn't know them before. And two, like, that's a very short timeframe. And so that's when we moved into motion.

• 5:47Speaker 00

  And, you know, we sort of moved very quickly to get to an agreement with Roy before the launch videos and all the viral, viral stunts as well.

• 5:59Molly O'Shea?

  Super impressive. I think one of the biggest questions a lot of people had in the comment section, which is always fun. Was

• 6:07Speaker 00

  That's where internet lives.

• 6:08Molly O'Shea?

  That's where the internet lives.

• 6:09Speaker 00

  The comment section.

• 6:10Molly O'Shea?

  And that's why X is so good. X is literally just the comment section.

• 6:13Speaker 00

  It is.

• 6:14Molly O'Shea?

  So in the comment section, the biggest question people had was, what is he gonna do with fifteen million dollars? And why would an investor put fifteen million dollars into this company? So what is he gonna do with this money? And how'd you gain conviction for that?

• 6:29Speaker 00

  Yeah, I think you probably asked this question to him as well. It's interesting. Venture is a little bit of triangulation art, right? It's not just, hey, like, tell me exactly what you need. I'll give you that X amount plus twenty percent for buffer, and here you go. Because sometimes that doesn't work for fund like us. We do have some ownership requirement, given the size of the fund and how big we need to believe the company becomes. And there's some triangulation of where that needs to work. So maybe the founder says, hey, like, I have a need for thirty million dollars. But that risk profile doesn't work for us, and we can only afford less amount. And the opposite can be true, where, hey, maybe I just need two.

• 7:12Speaker 00

  But maybe you want five, because, you know, the ownership requirement, everything sort of works. That would be the only way that worked for us. So there, part one, there's a little bit of triangulation there. Part two, I think if you think, you met Roy and the internet has met Roy. He's a very ambitious, very ambitious founder. And for very ambitious founders, it's interesting, especially when growth is so quick. Capital actually allows you to do certain things. And I'll give you one example would be actually lowering the hurdle for your product to be used in more of a free manner. And turning a little bit more into freemium, where you know there'd be a conversion. You know the people who convert will be retained.

• 7:55Speaker 00

  But you actually, you know, expand the product surface for people to try. And so that's one way to think about utilizing capital. The other ways to think about it is actually, you know, there, I sort of wrote this piece, Momentum is a Mode.

• 8:10Molly O'Shea?

  Yeah.

• 8:12Speaker 00

  You know, extra capital does give you ability to, and you need to sort of obviously work with founders who are thoughtful and have a very clear idea on how they want to use it, whether it's marketing or product building or hiring the best people. And I think that's exactly what it was being used, right? The 50 in turn is kind of a joke, but also there is a bunch of top tier engineers that are knocking down the door. So, part one, talent. And talent is one, expensive, but also there's a little bit of signal when funds like us come in where they say, okay, that's a good, good place to go. So, one is talent, two is marketing, and three is building out the product. So, that's sort of how I think of where the money's gonna go.

• 8:54Molly O'Shea?

  They are particularly polarizing with the polarization they've done. Yeah, you wouldn't believe it, but they, they do pull some stunts. I love his framing on this and the shift of between different platforms. So, what you see on Instagram and TikTok, their content wouldn't, it wouldn't be polarizing, but they found this, this kind of wedge on X where, yeah, people are like a little bit more excited by it. They're a little bit more provoked by it because they're not used to seeing it. That's one thing, like that's the media scope. The question I asked him was, okay, so are you concerned about your

• 9:38Molly O'Shea?

  professional risk with those? And what you feel will be too risky for, you know, your investors, your, your institutionally backed? How do you think about those stunts with venture capital and raising money from an institution like A16Z?

• 9:55Speaker 00

  Yeah. So, maybe we'll talk a little bit about how Roy thinks about it, which is, you know, the difference between the tolerance, if you will, of the spiciness of the content, whether it's in Instagram, TikTok, or Twitter. And I think Twitter is probably a little bit more polarizing, or X is a little more polarizing, and people react with a lot more. Animation, if you will. So I think he sort of figured that zone pretty well. And that zone, to me, is probably pretty wide, right? It's not like this exact type of content will work and that type of content won't work. There's some range of content that will work. And he's sort of tiptoeing around those areas to figure out what works.

• 10:40Speaker 00

  And I think sort of you learn through experience a little bit there. So that's part one. I think two is, your question is, how do you think about sort of when it's institutionally backed? Like, what are some of these stunts? And I think the way I think about it is this. Ultimately, we want to back companies that become generational and become very, very large. And a lot of the origin story of companies can be questioned when looked back in, from the history or from sort of current looking back. Like, Facebook started with Hard or Not. Snapchat's beginning at Stanford campus was, you know, they had a very specific utilization element.

• 11:19Speaker 00

  And, you know, I think a lot of these products, when you look back to the origin, there's questionable elements where, oh, like, is that really the right, you know, use case for it? And I think ultimately, tech moves forward and people sort of adapt. So I think that's the second. Third is, where I'm most sensitive is on hiring and enterprise customers.

• 11:42Molly O'Shea?

  Okay.

• 11:42Speaker 00

  So it's a lot less about, oh, AC16Z backed it. Aren't you worried about the polarization? I'm a lot less worried about that because, as you know, we, as one of my partners put it, we run into fires.

• 11:55Molly O'Shea?

  Yeah.

• 11:56Speaker 00

  Right? We're not, we don't shy away from that. So that's okay. What I am more focused on is making sure the image and the brand and what he's building is aligned with the eventual goal, which is to sell the product and apply the product to mature use cases such as enterprise and make sure we're able to hire people and a world, like, people on the bleeding edge that may or may not share the viewpoint of where Cluely stands today. And what is, like, how do we actually moderate for that? How do we actually make sure the more thoughtful message continues to bubble up such that people can pierce through the noise and understand what we're trying to build?

• 12:40Molly O'Shea?

  Their media strategy, I think, encapsulates really well this current moment in time and how distribution is seeping out all over the internet, how consumer companies have to think about marketing, go to market. They kind of created a playbook and now it's being replicated. So it's like really high-quality viral video launch, like different kinds of clips, getting lots of people around you, gathering a community, going through many different channels. How do you see the way in which companies, especially on the consumer side, need to go out today? You mentioned just, um, you mentioned momentum as a moat. So how does that fit into this as well?

• 13:21Speaker 00

  There's an element of the current discourse being around that, but ultimately, I think what it is, is we're living in a slightly different era. So when I say momentum as a moat, I don't mean it necessarily that that will always be the case.

• 13:33Molly O'Shea?

  Okay.

• 13:34Speaker 00

  It's not at all. In fact, if you look back all my writing and my stance on this in the pre-AI era, I love products that are crafted with care. I love products that are super thoughtful. I love products that are retention-first. In fact, they're back be real with or without the growth curve because their retention was so high. And it's like this product slaps. Like, I don't know if you're going to use it, but it's so good. And if people get hooked on it, they will use it. So I was in that camp. I sort of went through a little bit of a change i- in this period of AI. I believe there are a couple of my beliefs where I think AI is bigger than internet. And I think all the lessons that I learned in investing or thinking about

• 14:15Speaker 00

  product in the AI and mobile era may be dated, or maybe slight, need slight modification. And the modification to me is if I believed really thoughtful, crafted products over time with love and care was important, I think that's really hard to do right now. You can try to do it, but models come out every week. Like when you talk about caption, they have like amazing Mirage Studio model and that week, there's like at least five to six meaningful model updates and launches. So how do you actually craft something with care and like craft over longer time horizon? When the underlying plate is shifting so quickly?

