20VC: How Model Performance is Plateauing | Two Key Rules for Effective Deal-Making | Company Building Lessons from Keith Rabois, Brian Halligan and Pat Grady | Why Enterprise AI Adoption is Years Off with Harvey CEO Winston Weinberg

23:55Like, I feel like this is something that folks don't quite understand is like a lot of the consumer use cases, like four was like, we're done. Like, you don't need better reasoning to solve these problems. What you need is like different contexts. You need to connect to your calendar. You need to connect to, you know, all of the different apps that you use and things like that. That's what an increase in performance is for them, right? There might be a plateau in some of the consumer-facing side of things. On the enterprise, I think things are going to keep going, and especially Cogen. I think we are not going to see a plateau in Cogen.

24:27I think that is going to get much better really, really fast. What do you expect to see in Cogen in the next 12 months? I think the slope will only increase. I think that it will get better and better and better. And I think that will unlock a lot of productivity just across the entire world. When you look within Harvey, is everyone not using Claw Code, not Cursor? It's a combination. In the UK, we have a game called Shag, Marry, Kill. Okay. I'm not going to do that here because it's wildly inappropriate. But if we were to do a buy and sell, and you had Anthropic at$350 and OpenAI at$800, which one would you buy and which one would you sell?

25:06Yeah, I know. And we talked about this. I'd buy them both a double. You'd buy OpenAI at$1.6. Maybe not quite$1.6. I needed, there's a couple of things I need to see from them before I would do 1.6. What do you need to see from them before? I think the main thing with OpenAI is they have so much consumer brand. It is so powerful. And especially outside of X and outside of kind of like our worlds, it is so unbelievably powerful. And I don't come from the tech world. And so all of my friends, all of my relationships before this were outside of tech. That brand power is incredibly powerful. And I think like more focus on consumer and just tripling down on that, that I think is where I'd be the most bullish.

25:51I think that on the enterprise side, there will be multiple winners. Like enterprises don't allow there to be one winner, right? So no matter what, there's going to be OpenAI is going to get some of the enterprise market. Anthropix is going to get some of the enterprise market. But the consumer market, I do think OpenAI has an opportunity to take a lot of this. And obviously the main competitor there is going to be Google. But I think they both can be just astronomically huge companies. The other thing that I feel like folks don't realize is everything could pause. Like both of those companies could stop developing things right now.

26:25And the amount of saturation of AI that would just happen to the economy would still skyrocket. Like we're so far from just the ability of the models right now being integrated into daily life. People do not know how to use these systems. Like consumers don't, they don't. And businesses definitely don't. And there's so much of like the capability overhang is so high. Like I think it's higher than anyone is even talking about. It's astronomical. And so I think if both companies literally just stopped shipping things, their revenues would still explode because there are going to be so many companies building on top of their models.

27:05There are going to be so many different parts of the economy that adopt these things that I think we're still in early days. What do you think that time lag is? I know it's a horrible question to ask, but is it like a two to three year? Is it like a 10 year? You work with some of these enterprises. They don't speak the language that X and X generally do. What does that time lag actually look like? I think like three to five years until we see like massive, massive productivity gains in enterprise. I think the capabilities are there already. The capabilities were there two years ago. A lot of this is like, if you think about just like the average enterprise workflow, there's like 17 different systems they're pulling data from to get that workflow done.

27:43Like literally, 17 might be on the low end. Sometimes it's like 50. And you have 100 tabs open, and you're opening in all these different apps, and they kind of connect to each other. They don't really connect to each other, right? And so the long tail on actually getting these systems and agents to do a task from start to finish is so difficult. And the problem that you're going to end up happening is you have these vertical companies building vertical agents like us and Sierra, et cetera. But a lot of even the verticals connect to all of the other parts of the enterprise. So like one thing that's happening that's interesting for us is, you know, a lot of our revenue is starting to come from Global 2000 or Fortune 500 companies.

28:19And we actually haven't built many features for like tax compliance and procurement, right? Starting to happen is those departments are adopting Harvey, even though we haven't built features specifically for those departments. The reason why is the legal department actually interacts and just like legal documents are such a core part of a business that they interact with all of these different parts of the business, right? And so we released basically a feature that's multiplayer. It's called shared spaces. At first, like a lot of the impetus for doing it was you want a large corporate, like a Walmart or whatever, to work with their law firms in the same platform.

