Inside fal’s $1.65B Series E & F Led by Sequoia & Bessemer

thank you so much congratulations I think you've also hit the point where you don't want to do any media on it anymore so you've passed the inflection point of like the hype cycle and now you just have a humming business exactly be rather focused on the business the the announcements you know it's it it gives some you know push in the beginning but as as you do more rounds i think it's irrelevant it's the it's the business that that matters more the adrenaline has worn off exactly it's probably worked for hiring and that kind of stuff and customers but you gotta focus Okay, so let's talk about the evolution of the business today.

Generative media has taken off in AI. It's probably one of the coolest parts about AI, seeing all these videos being creative, all the creative stuff getting made. And so I don't know who wants to take it off, but feel free to just kind of like, where are we right now? And why is this just kind of exploded? The way we talk about it, AI really has like three product market fits. One of them is search and like initial ChatGPT consumer product and now Google and Gemini. The other really clear one that's like growing really fast now is coding agents. And the third one is we believe is generative media.

And to put things in perspective, when we talk about it with coding agents, an individual can go spend maybe $10,000, $20,000 a month on their cloud or OpenAI subscription. Generative media is the only other thing. This exists. An individual, if this is your job, if you work at an AI native studio or a real studio these days, you sit down in front of a computer and you generate videos all day and you spend $10,000, $20,000 a month. This is the only other use case in AI that an individual can spend that much money. And search is so big that it gets a pass, and there is no other use case or part of the industry that has this dynamic.

It's just coding and generative media. And that's why you are seeing all this growth, because more people are adapting it, and individually they are spending so much money on it.

So let's talk about the engine behind Fall, and then we can kind of get into how your culture is keeping up with the growth, because it's crazy. So you were saying you started off with compute. You started off as a compute company. You found your way into this area space.

I don't think, I think like when you first play with the first Dali, like you would never think, okay, like we could make movies with this. But it took only like... Came here very, very fast.

Yeah. We came here really fast. It only took like 18 months that people started thinking, oh, like this could actually make feature films. So, we're in San Francisco. People here are super nerdy. Maybe you guys are too, but like, well, as you're growing super fast in this inflection period how are you keeping ahead of research like are you paying attention to research like what are you how are you learning as you go in the beginning we were extremely involved obviously like we had a very small team and we had to be part of every single little edge we can make and then nowadays we have a really talented leadership team that most of them we worked it before in different companies. So I would say that's the best part of our job that we can rely on these leaders. And that's a superpower to ask their opinion, what they think about like what's coming new, what they pay attention to. And a lot of the information I get these days is from that team. I'm also very curious to read everything, but I get, I learn more from the leadership team than than the internet these days oh that's pretty good what about you um yeah i think just to echo what gercam said uh it is it's very important like how you build this team i think i

got a lot of inspiration from my days at coinbase in terms of like recruiting the earlier team i think one of the things we did we did there so i i joined coinbase 2016 team was like almost 100 people uh maybe like very early days similar to like our size now we're like 150 people uh today and one of the things they did was like they had this like um crypto quiz that they posted on reddit right and and one of the things they assessed for was like you're literally like your knowledge about crypto like how much do you know about it you know it's a bunch of technical terms also pre-ai Like, you know, it's...

It was hard to find the answers to these questions, but there was literally a quiz, and you had to pass this quiz to actually get on a phone call with someone on the team. How cryptopilled are you? How cryptopilled was it? So I think this was a very key factor to Coinbase's success in the long term, because you really want these fanatics about the space so that they can keep things going. because like you know most of the time like the whole job becomes about it becomes like staying up to date right so like how do you stay at the forefront one like you could collect really great people and you know get them on your team and hopefully they'll feel motivated or you can get people who are like already motivated this is all they can think about this is the thing that they're like most excited about today if you didn't hire them they would be doing this anyways so like that was literally like I still is this is kind of the criteria we have for for bringing in the early hires because like it helps with just naturally like we're up-to-date all the time and I think it helps with people being just like constantly motivated about like what they're working on so like you know you don't have to try to do that people are already like AI pilled or gen media