• 14:59Speaker 00

  So one of the reason why I say momentum is a mode is we are in this weird primordial soup of AI where everything's bubbling and it's unclear and we don't really know it's still super early. There's seven billion devices and number of people using more than chat GPT are probably pretty low. So we're still very early, which means that in order to break through the noise, in order to actually establish mind share, in order to actually start the flywheel going in terms of attracting the best people, applying the best tech, being able to sell your product with revenue so that you can continue that journey requires momentum. And when I say momentum, I mean distribution as well as product velocity.

• 15:40Speaker 00

  If you don't have these, it's just really, really difficult to break through the noise. And therefore momentum as a mode is to me is reflective of the current environment where I believe AI is huge and I believe we're so, so early.

• 15:55Molly O'Shea?

  It's, yeah. It's a pretty powerful time we're in. I was just at Kirsten Green's Humans in the Loop Summit for Forerunner. She had a lot of really great speakers. Reid Hoffman was one of the first keynotes that they had. They had a nice.

• 16:11Speaker 00

  Was it AI Reid or actual Reid?

• 16:13Molly O'Shea?

  It was actual Reid.

• 16:14Speaker 00

  Oh, okay.

• 16:15Molly O'Shea?

  Yeah, he had to confirm that ahead of time, but you know, there is some gray area there. We're not entirely sure. Uh, he was dialing in from, from Boston.

• 16:23Speaker 00

  I did see that. That's why I wasn't sure, like, is that?

• 16:26Molly O'Shea?

  Could be.

• 16:27Speaker 00

  Unclear.

• 16:27Molly O'Shea?

  Unclear. But between him and Kirsten, what they were talking about was. With things evolving so fast, what's happening today is not going to be relevant in three months. What happened three months ago is already obsolete.

• 16:42Speaker 00

  It's true.

• 16:42Molly O'Shea?

  Things are moving so fast, so capturing it now, like you mentioned, is so critical.

• 16:48Speaker 00

  It gives you the right to fight another day and be relevant another day.

• 16:51Molly O'Shea?

  Yeah.

• 16:52Speaker 00

  If you don't have it now, it's just harder to capture that. And that's a sentiment that I'm trying to capture where I'm not trying to craft this narrative of nothing matters, the product doesn't matter, retention doesn't matter, let's just move. That's not what I'm saying. I'm saying like, we're in a very specific time. And all the lessons that we had from the internet and mobile era may just be a little differently applied right now. And ultimately, you get to build the, you get to build a plane as it falls or build a car or fight as it falls off the cliff. In order to do that, you need to move very, very quickly. And that's sort of the point.

• 17:25Molly O'Shea?

  One of the things that Roy said in the pod when we were talking about Brex and his spending habits on Brex was, spend big, move big, make big moves.

• 17:35Speaker 00

  Move fast, break things, spend big, you know.

• 17:37Molly O'Shea?

  Are you worried about his spending?

• 17:42Speaker 00

  If it was reckless, I would, right? But we know the product has good margin. He's said a couple of times, he's profitable.

• 17:52Speaker 00

  In that case, then, you know, within, within, you know, budget is the wrong word. Within the right framework, keep going. And there are multiple people who ask, oh, how much did these like marketing antiques and like this launch video cost? Very often time, the cost is not that high. So it looks flashy, it looks very good, but I think that's also a skill.

• 18:14Molly O'Shea?

  Yuri Kim and Alfred Lin at Humans in the Loop were talking about going big.

• 18:20Speaker 00

  Yeah.

• 18:20Molly O'Shea?

  Alfred Lin especially said, you should be going for the whole world.

• 18:24Speaker 00

  Absolutely.

• 18:25Molly O'Shea?

  There's eight billion people here, go big.

• 18:28Speaker 00

  Yeah.

• 18:28Molly O'Shea?

  And think about the craziest product you can do and go after it. Because what do you have to lose?

• 18:32Speaker 00

  Absolutely.

• 18:33Molly O'Shea?

  Do you think that Cluely is doing that?

• 18:35Speaker 00

  Yeah, I think so.

• 18:36Molly O'Shea?

  Yeah.

• 18:36Speaker 00

  So cheat on everything is a very powerful message. It pisses people off.

• 18:43Speaker 00

  Look, it's a desktop, it's a translucent desktop assistant that helps you. And if I were on a Zoom with you and let's say I didn't look up your background, I would use Cluely and it'll show me translucently your background and the talking points and your things that you and I can connect on. That's just a good sales tactic. That's a way to connect with others better. So, one, I think that use case is absolutely global. And let's like take that to other, you know, companies and ethos, right? I absolutely agree that if you're building something, build it for the entire world.

• 19:22Speaker 00

  And 11 Labs is an example where the initial market when it was pitched, it was people were like, oh, dubbing.

• 19:28Molly O'Shea?

  Yeah.

• 19:29Speaker 00

  And one of the questions that we had was like, how big is dubbing market?

• 19:33Speaker 00

  Frankly, Molly, I don't know. But ask that question another way.

• 19:39Speaker 00

  Audio is one of the main medium of human interaction. When you automate and inject AI into all things audio, how big is that market? If you dismantle Tower of Babel and you can translate all things simultaneously, whoever you talk to, how big is that market? The answer is, I don't, I don't know at all. Not because I think it's small, because I think it's infinite. Lovable has this quote, Levanton, when he says this, where it's a great tagline, last piece of software.

• 20:10Speaker 00

  What does that mean? I don't know. Well, maybe the, maybe the product actually helps you create so many different products that it is the last piece of software. Cheat on everything. What does that mean in terms of getting assistant that is timely and relevant to you at any given time? I don't know what the end market is. So I do think he's going after a very relevant and global market. And I'm excited to see what, what happens.

• 20:36Molly O'Shea?

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• 21:17Molly O'Shea?

  With same-day and even same-hour liquidity, access your funds anytime. Companies like Scale AI, DoorDash, Service Titan, Hims, Anthropic, Flexport, Robinhood, and Plaid, trust and use Brex. Start today at brex.com/sorcery. That's B-R-E-X dot com slash sorcery. I want to get into your personal portfolio further. You are a legendary investor. You've invested in some huge names, especially in the consumer AI space. Talking about Eleven Labs, how did you first connect with them? And how did you gain conviction?

• 21:55Speaker 00

  Another really, really fun story. I have a portfolio founder, Gaurav, from Captions, actually my first investment ever.

• 22:03Molly O'Shea?

  Okay.

• 22:04Speaker 00

  And I trust him. He has a very strong technical acumen. He's an extremely strong product thinker. He calls me one day and says, BK, I gotta get in touch with this company. And it's the best audio AI product out there. And mind you, we had been already really interested in audio AI. And he goes, I can't get in touch with the founder. One, can you please use your VC-ness to go reach out to the founder? Maybe he'll respond to you. Two, it is by far the best product that he has used. So that carries weight to me. So I'm intrigued. Let's dial back a month or two to three months. ChatGPT had launched, we're all very excited. It's a moment, it's a watershed moment.

• 22:50Speaker 00

  And then we had two school of thoughts. One is that, okay, mother model may win everything. Okay, that's one school of thought. ChatGPT is very, opening is very important. Like, maybe open source version of that's very important. The other school of thought would be, there will be winner in each, winners in each modality. Image, video, 3D, world, audio. Let's go collect infinity rings of all the winners in each of these, like, each of these modalities. So that was like, second school of thought. I've always been very excited about audio, so we had met a bunch of companies in the space. And we hadn't met, made, made any sort of investment. And then that's when the Garof call happened.

• 23:32Speaker 00

  So we do a bunch of, you know, work and we meet Matty and we immediately sort of sense that guy is different. He's very thoughtful and it's a very AI native team. He and his co-founders, childhood friends. He's like, pure true is technical and so is Matty, but he also understands product and go to market. So we thought this was a great team. So the thing is, like, we had already had made the decision, like, this is it. We want, we want to be part of it. And we asked the very important question. Matty, we love you. We'd love to work with you. Are we your first choice? And Matty demeures a little bit and goes, uh, we like you.

