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Fraser & Nabeel explore what it means to build great products in this new world of AI.
Two former founders, now VCs, have an off-the-cuff conversation with friends about the new AI products that are worth trying, emerging patterns, and how founders are navigating a world that’s changing every week.
Fraser is the former Head of Product at OpenAI, where he managed the teams that shipped ChatGPT and DALL-E, and is now an investor at Spark Capital. Nabeel is a former founder and CEO, now an investor at Spark, and has served on the boards of Discord, Postmates, Cruise, Descript, and Adept.
It's like your weekly dinner party on what's happening in artificial intelligence.
Nabeel Hyatt (2): I feel like in a
world where most of us are trying to
process the entry of this new alien
species, this new thing, this LLM and
how it's going to work in our life,
I think we've mostly processed it in
very, very short go to market spurts.
Right?
the world is filled with incubators that
are asking you, you know, in three months,
make sure you launch the product and get
some traction to show up for demo day.
Or.
It's a hackathon.
Let's see what we can make
in two days over the weekend.
But My personal feeling was
like, no, also like we should get
weirder before it gets better.
Fraser Kelton: I think that we have
undoubtedly seen in the market that if
you go try to get like your merry men of.
Researchers together to go like
gallivant around and start a company.
I don't think that usually works out well.
Nabeel Hyatt (2): and then inevitably,
in the kind of rollercoaster of things,
you're going to wake up one day,
And, you know, there's some headline
of somebody who's raised a billion
dollars at, you know, whatever it
is, it's 10x more than you've got.
That's for sure.
Fraser Kelton: Hey
everybody, welcome back.
This time for real.
I'm Fraser.
Nabeel Hyatt (2): I'm Nabeel.
Welcome to Hallway Chat.
Fraser Kelton: Welcome to Hallway Chat.
You have a product for us, Nabeel.
You came metaphorically running
into the Slack channel where we talk
about products and you dump something
in, and it was the first time in a
while where I've seen a lot of us
jump on it almost instantaneously.
Tell us, tell us what
it is and let's jump in.
Nabeel Hyatt (2): Well, yeah, I
think we should talk about granola.
this week.
I've used this product a couple times.
Uh, Chris Pedregal is the CEO.
He's actually previously founded
Socratic, which was a Spark portfolio
company back in the day, doing
a whole nother product category.
We could talk about another time, which
is, uh, Socratic was the early, take a
photo of your homework and use AI to solve
it, which there's a whole category of 20,
000 of them in the app store right now.
But that's not what we're talking about.
He's doing a new company called Granola
just launched this week, And, you know, it
fits loosely into the AI note taking app.
Everyone jumps on it in Slack
because we all like to use
products, but let's be real.
We also do a lot of meetings and this
is an AI note taking app for meetings.
So it's also a little bit of like
customer fit as well for the team.
And, um, and some of us really
already know and respect Chris.
The product really simply is you jump into
a Zoom with somebody, There's a little
tag on the right hand side, the little
G for granola that says join now and
it pulls up a blank sheet of paper for
taking notes the same way you would have
brought up Apple Notes or something else.
I think there are a lot of very
interesting product decisions that Chris,
he's just a product person, did that are
counter to the, 30 other products that
have tried some version of AI note taking.
And I'm thinking about everything from
stuff like Otter and Notta and Fireflies,
uh, to whole screen recording, companies
like Limitless, to a product that we
talked about, I think, in maybe six
or seven or eight weeks ago, called
SuperPowered, which is the previous AI
note taking product I had been using.
And so I think we should just get into it.
I think there's some interesting
product decisions here with
lessons for other AI products.
Fraser Kelton: Before we jump in, let's
set up the discussion by talking around
the high level value proposition,
because I think that's why we were
all, uh, drawn to it initially, is
when he shared the announcement,
he said, if a bot is writing notes
for you, it's thinking for you.
And instead, Granola starts with
your notes and makes them better.
You know, we've talked a lot about whether
or not there's an agent or an assistant
that, is taking control of tasks for you.
Uh, and we've also then spoken about
co pilots, or paired programmer like
experiences that are collaboratively
building, your work product.
And this is the first note taking
app, at least that I've used,
that's in that second camp.
The other ones seem to basically want to
take full control and put on autopilot
the notes, whereas this one you have
I don't know, for lack of a better
word, editorial control over what it
is that it's going to like key in on
based on the notes that you're taking
while the, the conversation unfolds.
Nabeel Hyatt (2): The experience
for those who haven't tried it yet
is you're just writing into a blank
notepad that way you normally would.
And then at the end, it goes through a
transcription and note taking step where
it then does the thing that say Otter
or Nada would do, which is to give you
a structured, summary of your overall
conversation, but it then integrates and
is influenced by the notes that you took
.
So if you had, say, written down a basic
outline as you were going through things
or a couple of key insights that you
really captured or a quote that you really
loved, it'll fit into the hierarchy of
the way it then does summary controls,
kind of merging the two things together.
In practice, it feels almost like
You wrote down the things that
super mattered, and you had an
intern fill out all the rest.
And, and I really like that.
I think, you know, we've had lots
of conversations about agents.
We had a long conversation about
Devin and Cognition and Coding Agents.
These things that might try and go away
for a little while and go do a thing.
None of these things at this stage
of AI are really perfect or great.
