How Sierra Is Pulling Ahead in the AI Race | Co-founder Bret Taylor

start congratulating you um maybe i'll start with congratulations on the growth is that a fair place to start congratulations seems fair uh seven quarters what was the stat that i read seven quarters 150 million of error 100 million and then like a 50 million dollar quarter what happened we did 100 million seven quarters 150 and eight um so we were really proud of that 100 million dollars in annual recurring revenue in seven quarters just because i think uh we and wiz there's been a you know very maybe one or two companies that have done it and so it was certainly and rarefied air and i think just the reason we decided to be more public about it is i think there's a lot of you know a lot of venture funding available a lot of competition in this space but we're definitely growing faster and we felt like you know it was worth uh worth letting the market know that just because uh we do think and then to follow it with a 50 million dollar a quarter exceeded my expectations to say the least so really the business is growing really rapidly I think we're executing well but I also think it's just a really unique environment right now where the product that we sell which is AI agents to replace your IVR system or AI agents to engage

with their customers is so valuable that they're just you know every client we talk to needs it and the question is why us versus some other solution. which we're, I think, pretty effective at explaining, but it's amazing. I mean, it's what a fun privilege to run a company like this. Tell me if this is true or false,

you know like uh call it big company executives um i don't mean that disparagingly but executives that come from big companies that are used to managing big teams with big whatever purviews and you're in obscurity for several months and they don't get to hire teams there's trouble right like it's harder it's harder well it's interesting because you know you said big company executives said not to be disparaging but it sort of is that phrase is right like you don't no one says that i guess it's disparaging in the con in the context of like a baby starter well that's the thing actually but even if just the phrase itself is i would argue probably rarely used except for disparagingly.

And I would say that is more of a mindset than if you go into a larger firm, you'll find people who are extremely high agency and have grit and have intensity, and you'll find people who are good at managing politics and all of that. So the sweet spot for us was to find and people who had experience who weren't big company people totally because and and that's a nuanced thing and i think it's something we really try to hire for you know we one of our values is competitive intensity which is sort of an unusual company value but it's one of our company values like and a part of it is like we want people who relentlessly focus on outcomes more than anything else which is distinctly probably not what you meant by big company people right it sounds more like startup like grit uh and i would argue there are those gems everywhere and especially right now if you just look at the software market which is you know uh it's a really tough spot in the public markets i think a lot of people are saying who are the sort of like new guard of companies that will come to be uh the people who define these markets and we're trying to you know be one of those companies so that those you know folks who have experience who have grit want to work at our

company. And that's kind of the culture we're trying to create. Yeah. The thing that I'm like really poking at and mostly like I think it's a counterexample of success here, which is why I'm so interested in it. And by the way, like the irony is like you are the I'm not really sure what bucket you fall into, but you've certainly been a big company executive and now you're running a startup. But like, let's just say across the top eight KP portfolio companies and let's put the top five executive positions in those companies. So 40 roles. I think in our top companies 39 out of the 40 report to the founder for the first time in their career. And that is somewhat against conventional wisdom because conventional wisdom says like, these are the people that have been there and done that and seen the scale. And I guess my observation, at least in our portfolio, is that that's not necessarily the case. And I started asking myself, why is that? And I think the core answer is because it's very hard to find the people that have all of the things that you just described, the competitive intensity, while also being in a big company.

I think in some ways, like that is the ideal profile. You just have to sift through. You just have to really make sure you know. It is the hardest thing for a founder. And this is, you know, there's some downsides to, you know, I'm kind of an old guard at this point in Silicon Valley. You know, this is the third company I've started. And as you said, I've started two companies prior to this, and I've worked at Google and Facebook and Salesforce. So I've seen big, I've seen small. One of the benefits of that experience, and there are some downsides too, one of the benefits is I actually can identify people, I think, more effectively. I mean, the hard part for a first-time founder is if, let's say you're a software engineer making an enterprise software company and you have to hire your first head of sales, you probably never, I assume you've never run a sales team. It's not an area that you like studied or an expert in. And so you end up relying on other people's advice on what, you know, there's sort of the fit that you have, the personality match. And you rely a lot on your board members, investors, other things. Oh, this person's a great head of sales. And there's just so many examples of organs rejected by the body. And, you know, failure is an orphan, right? So

