Windsurf: The Making of a Billion-Dollar AI Company

Leigh Marie Braswell, Partner at Kleiner Perkins, speaks with Molly O'Shea on the rise of AI and its impact on venture capital. We discuss KP's 21st venture fund, KP21, an $825M fund to back early stage companies, and their third select fund, KP Select III, a $1.2 billion fund to back high inflection investments. We also go deeper into key AI infrastructure trends and machine learning applications, investments in companies like Windsurf, Glean, and Ambience, and the evolution of Kleiner Perkins over its 50+ years. Learn about the firm's investment strategy, the significance of maintaining a small team, and the process of finding exceptional talent. Leigh Marie also shares her background at Scale AI and insights into creating 'talent vortexes.' A must-watch for entrepreneurs, investors, and AI enthusiasts. Leigh Marie Braswell is a Partner at Kleiner Perkins, where she focuses on investing in infrastructure and machine learning (ML) application startups. She joined the firm in 2023 after serving as a Principal at Founders Fund. Previously, she was an early engineer and the first product manager at Scale AI, leading development for 3D annotation products used in autonomous vehicles, robotics, and AR/VR. Molly on X: https://x.com/MollySOShea Guest on X: https://x.com/ttunguz Follow Sourcery for the latest updates! https://www.sourcery.vc/ TIMESTAMPS: 00:00 Introduction 00:25 $10B+ AUM: Kleiner's Legendary Generational Transformation 08:08 Windsurf: Angel Investment to Potential $3B Acquisition 18:21 Hyper-Competitive AI Landscape 25:43 ARR, Fraud, & Scams 31:52 Code-Gen Competition: Cursor, Devin, Copilot, Windsurf 35:48  Key Trends in AI Infra & ML Applications 40:13 Leigh Marie's Background & Scale AI Journey 46:17 Talent Vortexes & Investing 52:34 Seed-Strapped Companies & Growth 58:37 Poker Nights & Networking 01:03:05 Looking Forward: AI and Founders

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

• 0:00Speaker 00

  And we're just so limited by being an extension. I want to be the ID. We'll be able to create a much better product for our users, even the enterprise ones. We can figure it out. Like if we own the ID, we fork VS code. And I'm just like, oh, my goodness. It's like a totally different product. And he's like, yeah, we're gonna call it Windsurf. Yeah, I think the team just like, there's no limit to their ambition. They don't just want to make, you know, 10x developers even better, but they also want to make everyone a developer. We're currently deploying out of, this is our 21st Fedra Fund KP21. It's $800 million on the venture side. And then on the growth side, we have a $1.2 billion growth fund that we call Select. Ted Schline, John Doe brought in Mamoon to kind of champion the next generation of KP. And Mamoon very quickly tapped his partner, Ilya, to lead with him.

• 0:44Speaker 00

  They've brought on all of us over the past few funds. Before I was investing, I was at Scale AI for four years. Long story short, I developed a really good [BLEEP] detector for things in AI. I don't see a ton of bootstrapped. I do see, there's this new term called seed strapped that I've been seeing more of. ARR is always what they say. It can mean just wildly, wildly different things.

• 1:05Molly O'Shea?

  Lee Marie Braswell, welcome to Sorcery.

• 1:10Speaker 00

  Thanks for having me, Molly. I'm so excited to be here.

• 1:12Molly O'Shea?

  Pumped to have you and pumped to get into all of the topics that we're going to discuss. From Windsurf to Kleiner Perkins, the succession planning and more. This is going to be so much fun.

• 1:25Speaker 00

  I agree. Where do you want to get started first?

• 1:28Molly O'Shea?

  So let's start with Kleiner Perkins legendary history. The firm has invested into Sun Microsystems, AOL, Intuit, Amazon, Google, Zynga, Looker, Slack, X, Spotify, Square, Brex, Plaid, Robinhood, Rippling, Glean, Figma, and many, many more. Wow, I'm like winded from saying all of that, but you guys have certainly made a big splash over the course of the 50 years that you've been around. So I'd love to understand, how big is the fund now and what is the thesis?

• 2:04Speaker 00

  Absolutely. So we're currently deploying out of, this is our 21st Fedra Fund KP21. Twenty one is eight hundred million dollars on the venture side. And then on the growth side, we have a 1.2 billion dollar growth fund that we call Select. Select three. What's maybe a bit unique is the relatively similar fund sizes to our last set of funds. I think what's very important to understand about KP's approach is that we believe that venture doesn't just scale with money. And there's elements of the business, especially at the earliest stages, that are just so unscalable, that are so relationship focused. That that's why we've kind of kept the funds a relatively similar similar size.

• 2:40Molly O'Shea?

  Great. And so fast forward 50 years, Kleiner Perkins has maybe over 10 billion dollars AUM and has undergone a legendary generational talent transformation that many others are having a significant problem trying to solve for. This includes massive turnover, toxic cultures, lost portfolios, zombie investors, et cetera, alongside these very, very turbulent markets, whereas it feels like KP has gathered the Avengers of investors to rebuild a legacy institution. I'd love to go a little bit deeper into that and the actual team leading this and the vision.

• 3:19Speaker 00

  Absolutely. So yeah, we're 52 years old. We are an old, old venture capital fund. But what I do think, you know, we have done really well, sort of rally this next generation of KP. And I can kind of walk through that, how that happens. This is a story that hasn't been told that much. Probably around eight or nine years back, this is when we were finishing KP 17, 17 venture fund. And essentially what happened was, you know, Ted Schline, John Doerr, Doerr brought in Mamoon to kind of champion the next generation of KP. And Mamoon very quickly tapped his partner, Ilya, to lead with him. And they've brought on all of us over the past few funds. I think it's just, you know, really great that we've got this now core team of nine investors. We each have majors and minors. We're very collaborative with each other.

• 4:03Speaker 00

  And we're generalists sort of across early, early in growth. But then also we've got the super wide network of advisors. So all of these sort of past previous generations of Kleiner, many of them are still advisors. I see John around the office all the time. I see Brooke Byers around the office all the time. Brooke was helping me diligence something in bio the other day. So it's great that we have this network of advisors, but then the core investment team, the latest, the latest generation. And it's in it's in it. And in many ways, the approach is very similar across decades with KP, which is, you know, this. Very small team, really concentrated, really working with founders to build companies, to do things that don't scale, whether it's hiring your first engineer, hiring your head of

• 4:44Speaker 00

  sales, talking about strategy from what we've seen over 50 years of all these different types of portfolio companies that we've had that have been successful, what that looks like. So, you know, I think it, I'm just really lucky to kind of be a part of this, of this current Janet KP.

• 5:00Molly O'Shea?

  You mentioned a couple of things in there I want to dig a little deeper into. So you mentioned it's a small team. So how many team members are on the investment side?

• 5:08Speaker 00

  Nine.

• 5:09Molly O'Shea?

  Wow.

• 5:10Speaker 00

  And that's across early and growth. Like that's, that's everything. That's for the, the $2 billion current set of funds.

• 5:16Molly O'Shea?

  How's it split between early and growth?

• 5:20Speaker 00

  So, and this is, this is an approach that I really like. I mean, I think ultimately, you know, our job is to find the very best founders. And, and I think that's regardless of what stage they're at, regardless of what type of company they're building, is to find the best founders and, and really be their partner. And so therefore, we don't like, I'm a partner in the early funds, I'm partner of the growth funds. I bring in growth investments, even though I'm mostly, mostly an early stage investor. We are all in both. And there's definitely, people have preferences, depending on your background, depending on just, yeah, what you tend to focus on. But we're all, we're all in both. We're all, yeah, in there together.

• 5:55Molly O'Shea?

  And you mentioned that you have majors and minors. So what does that mean?

