Kleiner Perkins: AI’s Next Trillion-Dollar Companies Go Physical

This are all confusion. Why is that a metric that even matters if you're a venture capitalist or or a public market investor? You know, taking a step back, I think if you look at these companies, whether it's anthropic, OpenAI, you know, Waymo, um, Databricks, uh, something that's truly incredible, that's happening today. It's just the scale of revenue and the rate at which these companies are compounding at scale. Certainly, things like AR do matter in terms of the predictability of that revenue and the longevity of that revenue and understanding how that revenue manifests itself over time. But I think the more important picture here is just we've never seen companies grow this big this fast in the history of technology. And that points to something truly foundational in what they're they're solving. You know, part of the confusion was also just an accounting discrepancy between like, how OpenAI does are anthropic does are. And that was interesting. You know, they are similar and they are different. Um, we have plenty of people on this show that are on the table of both. When you guys decided, okay, we will make an investment into anthropic. What was the thesis? What was the sort of guiding principle of that? Well, what we really see is, uh, across the board, whether it's at the application layer, at the individual layer, this impact of AI is still incredibly early, uh, and incredibly palpable. Right. It's like nothing in terms of technology, like nothing we've seen in prior cycles. So for us, it's much less about sort of those those details that you're talking about. It's really more about what does the future hold here and the future here is, from our perspective, really exciting. Uh, we're here in San Francisco. Uh, the more I native centric companies look and feel very differently inside than the most, even the most forward thinking traditional enterprises. So just at the enterprise layer, getting this technology into the market, whether it's directly through access of anthropic and open APIs, whether it's through companies like Harvey Cognition, open evidence that our companies are we um, we've just been showing some of the portfolio. And later on in our conversation, I think we should talk a little bit about, um, defense technology and hardware. But what if we guys bring back some of the port codes and we can cycle through them? What you're talking about that the application layer in enterprise, um, more specifically, how closely tied to the fortunes of those companies, to the success that OpenAI and anthropic are all having or hope to have? Well, I think they're all interconnected. Ultimately, it's really the ability to access intelligence. And some of that intelligence is access through very specific domain applications, like a Harvey for legal and professional services. And some of that is going to be access through developers in products like cognition or directly through um, Codex and um, and Claude. Uh, but ultimately it's really all about what is the cost of intelligence. Yes, you can access today and that cost. And in terms of the dollars per really, really high quality thinking it's actually been kind of going down on average because you're able to do creative things like balance to older, uh, iterations of models with newer ones. There's obviously a big movement in open source right now and weight models. So overall, this is really for us about what is the opportunity of getting this intelligence into the whole economy. And now with products like instinct, which we're also invested in. Yes. And you know, obviously muse and things like that. Um, now it's actually finally hitting the consumer. And that's really the exciting part here. It's interesting. I've been using dots a lot since launch. I was a dev day last week, and I've been using muse a lot, um, and instincts less so. But what's so interesting is that there is a market there, um, of of real products, and people have choices. Um, how do you pick the right one or back the right one? I think they're going to be tailored to different people with different needs in some sense. But really it's more important about that is I think this is the first beyond chat, the ChatGPT moment, right? This is the first time where consumers are deeply able to experience the magic of AI. This agent that just does stuff for you. That hasn't happened before, and I think it's a really foundational moment, which is why you're seeing so much activity in the space age. Um, do you genuinely day to day use these agents for anything useful? Yeah, I do, I do, actually. My wife uses them a lot more than I do. Okay. And I think it's a great product for families, but everything from scheduling dinners, kids activities. I buy pizza for my kids. It's a standard order. I just tell it to get it and text me when the pizza is done. Um, so it's really it's like having, you know, a copy of you that does the for you, you know, with all of the focus on, on both the frontier labs, but also these real agents. Right. They are agents in the sense that they can take an action. They are genuinely the creators of, say, autonomous. I still find the most interesting case study with Kleiner Perkins to be Waymo, and the patience that was required for everyone that went along with Waymo. And now here we are in cities across America and then generating a revenue generating fares. Um. Um, rides. What was that like being on the cap table? Well, the patience element. And so we got in the capsule a little more recently. Okay. Uh, but we've obviously been tracking the company for a very long time, and it's magic. Right. It's like teleportation. You sit in the way. This was the big round they did right at the start of this year. Exactly. Yeah. Um, but it really feels like you're in a teleportation machine when you're in a Waymo. And by the way, you know, Waymo's also still early, right? It's still, you know, in the select few cities, uh, it's expanding. It's kind of the parallel I'm trying to draw. You know, it it seems like it's been around for a long time. But in terms of, uh, everyday person's access to the technology. Is this happening now? Which is why, again, which is why you're seeing so much excitement and exuberance from the venture community. And, you know, you have Waymo, you have obviously autonomy on the water with companies like Saronic. So these foundational technologies on autonomy. Um, I are finally starting to make their ways into, let's call it the real world, the physical world. And that's, by the way, a big place where we will spend more time now. It has been an important year for the firm. So the $3.5 billion of new funds. You know, I tried to track where the venture dollars are flowing and it's still like very highly concentrated. I think like 21, um, big deals account for the majority of it here today. And it's a bit to go. How does you know you raising those new funds reflect that, that you need to be in the game on the on the bigger deal. So we raised 3.5 billion, a billion of that as early stage 2.5 billion. That is late stage. There's been about just over $400 billion invested through, I think, June and of June this year in venture. And over 80% of that has gone to late stage deals. Just to give you a bit of a sense of just the dollar is going and it's, you know, honestly, truly a reflection of the fact that you see these companies, whether it's anthropic, whether it's Waymo, whether it's data bricks, whether it's ceramic