28:54And that's happening. But actually what's starting to happen is these corporates are using the like legal team is working with the compliance department, is working with HR, is working with everything else, all in Harvey at the same time. I heard from Lagora that the shared spaces was ripped from them. Is that fair? No, we were working on multiplayer a long time ago. I think one of the things that's interesting about our company is we started with like the hardest customers and we did the same thing actually on the in-house side too. So like we had bank customers a while ago. And the security and permissioning systems that you need to build for a bank are so much more in-depth and like the enterprise readiness than for a lot of the other folks.

29:41And the biggest problem with multiplayer and the way that we're doing it is we're allowing the in-house side to kick it off or the law firm side. And to do that, the security and permissioning that you needed in place for both is astronomically high. So we were working on this like a very, very long time. We were going for like six months to almost a year. We just did all the permissioning and all of that stuff first before you do kind of the UI and on top. Why do you think they continuously say that you wrote their product ideas then? I think that if you were number two in the market, one of the things that can get you a lot of attention is just attaching yourself to number one in any way, shape or form, right?

30:20you kind of get free press from doing that type of thing. It's a good way to basically jump onto the distribution that the other front has. Do you respect them? Because you guys hate each other in a way that like, no, no, really you do. And I love it because it's like, I feel we got too kind in tech. Like, oh, we're all friends. That's like, no, we should be here to win. You know, Slootman, it's war. I love him. And you guys really, it's wonderful to see the animosity and hatred. But do you guys respect each other? I mean, I definitely respect them. And I think like one of the things that they did really well is I think they did a great job in Europe.

30:56And, you know, this is back in 2023. We're not that, I think they're like six months after us or something. It's not that big of a gap. And I think like one of the things that I would have done differently in the beginning is just invest like more in Europe in like 2023. And actually we, a lot of our first customers were in Europe, but having folks on the ground here is just really, really important and respecting kind of like the different cultures and how to productionize that and all of those things. Why did you not out of interest in terms of coming to Europe earlier? It was just bandwidth.

31:27Like when we signed Ano Sherman, which was our first customer, we had four people. So we did a 4 ,000 person enterprise grade rollout with four people. Was this when you were, I got told this from Pat, you were like in an Airbnb? Yeah, we were in Airbnb. The engineer who had joined, who was our first engineer, Gabe was basically coding everything before that. He had been there for, I think, a month. And then we onboarded a 4 ,000-person, very large-scale enterprise. Security was an incredibly important team. And so it was just bandwidth. When you're scaling that quickly, it's harder. Are you shitting yourself that the platform's going to fall over?

32:04Not anymore. No, no, not now. But then, in 2023, with one person in Airbnb. But actually, I think this is important. This is something that's interesting. when I look at a lot of AI application layer companies, if you go through their LinkedIn's and you look at the engineers that they're hiring, it's like 90 % front-end engineers, which is interesting to me. And a lot of that reason is I think like vibe coding works much better with front-end than it does for infra. And a lot of, I think what's happening to AI companies or is going to happen to them, and it happened to us in early 2024, is you do a bunch of front-end and you make really pretty UIs and really nice demos, right?

32:40And then you use that to land all the customers. and now you have a lot of actual active customers and you haven't invested in the architecture and the infrastructure of hundreds of thousands, millions of customers using your product. And we kind of made that mistake in 2023. And in the beginning of 2024, something that kind of slowed down our shipping velocity is we added just tens of thousands of users in like the Q4 before that, right? And we didn't quite have the infrastructure like to support that. And now if you look at our team, it's almost like 40 % of our entire EPD org is very senior from like a Databricks or something like that, infrastructure engineers.

33:20And it's a long-term bet that as you get these agentic systems that are processing tens of millions, you know, for us, I think last year we almost did like half a billion documents or something like that, that you need the infrastructure to actually support that. So it's not just about how do you win the demo and how do you win the deal, But how do you actually create an enterprise, very scalable infrastructure on your product? And I see a lot of AI application layer companies not doing this. So if you were advising those founders today, would you say, hey, really focus on prioritizing infra hiring earlier so you're able to fulfill what you say you will do to end?

