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With Scott Orn

A Startup Podcast by Kruze Consulting

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Scott Orn

Scott Orn, CFA

First Check Investors: A Deep Dive with Boldstart VC

Posted on: 09/10/2023

Shomik Ghosh

Shomik Ghosh

Partner - Boldstart Ventures

Shomik Ghosh of Boldstart Ventures - Podcast Summary

Shomik Ghosh, partner at VC firm Boldstart, discusses the types of companies Boldstart invests in, and looks at the current venture capital marketplace.

Shomik Ghosh of Boldstart Ventures - Podcast Transcript

Singer: So when your troubles are mounting, in tax or accounting, you go to Kruze. From founders and friends, it’s Kruze Consulting. Founders And Friends, with your host, Scotty Orn.
Healy: Hey, this is Healy Jones from Kruze Consulting. Excited to welcome to the Founders and Friend’s Podcast, Shomik Ghosh of Boldstart VC, a first check investor. But first, a word from our sponsor. Hey, this is Healy Jones, VP of Financial Strategy here at Kruze Consulting, and I want to say thanks to our podcast sponsor Arc. At Kruze, we’ve got a number of clients successfully using Arc to manage their deposits, payments, access, financing, all in one place. One of the things that Arc provides that’s really great, is over a quarter million dollars in FDIC coverage. Their insurance program goes beyond the standard limit and it secures up to five and a quarter million dollars. So, startups that have even more cash than that can go and access Treasury solutions to provide yield and safety. If you’re a startup looking for a secure financial solution that can help you scale, please check out our sponsor Arc at arc.tech. So, hey, Shomik, welcome to the show. How are you?
Shomik: Good, good. Doing well, Healy. Thanks for having me on. Really excited to be here today.
Healy: Very excited to have you. I’ve got a ton of questions. You are with Boldstart, which is a pretty unique fund. There are a lot of people who say they do what you do, but you guys are really known for it. Particularly for first check investing. So, I’m going to ask a bunch of questions about that, but first, tell us a little bit about yourself. How did you get into venture capital? What’s your journey to where you are now?
Shomik: Yeah, I grew up in New Jersey. So, on the East Coast at least, I was not exposed to startups or venture capital at all. I just kind of thought the route that you did was you became a doctor, or you worked in pharmaceuticals. Or you basically eventually became an investment banker or a hedge fund person. And so, I actually went down the path of after college trying to go into investment banking. So started off, actually, in fixed income of all things, so completely well away from what I do now. And then from there just went through a bunch of different jobs. I went out to San Francisco where I joined an investment bank and was doing tech M&A there. And from there actually I learned what startups and venture was. And that started my whole career to where I now have been at Boldstart for going on now four years, at the team. And so have done everything from growth stage investing to venture debt, to being the first employee of a startup where we were trying to do a bunch of different things. So varied careers, but finally found what I wanted to do at the early stage.
Healy: I mean, that’s pretty great. You got this sort of traditional finance training background, spending some time in startups, now investing in startups. It’s actually a little bit similar to myself and then Scott Orn here at Kruze. We both started off tech investment banking, did some finance venture stuff and a little operating stuff. It’s kind of fun to get to see everything from these different angles.
Shomik: If my mom was listening, I think she would’ve said like, “Hey, I wish you could’ve found out the career a little bit sooner.” But in the end it all worked out.
Healy: Yeah. Sometimes it’s the journey that’s the fun part, not the destination.
Shomik: It’s very true. So
Healy: So what about Boldstart? What is it? You guys are actually pretty cool, pretty different. Tell me a little bit about the fund and what you guys like to invest in.
Shomik: Yeah, so Boldstart, we just… Well, I won’t say just. But last year or a year and a half ago, and now it’s our sixth fund, which we’re investing out of. And all we do is focus on backing enterprise software founders from literally, what we like to say, day zero. So we are the first institutional check into every one of our companies, and that means that we are literally backing people at the pre-product stage before any line of code is built. Before a website. Before frankly there’s anything. It’s normally just anywhere from one to three founders in a room, that have an idea and come to us with that idea. The way we’re able to understand what they’re doing is we specialize in enterprise software. And so even within that, I would say we specialize in areas like software infrastructure where there’s developer tools, data infrastructure, cybersecurity. And then also in terms of the SaaS layer, we like to do a lot in kind workflow productivity software, or future of work. Or things like that. So, those areas we get very specific. We really understand the end users and the buyers. And then we’re able to kind of dive in with the founders when they talk about those areas. Just because that’s what we spend all of our time on kind of compound learnings in over time.