• 6:01Speaker 00

  Yeah, I, it's interesting. I like kind of joke that my major is AI and then like everything these days is AI. So whether it's consumer or fintech or what, there's a little bit of AI in there. But basically this means that like, and I really, really love this. It essentially means okay, you've got your major, AI for me, my minor, like DevTools, and you've got other investors at KP with overlapping majors and minors. And it's basically areas that we have more expertise in, and we can help each other out, share notes, work together on companies, especially when they're in these areas because you don't really have to get us up to speed as much in those particular segments. Right? So, I mean, I was at, before I was investing, I was at Scale AI for four years. And, you

• 6:43Speaker 00

  know, long story short, I developed a really good bullshit detector for things in AI. And so, you know, if you're talking to an AI application company, an AI imper company, I've got a lot of context. And so that's why I call that my, my major.

• 6:55Molly O'Shea?

  Well, that's important. I would understand having that bullshit detector would be a very good skill set now when every company is AI. So. That's great. In terms of being split on early end growth, what's the typical check size and categories that you guys cover for both of them?

• 7:16Speaker 00

  Maybe we're pretty, we're pretty flexible. You know, like I'd say because we're such a tiny team, we do have a relatively concentrated portfolio. So outside of a few exceptions, like some of those will do special things for accelerators, but outside of those, you know, we're tending to write checks that are at least a million dollars or up. And then it tends to be on the growth side, you know, our growth funds a little over a billion dollars. And so we don't want to be like way too concentrated. So probably the largest check that we would think about writing is like something in the like, you know, 100 to 150 range. And so that gives, that's, that's a pretty, pretty wide range of check sizes. So really, you know, very, very flexible when it comes to partner with companies.

• 7:57Molly O'Shea?

  Yeah, I think I just saw that you, your team led Chain Guard's recent round.

• 8:03Speaker 00

  We did. We co-led with IBP.

• 8:06Molly O'Shea?

  Great. Yeah, that one, that one was a big one. So I want to go into the exit environment. Figma just filed to go public and OpenAI just announced a potential $3 billion acquisition of Windsurf, one of your portfolio companies, which I believe you led the investment into. That would be OpenAI's largest acquisition to date. Is Kleiner untouched by the macro turbulence? Where are we at with this? And how does the team view the current exit environment?

• 8:39Speaker 00

  So I cannot comment on either of those things in particular.

• 8:44Speaker 00

  I mean, I, I'm happy to talk about Windsurf. Generally, I am on their board. That is an investment that I'm very involved with. So happy to chat more about that. In terms of the, the exit environment, I mean, what's interesting is primarily, you know, we're looking at quite early stage companies, especially me who, you know, I'm mostly, I'm looking at seed to series B. And so it's definitely like a bit, you know, far away from the eventual exit and we tend to take a very long-term view. And so I wouldn't say I have like, you know, any, any particular super hot takes on the exit environments, but it's certainly something that like we, we keep our eyes on as we're, you know, working with companies and, and pricing companies and things like, things like that.

• 9:25Molly O'Shea?

  So you don't think venture capital as an industry is doomed because the exit environment is limited now?

• 9:34Speaker 00

  I don't think we're doomed. I think ultimately, like even in the most trying times historically, there have been really history-making companies that are built if you take a very long view. And I'm really fortunate that that's kind of the default position of KP. And so, no, I don't think things are doomed. And I think if you talk to somebody and they're not making any investments right now, they're going to miss a lot of really big companies.

• 9:58Molly O'Shea?

  So I'd love to go into Windsurf specifically. I know you can't comment on any rumored acquisitions. Maybe something happens, maybe something doesn't. I'm not sure. But I'd love to know from the start, how did you find them and what was your thesis into the company?

• 10:15Speaker 00

  For sure. So this goes back a long, long time ago. So I actually grew up doing competitive math. That's kind of the thing that got me outside of Alabama in the first place. And, you know, I think growing up doing competitive math, there's this tight network of people. So that's kind of where I, you know, I don't think I, Brune and I, we ever met. Brune's the CEO of Windsurf. But it's certainly where we kind of like first we heard each other, probably talked on the forum somewhere at our Art of Problem Solving, which is like this competitive math website. But ultimately, we met when we all went to MIT. So Douglas, who's Brune's co-founder, Brune, me, we met at MIT and definitely had a lot of mutual friends. And certainly had a lot of respect for them because they were known as being

• 10:58Speaker 00

  really, really sharp guys. But then, you know, fast forward over a decade later, I'm starting at Founder's Fund as an investor. And I think it's literally like some of my first months of investing, I hear this rumor that Brune and Douglas are starting this company. It's called ExaFunction. And Green Oaks is leading their seat. And it's already done. Like, it was a very fast process and now it's done. And so I get on, this shows you how long I've known Brune. I get on Facebook Messenger.

• 11:27Molly O'Shea?

  Wow.

• 11:28Speaker 00

  And I, and I, and I'm typing to Brune in our last chats, like, you know, eight years ago or 10 years or something. And I'm typing to Brune like, hey, man, like, I'm, you know, I'm a VC, like, you know, why don't you want to talk to Founder's Fund for your raise? And he's like, you know, and I think he had a really great relationship with the Green Oaks folks. And yeah, I have a ton of respect for them over there. And I think they, yeah, obviously, made a really great investment doing that seed. But basically, what ended up happening was As a way of kind of like atoning for my sin and not keeping in touch and not seeing the seed round, I angel invested. And then that became the start of a really great relationship with Varun and Douglas and the team. And I think, you know, I think being able to like show how, you know, involved that you

• 12:13Speaker 00

  can be, that really kind of sets you up in a better position as an institutional investor for future rounds. So when I was, you know, involved with the company, I was making a lot of customer intros. X Function was a GPU virtualization company, totally different idea, totally different name. They'd go through this once more before finally getting on one surf. But basically what ended up happening was a lot of their customers were like self-driving car companies and I'd been at scale. And so I could introduce them to a lot of customers. I helped hire their head of business. I sourced from a poker night, sourced this guy and then he's now their head of business, this awesome guy named Jeff. And I was just helping them with hiring, sort of strategy stuff. We're in, I would talk all the time, just sort of like being a good sounding board for him or I like to think.

• 12:56Speaker 00

  And then basically, you know, we were kind of at a better spot when they raised their A. Founder Spun came in, participated in that round. And then sort of the, the story continues to have lots of twists and turns. As soon as he raised, as soon as they raised the A, which was a big A, like at a, at a, you know, high price competitive round.

• 13:16Molly O'Shea?

  What was the price? What was the round?

• 13:18Speaker 00

  I, I think it was like a, like a 25, 20 to 25 million dollar round and the valuation was, you know, somewhere in the, in the hundreds. I mean, they were a bit like a best in class company, like in terms of the revenue, like somewhat customer concentrated, but really great growth, amazing team, like the, the, the, the problem was clear, like these GPUs were way underutilized and X Function helped you like sort of get, get the most out of them for these really intensive workflows. And so it was like. From an outside perspective, like this is going really well. And if you were like a normal, non-crazy person, you'd just be like, oh, I'm like, I am the greatest CEO ever, you know, and I'm just gonna like, keep doing what I'm doing. But Varun is just not that person. He is like, he's obsessed.

• 14:01Speaker 00

  He's obsessed with building the best, biggest company that he can build. And so he's just, and even if that's requires like some very gutsy, uncomfortable moves. And essentially what happened was he and Douglas and the team saw what was happening with GitHub Copilot. And how like even in the beta, like how useful it was, but then there are all these problems. But like, it's already so useful, like how are LLMs this good at completing what programmers can do? And they just saw this opportunity, like there are all these enterprises that want to use this and they can't because it's not self-hosted, it's, it's not gonna work well in these like legacy code bases and weird languages. It's not gonna work well outside the Microsoft ecosystem for obvious reasons.