I remember when Anthropic came in,
they, they gave the analogy of, We're
going to start with an AI that's good
enough to be a kind of okay intern,
and then slowly move your way up
the stack in terms of capabilities.
And so another way of kind of like
inverting that and thinking about a UI
cycle is, What are the types of tasks
in the world, not that can be done
entirely by somebody else, like that
I would outsource to India to go do,
which is like customer service, use
cases and so forth, but what are the
kinds of tasks that normally somebody
is already looking over your shoulder?
to help with that your manager
is already kind of heavily
involved with and looking at.
Those are probably really prime
examples of situations where an AI
can be the co pilot, the assistant.
Uh, and it's funny, we've had co
pilot around for a couple of years now
and like everyone tried to move past
it really quickly without, I think
Grinnell is a very good example of Oh,
there's a lot still to mine there.
Um, somehow we jumped out of that when we
did AI note taking and we went straight
to, Nope, this whole thing is totally
filled out instead of thinking of it.
You know, it's pair programming.
This is like pair programming applied
to pair note taking, which is, I
think, a really interesting metaphor.
Fraser Kelton: Yep.
I think so.
I think the other thing that this
highlights at a very high level
is the importance of product
taste and product decisions.
Like the product is super immature
and young still, so it has, you
know, limitations and rough edges.
And we can talk about those if it's
interesting, but it is pretty clear
those are going to be on the roadmap.
But what they shipped is so
opinionated versus what is in the
market today for note taking apps.
And, thoughtfully done.
One of the themes that we've talked
about for a handful of weeks has been
the idea that these models aren't
great and you need to fail gracefully
across different use cases and find
ways to do that to engender trust.
I'll tell you, there was a
meeting where I was using it.
I carefully took a note that
was actually pretty important.
And then the auto summarize, uh, I don't
know what you would call it, like the,
the co pilot piece filled in the blanks
and gave me a nice robust note at the end
of it, but it had dropped that one piece
that I had taken as critical information
and I, I, I was like really angry, right?
I'm like, how dare you?
If I write it down don't, don't do that.
Yeah.
You're yelling at the intern.
Yeah.
Yeah.
Um, constructive feedback.
I was giving the constructive feedback.
Um, but there's a toggle at the bottom
where you can actually just go back to
the entirety of just your notes, right?
And so you can basically turn
off any of the, like the intern
scribbles around the margins and
get back to where you want to be.
And the other place where they do that,
is the entire transcript is there.
Nabeel Hyatt (2): Right.
You can, you can drill down
to the transcript, right?
Fraser Kelton: Yeah, you can
drill down to the transcript.
Um, and then
Nabeel Hyatt (2): I'm not
sure if I agree with that one.
I don't know if I like that choice.
I can understand why they did it for
exposure, but you know, there's something
about staring at a transcript of all
the uhs and ums and all the terrible
things that feels, boasts like a little
bit more of an invasion of privacy.
a little bit more cringy, which is
hilarious, of course, because you know
it's recording, but staring at all of the
words feels quite different to me than
you're only allowed to get a summary.
So I'll disagree with you there.
I probably would have
hidden the transcript.
I'm sure, I'm sure Chris and the team
have lots of good reasons why they did it.
Fraser Kelton: Here's where I
think it bubbles up in useful ways.
The intern's notes are referenced
or deep linked to the relevant
part of the transcript.
So, uh, yeah, that's right.
Right.
If it, if it shows you a bullet point
that it's written, you can say, I don't
know, what, what was the context of that?
You click into it, a little overlay
appears, and then you see the transcript,
just the snippet, the relevant snippet.
Nabeel Hyatt (2): I agree with you.
Okay, so that, that part I agree
with you, that, that's brilliant.
Like the, the, yeah.
You see a note that says, you know,
we discussed, you know, AI eye
contacts, and then I click a little
button on it, the plus to it, and it
actually shows me this short bit of
transcript, a quote, basically the
inline quote that referenced that.
That's brilliant.
You could do that without
having to show me anything.
All of the horrific things I
said for an hour and a half as I
was rambling off the top of it.
For sure.
Fraser Kelton: But I'll,
I'll like, I agree.
I agree with, with that.
Um, here's a, here's one
that will make you laugh.
Cause I'm just looking at the notes from,
uh, our call before we jumped on here.
And there's a bullet point that
just simply says Mike Kelly
as a follow up and Mike Kelly.
Um, you can imagine that when you click
in that Mike Kelly is, uh, something
very different than, than the name mike.
Kelly.
Nabeel Hyatt (2): I
think it's Kevin Kelly.
That's a mess up.
We'll get to Kevin Kelly in a second.
Oh, um, here's, you want to, you
want a really awesome granola thing?
So take that Mike Kelly.
Yeah.
Change it to Kevin.
Yeah.
And now if you click open the transcript
quote, it has taken your correction and it
has also corrected it in the transcript.
Fraser Kelton: Okay.
That's pretty good.
Nabeel Hyatt (2): Isn't that beautiful?
Fraser Kelton: That is beautiful.
I think the other, theme that is really
well done on this product is that
they've reduced the friction across
the, uh, the product in dramatic ways.
And a couple of examples,
it offs into your calendar.