Healy: So you’re kind of like the unicorn of the investor world. First check, got an idea, you’re talking with the founders, you’re helping them think through the market, the business model. That’s, first of all, it’s got to be a lot of fun, but secondly, you are really hard to find. So, pretend you’re a founder, wanting to come talk to you. What do they need to have? What tips can you give them to help them be more successful in that?
Shomik: So, we like to say, “We go pre-product, but we don’t do pre-idea.” And so, what we really want people to have when they come to us, is a well-thought-out, well-formed idea of what they want to build. Because then that helps us help the founder actually validate, “Truly, is this what you want to build? Is this what you want to spend the next 10 years of your life building? Or is there kind of little tweaks or things that could be done to that initial idea to kind of improve the trajectory in the future?” So, we’ll do that by putting in peers who maybe have either built similar companies in the space or adjacent to it. And then also from the enterprise buyer perspective. If you’re a founder starting out, normally it’s just like, you haven’t even written the code yet, so you’re trying to visualize what that would look like. But if you can now start to talk to some of the enterprises that are more forward-thinking. And say, “Hey, if I did build this, how would that work in your software architecture? Or how would that work in this use case?” Those buyers can then start to tell you, “Oh, actually this is the problem it would solve, but it would need to do this as well. And it would need to integrate with this product.” And so on, so forth. So, you could start to build out that framework for what that would look like in the future. And start thinking about that now, even though we actually advise companies not to go enterprise too quickly. Because sometimes that can actually lead to you getting stuck in this area where you’re trying to deliver something to a very large enterprise. And that’s taking all of your resources, and all of your energy, and having to do security and role-based asset control. And all these sort of things. Versus in the early days, it may be better to actually just iterate with an early customer that is more quicker to adopt. So, then you can have more cycles changing the product.
Healy: So, before you go for that elephant hunting, find somebody a little bit smaller who’s not going to turn you into a custom [inaudible].
Shomik: Or find an enterprise that absolutely knows the stage that you’re at, and has a history of adopting products as the first customer. Which by the way, there are some out there. Frankly, a lot of them are in the Boldstart ecosystem. Because that’s what we do. And so they want to adopt those technologies and get ahead of the problems that they know their organizations are going to have. And so, you want to find those if you’re going to go enterprise. If not, you want to start with a smaller company where they’re more of an early adopter. They understand the pain point, they’re willing to work with you even though you’re still very early.
Healy: The other thing that I find with a lot of extremely early stage startups, or ideas, is that the founder is starting out in a very tiny little niche. Some of them can articulate how they expand into adjacent niches or add features to [inaudible], and others can’t. Is that a thing you’ve kind of seen that some founders come with you and you think the idea is too small. And others come to you and you think, “Let’s just articulate this different and it’s bigger.” And if so, how do you differentiate between those two? And then what kind of advice would you have for a founder about, “Hey, it’s okay to start small, but here’s how you get big.”
Shomik: Yeah. I’d say, we like to have founders really start off and be able to articulate the vision at a thousand-foot level. From the airplane view of what’s going to happen, but then be able to drill down really into the specifics of what the steps will be to get there. And by the way, they may not be right, but at least having an opinionated view of how that will progress and evolve is something very important. Because again, that gets us to understand that the founder understands that, “Hey, eventually we’re going to be changing the world in this way, but right now what we first need to do is find one early adopter who’s going to use our product for this specific use case.” And then we can start to move into these adjacencies over time to do that. So it’s a very specific way of, when we’re looking for founders who pitch us, we’re looking for founders who can again, drill down to the nitty-gritty, granular details of that first product and that core wedge that they want to build. But then also be able to zoom out and say, “Here’s why that will impact the enterprise or the customer’s workflow in the future in this big way.” And that’s a really hard thing to do. But at the same time, some founders, especially a lot of the founders we work with who are technical founders, they may not have that… So, product marketing background or things like that. And so that is teachable, but what’s not teachable is the ability to still zoom out and see, “This is what the impact of my work here would be.” Because the founders need to see that vision of how it could be big in the future.