everyone blames everybody else. In starting Sierra, there's a lot that are really new about it you know the ai market is completely novel so you think about you know writing software in the age of software coding agents and it's completely novel and then there's parts of the business where like i know what i want you know i know what i want and clay knows what clay my co-founder and i like we decided this is who we want and we decided let's shoot for the stars like let's get the the person we want in this role to help scale the business and i would say probably half of our executive team it's their first time in a role like that and half are quite seasoned and it's a really nice nice mix um but the nice part of experience is i can sift through because i've seen hundreds of sales leaders and i kind of know who i want and and you know them and i yeah exactly yeah exactly yeah that makes sense sorry um you use the phrase failure as an

like it's not even the founder wouldn't listen to me yeah 100 you mentioned like this is one of the most competitive uh times that you've seen and like i'm curious like okay yes in the space that you're in like a support ai native support okay you're right there are like i don't know at least seven companies and growing some of which are like good companies like you're not fighting legacy old stodgy solutions and by the way you're also probably fighting some version of like open ai going into an account or anthropic going into an account like it's competitive in that respect okay like i buy that but do you think it's maybe somewhat less competitive in the sense that the

pie is so much bigger that maybe that's why there's so many sharks in the water here. Like, I'm curious how you think about like, yes, there's more companies in the space, but it seems to me

It's interesting, your point on like the venture dollars that are creating somewhat artificial growth and expectations in these markets and then creating more competition. Like, if you think about that, like if you put your kind of chair of the board of OpenAI hat on, your argument is like, as the cost per unit of token basically goes down, demand will go up.

I guess, couldn't you make the same argument that all of those venture dollars are also now artificially deflating the cost per unit of the tokens, like these actual underlying models? Or do you think that we are in an inevitable race to the bottom and it's just going to continue to get cheaper and cheaper independent of the venture funding for the underlying models?

know i'm curious if you think that will come from i don't know like models slowing down progress in air quotes um if that will come from all of a sudden public sass comps are down 50 and so people start getting jittery like i'm curious if you're like as you read the tea leaves obviously you have to think about some of this because you have to capitalize the business as a byproduct of what you see coming down the pike like how do you yeah like how are you like indexing the risks here i think it probably will happen um i think as you said the juxtaposition of multiples of software stocks being lower than they have been and the premium on ai uh investments which are largely private

creates this you know awkwardness which is like what happens when these companies go public do the valuation settle down and so you know you could end up where a world where you know as some of uh some i'll quote unquote ai companies and that definition is an interesting one just because i not sure exactly what it is like clearly open ai is one right there's everyone else is striving to be one just you mean it doesn't count if you put It could be that you end up where a few of these nominally AI companies enter public markets and don't get the reception. And that trickles down to private markets, late stage, and then early stage. Maybe the more likely one is macro, though. When interest rates went up because of inflation after the pandemic, that corrected a lot of the software market.

And so, you know, it does feel like these macro forces are greater than any sort of insular tech specific thing and, you know, will generally make, you know, just change the way people invest. I'm not sure what which will cause it, but it does feel like I don't think it's unhealthy, by the way. I mean, just just say, like, I'm a capitalist. So, like, I think it's really healthy that there's lots of companies going after these problems because it enables the market to kind of like do more exploration of ideas. um so it's but my sense is it just can't go on forever just because you can't have 20 companies going after the same space with uh it's just like there's just too much sort of saturation uh in the market but i think there will be a some form of correction there and then some form of consolidation and i think it'll be fine i think we'll i think we'll survive it and it'll be fine and actually the economic of impact of ai will be viewed uh probably with as much optimism as anyone has right now.