And so when you have a meeting coming
up, it's the product that basically
gives you the notification that a meeting
is coming up and there's a one click,
uh, way to launch into the video call,
I don't know.
Uninteresting?
Sure.
But what it does is it like also then
drops you into the note taking experience,
perfectly positioned on the screen.
You have your video on one side,
the note taking app on the other.
The title is already
filled in for the meeting.
Cursor's already live where
you can just start typing.
Somebody has cared enough
about the product experience
to craft all of those details.
That's one.
And then the second one is, is what
you pointed out, and that is, it
takes over the system settings.
Nabeel Hyatt (2): Look, I think
metaphorically, if we think about this,
how would I want a note taking AI to
insert my note taking, you can think of
these things as three different buckets.
And the first one is things like Mem
or Notion, which is you're taking notes
exactly the way you always took them,
And then we're going to layer a ChatGPT
like experience on top of it, right?
Right?
I can right click on
it and say, Summarize.
I can right click on it and say, Expand.
I can give you an outline
and say, Flesh it out.
That's kind of like, Yeah,
it's a ChatGPT for my notes.
Um, with notes, the way you previously
used it being the primary affordance.
The second is the inverse of that.
Um, it's not a note taking app.
It's a, the AI is the thing that
takes the notes, and then you can
do something with them differently.
And that's the Otter, the Nada,
and the Fireflies of the world.
which drive me crazy.
I've used all of them.
I've tried all of them.
They are okay for some specific use
cases, but especially the ones that don't
let you edit the prompts themselves.
So it's some sales template thing,
uh, that somebody at one of these
companies decided is the only way you're
supposed to get your summarized meeting.
It's just, just not interesting.
The one I do use constantly is called
SuperPowered, which is quite useful.
I record lots of, you know, meetings
when I need to, and they have a
custom prompt framework so I can have
it output the outputs that I really
want and summarize it the way I want.
It's great, actually.
I really like it.
Um, that's why we talked about it before.
But this is the, this is something
different, which is just it's not that
the AI is the first, input, and it's not
that my old view of the world, the way I
would think of Notion as the old input,
it's this, again, it's this kind of co
pilot view that I, I now, I immediately
came away from Granola trying to think
about lots of other consumer categories
and enterprise categories and saying Oh,
well, What would you do if it was that?
And so I love it when a product is so
inventive in its product surface area
that it makes you kind of reevaluate,
um, what, and I won't list all the
other categories or anything like
that because we'll have time to go
find those founders or whatever,
but it certainly made me think
about what are the implications,
um, for other things.
And normally, I mean, It.
The last thing I'll say is it just also
reminded me how much we have not really
been experimenting with interfaces.
Fraser Kelton: Mm-Hmm.
,
Nabeel Hyatt (2): you know,
we're, we're a little ways into
chatt pt and there is just not
enough people trying weird things.
Right.
Uh, with how AI is supposed
to surface in our life.
I was at a dinner last night with a
bunch of people talking about agents
and ai and, and, and, you know, UIs
came up and somebody brought up.
The mother of all demos, which
if you don't know what it is,
we'll drop it in the show notes.
You know, it was a presentation in, I
think it was like early 1969, late 1968,
it was a presentation from Engelbart
at the Augmented Research Center,
ARC, where he basically laid out the
next 40 years of computing interfaces.
Like he had a device connected
between Palo Alto at SRC up to,
I think it was San Francisco.
Um, Alan Kay is in there, like Bob
Sproul's in the audience, like it's
a, you know, hall of fame group.
Thankfully, thankfully I think it
was like, uh, Stuart Brand happened
to be in the audience with a camera.
And so he was recording it.
It's like insane.
And he's you know, it's let's
show you what a mouse might be like.
Let's show you these dual screens
and how you might communicate,
communicate over a computer.
Like stuff, frankly, that's in there
that we still haven't gotten to.
And I feel like in a world where most
of us are trying to process the entry of
this new alien species, this new thing,
this LLM and how it's going to work in our
life, I think we've mostly processed it.
in very, very short go
to market spurts, right?
We are now, you know, 50, 60, 70
years later, um, the world is filled
with incubators that are asking you,
you know, in three months, make sure
you launch the product and get some
traction to show up for demo day, or
it's a hackathon, let's see what we
can make in two days over the weekend.
And, you know, it was kind of counter to
the conversation we had at dinner, to be
honest, because a lot of the conversation
with dinner was like, wow, a lot of these
agentic companies are producing demos
that kind of like 80 percent work or
70 percent work, but they don't really
work enough to deploy into production.
And that is also true.
But my personal feeling was
like, no, also we should get
weirder before it gets there.
I don't mean hackathon weird, I mean
like, deeply ambitious alien weird.
We need to explore the design space
a lot more to kind of figure out,
what is the GUI of this world?
We're sitting, staring at MS DOS
prompts, and no one's made Windows yet.
And, and I'm not, and I I think,
you know, I don't even know what
the Xerox PARC or the MIT Media
Lab should be for this era.
It probably, it's not going
to be, you know, Google R& D.
All the incentives nowadays
are very differently aligned.
And so I don't think that's
going to happen there.
It's, it's probably not
going to be the Media Lab.
So I actually don't know where those
experiments are going to come from.
They probably have to come from
founders, right, doing the work.
Fraser Kelton: I would think so.
But it's interesting
to frame it like that.