33:54What I would tell them actually is your GRR matters. And I think like one thing that a lot of investors in the AI space have been not paying attention to is GRR. They've been basically just looking at net new ARR and kind of being like, ah, churn is fine because they're growing so fast that maybe they'll pivot or they have some customers. I think that's a huge mistake. You're going to see a lot of companies in a lot of verticals that go really, really fast to signing a bunch of customers because maybe there's only one in the vertical and now there's a second player, et cetera. But then they have to actually support all of those customers.

34:26And if you don't have the infrastructure in place and you make a bunch of promises up front and then all of that falls down, you'll start losing customers really, really fast. And I see a lot of AI companies not focusing on this. And I think that's going to be like a huge reckoning for folks once they get past 100 million ARR. This is what I worry about though when I look at kind of, when you look at GRR figures and you think about like a Sierra and it's like the growth, and Brett's amazing and like the best of the best. Jesus, like take my money too, Brett. I'm not questioning you, but I'm like, gosh, what you have to now fulfill from a per customer implementation service provider aspect to go from 100 to 400.

35:05It's a lot. A lot. It's not like a plug and play. It's much easier to go on the consumer side from 100 to 400 with a PLG motion. Agree. And I think that what that requires then is going back to what we were saying, which is how you go product market fit and then how do you get company market fit? And that's actually like how you structure your company. And I think part of that is different than how it used to be in the past, where if you have long implementation cycles, or one thing that is going to end up happening, I think, is a lot of these verticals are going to land at a big Fortune 1 or Fortune 2 or whatever, right?

35:37And their product is going to expand massively. This is a really interesting thing about Microsoft. I don't know how much you know about Microsoft Salesforce, but they started in the beginning, and the vast majority of their sellers, it was pre-sales, right? So spear fishermen, like you have tons of that, right? Old school spear fishermen. And they actually eventually migrated to a lot of what they have is post-sales. Like a lot of their investment is actually in post-sales. And the reason why is because their customers just, their NDR goes up, up, up, up, up, up. They keep buying more things.

36:07They buy more compute, et cetera. And I think a lot of these enterprise companies should start thinking about their company that way. In the sense of like, sure, there's some of a land grab right now. But really what's going to matter is if you are bullish on AI, you should be bullish on your product. the value of your product, like we are in day one of product development, like it's going to change astronomically. And so it's more important than landing new customers and getting really higher R is can you retain those customers? Because that customer that pays you a million today, there's a real world in which they pay you 100 million at some point.

36:41I think Databricks is a company that's done an incredible job with this. I have Alex Rampell, who's obviously at Andreessen, one of your investors on the show recently, and he said something that I loved, and it sounds a bit awful, but I loved it. He said, I want companies who have hostages, not customers. Okay. And again, as kind of bad as that sounds, I did like it. In this space, are they hostages or customers? How easy is it for them to move? Yeah. I mean, there's a third one that now develops, which is these AI products are so powerful. And I think over time, the ROI is so high that your ROI can become so massive that it's less of a hostage and it's maybe closer to how Palantir thinks about things.

37:22In other words, the more value that you create for the customer, the higher you get paid. And I think that more and more companies are going to start aligning to that. And the reason why is, I'll do the law firm side and I'll do the in-house side. For law firms, they bill by the hour. And so a lot of people are like, how could you ever sell to them? There's no way that this is going to work, right? Two things might happen. One, they might switch to fixed fees. Well, now we're good to go and efficiency is really good. I don't think it's going to happen that fast. The second thing that actually is happening, and we have so many law firm customers that have gained new business by building something custom in Harvey and saying, we'll do this M &A with this custom solution that we did in Harvey, and they win that deal over another law firm.

38:04That's not a hostage. That's this product that I'm paying maybe like a million dollars for a year, just earned me a deal that's 20 million. What is the ROI on that? Incredible. And on the in-house side, it's even clearer. It's just if you save time, you're saving tons of money. So I think that hostage thing can actually change to more like how Palantir thinks about it, which is, I think the value of B2B SaaS is about to become astronomical. And if you can figure out how to align your product to that ROI, it's not a hostage. You're just completely aligned with your customer. How do you align product to ROI when your customer base doesn't want to pay for a consumption model and they just want to pay for a seat model that they know and can rely on.

38:47Yeah, I think that that's not, at least in our vertical, what I've seen. I think there are a lot of areas where we are going to start moving to consumption-based pricing, at least for us, for our customer base, that would be completely fine with them. Rory O'Driscoll, the Irish guy, who I quote so often, he's brilliant, should basically just replace me at this point. He's much smarter than me. But he always says, AI will be magnificent for us all if we see spend shift from human labor budgets to technology budgets. Will we see that shift here? Already seeing it happen. How does that happen? Yeah.