It's truly changing. We can feel it deeply in software engineering and in customer service. It's completely transformed those industries. And for those of us in the middle of it, you can just see the capabilities of the models because you feel it. You know, you feel like the difference between using Codex today compared to three months ago, and you see what it can do differently. And it's easier if you're in the middle of one of those industries to extrapolate to all the others. But I just I do think it will have a huge, huge impact. I'm sure you read that article. I guess it was yesterday that came out. It was like, do you remember the name of the article? I don't, but I did read it. Okay. Yeah. It was like, how would I characterize it? I would say like sounding the alarm bell of the change that is to come through the lens of coding as the like models are improving. Basically, like the author was arguing that people, no matter how bullish you may be, you're still underestimating how quickly this rate of change is. And as most like primarily evidenced by what's happening in coding today with how good the models are getting where, you know, like two years ago, you could barely write, I think like, you know, it could barely write a line of code. And now it's like writing

like thousands of lines of code autonomously well yeah like really well like full code bases and then checking that code and it's really good yeah you know uh and um and you know i think the point of the article was like hey for people outside of the valley that don't really aren't living and breathing it like we are like you have no idea basically and i kind of viewed it as like um There was definitely a dystopian lens to it. Would you agree with that? Like it was somewhat dystopian. It was hard to tell. It sort of ended optimistic, but it was. Yeah, I sort of said, I agree. It had a kind of anxious dystopian lens to it.

I agree. Yeah, like the world's going to change and we're not ready for it. And, you know, it's interesting. Like I think every, what's crazy is like every three to six months, I feel like we, the pendulum swings from like the models aren't improving to nobody's going to have a job anymore like like it just keeps going back and forth between those two things like it's overrated and nobody cares about ai anymore to like we're all going to sit on the beach and have my ties one day yeah um and um that's like a pretty like I think if you don't come I think if you come from our world, it's still like a pretty heavy feeling. I can't imagine basically the rest of the world, how they feel just reading these things from the outside in. And Sam at OpenAI also talks about this in, and like Dario, like these guys are also talking about this, like this, like almost change management of society that is coming.

and um you know in some ways like there i think everybody's right in that like we are like things are going to be like drastically different but in other ways i'm like you know the pendulum has definitely swung into like we're all going to be on the beach in my ties i'm curious like i like where do you follow yeah like i'm not in camp my tie but i also not in the other camp either i i

And it's useful. I actually have started doing this, which is like I'll walk around and just think about like, OK, if we had like super intelligence by any measure, you know, what would happen to that flower shop right there?

You know, like what would change about it? And it's really interesting to simulate that because I do think it sort of shows both the short term opportunities and like the complexity of, you know, how this technology gets rolled out around the globe.

capitalizing the business, I'm really curious, is the last valuation public? Is that out?

The 10 billion? 10 billion. Okay. And so we know your ARR roughly. We know about when you did the deal. So it was like a hundred ish million at 10 billion. Okay. Those revenue multiples do not resemble the public market comps it's high it's expensive um like uh why like what like uh you can probably raise even higher but let's just assume that's a pretty high clip for you to raise at how do you um um why even capitalize the business so much right now um why raise at a higher mark Is it like, I'm just curious, like how you think about the strategy of what capital and valuations means as an edge to your business?

There's a lot to the why, because you're probably saying why I did it and why maybe our investors chose to do it. Actually, less the latter. Yeah, why we did it. Yeah, why you did it. We aspire at CIRA to be the platform of choice for every company in the world, in particular, the largest companies of the world. when they're thinking about using an AI agent for their customer experience. So whether it's healthcare companies like Blue Shield of California and Cigna or revenue cycle management companies like R1 or telecommunications companies like DirecTV, SiriusXM or the banks that we work with or the fintechs that we work with or the insurance companies we work with, we wanna be the default.

We wanna be the company that you can partner with that will enable you to go live, get success, and we want to be your first phone call. And I think that requires a lot. You know, one is, you know, I think part of the reason we've grown so much is we have by far the best sort of customer base. And so, you know, when people are saying, they look around and say, I'd like to use a partner that companies I respect use, we're in that. It also requires scale. So we opened an office in London, we opened an office in Singapore, we opened an office in Tokyo. you know you need to be present in these markets to work with the clients who are present in those markets and so i just don't think you know being so lean the uh you know focusing so much on that is really the right way to to win in this market we want to we use the term face in the place like we won't be next to where our customers are we work with you know one of the large spanish banks we need to be present in madrid to to partner with them uh you know we work with one of the you know, Southeast Asians telcos. And, you know, you don't want to have to wake up in the middle of the night to have that phone call, you need to be present there. And then similarly, you know,