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It's time to get Brex AF. Learn more at brex.com slash sorcery. That's B-R-E-X dot com slash S-O-U-R-C-E-R-Y. Bye. From handshake to signature faster, Harvey, the AI platform built for legal work, is trusted by 80% of the AMLA 100 and over 20% of the Fortune 500. Learn more today at Harvey.ai. That's Harvey.ai. AI needs more than chips. It needs power, land, and infrastructure. So where are you hiring people from? What were their roles? Because this is all, again, this is all very new. This is a common question I ask in these conversations because it's like to remind people like none of this really existed like three or four years ago so how many people are trained even in the beginning it was an overlooked market because it happened at the same time with with the llm growth like maybe if it happened by itself it would have been the hottest thing but it was like the second hottest thing it's also hard because it's the creative industry it's kind of at odds with technology to some degree it's like there is a lot of technology involvement in creative industries right like even an imax camera is like you know size of that table over there like there is technology involved and in in different parts of like animation filmmaking bigger parts and then it plateaus and maybe

we are going through one of those times where in the next five to ten years it's going to have another outsized impact on on the creative industries fees. But, yeah, like, AWS, AMD, they have massive, like, media businesses where they sell to studios and media companies. So, this is just the next wave of it. Yeah, I think I was listening to something on Christopher Nolan and his infrastructure. Where he's keeping all that IMAX film. Yeah, 900 pounds. So heavy. Which is funny. um okay so let's talk a little bit about the team and how you guys all gathered together so you came from coinbase you came from amazon yeah yeah so how did you guys meet and what was kind of like the early culminations of gathering together a group you you go so we are both turkish but we didn't we didn't know each other back home and we met in san francisco like when i first moved here 2014 is immediately I met him. We were both working at different companies and doing you know minding our own business and it was actually during COVID time we this we've told this story a couple more times before but we rented the house in Palm Springs and that's when we first thought okay maybe there's like a working chemistry between us and then it took us maybe another year

to start the company but that's that's how we met we were long time friends for over 10 years and never worked together until that covid uh palm springs house and and here we are we've been building the company for five six years now and you've been pulling people from coinbase coinbase and amazon it's really oh damn from both places exactly and so what what were you like looking for in the early days what were the types of hires? I would say like just really good people in in many ways like I think one is obviously like they have to be excellent technically I think early on like we we we definitely had to get the technical part right because like we were just doing a lot of like deep technical work we still are but that at that time that was our like differentiator um so people who are really good at you know very good technically i would say also like people who are just like people that we get along with i think like early team chemistry is like really really important um i think if you can like figuring out like product market fit is probably the most challenging thing for a startup right so like you have to in our mind i think you have to keep a pretty small team and that can work really really well together that can like stick together

and um just have a really like great way of experimenting with ideas and then like throwing things that don't work and and just like keep moving and keep looking i think this is one of the biggest advantages of starting a company in your mid-30s because you have your whole working life people you worked with you trusted you didn't trust that you can you can bring in together and as soon as you know you reach out to people you if if you have some something worthwhile they come and join you and they want to be part of the story and if you are like younger you unfortunately don't have that and you have to just go on your own and try to hire people and get trust but here we built trust with so many people that early engineering team was almost all people like we knew before and worked with and trusted helped navigating the problems so much easier

today. It's crazy. I mean, like their market cap peaked at like 250 billion. Now they're at like 130, 150. But I mean, it's like he is such a proponent of what you're just saying. Like his whole thing is built on individual contributors and like people not just because now we have access to coding agents. Like what about the other side of the brain? What about the like, you know the human personal things and also holding the business weight of it and making business decisions but like having you know the team effort around it so i think that is like kind of a structural component that's just fundamentally changing it's like you can't just be a 10x engineer you have to be yeah a lot more i think other ceos are like also talking about it right like brian armstrong from coinbase he recently talked about it like literally like describes a blueprint like this is how we're building the company going forward i think elon is a very big proponent of this, right?

For better or for worse, he talks about this a lot. Yeah, I think it's really picking up, especially among, I think it's harder to do at non-tech companies because there's so much hierarchy, but I think tech companies particularly are very, they still need to, I think, go out of their comfort zone, but at least they're better suited to be able to pull this off. But it is something I think a lot of people are talking about.

but it could just be like something you had no idea you were going to expect. I'd say like being at the forefront, like as a company is pretty hard. I think one, you have to really want it, right? Like you have to want to build a big, big company. And two, you have to like keep up with it right which requires a lot of effort so that I think in order to you know build up build a big startup you really have to just be very committed and be very hungry and and I think like that's you know that that definitely that's a lot of work you know that that takes that takes a toll on you I think Adam would say this probably you know but but yeah it just requires a lot of hard work? I don't know. I asked him what he's most excited about. He says he doesn't feel excitement. So he's beyond that point. You're going to get there one day. No emotions. Our industry

is incredibly dynamic, right? It's when there's no good model for a month, everyone starts panicking. Oh my God, it's been one month. Nothing new has happened. But the answer is just wait another month and something incredible is going to happen it's it's been true since since we started and that keeps excitement going and that keeps people like very encouraged that okay there's going to be the next model that's going to unlock these other use cases which is going to unlock these other types of customers and that has brought so much growth to our business and so far it just keeps happening for us where have you been seeing some of the best models come from do they just