Healy: So, there’s a lot of different ways… A thousand questions I want to ask you all of a sudden here. But I’d love to learn if you have any particular samples of [inaudible] who’ve done that really well, that really impressed you. I don’t know if you can share a particular founder. You’ve obviously seen stuff like that recently. How do those people communicate that to you? Or what do they do, to the extent you can tell us?
Shomik: Yeah, I mean I think there’s a variety of founders. We’re really fortunate to work with a number of them, but I think if you look at our current largest company by valuation and employee size is a company named SNYK, which painted this vision early on. Guy Podjarny, the founder, painted this vision that developer would care about security essentially. And it would basically change the software development lifecycle because of security being something that would be alongside what the developers were coding on a daily basis. And this was a pretty crazy vision to be honest, because at the time, one, people would always say, “Hey, developers don’t care about security.” And two, also, it was kind of more of a top-down thing. You had firewalls. And so that’s not something that an individual developer could bring into their organization. That would have to be a CISO mandated thing of like, “Okay, we’re going to secure our entire network with this firewall.” And so, this was a really revolutionary vision, but where Guy started was actually saying, “You know what? In the Node.js community…” Which is a specific type of programming language. There are a bunch of developers that’s growing very quickly and the adoption that’s growing very quickly, and they all use open source libraries. Those open source libraries happen to be something that are out there for any attacker to be able to look and see. And so, then they can go in and kind of find vulnerabilities, and actually attack packages through those kind of vulnerabilities that they have. And so that is a really great example of the vision was, “Hey, we’re going to create developer first security.” And that’s a really big vision. We weren’t sure what the market size was of that, by the way, but we were just like, “Oh, interesting. If this were to happen, there’s a lot of developers in the world and it’s growing very quickly. So that could be a pretty large market.” But where the starting point was was, “Hey, we’re going to start with open source developers that are using Node.js, not even using other languages.” And so, it was hyper focused, hyper figured out on what are their workflows, what are their pain points? And let’s resonate with them. By the way, now, their last rounds was I think a $7.4 billion valuation. And so, they’ve expanded the TAM significantly past the Node.js developers. They’ve gone to all the different programing languages, and now they’ve moved on to infrastructures code, container security, and so on and so forth. So, we like to say it’s not the TAM that you start with, it’s the TAM that you end with. And it will always start with a smaller TAM. That’s what allows you to actually build the business without large companies coming in. But then over time, if you nail that kind of core wedge, you can expand to adjacencies.
Healy: That’s great. I really liked the way you described that. First of all, great example of a company, it’s doing really well. But the idea of starting with the thousand-foot vision and then explaining what you’re actually doing right now to get there, I think that’s really solid. I help a lot of startups think about their pitches, and a lot of times they start, “Here’s what we’re doing right now, and then here’s where we’re going.” But you’re saying, “Hey, flip it. Just start with where you’re going to go so that people know where you’re going. Then you can say what you’re doing right now.” And that’s a good strategy.
Shomik: And I think the why is important too, for founders who are listening, right? It’s just like, “Why is that important? So Shomik, you just said this thing, right? Healy’s saying he agrees with you. Oh, this is great, but what’s the need?” And the need really is just like, you’re starting something that everything is almost stacked against you in a way. You have to find customers, you have to find hires, you have to sell every single minute of your day. From probably your significant other’s, who you’re devoting your time to this startup. To future employees, to the customers and all of that. And that’s something where being able to articulate that vision is so important because that will get people excited about, “Wow, okay, if this were to happen, this could be really big, this could change the way things are doing.” But then when people ask you, “Well, what are we going to work on now? Or, How’s this going to work today?” You need to be able to tell them, these are the steps along that journey. And that’s why it’s important. It’s because you’re going to be doing this not just to a VC, but literally every single moment you talk to a service provider, you talk to an employee, you talk to a customer, it’s going to be something you’re going to have to talk about.
Healy: So keeping in the same vein here, what’s another piece of advice [inaudible] wish every founder knew before they came and pitched?