• 24:16Speaker 00

  And so after, after our call with him, I'm like, oh, great. Okay, we'll keep working on this. Blah, blah, blah. And then we hang, hang up, immediately get on a debrief call. Jennifer, myself, just Seymour, we're like, we're losing. I don't know what's happening, but he did not say, I love you back. This is not good. And I booked, I got in Uber, I packed over two minutes and I got in an Uber. And I called my assistant and said, get me on a flight to London that is leaving in 90 minutes. So I don't know if I can, but like, I don't care what you do, please help me on it. So I ended up flying to London, sort of told Matty, I'm like, I happen to be in London tomorrow, let's chat. And

• 24:59Speaker 00

  We ended up getting to terms and an agreement in the next, you know, in the four hours I was on the ground. And then I came back to join our offsite in Las Vegas. So that's the story of eleven labs. And I think that story highlights a couple of things. One is like, we were very excited about the modality and the like teams that are building in it already. And two, you know, I think when you're excited about something, I think conviction matters and showing up matters.

• 25:25Molly O'Shea?

  Yeah, between this and Cluely, it's clear like you have relentless focus on.

• 25:30Speaker 00

  You know, they're fly there or bring steak, you know?

• 25:32Molly O'Shea?

  Yeah, you need to fly. If if someone's giving you the cold shoulder, you gotta fight for it.

• 25:36Speaker 00

  Absolutely. I think I think the bro actually talked about it. Bro, if you're like looping your assistant, you're not getting allocation. Like, yeah, like, I don't like, we move.

• 25:45Molly O'Shea?

  Yeah, you set a really good standard.

• 25:48Speaker 00

  I think the question is, look, if it's worth doing, it's our job. Like, what is a strong form of that conviction and why dilly-dally?

• 25:55Molly O'Shea?

  Why dilly-dally?

• 25:56Speaker 00

  Why dilly-dally?

• 25:57Molly O'Shea?

  You don't need to. I love eleven labs.

• 25:59Speaker 00

  It's incredible.

• 26:00Molly O'Shea?

  Thank you for funding them. I use it for things I'm not going to share because I don't want to release any secrets. But they're they're super, super great.

• 26:10Speaker 00

  Yeah, and I think AI is changing everything. I'm extremely excited about eleven labs. And of course, the other angle we can go to is context, right? AI gets hundred times better when you give it context. And one of my colleagues, Zach Cohen, actually said this was really interesting. Think about how much input you give Google and how much input you give ChatGPT. Google, I might say, places to go in Japan. Okay, well, that's that's the input. ChatGPT, I might say, well, I'm gonna go to Japan with my good friends and it's gonna be this length of time and I have this type of travel budget, that type of taste. Like, can you come up with itinerary? You just gave way more context to the thing.

• 26:54Speaker 00

  And I think, one, that I think that's powerful. And two, when you give context to it, the result you get back is 10x better. So that got me thinking on the, you know, if we're talking consumer AI, like where, where, which areas can a consumer give context and get a 10x better result? And one of the areas that we thought about was health, which is why, you know, in terms of physical health, we sort of made an investment in function health that sort of looks at your blood test and, and really over time overlay the AI doctor to tell you.

• 27:25Molly O'Shea?

  I love function health. I'm 18 years old, according to them, and because of that.

• 27:30Speaker 00

  Good for you.

• 27:30Molly O'Shea?

  Because of that, I posted that on Twitter, I posted on my newsletter, sold out all my referral links, had to get more, got some from the function team, sold out all of their referral links, it was flying.

• 27:42Speaker 00

  Yeah, it's, we, we talk about, it was, I talk about this with Jonathan, the founder, where let's become a morally criminal product not to buy.

• 27:50Molly O'Shea?

  Yeah.

• 27:51Speaker 00

  Right? Like if, if it's cheap enough at some point, you're sort of looking around and, you know, dinner table and somebody think, oh, let's go watch Netflix. Netflix total over a year is probably, what, like $200, $300? And let's say one of your neighbor, you heard a story that so and so got sick. It's morally criminal for the head of the household, whether it's the COO of the household, the moms or the dads to say, look, like, let's make sure we're good in health. And let's spend 200, 300, 400, $500 a year to make sure we're good. How is that not a very reasonable, if not a morally compelling product to buy?

• 28:33Molly O'Shea?

  Right. And because their price point is so low, I'm a super fan. But because their price point is so low, they do democratize access to a form of health that no one has access to before.

• 28:45Speaker 00

  It's so expensive.

• 28:45Molly O'Shea?

  You don't need insurance to do it. You get a full blood panel. I'm like, I'm selling them too hard right now.

• 28:51Speaker 00

  But that's the thing, like I, so I grew up in Korea, where I'm a strong believer that preventative is a way to go. That's a way to like, it's too, it's too late to fixing it when by the time you're, you know, going into a emergency, emergency room here in the US. So I'm a strong believer of that. And I remember, I remember distinctly, I was at Snapchat early on. I hired some of the best people that I know. I begged them to come work, work at Snap. One of them at 24, 26, I, I forget. Only child, Harvard educated, extremely hardworking, incredible human. And she calls one day and says, I have a stage three, stage four cancer. My heart broke. I like balled that day.

• 29:37Speaker 00

  But what that does is everyone around her rushed to hospitals and say, can you please check if I'm okay? Because you're scared for yourself too. And I distinctly remember hospitals saying like, nope. You got, you need a referral for this. You need like that, this to get some cancer testing. You need some other things to make sure that you can check your health. And I remember being very pissed off. And so, again, going back to the story of like origin story and why we backed function is a. I strongly believe part one, health needs to be taken back into consumers' hand. Two, once you have that result, you plop it into AI and it tells you how you're doing.

• 30:18Speaker 00

  Because frankly, I don't, if there are 130 biomarkers, I don't understand 129 of them. I don't get it. I don't know what these are. I genuinely don't, but I, I've gotten the result over two tests and I put it in chat GPT. And I ask, hey, am I doing better? Am I healthier or not healthier? It told me my BMI is higher, but other than that, every other blood biomarkers, I was doing a lot better. I didn't need to know what it is. I can drill down to any level that I want. And I think that's the power that AI wouldn't enable and I'll have so much trust in that. Because I, I know that's actual data, it's trained on things, it's good.

• 31:00Molly O'Shea?

  I think to emphasize a couple of points and, and bring this to the top. Consumer AI is not just media. It's not just social media. It's not just advertising tools or creation. It's, it exposes every personal, every personal like inch of our daily life.

• 31:20Speaker 00

  Individual decision making, essentially.

• 31:22Molly O'Shea?

  Yeah, individual decision making, health, personal life, work, et cetera.

• 31:28Speaker 00

  Absolutely.

• 31:28Molly O'Shea?

  What are some other areas that you've invested in in consumer AI?

• 31:32Speaker 00

  I've been very excited about creation. We go back to this era of AI, which I think is very, very early. And internet has that law, right? Like 99, one, where like 1% creates.

• 31:42Molly O'Shea?

  Yeah.

• 31:43Speaker 00

  Think about the number of people who actually fluently use AI today. I would say that's less than 1% today. And my belief is there's a strong overlap between that early, early adopter curve and the creative energy. So what I am really excited about right now in this era of AI is, especially as it relates to individual AI almost, is creative energy, creation tools. So captions, Viggle, civit.ai, and all these sort of glyph, these are all the creative tools that I've invested because I'm very excited about that energy. And I think, you know, that side is one. And I think over time, that creative energy flows into a little bit more professional side of things.

• 32:27Speaker 00

  So then you have like the caption 11 labs. And, you know, again, like I think lovable is a great example there, that sort of channeling that creative energy in a more professional setting and seeing that. And I think we're at that stage. And ultimately, I think, you know, I haven't watched a full human in the loop, but my guess is that there's a strong belief that AI for general population, 7 billion devices out there, will become very popular and will become democratized. I can't wait for that to happen. And I think we're probably just one or two steps away from that.