I want to make sure we're scaling our product as well. I think I always admire sort of what the rippling guys talk about this, but like your pace of innovation is, it's actually almost important than your product, right? Because in a world where AI is changing so rapidly, your roadmap matters a lot, right? Because you could have the state of the art today and 12 months from now have something that looks pretty archaic and you know our goal is to have like the fastest pace of innovation as well so we want to capitalize investment so we have the fastest pace of innovation we can grow our customer base the fastest and be present in all these markets and we just need to grow up pretty quickly to do that and it's in part because if you are one of the largest banks in the world you want to know your partner is going to exist in 10 years you know you want to know that you're not the first, you know, structurally important bank to go live on this platform. You know, second or third is probably five and not first. So that's, and that just requires capital and growth and maturation. And that's what we're investing in. That makes sense. And then on the valuation piece, like, do you have a philosophy on like, just take the

no judgment past i'm more just curious one of uh i i incubated a company here with mamoon um who's

on the board with me and um we came out of stealth and um there was a lot of investor demand and you know we like our things are working let's put it that way and i really wanted to bet on call it flipping over one more card or two because there was giant multi-million dollar deals that I was pretty confident were going to get done. I could calibrate accordingly. I don't think you'd mind me sharing this. Ilya here at KP, he had heard that there was a lot of demand. He was like, You know, there's an old Kleiner law. I guess there's Kleiner laws and he was like, one of the Kleiner laws is, um, uh, when the appetizers are passed, take an appetizer. And that stuck with me, you know, like, uh, that stuck with me. So maybe there's just something to it. Like when the thing is macro matters a lot, like there were a lot of companies and whenever interest rates started growing up that maybe could have been healthier than they were, but just didn't have capital available as well. Um, so I, that's the thing that is always like you know whether i mean i my first company the bank banking crisis happened in the middle and so you know it turned out fine but it just it changes markets and so like you know right now there's just a lot of volatility in the world and so yeah when the

Can I ask, like, personally, like, one of the things that I was thinking about this morning in anticipation of this conversation, I'm like, you know, given your pedigree, both like with what you're doing in OpenAI and everything else that we know, and obviously what you're doing today at Sierra, you're probably getting hit up on like, it's got to be like five to 10 cool things a day. you know like i don't know how else to say it like there's and some of them are customer things which i suspect you prioritize then some of them are like should i go talk to jubin today you know on grit and whatever do that right and then some of i said yes yeah you did you twice now thank you uh uh uh some of them are you know probably like the other founder dinners and stuff right some of them are like go give a talk somewhere like the list goes on some of them are like fly you to i don't you know some awesome place and go skiing with investors whatever it is right like it starts to add up like uh uh have you had to develop the no motion like uh it's uh again it's kind of a caviar problem it's the same problem as like too much demand at sierra right but like there's a lot of demand on your time and you have a wife and and kids at home like like uh tell me about the time

management piece? I'm very curious about that. Uh, first I work a lot. Um, I, I love to work. Um, so I mean, I guess all the time. I mean, I, uh, I think you, you know, this as a founder, you know, you, you, if you're in bed and your eyes are closed, you're still, still thinking about work. I mean, at least I am. Um, but I enjoy it. It doesn't mean it's always, uh easy but i i just love uh love what i do and i love sir and i love open ai So I just really enjoy it. And I do put in a lot of effort into it and a lot of time into it. And I don't know, it's fun. But also, my wife, she knew since she was married, and we love talking about it. It's great. So I do put in a lot of time. I do prioritize my time. I try to spend basically time on our product and technology and time with our clients.

And I try to do as little other things as possible. And the idea being that I think I love spending time with our customers, our partners. AI learn a lot. You know, I always joke if I'm talking to a banking CEO or a banking CIO, they've forgotten more about banking than I will ever know. I know a bit about AI, but to actually have the combination of Sierra and that client produce something great is like the two of us together. And that requires a relationship and like deeply listening, you know, truly being a partner. And, you know, when I was talking about that sphere and the surface of the sphere versus the center of the sphere, like I try to live on the surface and really spend time with our customers.