Shomik: I wish every founder knew that there’s nothing that… A lot of founders will come and say, “Oh, we were just saying something that we thought VCs would want to hear.” And ironically, I don’t really know what that means. But in some cases it kind of means, “Well, they want to hear something that was a big market opportunity.” Or something like that. There’s a lot of VCs out there, so everyone will have different things that they want to hear from you and different things they’re looking for. But in reality, what everybody really wants to hear is, what are you passionate about? And what do you know about the world that nobody else does? Because that’s what’s going to keep you driving forward on this mission, which is super hard and challenging, and it’s going to take 10 years. So, it is not a journey to go into, just kind of willy-nilly, right? You really have to know what you’re getting into. And so, what we actually want to hear is, what’s the passion? What do you wake up thinking about in the middle of the night, that you’re just like, “Oh my God, I can’t get this out of my head. I need to solve this problem.” I really hope founders don’t over-index on what they think VCs want to hear. Instead, talk about the pain points, the problems, the end users that you’re passionate about, and what problems you want to solve for them. And that will get us excited. Because we’ll feed off of your excitement, be able to ask you questions. And again, that helps us understand how deeply you thought about the idea.
Healy: So, I guess my next question to you is, you just got excited, you just got kind of passionate there. So, my question for you now would be like, what’s the most satisfying?
Shomik: Well, we’re at the earliest stage. So, I think where I get really excited is all the little wins that are along the way. And so, I think a lot of times what happens is, especially… I used to be on the growth stage side, so when you’re on the growth stage side, it’s very rewarding to see each quarter being hit or exceeding plan. But it’s kind of these larger milestones, but there’s a ton of little inputs that form that larger milestone, even just the end of the quarter. And at the earliest stage, that’s what’s so exciting is we get to see the first hire. We get to see the first prototype ship. We get to see the first customer. All those little wins are those inputs that then help us understand what will be the future trajectory of the business. And so that’s why a lot of the indicators… People always ask us, “How do you know if a company’s working or not?” What we’re looking for is basically product velocity and hiring velocity to kind of stay in lockstep. And what I mean by that is, you can have a really fast product cadence, but if you can’t hire to the same speed, then what you’re actually doing is you haven’t built an org that can scale. So, you have to figure out, “Okay, well then how would I scale that?” The flip side is let’s say you can hire really great, but all of a sudden now the product cadence is slowing. Well, then you have also an org problem, where people have either too much process or aren’t collaborating well to keep that cadence high. And so, what we’re looking is always the velocity of those kind of staying together. And those are the early signals that we can point to that, even if there’s not even a customer yet, we can point to that this company’s on the right trajectory because those things are in tandem.
Healy: Hey there, this is the VP of Financial Strategy at Kruze, jumping in to thank our sponsor of this podcast, Arc. At Kruze, we have a number of clients who are successfully using Arc’s FinTech tools to store deposits, manage payments, get financing, earn yield, all in one place. But another thing that’s important about Arc is that they have a heightened security and safety feature. Because they partner with globally recognized banks, they’re able to offer an FDIC coverage over $250,000. In fact, they offer up to $5,250,000 in FDIC coverage. And if you have more cash than that, they have treasury solutions. They can provide yield and safety for even more money. So, if you’re looking for a comprehensive financial solution that can help you scale, check out Arc. Go to arc.tech. Thanks again to our sponsor, Arc. I totally agree with that, particularly hiring good people right out of the gate. It’s important to us, mainly as advisors, but the other place that’s important to us is that we like to work backward [inaudible] the next round. In order to raise that next round there’s particular things you need to [inaudible]. You’ve got to prove certain things. You’ve got particular pieces of product you need to build, sales forecasts. It’s kind of hard to do that with two guys and a dog. But sometimes you do need to hire a few more people to get it done. I spend a lot of time asking founders like, “Okay, you should have hired 10 people by now, but you only have five. Can you still get all this stuff done?”
Shomik: And this is kind of the most interesting part about this current environment, which I think is a lot of founders are learning about how much overhead and process can kill velocity. And so, a lot of times we think, if you hire more, that means you can do more things. But in reality, that also means that you have more management structure, you have more communication channels, you have more people that you need to get around the table to make decisions. And so that can slow things down. Now, by the way, when you’re larger, it’s actually kind of important to slow things down. Because imagine if you ship a breaking change to an API that millions of your customers rely upon, that’s going to be a pretty big loss. Versus if you do that when you’re earlier, and you only have one customer or two customers, that impact is not the same. And so that’s something where everyone talks about bigger companies move slower, but it’s actually for a reason. They kind of have to. Because they literally cannot break the product that millions of their customers rely upon. But that’s also the advantage that you have as a startup, is staying lean and iterating very quickly. And by the way, from a perspective of working with Kruze or others, is just, do tasks, focus on what’s important to you and what’s most important to the business. Which is iterating with customers, getting product feedback, thinking about what you’re going to build. And so, things like accounting, you should definitely have an understanding of. You should know your cash balance, you should know your burn.