• 33:05Molly O'Shea?

  What are the biggest risks with unleashing mass creation and automation of all of this? There are concerns about deep fakes. I don't know if you saw Mountain Head, but I brought this up with the Jack Altman podcast because Mountain Head kind of exposed like, oh, if we give everyone tools for this, there's going to be fake news everywhere. We're never going to know the difference. Roy would probably counter that and say, people know. People know it's fake or not. But where do you think the risk lies with these creation tools? And do you think it needs to be regulated?

• 33:39Speaker 00

  So first and foremost, on people know, I think people know, but his people, what he means is young people know, internet native people know, mobile native folks know. There's a time, like even go back, what, like six months where if you look at Facebook posts, they're commenting heavily on AI-generated, you know, houses and like, this is so beautiful. Like, how could you?

• 34:04Speaker 00

  There are a group of people that are, they may not know immediately, right? Like, so I give, I give a lot of thought to that as well, right? So, part one, I think there is a thing around, people need to now think about, is this real? Right? And ultimately Photoshop is a good example of it where, and, and visual effect is a good example of this, where before, you know, people didn't think about that. And now it's a very, very common thing to Photoshop any pictures, have visual effects on any movies, and people accept that. So I think acceptance is going to be there.

• 34:45Speaker 00

  The discernment aspect, I think, will always be an aspect of humanity that we're gonna, we're gonna need to have. Of like, we need to digest information for ourselves and choose what to believe. So I, I think that's gonna be a continuous, struggle is the wrong word, but a continuous battle for people to understand what to accept as a belief system or not, and what to accept as a content as truth or not. And I think there is, you know, insofar as you wanna, I actually talk about one of these products where I believe Particle News went on stage, right?

• 35:18Molly O'Shea?

  They went on stage.

• 35:19Speaker 00

  And then when you look at sort of the article that's written, they actually have the spectrum, right? Of like, this is a left-leaning article, this is a right-leaning article, and there's all these dots for these articles. And you kind of pick and choose what you're gonna read, but you know where you're picking and choosing. You know your belief system and you're subscribing to it. I think that level of disclosure is really good, right? You're telling people, look, there's all these different things you pick and choose. I'm not gonna moderate, I'm not gonna say this is the truth, that's not the truth. Like, here's a spectrum of things, like, go make that decision. So I think that's a good example, what I think will, will be very useful for people in the future.

• 35:56Molly O'Shea?

  Do you think it needs to be regulated?

• 35:58Speaker 00

  That's a good question.

• 36:01Speaker 00

  I think oftentimes, regulation tends to be a little, what's the word that I'm looking for?

• 36:09Speaker 00

  Slower than the actual movement at the bleeding edge.

• 36:12Molly O'Shea?

  Okay.

• 36:13Speaker 00

  And so it's almost trying to catch something when it's already moved away. And you now have this funky rule that, you know, allows and disallows a bunch of things that may or may not be relevant depending on interpretation. So from that side, I think what, and this is you're talking to an A16Z team member who, you know, where we believe in techno optimism and we believe that, you know, advancement in technology can actually help people live better lives. And so I think my belief is that there are certain things that should never cross the line and those, whether it's child protection or whatever, like you, we can have regulation for that and continue to have those. In terms of like, you know, enabling companies and people to continue to build in this bleeding

• 36:57Speaker 00

  edge, I, I think any effort to curb that will probably not result in more innovation. It'll probably result in more gunk, if you will.

• 37:08Molly O'Shea?

  Right. So at Humans in the Loop, the whole purpose of that was kind of to emphasize and bring light, hey, consumer has been around for a while. It's not changed. It's still here. We've also been in an environment where exits have been frozen. It's kind of picking up again. Where are you seeing trends in the exit environment and liquidity and growth and outcomes for this consumer sector?

• 37:35Speaker 00

  Again, let's sort of think about this consumer sector as like individual set of things, like notions used by individuals and Figma is used by individual designs. And of course, like over time, it gets into like team, team play, what have you. But all of those to me fall in the bucket of products that appeal to individuals who make decisions. And so from that standpoint, I think the exit environment is an interesting word where. I guess I am sort of more on the earlier stage side. So I'm shielded from needing to think about immediate exits, et cetera. What I am excited about is seeing how fast these are growing. So when I think about exit, so to speak, it's less about liquidity immediately and thinking

• 38:19Speaker 00

  about what size and what impact these companies are having, because that to me does loosely translate to exitability, if you will, whether it's M and A or IPO, what have you. So when I see companies that are going from zero to 50, zero to 100, zero to 500 in run rate in a very short time, to me, that says there's an incredible value that is being created and market may or may not be efficient in the short term, but sure as hell, it will do the right thing in the long term. And I think there's an incredible amount of value being created right now. I'm very hopeful and excited about that. And so immediately as I think about exit, I think we're in the generation of seeing incredible companies being built that are creating a bunch of value.

• 39:03Speaker 00

  And I don't know when they'll exactly go out and gain liquidity, but I also think there's a little bit of a misnomer now in liquidity. Right? Like IPO is IPO because it gives you a tradable shares. It gives liquidity for early employees, et cetera. But now we're at a place where private companies are very large. They've been staying private for a long time. They're secondary, they're tender offers, there are different ways of getting liquidity back as well. So I sort of look at this trend as larger companies have opportunities to continue building, continue that momentum to grow into gigantic companies. And whether that's done in semi-private, it's funny, or semi-private or public, I think that matters a little less right now.

• 39:43Molly O'Shea?

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• 40:26Molly O'Shea?

  Mark particularly talks about the barbell strategy or the barbell effect. You either have really, really small, either investors or ones that are huge.

• 40:36Speaker 00

  Yeah.

• 40:36Molly O'Shea?

  And the huge ones are betting on these ginormous outcomes, these trillion dollar outcomes. What do you think about that?

• 40:44Speaker 00

  I think, um, hmm.

• 40:48Speaker 00

  We talked a little bit about it, but there is a thing around like we, we VCs are around because we also want to return capital for LPs. And that equation or mathematics work differently for different size of funds. So of course, if you're a larger fund, you're looking for Deca Deca corns essentially, right? You're looking for a very large outcome, then you're sort of back, you're trying to find those founders, back those ideas. I do think there is a world where if you have a smaller fund, then finding a very nice exit of, you know, X amount is actually a really good vehicle to return capital to your LPs and do what you love. So I think that's true.

• 41:28Speaker 00

  I think one, one of the things that's happening now is that you're seeing a bifurcation of what you need to appeal to the founders to win. Because world-class founder nowadays have all the options. Dollar's green, you can work with A16Z of the world and you can work with an angel. Like it's the same sort of dollar, if you will. And I think the way to appeal to a founder have changed. The whole idea around, I'll just sit around and schedule meetings and maybe tell you I'll invest or not. Like, I think that has changed a little bit. The best founders have all the options. And so, large funds or not, you need to appeal to the founder, this is why you need to work with me. So it's less, less about the fund size to me and more about what value can you add to the founders?

• 42:12Speaker 00

  And if you work at places like A16Z, we get to actually benefit from an incredible scale of operating partners who have incredible experiences that I don't have, I don't come with. I'm one person, I may not have the Rolodex of the entire firm. The CEO, the founder may not have that. We can come bear that and that is a reason to work with us. And at the same time, whether whatever size you are, you may actually come as very distinct advantage that is helpful to the founder. And I think that's what funds need to and investors need to think about these days.

• 42:44Molly O'Shea?

  And you have a ginormous media empire.

• 42:48Speaker 00

  We, I think we, I like to think we help, we help our companies distribute as well. And that is, that is a benefit.

• 42:56Molly O'Shea?