And then I try to spend all the rest of my time on product and engineering. And I'm fortunate enough to have both an amazing co-founder in Clay Bevor and also just an amazing team. So I have the luxury of spending time on, you know, product and engineering and spending time with clients and more or less keep my calendar to those things and the occasional podcast. That makes sense. Yeah. You use the word fun to describe like how you feel. People ask me all the time, like, how am I enjoying, you know, like building a company and doing all this stuff? um i like you mentioned rippling earlier like i like parker and mckinnis's metaphor which is like it feels like playing my favorite sport that's how i feel i love the way parker talks about like i know parker like not that well but like every time he talks i'm like yeah he's one of them totally he's one of my we're in the same like he's a sicko for the game yeah complete sicko for the game i love that guy he's great and i like the way that he uses that metaphor because i feel the same way but i would not describe even if i'm playing my same my favorite sport as fun the way that i would describe it is like i feel deeply fulfilled and the the reason i don't

say fun is like a different version of fun for me is like i don't know going and playing golf or hanging out with friends or doing other things and those days are like long gone at this point but i would never i never long for doing that version of fun if that makes sense because i can't imagine doing anything else. It is what I want to be doing. And it is all consuming because it is extremely fulfilling, but because it's also all consuming, I wouldn't necessarily describe it as fun because sometimes at two in the morning when my eyes are closed, I would like to actually be asleep. You know what I mean? You're right. Fun is too simplistic a word for it. I actually agree with every word that you said. And I feel almost exactly like no notes. Like that is also how I feel. But there are moments of fun. I mean, that's the interesting thing about um sport like you know uh yeah I'm a huge Niners fan and you know it was fun when we were winning games when we shouldn't have and it was really painful to lose against the Seahawks in the divisional round but and that wasn't a fun moment that was a tough moment I can't even imagine if you're Christian McCaffrey and you've been like burning the kettle at both ends you get to that

point probably didn't feel fun but he did probably feel fulfilled and I think the NFL honors honored that like i think you deservedly won comeback player of the year and and uh and so kind of similar you know where i think the interesting thing about being an entrepreneur is you you do feel every bump in the road i think you i generally i hate to lose more than i like to win i think that is something that's pretty typical of most entrepreneurs that i know which makes the feel particularly low you know if you lose a deal or you you know something goes wrong your candidates as know, whatever it might be like it, it haunts you. Um, which is why, you know, uh, the, I think it's hard to be not, I think the intensity in that are like two strands of DNA that are really intertwined, but you also have those moments of true fulfillment, but also fun that go along with it. And one of the things I would say, I'm a huge believer in having a co-founder. Um, I, uh, like I, it's not sort of a philosophical thing on solo founders not working. I don't mean that at all.

I think those, generally speaking, I don't agree with rules, like there's rules of thumb or lack first principles thinking in my general view. I think it's just hard to be a founder by yourself. And like Clay and I do everything together. Like internally, we're Clay and Brett. There's not like one of us separately. And like having that partnership makes it more fun because in those moments where you're about to go too low, the other person lifts you up. And when you have those moments of great things happening, you have someone you can share it with. And it's actually why I like, I'm a huge believer in marriage.

I'm a huge believer in co-founders. Like life is hard. It's really great to do it with someone that you care about. And what's nice about a spouse or a co-founder is there's something sort of unconditional about it because you're literally kind of in it together. Like it's either going to work or it's not going to work. And so for me, I would say like clay makes it fun. But you're right. It's more fulfilling than fun. It's like it's complicated. Yeah. One of my other observations that I've had in this same vein that you just kind of made me think about with the co-founders thing. I have two co-founders and both in them, but also in my team, the trait that I have come to value almost more than anything that has surprised me is default optimism.

like uh you can't handle the pessimism like i can't handle it yeah and with them it's like true in spades like they just um they've never met a problem that they don't think they can solve yeah and there is um i think like we all feel this way across like the three of us and i think it permeates through the company like um i think when you are a default optimist it starts to imbue a sense of inevitability into the organization. And I think that's really healthy because like it builds momentum towards an end state that is like promising. And like momentum does to me feel like the oxygen of at least Roadrunner. Maybe you feel the same way at Sierra. Like it just feels really critical to continue to stack wins. And now I've even in employees, I have started to crave that value of, of optimism. The venture version of this, of this world is the expression that, um, pessimists sound smart and optimists make money and applied to startups. Like, uh, it's not about making money, but like there's something to that. And anyway, like maybe one of my most unexpected things that I look for now is that. I think it's, I agree with you. And it's hard because uh it's sort of uncool as a founder to you know show up and be like i'm freaking out you know