39:20So there are a couple companies that have basically said that the Harvey budget comes out of their spend on professional services, not out of their tech budget. The budget for professional services is in the billions a year versus the tech budget for that G &A group is astronomically smaller. Sorry, the professional services budget is not the junior talent that they have in their organizations. No, no. And I think that's what's really interesting about our business is a lot of the work that we're doing for like a corporate is not the work that our law firm customers are doing. It's like alternative legal service providers.

39:58It's this like lower end work. What percent of revenue is law firm versus external? Right now, so you mean corporate versus law firm. I think it's around 40 % of our revenue is in-house corporate and 60 % is law firm, something like that. Is that what you thought it would be? Something like that. I mean, if you just look at the breakdown of how many lawyers exist on earth and how many of them are at companies versus in-house, that's pretty much the same. In five years' time, what will that be? I think it'll be similar. I think it'll be the same. How will we see law firms change? Will we have a cannibalization of juniors?

40:32I don't think so. I think we'll just get more work. So interesting, I had a conversation with... Are you going to make my girlfriend unemployed? No. I had a conversation with a pretty large private equity shop recently. And they were talking about their year is going to be incredible. They think it's going to be a big M &A year. It's going to be great. And they were talking about how they think about legal fees. And the way that they thought about legal fees is the reality is it's going to be a big year. And whenever we have a big year, we pay more in legal fees. That's just like how it happens, right?

41:02But there are certain things I don't want to pay for anymore. Like there are certain parts of the deal, et cetera, that I just, marking up NDAs, whatever it is, I don't want to pay for that anymore. But there's all these new things that I'm paying law firms for. AI risk, like should you buy this company? Is there a problem in XYZ country with an act or something like that that's going to change it? There's so many new pieces of work for professional services that my gut is that's not what's going to happen. In fact, I think what's going to happen is the professional services market is going to actually keep growing at the same as GDP.

41:36One way to think about this is most professional services is cyclical. So if you have a really good year, professional services have a really good year. That's almost always how it works. Other than bankruptcy and litigation is somewhat countercyclical, it depends on the area. And so I think people think about this and they're like, oh, wow, AI is going to impact legal and it's going to just destroy all these jobs. The thing they aren't thinking about is all of their customers are using AI to create more products. What happens when you create more products? You need more product to legal advice.

42:06What happens when you're expanding into other countries faster? What do you need? Regulatory advice, right? And so I think people are thinking about AI in all of these industries as like a vacuum. And the reality is you should think about AI as like the entire economy what's going to happen. And probably what's going to happen is the economy is going to explode. These companies are going to have crazy expectations for what they can do. And the professional service providers are going to have to respond to that. Do you think the economy is going to, I can't believe I'm asking this question because it feels like the most base question that shit interviewers ask, but maybe I'm just a shit interviewer at this stage, to be honest.

42:39Do you think the economy is going to continue to explode? We have so much external concern outside of the Xphere, which says like, hey, the circular deals are fucking nuts. US borrowing has never been higher. Europe is a fucking museum that is completely unproductive. beautiful. We are going to have a serious and material slowdown. Do you think that's wrong? I don't think it'll be this year. I think there will be bumps. I definitely think we will have more moments like the deep seek moment where everyone freaks out. And I think we're close enough to an edge of... If enough people say that there's going to be a bust, it's pretty easy for one thing to happen and for everyone to freak out and there to be a bust and it's a self-fulfilling prophecy, those are usually pretty short.

43:21I think that we will have a bunch of short ones, but I think long-term AI is going to completely reshape every part of the economy. I very strongly believe that. I do have to, as you mentioned Europe, and we spoke a little bit about Europe's productivity there. You said you wish you'd been more proactive earlier on Europe, but there's only so much you can do, blah, blah, blah. What do you know now about building teams in Europe that you wish you'd known when you started? Oh, I think that it's similar in Europe to where it is in a lot of places, which is you don't want to go into a country or a domain or anything like that and act like you know how to do something, right?