  It's an amazing benefit. It's amazing. Okay. So going back a little bit more. You talked about building a company now, you can escape velocity a lot faster, a lot quicker. I was at a Brex dinner a couple of weeks ago. It was a CTO dinner. So this was more technical. We were going down to the infrastructure layer. There were different sized companies there. It was off the record, so I can't share too much. But the general, the general thesis of this, or I guess the general takeaway from this conversation was pre 2024 companies are structured so differently than post 2024 companies. Post 2024 companies have an extreme advantage to scaling super fast, organizing their databases really well.

• 43:41Molly O'Shea?

  Using these AI agents and tools, using cursor, using co-pilots, that sort of thing. So that they don't have to worry about unjumping this like, as what Elon Musk would call like the, the US government. But like a ball of worms of an organization, but actually like go at speed and scale. And then get to that a hundred million dollars in revenue much, much faster. How do you think about that? Are you seeing that as like a much more attractive way to invest into companies? Look for those companies that have really clean infrastructure?

• 44:14Speaker 00

  Yeah.

• 44:18Speaker 00

  Maybe two things come to mind. One is that it's funny that sort of folks are delineating like 2024 and pre and post. I tend to think about like pre chat GPT moment or AI moment and post. And I think there's certainly a mind share shift. And this is again, why I have the momentum as a moat thing where post AI, you, you do get to build with smaller team perhaps.

• 44:46Speaker 00

  But I think you come with a mindset of I'm going to build fast, shift fast. And I don't, I think a lot of team had that thought prior to the AI moment. But it was slightly different time horizon, right? Mobile has been a platform that's been around for two decades. The biggest news is, oh, iOS is gonna actually come as this net new, you know, products and when you think about how to utilize those and that was a product cycle essentially. And now we're in a new world where things are happening every week. So you do have to move fast and I think that's the mindset shift versus, you know, the size of a team or cleanliness of infrastructure. Second thought that comes to mind is

• 45:32Speaker 00

  there are so many companies that have been around that actually is taking advantage of the AI moment to get their second coming, if not more. Raplits been around for a while and, you know, it was a good tool to try to teach, you know, middle school, high school kids coding. And if you think about the difference between what they built now and growing really well on and what they were before, it's pretty different and same with Bolt. And so the idea that pre 2024 companies have this infra debt and it's so hard to unjumble and you can't innovate, you can't grow fast, I don't think that's true. What I do think is true is you need founders who are

• 46:16Speaker 00

  understanding of the technical advancement that's coming out. You don't need to be a researcher, but you do need to understand what's coming available from the model advancement and understand how that translates into your product or it's the scope that you're interested in. And folks who are able to do that and move fast, I think has just as much ability to succeed and grow extremely quickly now versus companies that are being built right now. So I don't, I guess I'm saying no. I think infra unjumbling is it's relevant to extent, but I think there are many examples that sort of.

• 46:55Speaker 00

  You know, goes against that.

• 46:57Molly O'Shea?

  Yeah, we're seeing at least on the M and A side, thanks to new regulation and regulators that have left. That be an open door for advancing these later stage companies, these larger companies and going after an acquisitive strategy for this.

• 47:14Speaker 00

  Yeah, I suppose.

• 47:17Speaker 00

  I think I'm thinking more around companies that have been around that are moving very quickly, understanding what's becoming available and pivoting their way very quickly into net new product spaces.

• 47:29Molly O'Shea?

  So not just, okay, so there's, there's a couple of different categories to which this can happen. So it's, it's those kinds of companies. And then it's also Meta who is like going all gas, no brakes, acquiring things.

• 47:42Speaker 00

  Move fast and break things?

• 47:43Molly O'Shea?

  Yeah, move fast, break things, but also acquire like every brand name possible. Do this huge scale AI deal and try to rebuild their position against something like an OpenAI.

• 47:56Speaker 00

  I think there is a way to actually attract talent and I think one of the ways that I see Meta doing is they're attracting some of the best talent.

• 48:06Speaker 00

  Of course, it's very, there are multiple people who can build, you know, application layer, but I, I still think at a research layer, there, there are a set number of people who are on the bleeding edge. Who are setting the tone or setting the research agenda than moving the ball forward on the frontier. And having those folks in, in sort of four walls of your company, I do think is important, especially if you're aspiring to be one of the largest sort of AI company that is rebirthing yourself, if you will.

• 48:37Molly O'Shea?

  One of the things that I've seen recently with Kotu's East Mies West Conference, it was fantastic. It was great. They highlighted OpenAI's usage and now it's starting to eclipse, if not eclipse, social media. So we're seeing a shift towards knowledge as being one of the most, I guess, used tools or most attractive tools. How are you seeing this from all the categories that you cover? What will come next? What are you most excited about?

• 49:07Speaker 00

  You know, I think Harvard Business School did this, right? Like, there is a, there is a famous article that I think one of my partners, David Haber penned a long time ago. It's disaggregating Craigslist.

• 49:22Speaker 00

  And I think Harvard Business Review came up with this like top use cases of AI. And it has like forty different, you know, use cases. And I think first was a therapy companion and the list goes on. What I do see is for each of those lines, we're going to see incredible companies being built. And when we say, oh, like for the first time, ChatGPT or OpenAI eclipse social. I think I'm actually heartened by that. That that probably means the creative energy, the curiosity and productivity is outpacing some of the consumptive energy. And I think, again, that points to us being in a very early stage of AI.

• 50:03Speaker 00

  And there's a tremendous amount of creative energy that is currently being unleashed. And for those, again, for each of those line items that that sort of, again, I think it's Harvard Business Review that published like thirty, forty different use cases of ChatGPT. I think for each of those, we're going to see giant companies.

• 50:22Molly O'Shea?

  What's your favorite AI right now?

• 50:24Speaker 00

  What's my favorite AI? That's a great question. Got a shell company, so like eleven labs I love. I get, I use it every, I use eleven labs reader, eleven reader every day, which is the easy way to just consume things. There are a lot of other tools that I like, of course, ChatGPT, what have you. And the creation side for these clips. You know, it's, there are multiple tools that you can just put it in, don't get it and say, hey, give me the best clips. And then there are multiple tools that do that really, really well. So those are some of the tools that I really like using.

• 50:55Molly O'Shea?

  Love that. I'm obsessed with Opus.

• 50:57Speaker 00

  Yep, we shall not name names, but there are multiple tools that are amazing.

• 51:01Molly O'Shea?

  Captions is cool, too.

• 51:03Speaker 00

  That's right.

• 51:04Molly O'Shea?

  I want to dig in more on the metric sides of things. So Brex is all about spending smarter, moving faster, performance. They like to track performance and growth and they do this really well within their platform. It's awesome. I use it. Everyone uses it. We love Brex. So does Cluely. When you're looking at companies at the earliest stages, what metrics are you looking to determine their success? And which ones are you looking for their growth?

• 51:32Speaker 00

  Great question. So I did, I wanna say 180, but I changed.

• 51:38Molly O'Shea?

  Okay.

• 51:39Speaker 00

  So again, like prior to 2024, prior to 2023,

• 51:44Speaker 00

  my North Star metric was retention.

• 51:48Speaker 00

  And the whole question that I was trying to answer was, why, like, why do people use your product? And if you're answering that very effectively, the theory that I've learned hard way at Snapchat, helping build the growth team there, was that you will naturally see a very high retention.

• 52:10Speaker 00

  Theory back then was distribution, you can go viral on TikTok, you can viral on Twitter, like, you can do all these things. But retention was a thing that was really, really hard to get. Your product actually needed to be excellent and work. So I, I used to be very, very set in mind in terms of like, there's a retention hurdle that I need all my product to meet. And I get only excited, I only get excited when you meet that metric. And of course, there's all other things that actually talk about retention. It's not just the 30 retention. There's a, what I would call illness curve, how, how many people, how many times people use your product in any given week? And there are all these other metrics that I, I look for. So that's prior. I still think that's important and we'll get to that world.