When you told me this
initially, my response was, this
happened in the labs, right?
You come in and Aditya shows you a, uh,
Tennis ball thing that's pixelated and
you know, what's going on with this?
But if you squint, you're like,
okay, we're, we're a couple of cranks
away from having, uh, Dolly, right?
And there's so many weird, lovely
things that are, percolating there.
We just haven't seen it yet.
We see it after it scales up and,
and they've polished it or, or
we don't, but you're saying at
a, at a level even above that.
Nabeel Hyatt (2): Yeah, I
would push back at that.
I, it was OpenAI, frankly, like
when you joined OpenAI, right?
But, but after, after the ChatGPT and
before, right, when they're making Rubik's
Cubes robots and things like that, I
think once the ChatGPT gun goes off, A
lot of it is, it's not that there isn't
advanced research, and not that people
aren't doing amazing, crazy, interesting
things, but it's all in service of
something that's relatively deterministic.
And, and the problem with the corporate
labs, the large ones like Google, is,
we've had this conversation before I'm
trying to get my paper published.
And that's also a very, very
different incentive than if you
think about what's going on inside
of Xerox PARC at that point in time.
Fraser Kelton: Yeah.
You don't think there's the
same crazy shenanigans happening
and we just haven't seen it?
There's not the equivalent of
Sora 3 that you can squint and
see, but we're not going to see
it in the world for five years?
Nabeel Hyatt (2): It's a good challenge.
I would say there's probably a little bit
happening at the edges of Google R& D.
Yeah.
at least a year ago.
I'm often giving Google a hard time for
maybe even being the Xerox PARC of this
era in that they like invented all this
technology and then we'll see if they ever
effectively bring any of it to market.
But, look, in the world of consolidation,
where everything's moving together at
Google I kind of want them to consolidate
so that they can hopefully execute
really well so that we can actually see
Google as a good citizen in this time.
set of product surface areas and,
and invent the future of AI with
everybody else instead of just kind
of right, um, making demos, but the
downside of that is, and we've kind
of had this experience, we interview
people that are coming out of Google,
what kind of research did you do there?
Since you're joining XYZ new startup,
it is thinning in its aperture.
not widening, right?
Right.
It's narrowing in its aperture, right?
It's not widening that Google has
targets now that they're going after.
And so they're going to do
less of that work over time.
And so this is me just kind of
like raising a hand and being
like, I understand granola is
not like the most mind blowing,
crazy, you know, it's not Sora.
But that's kind of my point.
I think there's still a crazy amount
of innovation to happen even just
at the UI and UX and product layer,
not at the deep research algo layer.
There's nothing crazy technical
about inventing the GUI, the
graphical user interface.
The first time you ever saw a window
you could move around with a mouse.
There's actually nothing crazy
technical about the mouse
when it was first invented.
It is thinking about the product
experience and then developing technology
that maps to the product experience that
we think we want to have with this new
technology that's entered our lives.
I think we're going to do
great at new fancy algorithms.
Fraser Kelton: Yeah.
Nabeel Hyatt (2): I'm less
certain that we have the right
pockets in technology right now.
Innovate on new product experiences
because everybody's chasing growth
and we have been organized to
think about customer development
and MVPs and up into the right.
Yep.
So I can raise my billion dollar round
tomorrow and all the rest of that stuff.
Yep.
Yep.
Yep.
And I'm not that I'm not against growth.
Like eventually we're in the venture scale
business, but it's, we're just early.
And we like it's just, there's the
room for weirdness is important.
Fraser Kelton: I get all of that.
I was just sitting with the
founder that I work with.
And he's exceptionally early in a market
that's early and he's iterating, you know,
uh, toward a product that's resonating.
And my feedback to him was like, that
sounds good, but, At this moment in time,
I would make sure that you're taking
large swings adjacent to where you're
currently going to make sure that you're
not marching up a local maxima, right?
I agree.
There's so much stuff going on.
I don't know.
I feel like we have to give
permission to be creative at times.
We as in the tech industry.
Yeah.
And we have to be patient.
I think that's a big thing though
is if you were to see a demo of
that type of stuff now, think
about the world's response.
Yeah.
Nabeel Hyatt (2): Yeah, well there's,
there's a world where some of those people
are trying to do some of those demos and
maybe the world just says this is fake.
Maybe the world says this isn't shippable
and, you know, this founder is full of it.
Fraser Kelton: Yeah listen, we've seen
that exceptionally loudly on Twitter.
You shipped a waitlist, you shipped
a demo, you shipped there's a
cacophony of voices screaming at
you, and you have to be patient.
Twitter's not, one,
Nabeel Hyatt (2): Twitter's not reality,
uh, two, all we, all you really ask when
you're shipping a demo or talking about
a concept is that you be transparent.
It's a concept.
There's nothing wrong with
talking about a crazy idea.
The problem with talking about
a crazy idea is presenting
it as shipping in 30 days.
Just give me your a hundred dollars.
Right.
And it's ready.
Right, right.
That's the problem.
There's nothing wrong with making
claims and being highfalutin and, and
being, you know, you can be Walt Disney.
Just make sure you everybody
understands that you're
dreaming at this moment, right?
Um, yep.
I do think it is really hard to be
patient though, Fraser I agree.