• 14:44Speaker 00

  So they just saw these pain points, they saw this revolutionary technology and they were like, you know what, we could use a lot of our infrastructure expertise and some of the stuff we've built. And we can make, you know, a better, a better coding assistant, especially for the enterprise. And so they pivoted the company for the first time to this company Codium. And they're, you know, a set of IDE extensions, mainly of course on the enterprise, but then they also had a free version for just individual users and those across many different IDEs. And then, you know, this was when I had at some point, you know, moved on over to Kleiner Perkins. And when I got to KP and, you know, I continued to catch up with Varun. I just like saw how well this was going.

• 15:29Speaker 00

  There were a few other things that gave us a lot of conviction. I mean, one, these models just kept getting better. It became more and more clear this is gonna be a no-brainer for every programmer in the world to have one of these assistants. Two, and this is one thing I absolutely, you know, love about KP. We have these super great CIO networks. So these are people that are the CIOs of either high-growth tech companies or Fortune 50 companies who come to our office on semi-regular cadence. And we just like pick their brain and they pick our brains for like, you know, what are the sort of emerging technologies that we should use at our companies today? And they were all saying like, these are all these pain points with Copilot, like we were really looking for something that looks like this.

• 16:09Speaker 00

  Um, and so it was just clear that Windsurf had really found like a need, a mission critical need. And then I just saw Brune and Douglas continue to just hire amazing engineers, really be obsessed with the customer, really figure out all these like non-obvious things about the market. Um, and just also like, I think it'd be tempting when you're an engineer to like only want to hire technical people, but I think they were very clear-eyed about like, no, if we're going to go out to these enterprises, we need like a real sales team. Um, you know, we can figure out a lot of stuff ourselves first and we can put a lot of scaffolding and process for ourselves first, but you do need, you know, people who have been there, done that before to get to the next level. Um, and so ultimately, you know, built a lot of conviction, their approach, and then, you know, just like the founders themselves.

• 16:54Speaker 00

  Um, I just think it is very hard to find people more true-seeking, more courageous than Brune and Douglas and the team that they built. Um, I think that's reflected, you know, so then we did the B, um, at KP, that was like, I think 40, 40 million dollar round. Um, and they continued to do really well. We helped, you know, them hire house sales. We've helped them a lot with their sales team build out. Um, and then, yeah, I mean, they just continued to absolutely crush it from a product perspective. Things are going really well. Here's the, here's the pattern again. Here's, you can maybe guess what's going to happen. Um, I have a really funny anecdote where I literally am at this JP Morgan tech event with Brune. Um, and they are literally, every year at JP Morgan, they use tons of software. They have like a ridiculous number of developers. They have tens of thousands of developers at JP Morgan.

• 17:40Speaker 00

  Um, like way more, you know, it's just mind-blowing how many, how many developers they have, which makes sense. Um, but they have a lot of external software that they use as a result. And every year they induct, I think, one or two companies into their hall of innovation. And so these are like companies that have made the, the sort of biggest impact on JP Morgan. And Codium was one of those companies. And so we were there, um, just for the conference and Brune goes, goes up and gets this award. I'm just so like so proud of him, like. It's just incredible like seeing, you know, such a young company like enter into this group of, of, of really amazing companies. I think the other one that they induction was like sneak or something like that. Um, and, uh, Vroom, he comes up to me and he goes, you know, yeah, that's great. But hey, I gotta tell you something.

• 18:21Speaker 00

  And we go to the back and he's like, well, you know, things are growing really well, but, but I'm seeing all this AI stuff like continue to get better and we're just so limited by being in extension. I want to be the ID. I, I think we'll be able to like create a much better product for our users. Even the enterprise ones, we can figure it out. Like if we own the ID, we fork VS code. Um, and I'm just like, oh my goodness, it's like a totally different product. And he's like, yeah, we're gonna call it windsurf. It's gonna be a totally different thing. Um, and at that point, I'm just like, you know, I totally, totally trust Vroom. I try, I trust even when he says something that I think at first might be crazy, that it's probably the right move. And it was like, ultimately, when we launched windsurf,

• 19:06Speaker 00

  like it really did not take very long for windsurf to become very ubiquitous, just because yes, it's so much more powerful to own the ID. You can do so much more. Um, we also launched a version sort of for chat brains, which is the other, yeah, major, major ID in the ecosystem. And so, yeah, it was just once again, like a story of, of breakout success, um, in usage. And, you know, I think the team just like, there's no limit to their ambition. They don't just want to make, you know, 10x developers even better, but they also want to make everyone a developer because like it, you know, it sounds like this sort of bogus thing to say, but it's happening today. Like I have so many examples of, of non-technical friends who,

• 19:48Speaker 00

  you know, are literally like wanting to create like side project gifts. I have this friend, she's amazing. She's very artistic. She's like, I wanna, my, my, my husband's a programmer and I wanna make this like gift for him, this like, like puzzle hunt website thing. And she was able to do it in windsurf. It was like very complicated in like, you know, a few hours and she can't program. And then I'm like talking to somebody and they're like a salesperson. They're like, yeah, we don't even need like the sales SaaS tooling anymore. We literally can cancel hundreds of thousands of dollars worth of subscriptions because I can use windsurf to build, um, these like workflows that I need. And so it's like, it's, it's, it's happening today.

• 20:27Molly O'Shea?

  Isn't this called vibe coding?

• 20:29Speaker 00

  It is vibe coding. It is vibe coding, but it is like so power like vibe coding has become kind of this meme, but it is like so power powerful today, not just for developers, but like for for everybody else too. And so I think that's been what's what's been most shocking to me in the last year of just AI in general. It's just like how well this technology already works for like non non technical users and really.

• 20:53Molly O'Shea?

  Taking off tremendously like it's going vertical. I think I read somewhere and you could correct me if I'm wrong, that they've acquired a million users in four months.

• 21:04Speaker 00

  Yeah, that's right. Yeah.

• 21:06Molly O'Shea?

  That's tremendous. Like, that's pretty, that's pretty wild. I also saw a stat that they're doing a hundred million in revenue.

• 21:14Speaker 00

  I no comment. No comment is my new flavor phrase.

• 21:19Molly O'Shea?

  Well, a hundred.

• 21:19Speaker 00

  No comment on the revenue. We are very, very long and it's funny. I was I was on this podcast with Barun Grit, which is a kind of a juvenile who who is an amazing operating partner at KP. But he he basically is like, you know, the triple, triple, double, double, double sass thing is like you throw it out the window. You know, it's like there's a new, it's like 10x.

• 21:40Molly O'Shea?

  It's 10x, 10x, 10x.

• 21:43Speaker 00

  Yeah, exactly. Exactly.

• 21:45Molly O'Shea?

  Yeah, we're seeing that and a hundred million ARR mark is now a one million ARR mark. So the goalposts have moved. It's a new standard.

• 21:56Speaker 00

  Totally. It's and it's crazy too, because it's like, not only are you seeing these increased growth rates, but yeah, there's been stuff written about this, but like with tiny teams, right? So like teams are a lot smaller than they used to be. Though I do think, you know, maybe my hot take is like, if you're an enterprise business, you there, we have not automated sales yet. We've not automated enterprise sales yet. And so I do still think if you're working with enterprises where there's just like so many relationships, so much like data, so much integrations, like all this like enterprise, like readiness, stuff you have to do, it's just, it's not automated yet.

• 22:31Molly O'Shea?

  How big is their team?

• 22:34Speaker 00

  The biggest, oh my goodness, windsurf. I think it's like 150 now.

• 22:39Molly O'Shea?