• 52:55Speaker 00

  But right now, you asked, like, what metrics do I look at right now? I'm more of a Series A investor or what I call traction seed or Series A investor. What that means is I wanna, I wanna look at some numbers. You're telling me this is the idea is a kinda hard thing to invest on in my mind. Or there are multiple people who are good at that. It's just not me, I need numbers. So what I now look for is velocity.

• 53:23Speaker 00

  And what I look for in those are two to three things. Velocity in user growth or revenue. Nowadays, people are very willing to pay for tools, especially in this early age. So tools that are actually effectively monetizing and seeing the revenue grow quickly is very important to me because that tells me not because we're making money, but because your product is actually useful and it deserves to exist and people are loving it. That's how I understand it. The other thing that I look for revenue now is the retention of the revenue, which is kind of interesting now. Like before, retention of the revenue mirrored very closely retention of the unique customer count.

• 54:05Speaker 00

  Because if you're selling it to individuals, if X churned, that revenue's gone. What is different now is because of AI, because you can introduce different tiers, you can introduce credit for overage usages or what have you, you actually see revenue retention being higher than unique user retention. That gap to me is interesting. Because what that means is, for whatever reason, people are paying you more, like whoever's left in your cohort, they are deciding to pay more. I don't know if that means they're upgrading their plan. I don't know if that means they're giving you more credit or buying more credit, but they're staying and they're paying more. That tells me your product's important to them and to their workflow and what they're trying to achieve. So those two I look deeply.

• 54:49Speaker 00

  The third one is a little harder to, a little harder to exactly call it a metric. What I do look at is product shipment velocity.

• 54:59Molly O'Shea?

  Oh, yeah.

• 55:00Speaker 00

  And, you know, I don't, I wouldn't say we completely standardize it, but there are a couple of memos that I've written with a team where we try to compare the product shipping velocity across all players in the same sort of space.

• 55:17Speaker 00

  And there's a theory there that I have, which is again, if you're shipping product faster, there's this higher chance you're going to catch something. And shipping product faster 10%, 20% each week, that shit compounds. Like, it's not just, oh, you ship product faster to 20% than the other, so therefore you're 20% better. No, if you ship 20% more in week one, you have 120% versus someone else 100. Based on the 120%, you're going to ship another 20% on top of that, and that just will compound.

• 55:46Speaker 00

  So the metric, not metric, metric, I look for is how fast are you shipping? And that's the type of thing that I look for now.

• 55:55Molly O'Shea?

  That's amazing. I've noticed that as a theme too, with some of the highest growth companies that we've had on the podcast too, like WAP. They are constantly shipping. They're constantly shipping code, they're constantly shipping new products, they're constantly tweaking them. It's a complete iterative execution strategy.

• 56:13Speaker 00

  It's incredible. Like, they're a company that are literally announcing fairly large net new product every week or twice a week. And I'm mind blown, like, how are you doing this?

• 56:25Molly O'Shea?

  Yeah. Which also helps our go-to-market strategy because you're always in the news.

• 56:29Speaker 00

  Absolutely. And that is what I mean by momentum is the moat, because it's not just distribution. That aided by actual product announcement and people seeing that, and seeing it result in revenue, and you building and publicing and talking about that revenue momentum, that's the whole game.

• 56:45Molly O'Shea?

  Positive.

• 56:45Speaker 00

  Yeah, exactly.

• 56:46Molly O'Shea?

  Positive feedback loop.

• 56:47Speaker 00

  And that continues, that's so hard to break.

• 56:49Molly O'Shea?

  Yeah, people just need to ship more.

• 56:53Speaker 00

  And that's, that makes it really also hard to catch them, catch them. If you're like a newer entrant, or you're not a number one in mindshare, what have you, you better hope that the number one guy, dominant guy is like slipping in ship, in velocity. Because if they don't... They just fly higher and higher and you're just looking at them. I'm like, how do I do that?

• 57:13Molly O'Shea?

  That's a good point. Also, if you know that there's a gap, you have a strategic advantage to go in and do something big.

• 57:20Speaker 00

  Yep. You better ship twice as fast.

• 57:22Molly O'Shea?

  Yeah. I think like zooming out, something to kind of like push back on a little bit is within these bubbles, huge innovation cycles, there are two narratives. Well, there's a narrative that just that goes back and forth.

• 57:39Speaker 00

  Okay.

• 57:39Molly O'Shea?

  It's a seesaw. You're either driving for growth or you're driving for profitability. In these different loops, uh, when you're going up and it's like a good positive macro environment, it's all about growth.

• 57:52Speaker 00

  Right.

• 57:52Molly O'Shea?

  When times are tough, it's all about getting the profitability.

• 57:55Speaker 00

  Interesting.

• 57:56Molly O'Shea?

  Right now, we're in the upside. We're all about growth. Things have switched back over. Do you think we're still in the early stages of this hype cycle, this innovation cycle? When do we start to worry about, okay, now it's time for profitability?

• 58:12Speaker 00

  Hmm. I, I sort of demure because I, I, I get your question where there's like a, the economy of growth or profitability. And depending on macro cycle, there's, you know, focus on either side. And I think you're right to say we're in sort of the gross Trump's era.

• 58:32Speaker 00

  What I do want to say is that the current dynamic of the cost structure, especially for apps companies, really favor this equation of growth almost equals profitability.

• 58:49Speaker 00

  The margin structure of some of these companies that we're investors in is incredible. I used to be a CFO. I look at their P and L and I'm like, this is a public company P and L.

• 59:01Molly O'Shea?

  Wow.

• 59:02Speaker 00

  It is. So when you think about the profitability.

• 59:07Speaker 00

  You know, the whole like SaaS of like eighty percent mark, like all of that, a lot of that still holds true. Even if it doesn't hold true, there are multiple ways that it is very easy is the wrong way, but easy to imagine margin expansion. Whether it's you over time, take a bunch of queries in-house and start cutting costs that way. And we all know that compute cost is is going down at a very rap- very rapid speed. So you you get to actually, you know, price it at a point where it may be a lower margin today, but it'll expand over time. So it's not to skirt your question, but I do think we're in this funny stage where some of the winners in that are emerging.

• 59:49Speaker 00

  Have this like benefit of increasing profitability and growth and get to actually choose to reinvest that. There might come a time where it's more prudent to actually use those capital to invest in other things. And that may come, but I still think we're in the era of gross equals profitability to some extent. And and you know, the momentum in growth actually winning out.

• 1:00:14Molly O'Shea?

  That's a really good point. We're in a completely different environment. Companies are getting a lot more efficient.

• 1:00:20Speaker 00

  Yeah.

• 1:00:20Molly O'Shea?

  Teams are getting smaller. Who's to say like, yeah, people are shooting for that one employee unicorn.

• 1:00:27Speaker 00

  Honestly, some of these, uh, there, I think six months ago, Molly, if we sat down and you were like, oh, what an interesting metric. I might have said revenue per you, revenue per employee. I don't even know if that makes sense anymore. There are so many companies that are just, that's mind boggling number that is hard to compute.

• 1:00:44Molly O'Shea?

  Yeah. Okay. So also in Kotu's deck, there, there was a really great chart for AppLovin versus Microsoft. AppLovin's revenue per employee is like huge delta between Microsoft. Microsoft is kind of like flatlined a little bit, but like that, that is like a true trend we're seeing.

• 1:01:04Speaker 00

  Yeah.

• 1:01:04Molly O'Shea?

  Even in large private.

• 1:01:05Speaker 00

  Even in large private. So imagine companies that are being now, being built now is, you know, the unjumbled infra, I suppose.

• 1:01:12Molly O'Shea?

  Yeah.