and Harvey cognition, you know. But even in Sierra, these companies are hitting revenues and compounding at a scale truly we've never seen before. Um, and so if you have the ability for to access those. And deploy capital, you know, going back to Waymo is still early. I mean, it's hugely transformational. It's just an obvious opportunity. You know, I did I misspoke right. You got into Waymo in this this January round, which was actually notable at the time. Similarly like with Sequoia who I think co-led that round. Um, but this is a 50 year firm. How do you go generation to generation, uh, at a firm like KPMG, like, okay, this this year, this is something we're doing differently or it's still in line with everything we've done historically. Yeah. I mean, our, our you know, our, uh, goal at Kleiner Perkins is to invest in history making companies actually in companies that make history. And it's on our website. Uh, and so really what our main focus is, is understanding when the time is right and when the market is right for a company to break out and really create, uh, and define a category. Um, and so a lot of what we spend time on is really that understanding technology trends, but then really being informed by the entrepreneurs who come to our door every day and, and tell us about what's happening in the world. Um, and so it's very much an informed decision, but ultimately it comes down. Excuse me, to those founders. What what what drives the conviction on that, on that idea? Well, at the technology layer, uh, it's really the fact that you have companies like Waymo that have developed robust autonomy, if you like models to understand and map out the physical world, and those are finding their way into robotics and adjacent domains. And there's these massive industries, whether you think about transportation, supply chain, factory automation, building the physical things. You know, I was just in, uh, Texas for the Saronic Port Alpha unveiling this week. Yeah. These are we had, you know, on the show, these massive, incredible opportunities. And they're becoming much more viable in terms of technology permeation into that world today because of all this work that's been done at the frontier? Yeah. I mean, at least with Saronic, right? It's tangible. Um, you can say, okay, they want to build advanced shipyards domestically here in the United States. Is it a simple cost? And they can do that more quickly now because of AI? Uh, they can they can produce products that are much more interesting and competitive because of I and because of technology. Yeah, the autonomy piece of it. But if you just look at supply chain more broadly and we have companies in our portfolio like motive restored that have really taken a look at how goods and services move around. How do you actually inject vision, computer vision and robotics into safety, into performance, into automating warehouses so that the cost of access to things for consumers goes down? And that's becoming very tangible. Uh, and then you have obviously the transportation sector with with companies like Waymo. So all of these massive industries, um, that have been around for ages, that are truly trillion dollar markets are coming up for grabs in automotive Again, in another big sector, we have companies like Applied Intuition, yes, and most recently Mind Robotics, which is a robotics spin out from Rivian. Uh, really going after injecting technology into the automotive industry both domestically and globally. Again, all of this is possible because of advances in these large language models and video models and hardware. You know, those things are happening now. You know, we see evidence that venture is supposed to be, uh, about seeing around corners. You know, what is the next thing? Uh, that people aren't talking about right now, that you are just convinced it is the next wave, the next ax, whatever you call that. Well, I think, you know, the investments are being made now into what will become impactful in the coming years. And part of it is truly, I think the moment for robotics is finally now, both because of the hardware costs coming down and because of model capabilities. Um, there's a domain around science and kind of the frontier that's becoming very interesting, right? Can you automate labs and do materials discovery? Do drug discovery. Do you know investors in Chai Discovery, which is helping find antibodies and and make drugs? We're investors in a company called New Limits, which is going after overall cellular rejuvenation. So helping us, you know, become younger in a sense. And these things are only possible now and have been only possible over the past couple of years. And so that's what I think you'll see more of these kinds of things permeate into the economy. And then you might have, you know, eventually robotics in the home. You might have robotics pervasively through our lives and certainly in the manufacturing sector in a really massive way in the near to mid-term. And then there's chips. There's the foundations of I and I making I, uh, you are still accountable to to LPs and your job is to, to make returns. Right. And um, we should therefore talk about the IPO window or what you see. Um, anthropic is the the low hanging fruit for that. You also had some M&A success of late as well. Um, which I find interesting. Yeah. What's happening? Yeah. What's happening? So first, uh, you know, the IPO market. You know, it's a great, you know, outcome. You obviously have a few interesting companies on the come. Uh, the window is in some ways open in some ways. Uh, you know, you have to be thoughtful, uh, about how you approach that window. But overall, I say feeling much more optimistic today than, you know, in the kind of historical look back window. Uh, the M&A market is really is really quite interesting because if you think about and we had Salesforce acquired in McCabe and Finn. Yeah. Intercom uh became thin. Uh incredible story by the way. Uh, we had, uh, ServiceNow acquire move Works. Also a great acquisition. What you're starting to see is companies that have historically been grounded in SaaS, uh, and traditional software. Yes. Really reinvent themselves through acquisition. And I think that's that's a really important point for all these companies to think about, because the talent required to become an AI organization, um, is probably sitting out there in a startup somewhere. Uh, and it's really, really imperative for some of these companies to bring that talent inside. So. So let's end our conversation with I wanted to ask you, you know, what's the company you desperately want to see somebody build? That is it. That's not being done yet. Well, I think I mean, I think by the way, everything is getting built, which is pretty, pretty exciting. But I do think back to kind of our conversation, you know, I think the moment you have for the magical moment, you have something like instinct or muse. And I think that's going to happen in business and enterprise. Right. That's pretty obvious. Just a tool that becomes ubiquitous ubiquitously. Yeah. Just because you think about it, uh, you know, if you could clone yourself, right, and you could have somebody do your work for you and save you that time so you can spend it with family or just do more. Right. That would be incredible. Incredible for you and incredible for for society. I think that's an obvious set of things that'll happen. Uh, and then I think from that, you know, the world is your oyster. You can do anything.