  It's pretty, wow.

• 22:40Speaker 00

  Ish.

• 22:40Molly O'Shea?

  Yeah.

• 22:40Speaker 00

  Yeah.

• 22:40Molly O'Shea?

  Wow, that's impressive.

• 22:43Speaker 00

  But I haven't checked in a while, so it could be, I could be, I could be, I could be too low.

• 22:46Molly O'Shea?

  I'm curious from your perspective, you are a major investor in this category. You research and you watch every single company that's coming up. You're seeing these 10x multipliers across the board, whether it's revenue or valuations. How do you measure success for these companies? Or maybe it's for windsurf in, in particular, if we want to use that as an example. Like, what are the metrics that you're using to evaluate the company and determine, okay, it's on a successful path? It, it is, um, it can be underrated against peers, maybe it can't. I'm just really curious what the metrics you're watching are.

• 23:25Speaker 00

  Yeah, I mean, I think like, you know, a lot of the, you know, as, as game changing as AI is, like as much of a paradigm shift as, as it all is. I mean, ultimately, as an investor, you're still looking for a lot of the same metrics. Yes, now you have all these examples of companies just like really breaking out, especially the more like prosumery ones, right? Cause they can go viral and then there's just a lot of like PLG effectively. But, yeah, I mean, you're still looking at like your standard like SaaS, growth, efficiency, metrics and, but you know, obviously depending on the space. Maybe, maybe you're like, okay, you gotta, they gotta be a lot better. Um, if you like have comps in the market that are, that are performing at some really, really high, high rate.

• 24:06Speaker 00

  Um, I do think you have to be careful though, because, I mean, we can talk more about this, but you know, one, obviously like the model cost is going down a lot, but then at the same time, some of these companies are calling these models again and again and again to like provide the response to the user. And so like margins can be quite sketchy. And so that's like, you know, that's something that you certainly have to pay attention to, especially as you're underwriting more like things that are, that are growth investments.

• 24:31Molly O'Shea?

  Explain that a little bit further, like how do they get sketchy?

• 24:35Speaker 00

  Yeah, as in like, you know, you can't just, I'd say, take revenue at the face value. When, you know, let's say, for example, you're, this is an AI application company, they're calling OpenAI models, they're calling Anthropic models. And they're like, you know, maybe charging the user a certain amount, but then they're calling the models. You know, and the cost there is more than that amount, right? Um, and so, yes, they're making revenue, but they're losing money, you know, the more that the, that users use them. So, I mean, you just have to be, you know, maybe that's fine because the models get cheaper and you can charge the users the same. And then eventually you can get to like something that resembles more of a healthy margin. But yeah, at least today, you know, there's certainly AI businesses that, yes, they're growing really fast, but

• 25:20Speaker 00

  the margins are quite negative. And so therefore, like, you have to bet on them raising more venture money until they can like figure that out, whether that's from a, they develop their own models, models just get cheaper naturally. And this isn't a bad thing to bet on, but just as an investor, I think it's important to go eyes wide open into these sorts of things because it affects how much money they have to raise in the future, you know, it just kind of affects, yeah, just their, their growth plan.

• 25:43Molly O'Shea?

  Yeah, this goes right into your BS detector and quite a narrative violation, might I add as well.

• 25:51Speaker 00

  Yeah, I mean, yeah, it's been interesting. I mean, it's something that you and I have talked about a little bit, but um, I feel like now when people talk about ARR, which ARR is always what they say. It can mean just wildly, wildly different things. And so now I've, I definitely, like, the last six months, I've asked so many follow-up questions about, okay, like, you know, you've got, I don't take error at face value anymore. I, I gotta like get to the like nitty gritty of what actually are you talking about? Because many, many times I have heard something that is not predictable, that is not recurring, be described as error. Um, and that, you know, historically, you know, traditionally error is predictable, it's recurring, it's like signed, you know, contracts, usually they're live.

• 26:36Speaker 00

  And so like, It's fine to use these other metrics, but it's, I think, important to be intellectually honest as a founder and not call it ARR.

• 26:44Molly O'Shea?

  No, that's a valid concern because we have been seeing, and we will probably continue to see, stories like this. Companies like 11X, there are also previous companies like Frank that fudged their numbers or inaccurately accounted for revenue in, or who knows what ARR actually means these days. The more you get into bubble territory, the more you are subject to potential fraud and scams and all of that kind of thing. I was really curious to bring this up because when we are in an increased competition environment, that increases pressure on companies, and so some of this happens.

• 27:28Molly O'Shea?

  From your perspective, how are you detecting this within the companies? You mentioned you're asking more questions, but like, what in particular are you looking out for?

• 27:40Speaker 00

  Yeah, it's a great question, and it is like such an important part of the VC job to figure this out. You know, you've got a few different ways that, you know, like, I probably tend to try to make sure I dot my i's and cross my t's when it comes to diligence. But I mean, one, there's obviously just asking questions, spending a lot of time with founders. I think in general, you know, it is underrated to spend a lot of time with people because ultimately you learn, like, from meeting to meeting, like, how does their talk track change? Do they accomplish what they say they're going to accomplish? Like, are they, you know, and many of my, you know, best investments and relationships have been over many years. And so you can kind of skit this for like, do they actually know where the puck is going or not?

• 28:23Speaker 00

  Because you've been able to chat with them so long. And then also just kind of generally, are they trustworthy? Are they intellectually honest? And I think that's, you could kind of judge intellectual honesty from talking to somebody, just the way that they, yeah, are they like, are they, you know, proactively explaining discrepancies? Or are they just trying to like, kind of smoke and mirrors, hope you don't ask the follow-up questions? I think the best smart founders absolutely love to answer follow-up questions. They're like, Yeah, this competitor does this, we're gonna do that. Or if the OpenAI model is this much better, this is what's gonna happen. Like the I, like the idea maze of, of situations. They're, they're always very competent answering, I found among the Rivas founders. I think there's other things you can do too. Like I mentioned, we have those CIO networks at KP.

• 29:07Speaker 00

  That's extremely helpful because, hey, I mean, we, we have relationships with these people. They're using these startups products. You know, there's no better praise than when one of our CIOs that we trust or that we think like has a very high taste for software is like, hey, this startup like, you know, is legit. And then that's just like great asymmetric information for us. I'm not saying that they're not in any other venture funds, CIO network, but like it's not a public, public thing. Right? So that's always, that's always very helpful. And then, yeah, just like playing around with products yourself, not trusting demo videos. In general, just, yeah, doing work on the space so that you can ask better questions to like elicit more detailed responses.

• 29:48Speaker 00

  But yeah, it's, it's, it's a really, it's a really hard thing, making sure that everything somebody says is, is true. But, you know, I think because of that, I just try to spend more time on fewer companies.

• 29:59Molly O'Shea?

  Yeah, it's an interesting paradox because rounds are getting done faster, but you have to go deeper in diligence. And you have to do more, I'm not sure if you do this, but more upfront work and more references. And maybe we're utilizing some of the AI tools out there to get as much information on the company as possible and do significant diligence and make sure that it's not gonna be some sort of trap.