• 1:01:14Speaker 00

  Companies that get to actually think about their customer support a completely different way. Think about sales and outbound motion completely differently. It's just, uh, it's mind-boggling what's possible now.

• 1:01:26Molly O'Shea?

  There are a couple of critical questions that Calshi suggests with these and they have them in their markets.

• 1:01:32Speaker 00

  Is Calshi the one that have sorcery or is it a poly market?

• 1:01:35Molly O'Shea?

  It's Calshi. We are only Calshi in this household. It's Calshi, Calshi, Calshi.

• 1:01:40Speaker 00

  I, I have to ask.

• 1:01:41Molly O'Shea?

  We love Calshi. Two billion dollar valuation now. They're killing it.

• 1:01:44Speaker 00

  Your company, eh?

• 1:01:45Molly O'Shea?

  They're crushing it. Yeah, they're right, they're right up the street too. Yeah, they're great. Um, so one of their, they have two questions around this.

• 1:01:53Speaker 00

  Okay.

• 1:01:53Molly O'Shea?

  One of them is, do you think there's gonna be more, as like a secondary effect? Do you think there's gonna be more tech layoffs this year than in 2024?

• 1:02:01Speaker 00

  Huh.

• 1:02:04Speaker 00

  So that's like one question?

• 1:02:05Molly O'Shea?

  Yeah.

• 1:02:06Speaker 00

  Do I, am I betting on this?

• 1:02:08Molly O'Shea?

  Yeah. Are you bet, like, what do you want to put down?

• 1:02:10Speaker 00

  I would, I would actually bet that there would be less.

• 1:02:14Molly O'Shea?

  Okay.

• 1:02:14Speaker 00

  I think the opportunity cost is, cost of not having the manpower to actually build and accelerate is too big.

• 1:02:23Speaker 00

  And while on this, on like margins, they may be, oh, like, you know, maybe we can have less of X or Y. Overall, I think speed remains so important. Overall, I think building quickly remains so important that my belief now is that that it's not the time to actually try to get to super efficient and take sort of the, you know, foot off the gas a little bit, if that, if that makes sense. So my bet is no.

• 1:02:49Molly O'Shea?

  Good. Okay. So one thing, it's not betting, it's trading.

• 1:02:54Speaker 00

  Fantastic.

• 1:02:54Molly O'Shea?

  First federally regulated.

• 1:02:56Speaker 00

  Excellent.

• 1:02:56Molly O'Shea?

  Yeah.

• 1:02:57Speaker 00

  Good. Thank you. Thank you for the correction. I stand corrected.

• 1:03:00Molly O'Shea?

  Okay, well, good to know. Okay, so we're past the get-fit era. We're now in speed, velocity, keep the gas on the pedal. Do you think, maybe you already answered this question then, do you think unemployment is gonna drop by 2030?

• 1:03:14Speaker 00

  2030?

• 1:03:15Molly O'Shea?

  Or is it gonna increase?

• 1:03:16Speaker 00

  You know, I think that's like a, okay, I'm gonna say I'm not the best person to answer because I actually don't know which sector has the highest large amount of employment, to be honest. And to say, oh, employment writ large is going to change, not knowing what the biggest pie, size of the pie is. It might be manufacturing and if that's true, I'm like, I don't. Don't know.

• 1:03:38Molly O'Shea?

  Don't know.

• 1:03:38Speaker 00

  I think my answer, don't know.

• 1:03:40Molly O'Shea?

  Okay, valid, fair. Okay, well.

• 1:03:43Speaker 00

  I've learned to say don't know when I actually don't know the answer.

• 1:03:46Molly O'Shea?

  That's commendable. Some people wouldn't do that. So it's great you're being honest. You know, as we wrap up, so I jumped the gun. I went a little bit too far. We usually end with these Kalshi predictions markets.

• 1:04:00Speaker 00

  Oh.

• 1:04:01Molly O'Shea?

  Before we do that, I want to know what you're most looking forward to this year.

• 1:04:06Speaker 00

  This year?

• 1:04:07Molly O'Shea?

  Yeah.

• 1:04:08Speaker 00

  I am really looking forward to the first emergence of, first emergence is the wrong word, but

• 1:04:18Speaker 00

  the beginning of pure consumer AI products really breaking through. I think we're, I think there are a couple of products, like I would say ChatGPT has been the runaway winner and the consumer AI mindshare. And I'm, I'm very excited to see more popping through.

• 1:04:37Molly O'Shea?

  Exciting.

• 1:04:38Speaker 00

  And we'll get very, very busy.

• 1:04:40Molly O'Shea?

  Very busy.

• 1:04:40Speaker 00

  Very busy.

• 1:04:41Molly O'Shea?

  You know, I thought like I would have more time in the day, but now I just have more jobs to do because I need things to do.

• 1:04:48Speaker 00

  See, this is, uh, this is why I don't think unemployment goes up or layoff goes, goes off, goes up because you just, there's more to do.

• 1:04:56Molly O'Shea?

  Yeah.

• 1:04:57Speaker 00

  There's always more to do.

• 1:04:58Molly O'Shea?

  Somehow I have five jobs now.

• 1:05:00Speaker 00

  You, you do have five jobs and I probably will need to increase my job count as well.

• 1:05:05Molly O'Shea?

  You gotta, you gotta increase that number. Okay, so as we formally go into the Kalshi predictions market now, let's do a couple of cluely ones.

• 1:05:14Speaker 00

  All right.

• 1:05:15Molly O'Shea?

  One, do you think Roy will go to jail?

• 1:05:18Speaker 00

  No.

• 1:05:20Molly O'Shea?

  Not even in a stunt?

• 1:05:21Speaker 00

  No.

• 1:05:22Molly O'Shea?

  Okay. I kind of think it would be funny if he did a stunt.

• 1:05:26Speaker 00

  You know, going to jail affects background checks, which affects next rounds of funding, which, you know, that, no.

• 1:05:35Molly O'Shea?

  Good compliant answer. Love that. Do you think he's going to become a billionaire?

• 1:05:39Speaker 00

  Oh, okay. So I gotta look at the cap table.

• 1:05:42Molly O'Shea?

  Do you think he can reach that?

• 1:05:44Speaker 00

  I sure hope so.

• 1:05:45Molly O'Shea?

  This is what you're betting on, you know, as an investor.

• 1:05:49Speaker 00

  So, you know, I guess my answer default is I bet with our wallet.

• 1:05:55Molly O'Shea?

  More clearly.

• 1:05:56Speaker 00

  More clearly.

• 1:05:57Molly O'Shea?

  We gotta make Roy a billionaire.

• 1:05:58Speaker 00

  We do. Internet, please help.

• 1:06:01Molly O'Shea?

  Internet, please help.

• 1:06:02Speaker 00

  Comment section, please help.

• 1:06:05Molly O'Shea?

  Okay, um, going into consumer, what do you think the Johnny Ive and OpenAI device will be?

• 1:06:16Speaker 00

  My guess, it's an ambient device.

• 1:06:23Speaker 00

  I think it'll be closer to i- AirPods of the world than glasses. Like, I, I need glasses. I'm negative eight, negative seven.

• 1:06:31Molly O'Shea?

  I don't know what that means.

• 1:06:33Speaker 00

  It means that I'm blind without contacts.

• 1:06:35Molly O'Shea?

  Okay.

• 1:06:36Speaker 00

  I still don't wear glasses, you know, like, I lo- it's the form factor, I think it's, uh, you know, not necessarily for everyone. So then I need to think about what form factor can be ambient on people all the time. Accessories have personalized taste, it's kind of hard, you know, I like your necklace, but I can't wear that. So I, I think it needs to be a form factor that makes sense to be ambient. And my guess right now is probably AirPods-esque, but who knows? Who's to say?

• 1:07:06Molly O'Shea?

  Who is to say?

• 1:07:07Speaker 00

  Who's to say?