Healy: Yeah, numbers matter.
Shomik: But you shouldn’t be the one who’s preparing that. Because that’s taking valuable time away from the core things that you should be doing to push the business forward.
Healy: I totally agree. A startup is basically a ticking time bomb. You’re running out of cash. It’s a race to prove that you can raise more capital or raise the profitability. And so every second, as a founder, you spend doing something that doesn’t either help you get to profitability or help you build to get to that milestones to raise more cash. So, I strongly agree, you got to outsource a lot of the non-customer facing, non-org development, improving activities. You’ve got your culture to worry about, you’ve got your customers to worry about. So don’t worry about certain things like your finance. Yes, you should hire an attorney. You shouldn’t be doing contracts yourself, those are people who can do that for you. Lets kind of totally changing the subject here. The market has changed. We’re in the middle of 2023. A lot of prognosticators, reporters are starting to say, “Oh my gosh, we’re about to see a bunch of startups [inaudible].” What do you think it’s about to happen? Are we about to see a lot of companies go out of business? The market totally changed. What happens over the next? What’s your crystal ball say?
Shomik: I think certainly the environment changed so rapidly and so quickly that we still haven’t seen probably the full fallout yet. Because it’s delayed cycles. And so, for example, in 2020/2021, companies were able to raise a lot of cash preemptively, and those cash balances still haven’t run out. So, companies still have runway, they’re still executing upon their business. And then when it comes to raise, right, then that’s kind of where the next kind of reckoning comes. And I think what’s happening is honestly a couple of things. There’s one, some companies that maybe raise that too high valuations, but this is where I would say to founders, “Down rounds are not a bad thing. What matters in the end is the value that you create.” And so it’s not even the exit value, I would say. Because if you’re building a public company, well, the exit value could be something very far into the future. And so, you want that to be something that compounds over the long-term in the public markets. And so, in terms of what founders should do in this environment, one, I would say don’t shy away from down routes. If you believe still in the long-term vision, and you believe that you’re seeing the market pulling your product. And you believe that things are working, then getting more capital at an appropriate valuation for where you currently are can still let you build towards that future vision, that will allow you to become that lasting company. And by the way, there’s so many, I think Square, for example, took a massive, massive down round on the IPO. I think Dropbox did the same and took a down round, I believe, on the IPO. But those are still businesses that are in the public markets, they’re still operating very well, they’re still providing value to their customers. So, I think that’s one aspect that’s going to happen. And then the other aspect I think is there will be some companies that either fail. Or others who founders’ see kind of the writing on the wall. And say, “You know what? Not only is our valuation high, but also, I just don’t feel like we have that pull from the market. I don’t think we’ve figured that out yet.” In that case, hopefully when you still have cash left, you can start to look for where you could augment an existing team. And that’s where M&A comes into play. The Silicon Valley and the large companies that we know of today in tech… Which by the way is broadening well outside of Silicon Valley. Nike has been making data infrastructure acquisitions. John Deere has been making IoT tech acquisitions. So it’s a very wide space. And so, what I would encourage founders to do is just have this really rational, thoughtful conversation with whoever you trust the most, to understand where your business is at. And then be able to act upon that. And it’s okay if you need to engage in an M&A conversation. That is not a failure. That is a way for you, the product that you built, and all of your employees to continue to have a job. Continue to create value within a larger organization. And by the way, learn a heck of a lot. So, for your next company, you’re going to be that much more set up for the future.
Healy: I 100% agree. This is what we’re seeing here at Kruze. And I think if you wrap things up gracefully, you will be able to raise. A lot of times I tell founders, “Is this your only idea? Will you never have another idea again? Is this the company you want to retire doing? Or do you think you have another idea?” Inevitably, pretty much everyone’s like, “Well, I’m going to have another.” So, it’s like, “Okay, gracefully fold this thing up. And if you do it nicely, do it respectfully of the investors and the people on your team, they would probably give you money again.” This is Silicon Valley. This is not some country where failure is looked down upon. This is Silicon Valley. It’s like, “Oh, wow, you sold your company for a very modest return. I’ll take a meeting with that guy.” Right? I’m sure you would take a meeting with that person.
