The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch

20VC: Why We Are in a Bubble & Now is Frothier Than 2021 | Why $1M ARR is a BS Milestone for Series A | Why Seed Pricing is Rational & Large Seed Rounds Have Less Risk | Why Many AI Apps Have BS Revenue & Are Not Sustainable with Saam Motamedi @ Greylock

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Jul 15, 2024

Saam Motamedi, a General Partner at Greylock with a background in AI and security investments, dives into the current venture capital landscape. He discusses why today's seed market is frothier than ever, yet rational due to increasing competition. Saam challenges the notion of the $1M ARR milestone for Series A, arguing it's overrated. He also shares insights on the unsustainable revenue models in many AI apps and why he believes Series B investments are currently unprofitable. His experiences highlight the importance of founder quality and market dynamics in investment success.

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INSIGHT

AI Bubble

The AI market is in an exuberant bubble, with seed round valuations inflated beyond 2021 levels.
Current AI company valuations are hard to justify given that public market multiples are much lower.

INSIGHT

Evaluating AI Investments

Explosive growth in AI, even if short-term, is hard to ignore.
Evaluate AI investments with a dual lens: data-driven reactivity and fundamental market analysis.

INSIGHT

AI vs. Traditional SaaS Investing

Differentiating among similar AI applications requires assessing founders, product depth, and distribution.
Similar questions apply to non-AI SaaS investments: competitive differentiation always matters.

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Saam Motamedi is a General Partner at Greylock, where he has led investments in Abnormal Security (incubated at Greylock), Apiiro Security and Opal Security, as well as AI companies like Adept, Braintrst, Cresta, Predibase, Snorkel, and more. Before Greylock, Saam founded Guru Labs, a machine learning-driven fintech startup, and worked in product management at RelateIQ, one of the first applied AI software companies.

In Today's Conversation We Discuss:

1. Seed Today is Frothier than 2021:

How does Saam evaluate the seed market today?
With seed pricing being so high, how does he reflect on his own price sensitivity? When does he say too much and does not do it?
Despite seed pricing being higher than ever before, why does Saam believe it is rational?
How has the competition at seed changed in the last few years?

2. Series B and Growth are not a Viable Asset Class Today:

Why does Saam believe that you cannot make money at Series B today?
Why has pricing gone through the roof? Who is the new competition?
When does it make sense to "play the game on the field" vs say this is BS and do something else?
What would need to happen in the public markets for Series B to be a viable asset class again?

3. Markets vs Founders: The Billion Dollar Mistake and Lessons:

How does Saam prioritise between founder vs market?
What have been Saam's biggest lessons when it comes to market sizing and timing?
What is Saam's biggest miss? How did it change his approach and company evaluation?
Which other VC would Saam most like to swap portfolios with? Why them?

4. Saam Motamedi: AMA:

What does Saam know now that he wishes he had known when he got into VC?
Saam has had a meteoric rise in Greylock, what advice does Saam have for those younger investors look to really scale within a firm?
Sourcing, selecting and servicing: Where is he best? Where is he worst?
Why does Saam believe that most VCs do not add value?

20VC: Why We Are in a Bubble & Now is Frothier Than 2021 | Why $1M ARR is a BS Milestone for Series A | Why Seed Pricing is Rational & Large Seed Rounds Have Less Risk | Why Many AI Apps Have BS Revenue & Are Not Sustainable with Saam Motamedi @ Greylock