• 1:07:08Molly O'Shea?

  AirPods do make up a large portion of Apple's revenue.

• 1:07:12Speaker 00

  I think it's one of the best hardware products that like got launched that people don't talk about. Like, it's an incredible product.

• 1:07:17Molly O'Shea?

  It really is. They're great. They, you know, you drop them, they fly all over the place, they're gone.

• 1:07:22Speaker 00

  They're gone. You gotta replace it. You gotta buy it immediately.

• 1:07:25Molly O'Shea?

  It's like they almost have some sort of like ergonomic factor inside of them.

• 1:07:29Speaker 00

  Bounce away.

• 1:07:29Molly O'Shea?

  To bounce as far as possible.

• 1:07:31Speaker 00

  I think that's right. I think that's right.

• 1:07:32Molly O'Shea?

  Incredible design.

• 1:07:33Speaker 00

  I have three of those.

• 1:07:34Molly O'Shea?

  You do?

• 1:07:34Speaker 00

  Yeah, you just, you just gotta, you don't know if you're gonna lose one, you know?

• 1:07:38Molly O'Shea?

  Do you keep them like one on the charger at all times?

• 1:07:40Speaker 00

  Yeah, I do. I do, yeah, I do. Like, gotta, you know, you always have a full one.

• 1:07:46Speaker 00

  Cause, uh, without it, I don't answer phone calls.

• 1:07:49Molly O'Shea?

  Okay. Neither do I. I don't know how to pick up a phone anymore.

• 1:07:53Speaker 00

  Yeah, it's the button, but I don't really know how to do that.

• 1:07:57Molly O'Shea?

  I love that. That's a good, that's a good one. I could totally see that.

• 1:08:01Speaker 00

  Pins like, you know, it's funny.

• 1:08:03Molly O'Shea?

  Are we past pins?

• 1:08:04Speaker 00

  I don't know if we're past pins, but there's a very funny, it's not a social experiment, but in my mind, it was an A B test where we had a consumer A I event in New York. Same day, there was a consumer A I event that one of my partners did in S F. And then in S F, some portion of people came with pins and recording the whole thing ambiently there, blah, blah, blah. I don't think you can get away with that in New York. Zero chance.

• 1:08:35Molly O'Shea?

  Too much noise?

• 1:08:36Speaker 00

  No, no, what I mean is just like, it's just cringe. You can't, you can't come to an event with a pin that's recording.

• 1:08:42Molly O'Shea?

  Yeah, no one would want to talk to you.

• 1:08:43Speaker 00

  No. So it's just like a very interesting social test of what's ready. And of course, you know, robo taxis or, you know, Waymo really started in San Francisco's and it's now going everywhere. So maybe that's the start of it. So I'll never rule anything out, but socially, right now, I think there are probably other form factors that make a little more sense.

• 1:09:06Molly O'Shea?

  Interesting. Okay. Yeah. On the Waymo part, Waymo is coming to New York.

• 1:09:13Speaker 00

  It's hard to believe.

• 1:09:15Molly O'Shea?

  I hope they're treated well.

• 1:09:17Speaker 00

  I, I hope they're treated well as well. I say thank you every time I get off.

• 1:09:20Molly O'Shea?

  You have to.

• 1:09:21Speaker 00

  Yeah. I say hello, thank you. I'm very polite.

• 1:09:24Molly O'Shea?

  How's your day?

• 1:09:25Speaker 00

  How's your, how's your day? How are you feeling? It's important in case they're listening.

• 1:09:30Molly O'Shea?

  They, well, they are listening.

• 1:09:32Speaker 00

  They are listening.

• 1:09:32Molly O'Shea?

  They're listening and they're watching.

• 1:09:34Speaker 00

  In case there's a pure, you know, highest form of A G I, what's the, what's the downside of being nice to them? Or having them know that you have been always nice to them.

• 1:09:42Molly O'Shea?

  You also want to train them to be nice.

• 1:09:44Speaker 00

  Exactly.

• 1:09:45Molly O'Shea?

  It's like having good friends. When you have good friends, it rubs off on you.

• 1:09:49Speaker 00

  This is exactly, yeah.

• 1:09:49Molly O'Shea?

  If you're good to the robot, the robot will be good to you.

• 1:09:53Speaker 00

  Exactly.

• 1:09:55Speaker 00

  I'm excited for it to come to New York. Well, we'll see how that does.

• 1:09:58Molly O'Shea?

  I know. They're gonna, they're gonna be hardcore.

• 1:10:01Speaker 00

  Yeah, we'll, we'll see how they weave through all the honking and, and, and, and the bikes.

• 1:10:07Molly O'Shea?

  In LA, that's where I'm from, they're not treated well at all. I mean, they, they just set them all on fire. They had to send them home, essentially.

• 1:10:16Speaker 00

  Their, their home is SF?

• 1:10:18Molly O'Shea?

  I, I think so.

• 1:10:19Speaker 00

  They're treated nicely in SF, I believe.

• 1:10:20Molly O'Shea?

  They're treated really nicely.

• 1:10:21Speaker 00

  We're, we're kind to them.

• 1:10:23Molly O'Shea?

  How many cities do you think they're gonna be able to scale to this year? Like, how many more cities?

• 1:10:28Speaker 00

  This year?

• 1:10:28Molly O'Shea?

  Yeah.

• 1:10:31Speaker 00

  Three more?

• 1:10:32Molly O'Shea?

  Three?

• 1:10:32Speaker 00

  Yeah.

• 1:10:33Molly O'Shea?

  What's, which one?

• 1:10:34Speaker 00

  I mean, cities, it's so funny. Like, we, we live in the US, right? So, cities, I'm like, oh, like, what state and what cities? Like, people forget, I, there, I don't know, I need to verify this as a fact, but somebody once said, if you had LA and New York as a market, consumer-wise, that is bigger than continental Europe.

• 1:10:51Molly O'Shea?

  Yeah.

• 1:10:52Speaker 00

  So, that's two cities.

• 1:10:56Speaker 00

  That's bigger than continental Europe. Like, so, we were saying, oh, maybe three cities, whatever, but that's huge. That's huge.

• 1:11:04Molly O'Shea?

  Pretty big.

• 1:11:05Speaker 00

  That's how I think about it. I'm from Korea. It's a tiny, tiny place. Like, California is four times larger than Korea.

• 1:11:12Speaker 00

  So, I, I sort of think about that. I'm like, I don't know. Like, three cities can be ten countries, more.

• 1:11:20Molly O'Shea?

  That's a really good perspective. That's a good point.

• 1:11:23Speaker 00

  We live in a big place. There's a lot of consumer, there are a lot of money, there's great, great opportunities to build here. It's great.

• 1:11:30Molly O'Shea?

  It's great.

• 1:11:31Speaker 00

  It's time to build.

• 1:11:32Molly O'Shea?

  It's time to build. That's a great way to end it.

• 1:11:35Speaker 00

  And, and, and.

• 1:11:36Molly O'Shea?

  End it there. It's time to build. The next Cluely.

• 1:11:40Speaker 00

  There we go.

• 1:11:41Molly O'Shea?

  Thank you so much.

• 1:11:42Speaker 00

  Thank you, Molly.

• 1:11:43Molly O'Shea?

  This was a lot of fun.

• 1:11:44Speaker 00

  This was great. Thank you.

• 1:11:45Molly O'Shea?

  Bro.

• 1:11:45Speaker 00

  Bro.

• 1:11:46Molly O'Shea?

  Hey, it's Molly. If you enjoy our interviews, check out our newsletter, sorcery.vc, where we deliver a once-a-week top deals and tech headlines email, and also go deeper on our podcast interviews. Subscribe to Sorcery today. And don't forget to subscribe to the podcast on YouTube, Spotify, Apple, or wherever you listen. Link in description to sign up.