• 30:28Speaker 00

  Absolutely. Yeah. And I, um, I maybe have a few, a few things that I do that some of those people make a little bit of fun of me. But, you know, like I am a predominantly outbound. Investor, like the vast majority of my investments have come from me reaching out to an entrepreneur and trying to basically get in front of what they're doing. And you know, because as you said, these rounds come together so fast. So if you don't already have a prepared mind and a like read on a founder and a good relationship with them, you're just, you're not going to be in the mix. Like, you're not going to get the call. These, these sorts of the hottest things, in my experience, they don't get sent out, you know, to, to people. It's like founders that are aggressively approached with a term sheet. And then it's like, okay, well, who else

• 31:11Speaker 00

  maybe did I get to know before this fundraiser? And so I'm just like, I think this is one of the biggest surprises, but I'm just doing, constantly doing outbound and constantly like proactively reaching out to people and just trying to develop my own thesis on people and things way before, you know, somebody gives them a term sheet, or better yet, maybe I can develop my opinion and conviction so strongly that I can give them a term sheet ahead of when they thought they would, they would get a term sheet. So it's certainly like, I agree with you, like these rounds happen so fast. And I think as a result, you have to like, just change how, you know, I don't think there's the traditional, like, you've got four weeks and they're going to give you all, you know, upfront. And no, I think you have to like, figure out scrappy ways to get a lot of that yourself.

• 31:52Molly O'Shea?

  Going back to our topic on competition and windsurf in particular, so they're in an increasingly competitive market. It is so competitive. We've Cursor, Copilot, Devon, there's so many in this environment. So how have they been able to rise above the pack with this impending news? Maybe it happens by now, maybe it doesn't. But how, how have they been able to gain that, that, that attention and that market share?

• 32:23Speaker 00

  Yeah, it is like, so it's, it's interesting. I mean, there are endless like possibilities with this technology that we have right now with all the, and multimodal models, it's just like endless, the, the, what's going to end up happening. But I mean, there's like these near term, what I call like battleground spaces. And, you know, Cogen is probably like, the like, most, most, most.

• 32:48Speaker 00

  Most war zone right now. You've got customer support and then you've got like you know, copywriting, maybe some areas of like sales AI that are starting to get really competitive. But yeah, Cogent is just like an extremely, extremely competitive space. And so, I mean, I think like there's a few parts of Windsor strategy that have been really great. I mean, one, their team, their infrastructure experts. So they are just really, really good at being able to like optimize these models and the product for what users care about latency, accurate results, things like that. And then I think the strategy of like, let's become an enterprise ready tool, but then also have this sort of like best in class PLG product to like get leads for the for the enterprise motion.

• 33:32Speaker 00

  I just think that's a that's a winning approach. And, you know, I think the team just proves time and time again with every wave that they ship rapidly that they really, you know, care about usability and and their users. And I was just kind of talking about this the other day. This isn't like a new take. But, um, you know, I think it's very unclear right now what out of all these companies, who has a moat? But I do think like speed right now is kind of the only moat that you can have. And hopefully, hopefully that will translate into, okay, like you get into these enterprises. Maybe you learn and you become more personalized to certain users' workflows. There's switching costs. Maybe that becomes a moat, or maybe like there's some amount of network effect when you start to collaborate with other people on the

• 34:17Speaker 00

  on the Windsor platform or something like that. But at least today, you know, the the moat for all of these companies is just like how fast they can move and you know, I think, I think what's what's what's good about this space is it's huge. And, you know, as I was saying earlier, it's a lot bigger than I thought.

• 34:36Molly O'Shea?

  The pendulum swings back. Before it was, okay, let's get to profitability as fast as possible, as fast as possible. Now it's growth at all costs, save nothing, go for it, go big or go home.

• 34:53Speaker 00

  Yeah, yeah. Well, I mean, in some areas.

• 34:56Molly O'Shea?

  There's always, there's always a nuance. But if this is true and this this acquisition goes through a $3 billion acquisition by OpenAI. Lee Marie, you will be a legendary investor. You are a legendary investor and probably better than 99% of VCs out there and everyone will be very jealous.

• 35:19Speaker 00

  I can't comment, but you're gassing me up. You really are.

• 35:23Molly O'Shea?

  Just doing my job.

• 35:26Speaker 00

  Yep. No, no commenting for now.

• 35:28Molly O'Shea?

  All right, fair. Well, speaking of rising above the pack, the rise of AI was the theme of your latest fund announcement. I would love to go into this further. Like, what are the key trends in AI infrastructure and ML applications that you're watching?

• 35:47Speaker 00

  For sure. Yeah, so we already talked about kind of the battleground spaces. And I think what's been, I mean, I'm very lucky that my partners, even before I got to KP two years ago, have been making investments in these spaces that have been doing really well. So for example, we invested in Glean. Or I should say, I mean, it was more of a, we kind of incubated Glean. So we had a big role of like getting Glean.

• 36:08Molly O'Shea?

  Another zero to 100 million ARR track.

• 36:12Speaker 00

  Yeah, I mean, yeah, Mamoun, he's definitely, definitely a GOAT when it comes to just like amazing software companies. And this is no exception. I mean, Glean, we're super bullish on. And yeah, so that's like, I'd say that's in a battleground space. Like at this point now, you know, like enterprise knowledge discovery, I think that's becoming all of you, you know, perplexity, all these other, all these other, all these other tools are now trying to kind of like get into that area too. So that's certainly like a battleground space. I mean, you have the medical scribe space. We're in Ambiance, who's doing very well. So this is basically the tool that doctors use during doctor appointments to like listen in.

• 36:53Speaker 00

  And then instead of them having to spend countless hours like writing down notes into their EHR, like as a follow-up, email summary, like it's just done automatically. And this is kind of like a no brainer. And then, let's see, I think the only area that we don't have anything in right now that's like very obvious is customer support. And so, you know, we have a growth fund, we're looking, but you know, I'd say those are like the areas where it's like the tech, clearly there, the customer clearly there, like people are just duking it out, competing for the, for the big prize.

• 37:28Speaker 00

  Like, you know, and this is what I'm excited about and what I spend the vast majority of my day on is, okay, well, what are the other really big companies that can use these models to create, you know, in customer value to help customers cut costs? Basically, you know, to to do work versus just kind of like be sort of a software tool. And I mean, I think there's like a few areas that I'm that I'm really excited about. I mean, I think we are just at the the tip of the, you know, iceberg when it comes to enterprises actually using AI effectively. Yeah. I think a lot of people use use chat GPT like want to use AI.

• 38:07Speaker 00

  But in terms of actually like automating tedious back office tasks or, you know, being able to like come up with like new ideas really quickly or analyze like data, there's just all this stuff that they could be doing that they aren't because it's just really hard to integrate AI into like these, you know, giant enterprise data silos and and things like that. So they're certainly looking for like companies that have a strong point of view on like, okay, this enterprise doesn't need to use BPOs for this this sort of task. They can use, you know, maybe a BPO plus a combination with a with a software tool or or maybe just like fully automating certain types of processes into end.

• 38:49Speaker 00

  I think I'm excited about there's there's probably a lot of opportunities in finance to automate like financial analyst workflows. We don't yet have a bet in that space, but we have a lot of people that are on the KP investment team that used to work in investment making or private equity or hedge funds. And the amount of like PowerPoints they had to put together or like Excel workflows or all that stuff. That's all been relatively untouched by AI. And, you know, you could imagine, especially as the models develop better quantitative understandings, like just being able to deal numbers better, you could imagine those workflows being automated away. I mean, I think there's just a lot of like very domain specific stuff, whether it's in supply chain, whether it's in like biotech, biopharma,

• 39:31Speaker 00

  whether it's in like other parts of legal, I mean, we're all we're in Harvey and they're they're they're going really well, but there's just so much. So many workflows there. Um, yeah, I just think like leaving the models today, you know, and and hopefully the the cost will continue to go down by 10x every year. Um, it will be able to unlock a lot of this, but there's just a lot today that is very rote and doesn't require a high degree of like, you know, creativity or whatever that these models can can automate.

• 40:00Molly O'Shea?