It's very hard to keep iterating on
a thing to really get to new things,
especially When all of your competitors
are probably chasing a little bit of
traction and are probably raising a bunch
of money And so you know, you're trying
to iterate on refining the product and
getting it perfect and you're rethinking
You're like throwing out the UX for
the third time to really make it work
And then you wake up one morning and
you open up TechCrunch and somebody
else is doing something orthogonal It's
raised just raised a hundred and fifty
million dollars or whatever the number is
like, you know, this is we as a venture
community are part and parcel of in trying
to solve our own problems on a monthly
basis and get our, you know, whoever.
principle at some firm is
trying to get a promotion.
So he's trying to jump on the hot
thing that week is is certainly makes
it harder to build really good product
and make really good decisions.
No question, right?
Fraser Kelton: I also think that
personal incentives are incredibly
important in everything like full stop.
And I think the structure of
performance reviews and yearly perf
packages that people pull together,
I think it'd be almost impossible
in that framework to find the
structure that rewards that level of.
Exploration, right?
Like it's, it's probably, probably
doable, but it would take even at
the org level, some real careful
consideration and sculpting.
Nabeel Hyatt (2): Yeah.
The, the, the old adage from Charlie
Munger, show me the incentive
and I'll show you the outcome.
Fraser Kelton: Oh, for sure.
A hundred percent, right?
Yeah, yeah, yeah.
You know, talking about, um,
waking up and seeing the headline
that, that your competitors raised
hundreds of millions of dollars.
That is a topic that has been on
my mind for a while now, um, and
I'm sure it's been on yours, too.
Nabeel Hyatt (2): Yeah, it's impossible
to not be operating in the AI market
and trying to be either an employee
in a startup, a CEO of a startup, an
investor in a startup, and not wake up.
On both sides of this equation, at
some point in your life, you're going
to wake up, and you're going to feel
great about having raised a bunch more
money than somebody else, and you're
trying to figure out how to use it,
and we certainly have those companies,
and then inevitably, in the kind of
rollercoaster of things, you're going
to wake up one day, And there's some
headline of somebody who's raised a
billion dollars at, at 10 billion or 100
billion at, at, you know, whatever it is.
It's 10x more than you've
got, that's for sure.
And then they call you,
Fraser, I know you've had this
happen, I've had this happen.
What do you say to somebody who calls
and says, man, they just raised that
much money off in the, Is they're
the same size as us or even smaller,
or like, how did that happen?
What do you say to a founder and how
do you think a team, not even just a
founder, how do you think a team should
internalize when there's money flung
around in that kind of like haphazard
way that that may or may not feel
like it just took you out that day?
Fraser Kelton: I think any good piece of
discussion around startups, uh, there's
way too much nuance for us to have a
tight, solid piece of wisdom here.
Nabeel Hyatt (2): It's
not three headlines.
It's not the three steps to the epiphany.
Fraser Kelton: It, uh, because
listen, we went through an era where
software was like, Bank thought
that they could overcapitalize every
company and crown the market winner.
And I think that we've seen that
that experiment didn't work out.
Nabeel Hyatt (2): You know like all
things, it didn't work in 20 places
except for the place where it worked.
Like it really worked for DoorDash.
Right.
Like that it absolutely worked.
And then there was like, right.
You know, a MA and probably maybe
one other place, but the, yeah.
Capital creates the winner
was a graveyard otherwise.
Right,
Fraser Kelton: right.
Right.
It just incinerated a bunch of
capital and an awful lot of startups.
Yeah.
And I feel that in my bones, like one
thing that I think is, is like the
cardinal sin of a founder, and I felt it
when I was a founder, was overcapitalizing
and celebrating the amount that
you raised or your, your valuation.
Because I think that, I don't know,
it's probably not causation, but it's
pretty darn close, um, to that, right,
is, is, it feels, I can't think of
one example where that's the case.
You have on one end of the, the, the
ledger, uh, a situation where over
capitalization kills companies, the
idea that capital can crown the king
also really didn't work out, and yet
I feel like in many markets right now,
Uh, you will lose your edge if you're
not at least in the same ballpark.
If you're a company that's raised 20
million and you have competitors that
have raised 150, 250, 400 million, if
you're trying to compete for the same
large enterprise customer, if you're
trying to compete for the same researcher
who's been at DeepMind for five, six
years, I do think that you're going to be
perceived very differently in the market.
Um, with that type of a split.
And then I think that over time, uh,
it's going to have a real effect, a
negative effect on, on the company.
Nabeel Hyatt (2): I think
that's somewhat true.
I think it's worth digging in and
giving a little bit of nuance back to
a team that's trying to process this.
Like, when you're thinking about larger
competitors, I just think it's important
to keep your customer in mind, and
it all roots back to your customer.
Your customer is going to
make your success, not you.
Not a VC and not your bank account.
And so sometimes the money matters
because your customer matters.
Sometimes the money matters because
it matters to your customer.
Fraser Kelton: Not,
Nabeel Hyatt (2): it's
often that not because.
It is a situation where it made the
next engineering hire happen or not.
I started a company a long
time ago called Conduit Labs.
About nine months into its life, it
pivoted into Facebook games as the
Facebook app platform opened up, and
that led to the acquisition by Zynga.
But early on, we were building
virtual worlds in this kind
of post second life world.
