20VC: Benchmark General Partner, Miles Grimshaw on The Five Pillars of Venture Capital, Why Data Can Be a Trap When Early-Stage Investing, Investing Lessons from Missing Figma and Plaid & The New Business Model for AI & Why Co-Pilot is an Incumbent Strate
Sep 18, 2023
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Miles Grimshaw, a General Partner at the prestigious Benchmark, shares his invaluable insights from years of venture capital experience. He discusses the five core pillars of successful VC, emphasizing the most critical aspects of sourcing, selecting, and servicing investments. Miles reveals his biggest lessons learned from missed opportunities like Figma and Plaid, highlighting the pitfalls of relying too heavily on data. He also delves into the transformative power of AI in business models and the emerging trends shaping the tech landscape.
Focusing on what's changing and new is crucial when making new investments.
Broad curiosity and learning from various fields can influence a successful investment approach.
Missed opportunities with Figma and Plaid taught the importance of thinking beyond conventional expectations.
AI has the potential to bring about a new architecture and business model in the technology industry.
Deep dives
The power of change and new opportunities in investments
When making new investments, the speaker emphasizes the importance of focusing on what's changing and what's new. New opportunities arise from change, which can lead to dislocation in the market. The speaker believes that data can be a trap, and the best entrepreneurs are always making new mistakes. They share their excitement for working with Miles Grimshaw of Benchmark and highlight his insight and strategic thinking.
The impact of curiosity and breadth in investment
The speaker discusses their broad curiosity and how it influences their investment approach. They consider themselves a generalist, specializing in helping founders make the best decisions for their companies. They believe in learning strategies from various fields rather than relying on procedures. The speaker recognizes the importance of specialists in specific areas and acknowledges moments of insecurity when comparing their breadth of knowledge to the depth of specialists. They highlight the value of connecting founders with specialists when needed.
Lessons from missed investment opportunities
The speaker reflects on missed investment opportunities with companies like Figma and Plaid. In the case of Figma, they underestimated the potential impact of the product beyond the design market. They learned the importance of recognizing new adaptations and the power of market adoption. With Plaid, they underestimated the challenges of developing an industry-wide OAuth system due to banks' lack of incentive. These experiences emphasize the need to think beyond conventional expectations and carefully examine the potential of new ideas.
Insights on AI and LLMs in investments
The speaker shares their early interest in AI and LLMs and their belief in a paradigm shift in computing. They saw the potential of models with reasoning capacity and the emergence of AI as a widespread tool accessible to all engineers. They anticipated AI becoming a critical part of every engineer's work, leading to the need for application frameworks and tooling. This perspective shaped their investment approach and highlighted the importance of AI integration in various fields.
The Potential of a New Architecture and Business Model Enabled by AI
AI has the potential to bring about a new architecture and business model in the technology industry. While the comparison to mobile is flawed, AI can disrupt the existing co-pilot strategy of incumbents. The new architecture would focus on selling the work, not the software, and providing SLAs on outcomes rather than reliability. This shift would move towards a control center model, with AI and agents doing more of the work instead of users. This new architecture and business model could unlock new market segments and change the way software is distributed.
Infrastructure Layer AI as an Exciting Opportunity
The infrastructure layer of AI is currently the most exciting area for investment. Democratizing fine-tuning, improving security, and enhancing data acquisition and cleansing are key focus areas. This infrastructure layer is essential in enabling developers to build AI-enabled applications and new frameworks for this environment. The value and impact of infrastructure layer AI can be significant, leading to profound changes in architecture and the overall market.
The Opportunity for Startups in the AI Landscape
While incumbents are focusing on the co-pilot strategy, there is an opportunity for startups to embrace a new architecture and business model enabled by AI. This shift involves selling the work rather than the service and providing SLAs on outcomes. Startups can build their strength in this orthogonal approach and disrupt incumbents' dominance. However, the transition to the new architecture and business model may take time and involve significant organizational change.
Miles Grimshaw is a General Partner @ Benchmark, widely considered one of the best venture capital firms in history. Prior to joining the Benchmark Partnership, Miles was a General Partner @ Thrive Capital where he led investments in Airtable, Monzo, Lattice, Github, Segment, Slack and Benchling to name a few.
In Today's Episode with Miles Grimshaw We Discuss:
1. Straight into VC From University: From Yale to Thrive
How did Miles come to land a role with Josh Kushner and Thrive right out of Yale?
What are 1-2 of his biggest lessons from working with Josh @ Thrive for 8 years?
What does Miles know now that he wishes he had known when he started in venture?
2. The Pillars of Venture Capital: Sourcing, Selecting, Servicing:
What does Miles believe are the 5 core pillars of successful venture capital?
1-5, what is his strongest and what is his weakest?
Does Miles really believe that VCs add value today?
What are the most clear ways that Miles have seen VCs destroy value in portfolio companies?
3. Investment Decision Making: From Github to Segment:
What is the single most important question that Miles has to answer to say yes to an investment?
How does Miles think about both market sizing risk and market timing risk?
What have been Miles' biggest hits? What did he learn from making those investments?
What have been Miles' biggest misses? What did he learn from missing Figma and Plaid?
What have been 1-2 of Miles's biggest lessons so far from working with Bill Gurley and Peter Fenton?
4. AI: What Happens Next:
Does Miles believe we are in an AI bubble today? How does he assess the landscape?
Why does Miles believe that the "Co-Pilot" strategy is an incumbent strategy?
Where does Miles believe the value will accrue; the application layer or the infrastructure layer?
What does Miles mean when he says the future is in "selling the work and not the software"?
What business model disruption and adoption disruption does Miles believe AI will enable?
Why does Miles believe that the analogy of AI to the rise of mobile is wrong?
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