  Yeah, there's a lot and it's it's great because you have such a severe expertise in all of it and you've been watching it for a while. That I've learned a lot even in this short amount of time that we've been talking. Um, but I know we didn't get a chance to go deep into your background yet, so I want to do that. I will hype you up again, Lee Marie. Um, so part of your portfolio is Windsurf, Nooks, Chronosphere, Neon and Persona. Could we just go back to Lee Marie, Scale AI and go forward from there? Let's talk about your background.

• 40:35Speaker 00

  Let's do it. Let's do it. Um, so yeah, I guess, uh, the way that I get to Scale AI was again through competition math, which is which is hilarious and also poker. Alex and I got very close on the MIT Poker Club, um, before he dropped out. I think his sophomore year at a fountain scale. Um, so I was at Scale, let's see, pretty early on. I was like an intern when we were like three. Um, and then, yeah, yeah, yeah. When it was like ti- tiny, tiny.

• 41:01Molly O'Shea?

  Oh, my gosh.

• 41:03Speaker 00

  Yeah, I mean, those uh, Scale was the API for human labor back then. Um, and I called it the Alex API because we didn't yet have like a task force. So if you put in, is this still an API? And you could like, you know, basically there's an endpoint where it's like, you know, still will make you a phone call or like order your pizza and like Alex will be on like the back end like doing that.

• 41:24Speaker 00

  Which I'm like, no, this, I, I mean, this is one of the greatest skills, but he's always very, very in the details and, um, you know, just worked, it works extremely, extremely hard. Um, but basically, honestly, when we were like three, I was probably full time when we were like around seven, um, started as an engineer. Um, this is back when, you know, I think Scale very quickly realized like you can't be the best. API for everything you have to pick and you know they were Y C company and so a lot of these self driving car companies especially through Y C. Um, started using the API and that was just this incredible customer pull like, okay, this is like. If you want to build E M L platform of the future, where's the biggest pain point right now? It's um, providing labeled image data for self driving cars.

• 42:10Speaker 00

  And so kind of rethought the whole product to just be around that, providing it, you know, basically. End to end, you know, you don't have to manage the labels, you don't have to manage the payments, you don't have to manage the quality, we do all of that for you. Um, and I think that really that value prop really resonated. Um, and then very quickly. Alex realized there's an even bigger opportunity in Li D A R or three D labeling for the same companies. Um, so the vast majority of companies outside of Tesla believe that you have to use this three D sensor Li D A R. Um, to have enough redundancy to make a really safe self driving car. Um, and so I, uh, as you know, the product service area got bigger. Um, I had always kind of wanted to be a P M at scale. I started as an engineer, Alex is very product minded.

• 42:52Speaker 00

  But as the product service area got bigger, you know, there was an opportunity for me to come in and like product manage. Um, and at first I was just like, I get to code and I get to do product management tasks, you know? And I get to organize a G R. Um, but eventually that became, you know, like, okay. Where, where are we taking this product and how do we integrate M L to reduce our cost and things like that? Um, which was extremely interesting. Um, and so I was there for around four years, like in that time scale started working with basically is all the self driving car companies. Um, also made inroads in defense, which was back when it was like, yeah, you know, that's like not cool.

• 43:26Molly O'Shea?

  Yeah.

• 43:26Speaker 00

  Yeah, there's like in this recent thing where it's cool to.

• 43:30Molly O'Shea?

  American dynamism, the gundo.

• 43:32Speaker 00

  Yeah, yeah, there's like a term now, American dynamism, dynamism, but like back then it was like, it was like not cool. Um, and Alex, I think.

• 43:40Molly O'Shea?

  Really long sales cycles.

• 43:42Speaker 00

  Hard to sell into morally wrong, you know, like there was just like all this. Evil, yeah, evil to help US government achieve the US government's goals. But um, yeah, so it was like impacting to us even more admirable. Um, but that's now become like a big part of the business. And then, you know, this was all pre, or maybe I was there, maybe at the tail end of this, but we actually helped OpenAI with GPT two. Um, and I came over thinking like, what is this? Like, you know, I don't even know if this lover, like, what are, what are like LM's and transformers? Like, you know, uh, and then, and then, you know, I left and then, you know, a few, a few years later, then now it's like, um, this is scales like main, main business line. Um, and I think that, you know, one thing I always say about scale,

• 44:26Speaker 00

  yeah, Alex and his ability to put himself in like the right rooms, know the right people and be able to see, like, okay, where's all the like, like revenue going to come from? From the next wave of like what's going on in machine learning? Like, human intelligence, and I'm biased, but in human intelligence and data will always be needed. And I have like full confidence because he's done it time and time again, that Alex is always going to be able to figure out, like, where is that place where scale needs to like build a product? Um, to sort of like be able to bring the humans, um, to, to the models. Um, and so that like, you can't ask for a better first startup experience. Like every six months, the company changed dramatically.

• 45:08Speaker 00

  It grew. I got to learn things about sales, marketing. I get to learn just in general, like how chaotic a startup is. Um, and I get all these people that will say like, hey, Marie, like, my startup, oh, just like, it feels like we're changing things all the time and everything's on fire all the time. And I'm like, great, because if it's not, there's like no customer need. Like, if you, you are not like feeling like you are running around all the time and everything's on fire, then like, there's probably not product market that, like, there's probably, it's, it's not, there's not that. The only like hybrid growth startups, even the ones that seem like they have their shit together, they don't. Um, it's just like, uh, it's always a constant fire. And, um, I think it's, it's nice that I like lived through that because now when I like go partner with companies, I'm like,

• 45:53Speaker 00

  if I see that craziness, if I see that, like, they're all over the place, they're, you know, being pulled in all these different directions, I'm like, okay, well, they've like stumbled onto something gold, you know?

• 46:03Molly O'Shea?

  Yeah, and I was talking with Bucky ahead of this and he nudged me over some questions for you. One of them in particular, um, actually, most of them do come from your time at Scale AI. So while you were there, you developed an eye for talent vortexes. Could you explain this? What does that mean?

• 46:25Speaker 00

  For sure. Um, you know, I think this is kind of like, this is also the name of the game in venture, I think. Um, but yeah, I mean, what really matters when you're building a startup, uh, is hiring extremely talented people. Um, and you know, it's a, it's this flywheel where you hire talented people and they'll hire more talented people. And if you stop hiring really talented people, then, um, it's much, much harder to hire talented people because the bar is, is lower and it kind of reflects on all these downstream effects. It makes it harder to make good products, to sell bad products, et cetera. So, um, I think, you know, at scale, we were just obsessed with hiring extremely high quality people.

• 47:09Speaker 00

  Even so much so as I remember, I got so frustrated my first year at scale because it seemed like everything was, I was just overwhelmed. I was, I was coding all day. I was labeling task all night. Alex was labeling task all night. We were all just like totally overworked. Um, and then we would interview these candidates and you know, like, these are smart people. Um, and then, you know, Alex ultimately will say, well, they're not, you know, no, they're, I don't think they, they meet this bar. Um, and I'm like, oh my God, if we could just have like two or three more people right now, it'd be like, it would make my life so much better. But ultimately what that did was a few things, like it just kept the engineering bar so high that, you know, then we went and were able to develop these, these sorts of great, great future products.

• 47:50Speaker 00

  And then also kind of created this like aura around the company, which I think can be, it's like this weird amorphous thing, but they can be very useful down the road just with everything. Like as scale just became like an MIT, like this is the selective place to, to work. Um, and that's sort of like helps us hire way better talent in the future and stuff like that. So. You know, it's like, um, it's, it's always tough when you spend so much of your time on hiring and then you just keep rejecting all these people. But then at the same time, um, you know, I've just seen it play out and now multiple companies where if you do that and you're very intentional about hiring, you just create like a world-class team and, um, things become a lot easier for you down the line. And so then how this, you know, translates to investing.

• 48:32Molly O'Shea?