Shomik: It’s just honestly failure, as long as it’s someone who learns from that, which is what most founders are. They’re learning machines. And so, normally what we call so-called failure of like, “Okay. Sure, let’s say you didn’t get the return you wanted, or even maybe lost some money along the way.” Well, guess what? We are in this journey together to build long-lasting, impactful businesses. And if you can learn from what went wrong, if you can learn from being in a larger organization and learning how scaling works within that larger organization. Maybe more pain points that exist within that larger organization, so on and so forth, you can really start to build a powerful company. And by the way, some of our largest outcomes have been companies that originally started with a founder who sold their business for a much smaller amount and then went on to build… Guy Podjarny sold his first company to Akamai and then went on to build SNYK. Dmitri at BigID sold his first company to… It was Layer 7 to CA Technologies. And then he went on to go build BigID. Rahul sold Rapportive to LinkedIn and then built Superhuman. So, these are all examples of, “It’s okay.” And by the way, we were excited back those first companies too, because no matter what, you’re still building a cool vision. You’re still building a product that gets people excited. And those learnings will help you go for a big company in the future.
Healy: So again, it’s 2023 and you’re investing in enterprise space. We got to ask, AI? Over-hyped, under hyped, just right, what do you think?
Shomik: This is the question. And I think if we all had the answer, we would be a lot smarter, and a lot richer, and a lot wiser. But I think the answer can be both, right? It is absolutely over-hyped right now, 100%. I don’t think there’s any way we could say that’s not the case. I also think that it is under hyped in the long-term in terms of what it will enable, but right now we haven’t seen those production use cases. We haven’t even seen enterprises really start to adopt AI. The reason being, it will frankly just take time, right? ChatGPT, I don’t even know if it’s been a year yet since ChatGPT 3 came out. Where it was really the step function forward and really this order of magnitude difference in what you could do. And so, I think it just takes time for that to happen. But right now what we’re seeing is basically you can scale revenue very quickly doing what we call a wrapper around the OpenAI API, right? And so, if you just call that API and then you build some sort of application that you can use the LLMs on top of whatever data you’re collecting, you can kind of start to build something really quickly. So Jasper.ai, Writer AI, Copy.ai, they all kind of do various forms of content generation, and those have scaled really rapidly. The question is of course, durability. And are those kinds of businesses, can they sustain growth over the long-term? And I think we’ll still see, right? But you can scale very rapidly. And so, what happens is a lot of founders see that, and then of course a lot of founders flood into that same area. And so, this is where the over-hype nature happens. Because everyone then starts pitching AI. And they start saying, “Oh, we’re going to do this. And by the way, did you see Jasper just went like a rocket ship off?” And it’s like, “Okay, that’s great, but what you haven’t seen is the 20 other founders that are doing the exact same thing because they saw the same thing that you saw.” And so, this is the part that we get very excited about, where we get excited about the founders who are saying, “Hey, how can LLMs…” If we’re using the current instantiation of AI. “How can large language models impact the architecture and workflows of core products that we see out there that exist?” And this could be something like taking something like a CRM and saying, “Hey, LLMs work really well with structured and unstructured data. So, what if we used a natural language interface for you to input that data in, and it could automatically do the field mapping and data modeling for you?” Or what if, I don’t know, it could even set that all up for you just from you saying, “Hey, I’m a healthcare company in this region.” And so on and so forth. So, these are kind of ideas that, it’ll just take time. But for founders out there, I would say actually take that time. Think about what will happen in two years that nobody else is thinking about? And how can you then work backwards from there? So, build for that future that’s going to happen. And the reason I would say that, by the way, is the largest outcomes that happened today started before key things occurred. And so, Vector DBs, they’re the hottest thing right now in AI. And everyone’s like, “Oh, I need a Vector DB to deploy LLMs.” The largest company in that space right now is a company called Pinecone. Now Pinecone is scaling like crazy, has raised great valuations, doing really well. Now everyone has started other Vector DB companies around that, because they’ve seen Pinecone’s success. Ironically though, Pinecone has been building since 2019. So ChatGPT was three years away. That is the vision you need to build towards because then you catch this wave. We had another company Protect AI, they started in 2021, I believe. And then ChatGPT comes out late 2022. So they’re a year and a half ahead of ChatGPT getting released. Well, guess what? We thought that AI would be an attack vector and a threat vector that CISOs would care about in the future. It just came a whole heck of a lot sooner once ChatGPT came out. And so again, you’ve got to build for that vision of what you believe will be the thing. And if you build for it, then once that wave comes, you can really capture it.