And I just remember the product
we were working on, MTV funded and
built a competitor to that product.
And I was freaking out.
And I remember talking to Alex Rogopoulos,
who's the CEO of Harmonix, guys who made
guitar here in rock band at the time.
And I just remember the advice he
was giving me, which is just right
now you are all default debt.
I don't really care how
much money comes in.
The default process is that whatever they
just come up with is just not good enough.
And so don't stare at them with
their money and be covetous stare
at their product and be covetous if
they've come up with the right thing.
And, uh, you know, the similar
thing happened, Ambient Devices, a
previous company I started that was
a spin out from the MIT Media Lab.
I remember LG.
After we'd had extensive conversations
about licensing agreements, a couple six
months later, they started, they launched
their Andean Computing Initiative at LG.
And we were like, oh man, big guy.
You know, it just turned out the
whole category wasn't a category.
It wasn't a massive category.
So it's fine.
You know, I think Cruise is another
great example where, man, you
know, that was a, a capital war.
You had Google, uh, with Waymo
budgets, after Cruise raised,
not long later, Aurora raised,
Chris Armisen, um, became the CEO.
You know, he had, he headed the self
driving, uh, car team at Alphabet
for seven years and then it
turned out, by the way, that I don't
know, Cruz was the first to market.
We'll see what GM does with it now.
Waymo is another viable player.
Aurora, we'll see what happens, but
certainly even with the war chest that
they built, didn't immediately make them
winners in the market, that's for sure.
So, I don't know, I think
Capital, I think of it three ways.
One is, if it's day zero and you're an
overfunded pre product market company,
capital is, is oxygen, and you could
absolutely die by oxygenization.
Fraser Kelton: Right.
Yes.
Good.
Nabeel Hyatt (2): And I remember when
Thalmic Labs raised a hundred million
dollar round, uh, years ago, they're an
early frontier tech startup we backed.
You know, I remember showing at that
point in time, the list of other hundred
million dollar pre launch companies
That it existed, like literally every
single one that it existed, and it was
a unbelievable quibby like graveyard
of companies that did not work out.
There's a bunch of reasons we need to go
into now about why I believe that is true,
but it's not categorically true, right?
But it's pretty rare.
And hard to raise that kind of capital
and still keep a disciplined, fast
moving, execution oriented startup.
A hundred percent.
Yeah, and keep up with everybody else.
So sometimes a bunch of money
into somebody else can be a gift.
The second bit, which you were
getting to, I'd say on a large, on
a large raise, or somebody who's
doing it is, is who is your customer?
If your customer is a consumer I don't
know, a hundred million dollars, five
hundred million dollars in the bank, like
it doesn't change your retention curves.
Nobody cares.
At all.
That's right.
Your customers barely pay attention.
They don't really know.
I wouldn't worry too much about it.
If anything, again, it
might handicap other people.
If your customer is I don't know,
some old money water company in France
that wants to buy the safest thing
in the planet, Then you should worry.
Fraser Kelton: Yeah.
Nabeel Hyatt (2): Right?
If your, if your customer is very
safety oriented, late adopter type,
who just wants safety, then them
looking at a startup that has a
10 times higher bank account than
you, it will affect your business.
And you better find a way
to fight the capital game.
Or at least, as you said earlier, at
least be within an order of magnitude.
Right?
Right.
Yeah, same universe.
In the same universe.
You don't have to play a capital war.
That's it.
But you better have the same number
of zeros as the other person.
Or else, again, it's, it's,
but again, that's not really
about the money in the bank.
That is about the amount
of capital you have is.
a feature of your company when you're
trying to sell to a large organization.
Fraser Kelton: For sure.
Nabeel Hyatt (2): It's a part of
your product, strangely enough.
Fraser Kelton: For sure.
Nabeel Hyatt (2): But that's
very, that's very rare.
Most of the times, most AI companies,
are not trying to sell to late
adopters kind of by necessity.
If you're selling to a fear induced
late adopter, first of all, thank you.
Elephant hunting, whale
hunting startup, it's hard.
Right.
Impossible.
And it's going to be slow
and it's going to be painful.
You should probably see if you have
early adopters you can sell to first.
That's the nature of things.
Right.
But yeah, and then there will be the few
situations just like there's no playbook,
there's no three headlines to get you
through, but there will be some situations
where You know, you are in a capital war.
That's just the bottom line.
Fraser Kelton: The other thing
that we've heard from, from very
capable founders who tell us.
that they know better, is that the
types of talent that can make a
company in this moment, and I'm talking
about applied researchers or product
focused researchers, are valuing
total comp in the moment rather than
the opportunity for appreciation.
And we've met a couple
of really great people.
Really strong founders that I respect who
then say, listen, I know, I know, I know,
but to hire the three types of people
that I need to hire over the next 18
months, uh, to make the company, they're
going to evaluate it on that vector.
And so it's important that I'm
again in the universe of valuation.
Nabeel Hyatt (2): Yeah, there was
a tweet a couple of weeks ago that
was like, If you're interviewing at
OpenAI and you're interviewing at a
startup, then the startup should just
stop interviewing you immediately
or something along those lines.
Fraser Kelton: It was, if you're
a startup and you're interviewing
somebody who's also interviewing
at big tech, you should just stop.
Nabeel Hyatt (2): That's right.