43:56Like you really need to partner with an industry or you need to partner with a geography, right? And when I say, you know, we should have invested more in that, it's more like we didn't invest in it that much in 2023 and 2024. We invested tons last year. And we're investing even more this year. And the difference is pretty massive. The difference in kind of the quality of our team last year and the partnerships and things like that and how our product is localized for each geo is just a huge difference. But you can't do this from sitting in San Francisco and like kind of thinking about how to do it.

44:33You've got to travel. What's the biggest difference in talent between the US and Europe? It's not a difference in talent. It just takes a long time to hire people. And so you have to just think about it like with a way, way longer time horizon. Because of gardening leave. Yeah, it's just like really hard to hire people. And so that was just kind of like interesting to me or something that I wasn't used to. Whereas in the States, you can hire someone and they start quite literally like the next day sometimes, like literally. Or if they have to give two weeks notice, they start exactly two weeks later.

45:04That allows you to be a little bit more just, I quickly need to hire this. Retroactively, I can fix a problem. In Europe, you have to plan out more. And so we've done a lot of really big office openings, like we just announced Paris and Dublin and a bunch of other ones. But you have to just think about this stuff at like a longer time horizon. You can't do it instantaneously. Is the U.S. trope of Europeans not working as hard fair? That's not what I've found. But I will say I interact mostly with lawyers. And lawyers have billable hour targets. And at the end of the day, too, they are either at international firms or they're competing against international firms.

45:42So I have not found that at all. Right. I mean, there are so many incredible hardworking lawyers. UK lawyers work pretty hard. UK lawyers work insanely hard. And so it might be that I don't notice it as much because the domain that we're in, they work the same across the globe. Like lawyers are just incredibly disciplined, hardworking people. I totally get you and agree there. In terms of the people assessment, Pat told me that you're world-class at understanding people. If I were to ask you for a trait that you look for in someone joining Harvey that is less obvious than the foundational integrity or ambition that you normally get.

46:19I look for obsessed psychopaths. That's a good one. You definitely need to be obsessed. What would yours be? So obsession is definitely very important. But the one that I look for right now a lot is ownership. And there's a bunch of different ways that you can assess this. But you do, over time, you start to be able to just read if someone actually can take ownership over something or not. And the reason this becomes really important is as you scale as a company, it becomes really hard to figure out where a problem is stemming from. It becomes hard. This is how this ends up going. It used to be I knew every single thing that was going on at a company, and I can just be like, hey, that's where the problem is.

46:56I'm going to unblock that, right? Now we're getting to the point where I know most of what's going on at the company. but sometimes something is like so low down that I don't know what the problem is. And if I ask five people, they'll all do this. It's like the Spider-Man. That's like bad deals in venture firms. Who did the deal? Yeah, it's just like all over the place. Yeah, exactly, right? It was Johnny who left. It was Johnny and I don't know. And I have found that there are a lot of people in tech that have done a really good job managing up. They have ridden a wave of their team success without being successful themselves.

47:26So the thing that I look for a lot is can people admit their mistakes? It is so obvious when someone is actually admitting mistakes versus they're saying that one of the biggest things they've done wrong is actually like something that's really great. We'll go back to something you said earlier. Like when you said some of the things are bad habits that you're trying to get out. Well, I mean, yeah, yeah. And you said like checking slack too much. Right, right. And like that, I think, is a good example of like - I was thinking like alcoholism, bulimia. Alcoholism or something like that. Yeah, totally.

47:55This dude is too good. And like I would actually, if I had interviewed myself and I saw that as like the way that I answered, the way that I would push on this is I would say, why do you do that? Like, why do you do that? And my genuine answer to that would be I have trust issues. Like I have trust issues. Like it is hard for me to trust that somebody else is going to handle that problem. And now all of a sudden it actually is ownership. That is like an actual problem of being a leader. Like you cannot scale a really good company and get to tens of billions of revenue if you have constant trust issues and you can't trust other leadership.

48:32Where do you think that comes from? I have trust issues because I've found that generally when relationships break down, it always comes down to them extorting me for money. Great. It's true. Yeah. I think my trust issues, I mean, I think part of, you know, part stuff is it's hard to tell whether it's like nature or nurture, right? But I think that I definitely had some problems with authority when I was younger and I had not the normal Silicon Valley kind of background and upbringing. And because of that, I think that I really went out on my own at a pretty young age and was pretty independent.