  Right. Yeah. That was going to be my second question. How does this inform you? Your decision-making and investing.

• 48:38Speaker 00

  I'm proud of mine, the talent vortex.

• 48:39Molly O'Shea?

  Yeah.

• 48:41Speaker 00

  Yeah. And there's like a few, I'd say like a few different ways I do it. I mean, the funniest way is, you know, I, I remember one of my first investments at FF was Persona that I worked on with a few other investors there, including Napoleon. And, and he's like, okay, well, you know, Lee Maria, like, how strong is this engineering team? You were an engineer and I remember I looked through, not saying you should always do this, but I remember I looked through every LinkedIn of every engineer. Just to like, cause we want to understand like what types of like backgrounds are they hiring, which types of people are they hiring? And then also you just like looking through, like talking to people, talking to people there, like looking through, looking through company reviews. And I think Persona in particular has just created this insane culture where not only do they have all these extremely experienced,

• 49:25Speaker 00

  yet like fast-moving engineers, but also their retention, um, like employee retention is just off the charts crazy. Like, like no one ever leaves because they have such an amazing engineering culture. And so I was like, this is like a, this is an unfair advantage, even though it's a very crowded space. I didn't even verification, like they have a truly special team and it reflected in, we obviously did a lot of product feedback calls too. But like, you know, time and time again, we're hearing that, you know, this is the, the best product on the market. So there's that, there's the thought out that way. And then I'd say like, that's a relatively scaled out company. It was a, like a series C, I think. But you know, when it comes to like very early-stage companies. One of my favorite things to do as an angel, and now one of my favorite things to do as a VC, is I have a lot of technical friends and they very, you know, occasionally they're looking for jobs.

• 50:10Speaker 00

  And I love to make matches. And so I'm always trying to, if you just want to talk, you know, some ideas, I'll tell you companies inside the portfolio, I'll tell you companies outside the portfolio, whatever location, stage, whatever, like it's my job to have like a big map of all these companies in my head. And what I'll do is like, this isn't like, I love to make matches because it makes me feel good. Cause I mean, I love to see my friends crushing it. But then separately, I get a lot of data on like, what companies are able to recruit and retain really strong people. And so I've very frequently been, I've like updated my model of a company, like, oh my God, talent vortex, because, you know, I take somebody I used to work with at scale that I know is like a really strong engineer. And then like, you know, he's asking like, oh, well, you know, maybe you should give me an open hour referral.

• 50:53Speaker 00

  But then I'm like, oh, well, you know, yeah, I will. And I did. But then I also was like, hey, you should also meet this like super early stage startup, you know, it's got, you know, you'd be their first engineer. I was like, like, you know, I was just kind of lobbing it, lobbing it out. Um, and then the startup managed to close him. Um, and I was just like, holy moly, like this is, this is like, I, I update on the founder. I'm just like, wow, this person's like clearly, one, a good identifying, good at identifying talent. And then two, good at like convincing talent that has many options to go work there. So, yeah, it's kind of like, how do I, you know, and I try to do these poker nights and that's another way of like, getting people together and getting insights and things like that. But do, how do I like, find all these signals of like these brilliant people in my network, where are they going?

• 51:39Speaker 00

  And like what companies are managing to, to, to snag them?

• 51:43Molly O'Shea?

  It's a much more thorough process than what is memed about quite frequently. And it's like LinkedIn turnover from OpenAI. So you're deep in the weeds.

• 51:53Speaker 00

  Yeah, no, I try like, yeah, I try to, yeah, I try to, I mean, ultimately, I think adventure is like, you know, you wanna figure out like people, people that you trust and really smart people and, um, you know, it's not, it's not like a super scalable thing, but um, I think if you like

• 52:10Speaker 00

  work hard enough, try hard enough and you start to, you'll start to hear like the same names come over and over again and you'll like be like, okay, this, this is the place, these, these are the places where like, they're just really sneakily good at recruiting all the best people and you should probably just like in, invest in those companies.

• 52:26Molly O'Shea?

  So I wanna pivot like a little bit, but go back to our conversation on like the AI-ification of companies. From your perspective, have you been seeing more bootstrap startups in this era? Like at what point? Let's just start there.

• 52:44Speaker 00

  Yeah, I don't see like, I mean, and to be fair, I'm, you know, usually I'm looking like seed and after, so like the might just because I look a little bit later than like maybe a pre-seed investor, but um, I don't see a ton of bootstrapped. I do see this, there's this new term called seed strapped that I've been seeing more of.

• 53:02Speaker 00

  This is our, this is our real thing, Molly, you gotta look it up.

• 53:06Speaker 00

  This is he strapped, seed strapped company. Basically what this is, is a company where like they raise a bit of venture funding, like a few million dollars to like get out the gate. Um, and they are so wildly successful with their tiny team and they're like crazy 10x, 10x revenue thing. They're like, they're just hand over fist of money. Like they don't need, they don't need more money. They don't need to raise a series A. Like maybe they don't like, maybe they don't even need to raise a series B.

• 53:31Molly O'Shea?

  Yeah.

• 53:31Speaker 00

  You know, like maybe, maybe they live, they're like first, first round of funding after, after the seed is like a series C.

• 53:37Molly O'Shea?

  I've been hearing this time and again. It's like companies founders are like, yeah, I wanna raise this funding, but then no more after that. You know, this is the only round we're gonna raise. I'm like, are you okay?

• 53:47Speaker 00

  Usually that's totally like total like, you know, that, that's, that never is, that's like never what happens. But then like for these companies, at least a few companies that like I, I agree well, that is kind of what's happening. Like, do I think they'll ever raise? Yes. Like, you know, I think, or ultimately they wanna build like a huge business and they gotta hire a sales team like we were talking about before. Like, there's probably, and it's a competitive market and then you've got these people that are like. You know, potentially like try to compete with you and you need more resources. Like, yes, you'll probably have to raise again, but it'll just be interesting. I think we'll see multiple examples of like a company raised a seed and then a company raised like a series C. And it's just gonna be weird, but that's just, yeah, kind of kind of how this this world is.

• 54:28Molly O'Shea?

  Because you are so close to the ground to the efficiencies on the early stage side of how to rebuild and build a company from the ground up with the most efficient team possible with all these tools and all these cool things that are going on. How does this inform the legacy portfolio of growth companies? I know you don't do much on the growth side, but I'm I'm really interested to know, like you have companies like Brex, Plaid, Robinhood, Rippling, Square, these are all large companies. How how are you or the team helping inform them restructure if they are to meet this new environment?

• 55:10Speaker 00

  I mean, a lot of these companies are just being like, I mean, very proactive about all this. I mean, I think they all like, or, yeah, the vast majority of them realize that like, hey, like, we need to make sure that, like, we're using the most cutting-edge AI tools when it comes to, like, cutting costs or making the user experience better or things like that. And you you've been seeing a lot of companies like reinvigorate it, like, because they're able to to really like create a create a great product with AI they have like today. And so like, yeah, I mean, in general, I think all of these growth growth stage companies are like, you know, doing doing a good job and, you know, whether it's like, we do a lot of dinners with like executives at these companies and like talk through like, okay,

• 55:52Speaker 00

  best practices, sharing best practices of like what tools they're using, what they're doing. Whether it's like things like that, or just like, I mean, I mean, a lot of these companies are just incredible, incredible companies that that that figure stuff out.

• 56:07Molly O'Shea?

  Cut overhead, insert the robots.

• 56:11Molly O'Shea?

  Make the product 10x again.

• 56:14Speaker 00

  Yeah, I mean, like, it's just incredible, like, how much, you know, you your day to day changes with these tools, right? Like, now we've got deep research to write demos internally. And as you said, there's like all these tools that we can use to like glean insights like of, um, yeah, who's going where and

• 56:31Molly O'Shea?