Fraser Kelton: They're like a tourist
who's going on a little side journey
to understand, uh, how interesting
it might be in a startup, but
they're never going to come to you.
Nabeel Hyatt (2): I will push back
slightly on that, and I did in that
conversation, which is that there
are some people who actually don't
really know the difference between
joining OpenAI or joining Google and
joining a startup, like there are some
people that are just earlier in their
educational journey about what that
choice really means and the pluses and
minuses of the choices of being a big
tech or being in a startup environment.
And so sometimes it's worth
explaining to people if you
haven't explained to people the.
Appreciation of stock and the amount
of change and responsibility and
excitement and agency that comes with
being in a startup versus working in a
lab at Google, then shame on you as a
founder, and there are plenty of people,
especially if you haven't grown up.
in Silicon Valley, there's still plenty
of people on the planet, even those
who've been working for many years, who
don't really understand startup culture.
They understand technology
culture, but they don't really
understand startup culture.
So I think you have to explain to them
what it means to join a startup, and what
that means from a compensation standpoint,
and also that, frankly, what it means from
a working and responsibility standpoint.
And then, yeah, if at this point,
you're haggling over those kinds of
choices between OpenAI or a startup
they should probably just first pick
big company or startup right before
they even get to the name of the thing
right because they're just wildly
different paths like it's You know,
it is like different careers in a way.
Fraser Kelton: Listen, I get all of that.
The market's telling us
something different right now.
The market might be
irrational in the moment.
We've seen that.
But these are, these are like
seasoned, capable founders who are
telling us that they need to play
that game to make the couple of hires
that are going to make the company.
Nabeel Hyatt (2): No, I just disagree.
I like, I just disagree.
Like you, that person, because the
problem is that person is coin operated.
That person wants whatever the
highest comp package for that year is.
And what that means is that they are
going to join you and you're going
to go through all this integration
and they're going to get work done.
And then six months later, somebody's
going to give them a signing bonus
and they're going to be gone anyway.
Everything in my bones
tells me you're right.
Fraser Kelton: Yeah.
Right?
Everything in my bones
tells me you're right.
Yeah.
No, I think that the challenge that I'm
wrestling with is I've seen firsthand
how one person One person can breathe
life into something in this moment.
That is, that is, uh, ethereal.
Like it's, it's not like you're
hiring a 10 X engineer who's going
to come in and you're fighting
for that type of incremental, like
efficiency on your engineering team.
And you're going to ship your like backend
data pipelines a little bit faster.
Yeah.
I think we're sitting in a
moment where there, there are,
Nabeel Hyatt (2): it's like signs
of life is what your point is.
Like it's
Fraser Kelton: signs of life from.
Yeah.
Uh, a very scarce number of people who
can control the, the, the magic, um,
and, and, and grant it to your company.
If, if you are really going to push
the frontier of AI research in a
domain and in an applied setting.
With that research, I don't know,
like I've seen Alec Radford,
like this guy is amazing.
You probably should, you know, put
yourself in a position where you can get
the N of 4 in the world into your company.
I think the challenge then is if that's
true, people misconstrue that and do
that same playbook for the backend
engineer where it really is immaterial.
Nabeel Hyatt (2): The trend I have
felt in the last three or four
or five months by folks who've
been in AI for a long time is.
I only want one of those deep
researchers at most and, and
me as the founder or the CTO.
is that one.
And I thought I needed 10, and the truth
is I, I, now, now, I'm just gonna train
some really good ML people internally,
and I will get 99 percent of the way
there on every single thing I want to
do, uh, and frankly, they'll be more
product oriented, more consumer oriented
you know, uh, uh, uh, two years ago
and a year ago, the kind of prevailing
thought process was, I want a really
hardcore world class research team on
top of a world class engine product team.
And I need to build both of those
and keep those dualities together.
And I, and we've both seen that
the trend for the best performing
companies now has been incredibly
slim to almost no research team.
Maybe, again, one to two
people, often the founders.
Right.
And so, You know, again,
unless you're Anthropic.
Anthropic has a reason to have a massive
research team to be in, you know, a
state of the art large language model.
Fraser Kelton: Yeah, this is, this
is where so much nuance matters on
the decision because I know, man.
Yeah, I know.
I think I agree with you for
when you're starting out.
I think that we have undoubtedly seen
in the market that if you go try to
get like your merry men of researchers
together to go like gallivant
around and start a company, I don't
think that usually works out well.
You have a researcher, usually
the founder, founding CTO, who's,
who's pushing forward with a lot
of product motivation behind it.
There is a time though, when that
company is No longer three people
and just founding, they have a
product and market, or they have
the scaffolding of an organization
around them, and they've started to
scale a team, you can basically, I
don't know, is like the equivalent
of a two pizza team again, you can
replicate that playbook multiple times.
Depending on where you are in the arc of
your company, I would take multiple people
like that and build a team around them
and, and let them, let them run rampant.
Yeah.
Like it, it is, I think, I think there's
a moment in time where that can happen.
So let's, let's bring it back is,
uh, a founder comes, they've raised,
let's keep it at tens of millions.
They say, Hey, listen, this company
just raised a billion dollars.
They just launched the company.
They haven't even launched the product.
Right.
They've introduced the company
with the billion dollar round.
And actually all the people on the
team are not the founder ethos.