Healy: It’s now. Yeah. Yeah. I mean these are multi-year overnight successes. Everybody sees it take off and don’t notice the work that went before. So, I guess for the question of under hyped or over-hyped, I’ll put you down for under hyped. No, I’m just kidding.
Shomik: Like I said, over-hyped in the near term, under hyped in long-term.
Healy: So I mean there are going to be multiple billion companies that come out of this.
Shomik: Yeah. And to be honest, maybe the multi-billion dollar companies are also multi-billion dollar companies that already exist. This is the unknown part, right? It’s like without a doubt, AI benefits Microsoft, Google, Facebook, you name it. Whatever large company has a ton of data, it benefits them, because now they can do stuff with that data they weren’t able to do before in an easier manner. Or expose interfaces or user onboarding to customers or end users in a way that is easier than before. But that doesn’t mean that there’s still not opportunities for founders. You just need to think, and instead of jumping into it, really observe the different solutions that exist out there. And again, how could you change maybe the architecture? How could you change maybe the go-to market? How could you change the data model? Whatever that is, to have something that’s differentiated from the existing companies out there and then build upon them?
Healy: Do you have any particular trends that you’ve noticed that the enterprise buyers that you’ve interacted with are thinking about around AI?
Shomik: They’re all looking for solutions. I mean, the funniest thing about enterprises is they’re not stupid. They got to where they are because they did a lot of really smart decisions. And the smartest decision right now is to let your employees play around with what LLMs could do, and be able to envision the future for what your product could enable. And so, Coca-Cola put out an AI-generated commercial, for example. It was brilliant. It looked really cool, and it was just a stunning, stunning thing that they released. And this is Coca-Cola. This is not the most tech forward company that we think, but this is a company that’s already experimenting on the edges of what’s possible. And so, these enterprises, what they’re looking for and what they have pain points around is, one, data. So, the data that gets into an LLM, who can access that data? Where’s that data being stored? Also, from the training perspective, are they getting the right representative set of data to train? Because they don’t want to especially have bias in various ways. Because if you have certain data, it could be biased towards genders, or religions, or whatever. And so, they have all these things that they need to be aware of. So, from security, from model deployment, from analytics, from understanding how these models run, observability. These are all problems that they have. And then not only that, finally then they have the problem of like, “Okay, well now what happens if we want to fine tune a model that we have on our own data. Maybe customer support tickets.” Well okay, how do we then self-host that model? How do we train that? How can we access the GPUs that are needed to train that model? All these sort of things that are challenges. So, it’s a lot of these basic infrastructure things that are challenges that exist right now, but there’s a ton of founders that are also looking to solve that and building for that future right now.
Healy: Right. And that means there’s a lot of opportunity.
Shomik: Exactly.
Healy: Folks inside these large enterprises are thinking about this.
Shomik: Yeah. And by the way, a lot of the large enterprise that I think just for listeners, again, they’re not sitting on their laurels. And they’ve basically gone out and said, “OpenAI, what do we need to pay you for our own, call it reserved instance of an LLM to use?” And so, once that happens, it’s just a dollar cost. So, on one perspective, OpenAI is in a great position from that area, but once they pay that cost, now they have unlimited bandwidth for their employees to experiment with. And that’s what’s got to be exciting.
Healy: This has been a great conversation. Really, really enjoyed chatting with you. How can founders find you if they want to get in touch with you?
Shomik: Yeah, so I’m on Twitter @shomikghosh21. LinkedIn as well. And then also I write a blog that’s called Software Snack Bites where it’s five-minute reads on a weekly basis. And also have a podcast where dive into, as you can imagine, software. And so, we go pretty deep into various topics. For example, we just released one in AI security. We’re going to have one with AI’s impact and SaaS coming out soon. And so very granular, like software insights for people who are excited about that. So, if you’re looking for general advice, probably not the best place to go. But if you want to dive deep into software areas of expertise, that’s the podcast for you.
Healy: Thank you so much for your time. We had a great conversation and hope you find some good AI enterprise companies to invest in.
Shomik: I hope so. And I think we will Healy, for sure. But thanks for having me on. Really appreciate it. And looking forward to chatting again in the future.
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