Navin Chaddha, managing director of the 55 -year -old Silicon Valley Risk Company MayfieldBetting on the AI capacity to transform heavy industries of people such as consulting, law and accounting. The veteran investor, whose victories include Lyft, Poshmark and hashicorp, recently discussed in Techcrunchs Strictlyvc Night at Menlo Park WHY HE BELIEVES “AI TEAMMATES” CAN CREATE SOFTWARE-Like Margins In Traditional Labor-Intensive Sectors, and Why Startup Should Right Now Target Neglected Markets Rather Than Compete Head-Head With Giants Like Accenture-Thought Distribution Gedits and Tawere’s and Tawere’s and Tawere’s and Tawere’s Dathushitsded Gacowied Ged Ged Ged Ged Ged Ged Ged Ged Ged Ged Ged Ged Ged Ged Ged Ged Ged Ged Ged Ged Ged Ged Ged Ged Ged Ged Ged Ged Ged Ged Sometimes Hardwarer than Silicon Valley anticipates. This conversation has been edited lightly by length and clarity.
You believe that law firms, consulting companies and collectively accounting services, a $ 5 billion market will be complete reinvented by Ai-Five companions that operate with software-like margins. Demonstrate. What have you seen beyond PowerPoint’s presentations?
I think that an advantage of a company that has bone in the business for more than 50 years is that it has all the trends, from Mainframe to mini computers, PC, Internet, to mobile, clouds, social devices and now this era of AI. The example I would give in the late 90s, this concept of electronic commerce occurred, which was: if I am a physical business, I cannot survive if I am only brick and mortar; I need to click and mortar. Then, subcontracting became a trend, and relocation became a great trend. I could not build a software services without a presence in India or one of the emerging markets. The same happened with supply chains and manufacturing: China and Taiwán Rose. So what is this new era with AI? Clearly, AI is a 100x force, and AI is being associated with humans, hopefully to improve them. And I think it is, and it will help reinvent business.
Many of the repetitive tasks will be performed by AI … and there will be two models. One is that you grow organically. The second is that you grow inorganically. . .
Can you give a specific example of how this will work?
What are the children of the things that a LLM or AI can do? Well, let’s say I have to implement Salesforce. Who wants to go to do that job? The human will enter and say: ‘I am his client manager. Salesforce must implement. ‘It is the same set of things. Use AI as the horse to do it, and whatever, the AI cannot do, have the human in the loop.
Now, suddenly, if you start doing thesis, son of things, you can have less work done by humans and more work done by AI, and [customers] Only pay the AI when [they] Use it.
And the market [entry] It shouldn’t be to go after [big consulting and IT companies] As Accenture, Infosys or TCS. Go behind careless masses. There are 30 million small businesses in the United States and 100 million worldwide that cannot afford knowledge workers. Provide them with service as software. They say: “I need a receptionist. I need a planner. I need someone to build my website …” Ai must be accustomed to [create] Start financing forms, with some humans [involvement] For negotiation. Do not compete with the accentuas of the world. You go after the fragmented markets, where instead of charging per hour, instead of charging per month for a contractor, it is charged per event.
Therefore, prices based on results instead of time -based billing.
This is based on the results, yes. . . The billing of the cloud is like that; Electricity is like that. . If 80% of the work will be done by AI, it can have a gross margin from 80% to 90%. Humans can still have a margin of 30% to 40%. It could have combined margins or 60% to 70% and produce net income from 20% to 30%. And believe me, most service services earn money. Technology companies do not. They live with risk money and then public market money.
You just lead the series A for a company called Gruve A A few weeks ago. It is a technological consulting startup. What did you see in your first customer pilots?
I think this is where the combination of inorganic and organic occurs. [Gruve was founded by] Very successful founders who had made two service companies before [and] Bootstraped and obtained them at $ 500 million in revenues each, and $ 50 to $ 100 million in earnings. They started this time and said: “What do we know? We know security.” So they acquired a $ 5 million security consulting company [that offers managed security services]. And they said: “Let’s see people. All growth from this point will happen through AI.” And they grew up from [$5 million in revenue] at $ 15 [million in revenue] In six months. They literally have a gross margin of 80%. It is based on results. Customers love it. Cisco loves. They say: “Hey, I’m not being pirate. Why am I paying for all these security people?” If subcontractors, [a vendor has traditionally charged] $ 10,000 per month. [Gruve] Says, ” [You pay us] zero. If they pirate you, if there is an event, if I look at it, then pay me. “
Can’t companies like McKinsey simply buy thesis AI capabilities? They have large companies that do not want to lose.