They're, you know, gray haired,
grizzled industry veterans.
100 percent of that case.
I'm like, you should just ignore it.
Like you don't even pay any mind share.
They've just killed the company
and they don't even appreciate it.
Um, I think the thing to be worried
about is the company or at least
inquisitive about is the company
that's in your market in a market
where your customers care about things.
And, or there's a small number of
people who can wield this magic
today, um, and care about outsized
comp rather than appreciation and
have raised many multiples of you.
Because I think that your,
uh, you said product earlier.
I think that's your, I think that's a
reflection of your brand in the market.
And I, I think that people.
A lot of markets buy on brand.
Nabeel Hyatt (2): Yeah, that's right.
I think they do buy on brand.
I don't think consumers buy on brand.
No.
I think even mid market to small
business, if you're, don't buy,
the people who buy on brand and
safety are middle to late adopter.
Yeah.
Large, large elephant hunting enterprise
customers, which is actually a
vanishingly small number of startups
actually have that customer base.
Fraser Kelton: That's right.
Nabeel Hyatt (2): And for
everybody else, like we're
glossing over a bunch of things.
Of course, money matters, but there
are a million different things that
are going to kill you as a startup.
And frankly, Most startups are going
to die by suicide, not homicide.
Fraser Kelton: And
Nabeel Hyatt (2): so the staring out
your window at everything else is just
distracting you from the fact that it is
get your culture right, get your product
shipping right, make product market fit
right, take some weirder choices on,
on UI until you find the right things,
push your engineering and your, Research
teams to see around the next corner, like
all of those things are going to matter
a lot more than capital, to be honest.
And the interesting thing, of
course, is that those sets of
things do tend to beget capital.
And I wish we had some charts or graphs
of the number of times that over the
years where you know, some of this is
just once you've lived through it, like
five or six or seven or eight times as a
founder, And then as a, as a vc, you just,
it's that like old Chinese proverb of the
guy with the horse where you're like, you
know, the thing that looks like a gift.
You're not sure if it's actually
a gift and we'll just turn
another page and I don't know.
And a number of times that the, the
most well-funded player has won.
Yeah.
I don't even know if it's correlated.
No.
Uh, at least in the early days at
some point, like IPO and beyond, like
it's a different world, but Sure.
But in these early.
You know, startup malleable.
We'll see who wins.
Um, person who did well this
week, person who won the month,
person who won the quarter.
It's a long game.
Fraser Kelton: I think you can overstuff
a duck and end up with foie gras.
I think you can, you do that
with a startup and you kill it.
The way that you framed it to a
founder once that I think has really
resonated with me is, if you know
what you want to do with the capital,
All of that capital, go and do it.
Uh, and if you don't know what you're
going to do with the capital, uh,
it is, just think of it as going
to be a negative for your company.
Nabeel Hyatt (2): Yeah, that's right.
Is it fuel?
Uh, and, and I mean fuel in the real way.
You know what to do with
it, not just more runway.
If so, it's possible
it'll help you get ahead.
Right.
That's right.
Let's be done for this week, man.
It's great chatting with you, again.
As always, I'll leave with one,
Little thing, which is, at a dinner
last night, my friend Michael Galpert
said is, is WebSims, the GeoCities.
Of the LLM era.
And so if you haven't tried Web
Sims, we're not going to talk
about it here, but I would, I would
suggest going and playing with it.
It is a crazy fun little demo.
And as long as we're talking
about new UIs and crazy things, I
think you should go take a look.
Okay.
I got to do it.
Didn't you have a product you were going
to roll out with me or talk about as well?
Fraser Kelton: I'm just going to
drop it and then we'll hang up.
I tried this new, amazing
product called Superhuman.
Nabeel Hyatt (2): Finally
Fraser Kelton: I love Gmail.
Yeah, I have lived in
Gmail for now 20 years.
I don't want to adopt a new workflow
when I download a new email client.
I just want to do email.
And Superhuman has made the decision that
you can just do email in a beautifully
designed UI if you want to do it.
They've introduced a
handful of AI features.
And I think the thing that I take away
from that is that they're feathered in.
That's the way that I would describe it.
It's not ham fisted.
Um, it's not trying to turn it into
a marketing event where it's like,
Hey, here's this new AI feature
that we're going to cram down you.
The summarization of
threads is really nice.
Um, and then you can actually like
click and it expands to show you
a, a different like depth of the
summary, which is really nice.
Right.
They have instant replies that are nice.
And then again, like thoughtfully
done where they're there if you
want it and not if you don't.
Nabeel Hyatt (2): I will say
though, I have so indoctrinated
into the superhuman workflows, but
it's interesting to ask, What's the
Granola co pilot version of SuperHuman?
And for me, I would want to log in
in the morning and have the most
common emails I would reply to have
drafts of the replies already there.
That would be the Granola
way of doing this.
And I think that would be awesome.
And I could delete them, I could
say, No, I didn't want to say that.
But right now, it's a very notion
view of how to influence AI, right?
It is a little command key
that I can type in, finish this
email, or so on and so forth.
And I'd love something a little
bit more copilot y but assertive.
But before that works , I think
there's probably a hurdle on the
writing style getting better as
well, but it's a thought to end on.
Cool.
See you later, Fraser.
Fraser Kelton: See ya.