got some funny names yeah happy horse nano banana what what's what do you like uh there's happy oyster it's like a game model uh um there's MiniMax sea dance sea dance and sea dream I think when Nano Banana had its moment and everyone was talking about Nano Banana for like three days, even my dad was talking about Nano Banana, I was like, what the hell is going on here? I think the back story is that it was an anonymous model, so people do these cloaked releases where they will release a model, they won't actually disclose who it is, it's codename get like people excited about it because it's like ranks highly and i think somehow they use that like nano banana as a placeholder name codename yeah and then it just like stuck so it became the original name if you guys were a model what would your model name be sorbet sorbet I don't know why. I wanted to rename the company at once, Sorbet.

Sorbet? He likes Sorbet a lot. I also have this, I think about names, I also want these exotic colors, like burgundy, turquoise, you know? I think that would be a good series for model names. That is a good name, I guess. What about you? I don't know. Sorbet could be a color, apparently, too. It's like the peach color associated with sorbet as a color. I like, we can do birds, there's so many birds. Birds. Yeah, you can do birds. Do you have a favorite bird? I'm asking for a name. I don't know. Yeah, yeah. Like, you can even do owls. Like, there's so many owls. You can literally just do, like, different owls.

You can do insects. I don't know. Nature, I think, would be my theme. Well, how did you come up with the name Fall? All right. So. Let's talk about this. Yeah, yeah. So, FAL is, so we have a longer name, Features and Labels. It's a double entrande. Yeah, and it's the initials of Features and Labels. And it's not FAL, it's FAL. It's FAL, yeah, it's FAL. Yeah, it's Features and Labels, which if you're a real OG, you would know those two terms. It's like from the machine learning world. It's like very old, like pre-AI. And so, it's the initials for that, but also, it's, I don't know, have you had Turkish coffee?

Yeah, I have. Okay. So, have you been, like, told your fortune from, like, the coffee grounds? No. All right. So, that's foul. It's, like, like, your fortune told by the coffee grounds. That... You should get it done. We'll do it sometime. Okay. Okay. Let's do it. So, you know, it's, like, your future prediction. Someone looks at, like, when you finish the coffee, it looks at what's remaining. can you tell portions you know no everyone is trained in turkey everyone has done it before yeah yeah like it's like should we do it right now we could try yeah yeah we'll get some coffee yeah i think they have turkish coffee here oh my gosh that's fun do you think the open source

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like not built yet so yeah like it's very slow right like building these things is it takes a lot of time and there's not enough compute right now so i have two final questions and then i'm going to ask you what your hot take is i'm letting you know that now so you can like get it think about it this was a hot take you guys have been crushing it you have great answers and they're quiet opinionated, so it's awesome. But before we get there, what are you most looking forward to

in the next 12 months? I'm looking forward to the first timeless AI content. And the way I define this is you and I, we are going to watch this and it's going to be a year later. We're going to watch it again and we are still going to like it the same way we like it today. So far, AI content has been about capabilities it's been about oh look this is possible to do with a video model or that's possible to do it like an image model but we need to reach to that point where things look fresh all the time and I I'm looking forward to that I think we are in the next year there's gonna be a widely accepted maybe a short movie maybe animation that people are gonna look back at it in a couple years and they're still gonna enjoy it the same way they're enjoying it today it's pretty good evergreen content yeah it's very important i try to do that there you go like people say toy story is is that for computer graphics like that was the first time it came out in 1996 something like that crazy how long ago that was created you know we can just go watch it and it's gonna be good yeah it's i'm gonna enjoy it did you like the odyssey in that way i haven't seen it yet you haven't seen it all you've been doing is talking about

i'm waiting for the imax the big imax and i couldn't i couldn't get a ticket yet yeah go to the spear did they show it there i don't know it's too big too big not as normal intended no um for me i would say like world models is we haven't spent too much time talking about them i think they're super exciting i I was like I was very skeptical like even three months ago so world models are these models like you can actually like play around and like move around it kind of like looks like a game and you can actually like put in actions like with your keyboard and you know you can navigate the world but like seeing what I've seen recently it's it's pretty incredible I actually started feeling very bullish about it it's a matter of I think the quality going up and then the speed getting so much better and I think there's not new architectures now that like people are able to actually have like more persistent worlds before you used to like look this way you know see the flower look away come back it's gone uh so they're able to like persist things now uh and you can actually you'll be able to like actually build like a game with a prompt but i think that space is like just gonna blow up so um again the big challenge there is compute but i actually think that because

you need like a gp running at all times actually like play that game but i think the quality of the games itself is gonna go a lot better and i think it's gonna be probably yet another product market fit like gaming with ai that's not like a thing yet i i actually think there's a big chance that may happen and it might be like this fourth category maybe very expensive yeah damn okay so um this is we have one more question until the hot take okay i'm just letting you know again I'm warning you. Okay, so Sorcery is very proud to be sponsored by Brex. I don't know if you know what Brex is, but Brex knows where you are. So they're all about spending smarter, moving faster performance, a performance corporate card. I like to take this question in the personal bend things.