Yes, I think what is going to happen is that this is where the dilemma of the innovator enters. When business software companies, which were perpetual license companies, saw SAAS companies emerging, did not want to adopt [the model] because [SaaS companies] Charge companies monthly instead of five years in advance. Business companies also raised a 20% maintenance rate. It was difficult [for them] To get out of that drug and say: “Oh, I will charge you monthly.” The innovation of the business model was the key. They did not. Then McKinsey and Accenture, with so much dislocation, will be busy serving their customers [which is why I advise founders to] Go behind careless masses. Find a unique strategy and service to go to the market [an Accenture can’t come down market to serve].
But they will also imagine again. Then, these small companies, which do not compete with them today, mark my words: in 10 years, they will compete with them. And those large companies, McKinsey, BCG, Accenture, TCS, Infosys, have the innovative dilemma [and are asking themselves]: When do I do it? [When do I switch to an outcome-based AI model?] Due to a public company, my income will decrease in revenues predictable to income based on public services.
You carved $ 100 million From their recent funds collected to dedicate to “teammates” the past fall. What makes a true teammate versus an AI tool?
There are many fashion words in the industry. First they were co -drivers, then AI tools, AI agents, colleagues from AI. So, Mayfield’s thesis is that a AI teammate is a digital partner who collaborates with a human in shared objectives and reaches better results. The technology in which it could be built could be agent or co -driver technologies. The demonstration is: “I am a human resources teammate. I am a sales engineering teammate.” The objective is not to replace; The goal is to join and collaborate together.
When people started talking about teammates and attendees, it sounded novel, but I wonder if that will look insensitive as more people lose their jobs. Does Silicon Valley have a Marketing problem?
Absolutely correct, and I think we need not to whip it. We need to address it in front. . . Yes, there will be job displacement, but humans are intelligent. They are jockey. The horse here is ai. We will reimagine. We will reinvent ourselves. Today, the approach is to reduce costs, but we will discover how to expand our markets, how to increase income. This happens with each technological wave that comes. When Microsoft Word reached the PC on the desktop, people thought [executive assistants] They were out of business. Then Excel arrived, and the counters who made calcals, all who were out of business. We saw the same with Uber and Lyft. People thought the taxi drivers would leave. But what happened in your place? The markets expanded.
My thesis is, the way in which emerging markets such as India, China and Africa never had fixed lines, copper could not be digging, so they became wireless, cell phones, that is what will happen with many markets. The AI will do the work where humans are not even available to serve that client. So, for a long time, I am very, very optimistic. In the short term, there will be pain, but without pain, without gain.
Speaking of coding, a recently announced “The coding of environments “dealt with an Israeli company of six Monh that had just reached 250,000 users per month and $ 200,000 in monthly income. It was bought by another Israeli company, Wix, for $ 80 million In cash. Does that make sense to you?
Actually, these days, no mathematics makes sense. We are at AI’s age. You don’t know what is going to happen. I am surprised that with $ 2.4 million in [annual recurring] Income that only sold for $ 80 million. I thought it would be $ 800 million, right? [Laughs.] In today’s world, you don’t know. It is a market.
How do you invest in that market?
That’s where the secret recipe comes from people who are proven investors. They have deciphered the code. It is not a science; It is an art. It’s like 10000 hours [rule]: The more you practice this, the better you will get. And the companies that have existed for 50 or 60 years, have seen all kinds of bubbles.
The number one rule is to have its own star of the north. Having discipline and not having fomo, because Fomo is for sheep. And if you have those two or three things, your own strategy and without fear, [you’ll do well]. Just remember one thing: for people [in this audience] They are VC, we are in the money management business. It is not about collecting logos. It’s about taking small amounts of money and making them larger.
Duration this part [of the cycle]He will earn a lot of money. But I think 80% of people will lose money. They don’t know what they are doing.