49:04One thing that you have to learn when you're leading a company is you are a leader and you are a partner to the rest of your team. It is not just you. I am not Harvey. Harvey is not me. It is a group of people that are building this company. And I think that sometimes what founders can end up doing is they can start basically saying like, I want to be the number one. I think of this as like a sports team. There are people I know that they don't care about winning the championship. They want to be the person who scored the most points. And they're okay with losing the championship as long as they're the one that scores the most points.

49:40Those are the exact type of people that I do not want to work with. I want to work with people that do care about how many points they've scored, but they care about that because they helped win the game, right? And I think that's a huge problem in tech is we have too many people that it's me, me, me, me, me, and not company, company, company. I think the US is just full of logo chases. There's a lot of that. You guys just love to like work at a hot company. It's the hot company bouncer, I call it, where it's like they just go two year, two year, two year, two year. And it's like they're doing venture portfolios with like company equity.

50:12And it's just like, God. I was about to say VC's the same thing. And I sit in these operator groups and they're like, ooh, I hear clay's really hot. Ooh, I hear like Notion's really hot. And they just jump. Yeah. I mean, I think VC - The promiscuity of American operators is incredible. It is the same thing. But like, look at - Brits are too negative. We're like, that's crap. This also, I forgot who tweeted this. I don't remember who it was, but this was like end of 2022. And it was like right after the ChatGPT launch. And someone, I forget which VC did this. So sorry for not giving credit to them.

50:42But they basically tweeted, my prediction is what's going to happen is a lot of VCs, because they don't understand the AI ecosystem, they're going to revert back to looking at resumes because they don't understand. And this is what people do. When there are situations of chaos and folks don't know what's going on, the safest thing is to go look at other social signals to make decisions instead of using your own gut. And so I think that that's happening a lot in AI. And hopefully, you know, as the markets, you know, mature, this stops happening. But there's a lot of, I don't really understand this.

51:19And so what I'm going to do is look at the resume or look at a logo or look at that, because that seems like a safe bet. How many truly great researchers do you think there are? Hundreds. And that's it. How do you know a good researcher from a resume? I don't think you can. That I think is actually a pretty big disconnect. The researcher community knows. So this is a huge disconnect between VCs, I think, and the researcher community. So what would you advise me investing? What I would do is you can use the researchers to pinpoint who is the best researcher. So in other words, if you ask a bunch of the researchers, not other VCs, ask a bunch of the researchers, who do they respect the most?

51:57They have such a tight-knit community, and it's all merit-based. I'll tell you a group of people who do not manage up. AI researchers. That is not what they do at all. for better or for worse. And because of that, if you ask that community who are the best folks, they will triangulate for you and they will help you find. And usually it's not the loudest. They aren't necessarily the most famous, et cetera. It's not like that. How do you assess the promiscuity of AI researchers? I mean, poor old thinking machines. How do you assess that? Is that just a sign of the very brilliant times? Yeah, I think there's a combination of things.

52:34I think the reality is what researchers care the most about is working on really hard and interesting problems. And I don't say that as like bullshit. Like I think that there sometimes like to your point of like people just want to join hot companies, like a lot of tech I think is like people just want to join hot companies, right? Researchers really genuinely do care about pushing research forward. And I think what ends up happening sometimes is the leaders at some of these companies kind of change the direction of the company, and the researchers are no longer interested in that direction of the company.

53:07And that happens a lot at these big labs. Like, they're making multiple bets at multiple places, and what ends up happening is the people say, ah, this isn't what I signed up for. It's kind of like a bait and switch, and they go to something else. And by the way, this has nothing to do with thinking machines. I'm just saying this is what's happening, I think, at all of these labs is, you go to work at Meta, you go to work at OpenAI, you go to work at Anthropic, and you think you're going to work on something, and then you end up not. And, you know, they're in insanely high demand. They're able to pick what projects they want to go work on.

53:38How bad is the war for talent? You're in the midst of it. Yeah, it's incredibly, it's very, very high. And one thing maybe to bring up is, I think that over time, we have this interesting thing where it's like a lot of the AI companies, like application layer companies, including ourselves. Like in the beginning, we're like rappers, right? And what's going to happen over time is these companies are going to do two things. One, a lot of just the core software that they build, it's not even going to be AI related. It's just core software building. And that's actually going to be very differentiated.