because as a founder you're you have to essentially manage a lot of stakeholders like you have to whether it's your employees your customers your investors your the public writ large and their opinion of your your firm there's a it's part of why there's sort of that distasteful kind of like hustle culture and performative stuff on social media is people need to act like everything's great. And it's so obviously bullshit, but people do it anyway. But it's partly because you're trying to convince yourself and try to convince everyone else. The thing I'd say is I agree on the optimism, but I also think you have to be careful not to bleed into inauthentic optimism.

Uh, you know, there's a, we, we have a, um, uh, philosophy, um, at Sierra related to our value of craftsmanship, which is like, basically the idea is like we. as a team. So in engineering, there's this idea of a root cause analysis when a system goes down and the spirit of an RCA, a good RCA is you don't blame people because the whole point of a well-engineered system is it should be impossible for a human operator to accidentally like trip over the wire and have the whole thing go down. So for example, if you push new code and it failed in production, it's not the person who wrote the bad code or even the person who pushes is like, why wasn't there a test?

You know, if it took the whole service down, why didn't we roll it out to a set of canary servers first and measure the metrics? And you say, okay, like, what is the system that could have been in place that would have prevented that thing from happening? We try to do that with all parts of our culture. If we lose a deal, if we lose a candidate, if we, you know, anything goes wrong, we'll do a dispassionate, blame-free, you know our root cause analysis so we call it lessons learned across the company yeah we do in front of the company every week um and the idea being that it's a way of making a failure collective because it makes it not pessimistic but it's like here's how we're going to keep this from happening again um and i think it's important because for us when i brought up the the flip side of optimism is storytelling and you know you want to have people who can solve a problem but you also don't want people the collective delusion that everything's okay when it's not because it might actually impact your decision making so it's interesting because you sort of want people who are like optimistic um but like with a real solid sense of reality and sometimes people are optimistic and they're like hype men you know and like everything's great when it's not

and then then there's the toxic people they're like everything sucks we're gonna lose yeah well like get those people yeah like i don't have the mental i don't have the emotional capacity for that and so our tactic is uh losing collectively and i think it's really important what i mentioned going back to the beginning and success is a uh as a thousand fathers failure is an orphan uh how can we make failure have a thousand fathers and like how can we make it so that when something goes wrong there's a cultural it's like cultural antibodies come out say we're going to make sure that we never make that same mistake again and i that's our mechanism it's like andy grove only the paranoid survive it's like our way of operationalizing paranoia yeah i think it's very well said and i totally agree with it um i think on the optimism thing like it's very easy to be a default optimist when things are going well yeah you know like the other slice of this is like almost i view it as a responsibility to inject tension and pressure into the system when things are good and then be uh supportive and optimistic when things are tough uh and i think when things are tough i really value like yeah no shit like this bug

just took down our system you know what i mean like it's pretty easy to be down on ourselves and i think we all collectively agree that shouldn't have happened that i wish it didn't happen. But I think that in those moments of like real vulnerability, uh, that's, that's the moment where I like crave the optimism. You want the person who's like, let's go fix this. Not, oh my God. Yeah. I appreciate you doing this. Um, like, can we do it more? Like I would love to do this more. I'm right down the street anytime. Yeah. Where are you? Uh, we're right around like, uh, Right over on 2nd and Howard. Oh, good.

All right. Yeah, we could do like biannually or something. That sounds great. I'd be happy to. There's so much change. Six months is like a year. I was going to say, we could do it weekly and we'd run out of things to talk about. Yeah, absolutely. Good to see you. Thank you. Are you hiring? Any roles that you want to shout out? We're hiring in all functions, engineering, products, our agent development team, which is a mix of sort of both engineering and some consulting roles, sales, We're also hiring in the UK, Europe, Singapore, Japan. So if you are talented, please reach out. All right. Thank you.

Thank you. That's it for now. If you like the episode, please leave us a review or go back into the archives where we've done more than 200 episodes with some fantastic folks. This podcast is a Kleiner Perkins production, and I'm Juven. Thanks for listening. We'll be right back.