AI’s Transformative Power
How AI is Becoming an Enabling Tech
AI has advanced rapidly over the past decade – and exponentially so in the most recent couple of years. The rise of large language models and the many tools they can train has led to AI evolving into an enabling, platform technology.
Just as previous technology transitions of mobile and cloud impacted the nature of businesses, AI is beginning to shift nearly every category we invest in at Greylock, from cybersecurity and vertical saas to cloud infrastructure and consumer networks.
While it’s true that most companies and investors are exercising restraint in today’s economic environment, a fair number of early-stage startups are still attracting capital and partnerships. In many cases, these are companies that are developing tools using artificial intelligence – and for applications across a range of consumer and enterprise sectors.
We discussed this in depth at Morgan Stanley’s TMT Conference, where more than 3,000 investors and tech companies were in attendance (unsurprisingly, this year’s theme was AI). During our conversation with Morgan Stanley’s Global Head of Tech Private Equity and Venture Capital Investment Banking Umi Mehta, we discussed the impact AI is having on venture investing across enterprise and consumer sectors; the various ways AI is expected to impact nearly every profession by providing a “copilot” for various job functions; and the importance of developing the technology safely.
You can listen to the interview at the link below or wherever you get your podcasts.
Episode Transcript
Umi Mehta:
Thanks everybody for joining. I’m Umi Mehta from Morgan Stanley.
Before we jump in on what I know is everybody’s favorite topic, AI, I want to spend a few minutes and just talk about the overall VC ecosystem. The tone has changed, the investor sentiment has changed, what people are looking for has changed.
Just give me a little sense of where you think we are in the VC ecosystem today. Saam, why don’t you kick it off.
Saam Motamedi:
I’ll kick it off – and it’s good timing, we actually just came off a limited partner meeting last week.
I think it’s no surprise to anyone here that we’re in a reset moment in the venture capital industry. From the limited partner perspective, I think they’re going to be a lot more discerning going forward on the managers they work with. They’re going to orient towards people with a track record of actually building enduring businesses that can scale over time.
On the company side, we’re also seeing a significant reset moment. You have a number of companies that got ahead of their skis in terms of capital raises, the cost structures they’re operating their businesses at. We’re seeing that normalized. We’re seeing a lot of restructuring going on in mid to late stage tech, and I think that work is just beginning and it’s going to play out in the second half of this year and next year in particular.
On the positive side, I would note, early stage continues to be very robust and it might surprise people here that we are as active as we’ve ever been at Greylock. I think this week we had three companies into our full partner meeting on Monday. A lot of them have something to do with AI, which we’re going to talk a lot more about in a bit. We’re investing early, we’re investing with 10-year time horizons and we continue to be very active.
Reid Hoffman:
And I think part of the thing is, while obviously when you’re looking at these things and obviously we’re in a large language model AI moment (which Saam and I wrote about last year and a bunch of other things), it doesn’t mean you stop looking at marketplaces, networks, people.
One of the things that Greylock has been, for decades, one of the leading firms on is various enterprise SaaS, cloud security, et cetera. So you keep doing that. Of course, you’re also always asking in a new platform, okay, what’s the new platform you mean for this? What does AI as a new platform mean? And you’re always asking that question both of your current portfolio and also of course prospective portfolio.
UM:
So I heard some sub-verticals there that you’ve historically invested in. Outside of AI, are there other new verticals that the VC community and Greylock in particular is interested in?
SM:
On the enterprise side, it’s interesting, because AI is an enabling technology wave and it’s shifting every category that we invest in.
So for example, cybersecurity is an area that we have a prolific history and then we continue to invest in quite actively. And as you see the perimeter shift to the cloud and increasingly to home into mobile, that whole stack is being reinvented. And so that’s one example.
We continue to look at systems of engagement, systems of record. On the application side, there’s new themes and infrastructure. So at a high 30,000 foot view, the categories are the same, but I think for the first time in a long time they’re going through very material disruption. And a lot of these markets are for grabs.