I mean, you guys have worked for legends, whether it's Brian Armstrong, Jeff Bezos. I mean, you like Chip, so you might like Jensen Wong. I don't know. And then you also like Christopher Nolan. So I'm curious who are some figures that really inspire you and keep you motivated who keeps you like running at it great question to be your dog I don't know of the you know previous generation of founders i think jack dorsey is very underrated and i think he has more range than than anyone else and and then like now he's he's like maybe maybe coming back i think watching his his journey with twitter and then square i i never got to work closely with him but that that's a like inspiring figure when i was younger in silicon valley i always like look up to what he was doing yeah um i wouldn't say it like keeps me going level but like i really like ali ali gotzi um i think he's like transformed this company many times like over time i think like i like to think it's reinventing it keeps reinventing and um i think that's very important i think that's like a secret to building a long you know long lasting company and and navigating through like all these changes that are happening uh so yeah really great leader i think the time has come what is your hottest take right now

do you have it no no there's so much pressure well we can we can take our time yeah let's take our time you can cut it cut it and then It's like dark outside. Should we prompt you with some? No, no, let's do it. I have a good one. It could be on like IPOs, it could be on like companies disappearing, it could be on fake GPUs that people sell from, I don't know where they get them. It could be. Yeah. I had a hot take, like, a year ago, the OpenAI meta merger. Yes. Ooh. Could still happen. Again. It could still happen. They're not doing too great. I think it makes sense. My hot take would be bad for the whole industry.

Sure, sure. Okay. So, not, I guess, like, not too spicy or anything, but I think it makes a lot of sense. Like OpenAI was like known for this like, you know. Consumer, like, edge, right? Like, that was their whole thing, right? Oh, like, OpenAI is winning in consumer, therefore, they're going to win because, like, consumers are so much harder to win. And then Anthropic sort of came with, you know, their enterprise thing. And, you know, and then Google started adding, made their own consumer move. And so I see, like, OpenAI not necessarily, like, winning very strongly in either enterprise or consumer.

And then Meta, on the other hand, I think is in a similar situation where, like, they need something. And I thought, what if they, like, combine their forces? That would be really cool. So, like, they can really just, like, really start winning consumer. So I thought it made sense. But again, I have no information about any of this. So I'm completely speculating. But I thought it would be a good move. That is very interesting. another one this is this is a common hot take i'll do it for both of us sure um i have more now okay good good good it's coming the consensus view was there's going to be more margin in the application layer yeah and i think it's completely reversed margins are close to zero in the application layer there's so much competition people need to spend so much money for marketing You can only create margin if you are in the compute path and you can innovate in that path.

That's the only way you can create margin, which wasn't the case when we started the company four or five years ago. Everyone thought the infra layer is going to end up with price going to the bottom and application is going to have margins. Looking around, application layer doesn't have any margin today as well. So, wake up, we cease. It's a good one. We talked to Tony Kim about this, that raise, and he was like, the chips have much better margins than all these companies. They're the only ones with margins right now. I have another one. I think this is a very recent one. I've been kind of like toying with this.

I think coding is part of Gen Media. Really? Yes. Well, it's also part of Gen Media, right? like it's its own thing but at the same time like we're seeing so many developers building like richer applications that are not just like a website like they can be you know programmable video right like content like maybe you've seen these websites that like look more like a video like there's i think coding is becoming more and more like a very key part of like what the developers on file are using so i you know i think we're gonna like have to invest in it because there's just so much demand from our our own customers everything is a computer everything is a computer everything is computer that's the hot thing well that's a great place to end thank you guys so much i'm very excited for dinner and the coffee and the coffee i can't wait to know what my fortune is there you go cool thank you thank you molly hey it's molly if you enjoy our interviews check out our newsletter sorcery.bc where we deliver a once a week top deals and tech headlines email and also go deeper on our podcast interviews subscribe to sorcery today and don't forget to subscribe to the podcast on youtube spotify apple or wherever you listen

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