  Was that a little, was that a little plug for glean?

• 56:35Speaker 00

  Oh, yeah.

• 56:38Speaker 00

  I, uh, this, this is how I plug, you know, like I describe it and you say it and then, uh, there's not an ad.

• 56:45Molly O'Shea?

  This is not an advertisement, but glean, if, if you want to advertise for sorcery, let me know.

• 56:49Speaker 00

  Use glean, I use glean a lot. Yeah. Yeah, there, yeah. Incredible, incredible tool. Definitely, yeah, we do this thing, portfolio review. And it's like every, I think every quarter, we go through all of our, or most of our investments. And like glean does this thing where it will like summarize a lot of our board decks into like, okay, here's like the key metrics and commentary and it is a lifesaver. Yeah. Especially for my partners, I have a lot more boards than me. I couldn't imagine doing that non-automated.

• 57:17Molly O'Shea?

  We gotta check that out. Check it out, by the way. Um, how many boards are you on?

• 57:22Speaker 00

  Uh, let's see. I mean, I am on, I have one board director seat and that is one surf. Um, and then I have a few observer seats. Um, I still observe the on's board, um, which is an investment I found responding. We did part of the series A. Um, I'm observer on Nox's board. Um, so they're a, a AI tool for sales, salespeople. They do a lot of different things. They have a power dialer, which helps you cold call really efficiently. Um, a training product where you can like, train before the call, what are you going to say? Um, and then also a new prospecting product, um, which is really great. Um, but I'm on observer on that board. I met Dan, the founder, when I was at scale, actually. Um, it's another scale talent vortex outcome. Um, and then also observer on, um, a stealth investment. So.

• 58:07Molly O'Shea?

  Ooh, a stealth investment. I'm going to guess no comment, but I'll take it.

• 58:12Speaker 00

  No comment. Yeah. Uh, hopefully, hopefully we can announce it. But, um, that and then, I mean, I don't really see companies that only have boards. But yeah, I work with like three, three seed companies.

• 58:23Molly O'Shea?

  We have to talk about poker, okay? Lee Marie, can you please explain your poker situation? I heard the buy-in is like a million dollars per hand. Is that right?

• 58:34Speaker 00

  It's actually 10 million. Uh, we are, we are playing for stacks.

• 58:40Speaker 00

  Yeah, no, no, it is not. Um, it is, is a very, very modest. I like tend to keep it. My mile, like the whole point of the poker nights, and they're very like, they're like, they like small poker night. Like it's, it's in my apartment in the marina. Like we have a round dinner table and I put felt on top of it. To make it look more like a poker table. Um, yeah, I got on Amazon.

• 59:02Molly O'Shea?

  It's like Molly's game.

• 59:05Speaker 00

  That's, that's the goal, um, without the fraud, but, um, Yeah. It's like, you know, usually like a few hundred dollar buy-in, um, or maybe less. I, I wanted to be like, if there's startup founders, even that, that are very early stage that like to play poker, I want them to be able to, to play poker and I want, you know, like, also personally, you know, just I, I, I'd much rather keep it friendly than people really focused on, on, um, you know, just betting giants amount, amounts of money. I think it's still like, if you're playing with a hundred dollars, you care. You care about what the outcome is. That's the point of the money, um, at all. Like, I think if you play for no money, people don't care. Um, so you gotta like, put a little bit of skin in the game to just encourage good gameplay. But ultimately it's so that I, you know, I get to, get to know people, like strengthen my relationship with them.

• 59:49Speaker 00

  A lot of times like founders, engineers, I've had people get hired from the poker nights. I've had people sell their software to other people at the poker nights.

• 59:56Molly O'Shea?

  Classic.

• 59:57Speaker 00

  I've literally built my relationship with founders who I later invested in, effectively starting with a poker night, or maybe I'd met them once before and then like, we got to know each other through poker. Um, so it's just like, and then at scale, we hired so many people. That, that was our strategy. We would bring people in the office to play poker. Um, and then, you know, like they would get to know us and things like that. So a lot of the most important relationships in my life have been like formed through poker. And it's something that I love to, to like continue as a, as a VC and, um, yeah, there's not, there's, there's so many positive things I can say about it. Um, but it's definitely, uh, it's not the meme where it's like, I'm, I'm not, you know, like making investment decisions based on how people play poker. But I am like, you know, it's just a great opportunity to like get to know, get to know somebody.

• 1:00:42Molly O'Shea?

  Well, there might be some bias in there, some subconscious.

• 1:00:45Speaker 00

  If you're really, really, uh, you're really, really bad or really, really good, ma- maybe, you know? Yeah. You're really, really good. Uh, definitely, definitely positive.

• 1:00:54Molly O'Shea?

  So what kind of tips would you have for someone who's just starting a poker, like a YouTube channel? Do you have your own YouTube channel?

• 1:01:02Speaker 00

  I, um, I uh, let's see, I like uh, there's a few things that I recommend. There's this app called Poker Power, I think. Poker Power app. Um, that's like for beginners and like they do like courses and things like that. Um, that I, that I've like, you know, tried before that I think is really great. Um, and then there's like, um, I mean, was on the poker club at MIT and the book that we would always reference is called The Grinder's Manual. It's like a PDF online, um, but it's in terms of like the theory, theory of poker and like, you know, really learning how. Yeah, to do to like the math behind a lot of it, um, is great. Um, but yeah, also just like playing and finding people that play it, you know, the stakes that that you feel kind of feel comfortable with.

• 1:01:46Speaker 00

  I got very lucky. I didn't know how to play poker before college, but I was a Jane Street intern a few times. And instead of like going out on the town in New York, we would just stay in the office and we would play poker. Like after work every single day and we played only $20 buy-ins, thank goodness. So I learned how to play by just like. I play, I'd make terrible decisions and then like my buddies would be like, hey, Lee Murray, like do this instead of that or think about this and that. So, you know, just like figuring out uh, places where you can like go a lot.

• 1:02:12Molly O'Shea?

  It's an amazing way to have your own community building while doing something that you love.

• 1:02:19Speaker 00

  Totally, totally.

• 1:02:20Molly O'Shea?

  And score some deals out of it too, because that's always a thing for you.

• 1:02:23Speaker 00

  Of course, of course.

• 1:02:25Molly O'Shea?

  Well, to wrap it up, we've covered a lot. Um, we went through windsurf as much as I could possibly get out of you and I appreciate that. Um, we talked about the succession planning of Kleiner and how you guys have retained your legendary track record. And a little bit more on yourself and your background, especially with Scale AI. I mean, it's really tremendous. To end it out on a positive note, I'd love to know what are you most looking forward to this year?

• 1:02:54Speaker 00

  All right, looking, looking forward to this year. I mean. Like, I just think there's so much opportunity, like, to, in AI in particular, but also, also in a few other things too. But I'm just like very excited to continue to, to meet incredible founders and, and really partner with them closely and, you know, help, help build their businesses. But, yeah, I mean, ultimately, that's, that's what we're looking for. And I just like never experienced, even back in 2021, when there was like a very high deal volume, like, I've never experienced so many smart people like wanting to become founders. And like the, the sort of like why now and like the tailwinds being so like real.

• 1:03:36Speaker 00

  And I just think that, you know, there's so much opportunity right now to build, to build a massive company. And so, yeah, I'm just, I'm really excited to continue to, to, to meet founders. And yeah, continue to make achievements.

• 1:03:50Molly O'Shea?

  Fantastic. Well, Lee Marie, it was a pleasure to have you on and thank you so much for the time.

• 1:03:56Speaker 00

  All right, Molly. Thanks so much for having me. Really appreciate it. Great questions.