54:11The second thing that's going to happen is none of these companies have access to proprietary data until very recently. And so a lot of the stuff that we're looking at is how do you actually create custom solutions for a large enterprise? And that is AI problems again, right? So now we're all the way back to AI actually mattering. And I think that what we're going to see is that kind of main problem of a lot of these companies haven't hired any AI talent. And a lot of what they've done is kind of, you know, the model is basically the entire product. And as these companies scale and they have to create more differentiated products, I think having AI talent is going to matter again.

54:52And we're just getting, just now, getting to the size of the company where we can hire the people that we need to kind of do a lot of that frontier work. We said about the skill of people assessment in terms of the talent there. We said about your lack of trust and trust issues, which was another one that I think it was Pat told me. I put one of your investors, but I'm going to throw him under the bus. I think it was Pat. Perfect. Great. Sorry, Pat. Pat did also say that you're an excellent deal guy. And I wanted to unpack that. What's your biggest advice on how to get the best deal? Maybe two pieces of advice.

55:23One is listen more than you speak. And it's very, very dumb, but it's true. I think a lot of people in deals, they think that movement is action. So they think that movement is progressing the deal forward. And they think that if they talk the most, they're in control of the deal. Not true. In the same way that in conversations, just because someone isn't participating in that conversation doesn't mean that they aren't listening. It doesn't mean that they have maybe the upper hand or something like that, right? And so I think listening is really important. And I see a lot of folks think of dealmaking as like chest forward.

55:55And if I'm the loudest and I'm saying the most, the reality is like all dealmaking is just people reading. That's it. And it's people reading at scale. So it's people reading like a one-on-one conversation, and then it's reading groups of people, and then it's reading entire verticals of people, et cetera, and it's figuring out what they want. The second piece is know when to not negotiate. This, I think, is actually really, really important, and the best deal makers I know are very good at this, which is there are certain deals where you want one thing from the deal and nothing else matters. This only works when you understand the value of something more than everyone else does.

56:36And if you understand the value of something more than everyone else does, throw all of your principal deal-making and you're supposed to negotiate X and then Y and then it'll be 50 % in between and all of that. That's all bullshit. Throw that aside and get the thing that you know is more valuable than anybody else does done. The best dealmakers I know, like the best, they know that very well. When did you understand the value more than everyone else? And how did that shape how you behaved? There's just certain deals that we've struck where I wanted one thing in the deal. And maybe the financial part of the deal or something else about the deal, like my CFO or my VCs were like, oh my God, don't agree to that.

57:16Like do XYZ. And I knew that if we signed it and we got the particular thing that I wanted from that deal, it would help our company to such a degree that it would help close another deal or it helped do something else. Like a lot of what you're doing, I think like the very good deal makers, and I think Sam Altman is incredible at this, is you're holding multiple ropes. And you can kind of think of it as like, you have like 17 ropes in this hand, you have 17 ropes in this hand, you're grabbing all these ropes. And at some point you're going to get like pulled apart because it's just too much pressure and you're going to lose, right?

57:49And what you do is you get good at tying off one of the ropes. and then that pressure is gone and you have one tied. And then you tie another one and you tie another one and you tie another one. And tying those ropes allows you to pull more ropes. And like, that's a lot of how I think about deal-making. I think another company that has done an incredible job of this is Microsoft. Incredible job. They've created this partnership ecosystem, right? A lot of people have given them a lot of flack of like, why do you let people do XYZ partnership? Why do you let people build on this? Like, they're just gonna take it.

58:21And it's very clear that Microsoft has actually won in a lot of areas because they've decided to partner with kind of everyone instead of saying, ah, no, brass tacks, we're going to be very tough on this. I think one actually also is always when you hire people and they say that they want 75 grand. And then so often I meet founders and I'm like, ha, but I got them down to 70. And I'm like, give them 75. They won, they start, they feel valued. With hiring, this is a huge mistake that people make, massive mistake. If you want to hire somebody, hire them, whatever they want to be hired, and put them in the position that they want.

58:57If they're best in class, if you can't tell if they're best in class, it's a separate problem, but don't go back and forth. It doesn't matter. One of the most valuable bits of advice Josh Kushner actually gave me, I love him, is he said, and this was on a specific investments, if you're willing to take less, don't do the deal. Imagine I'm a VC and it's like, I want 10 % and you're like, I can only give you seven. I'm like, I'm actually fine with seven. Well, then you don't believe in that company. That's not going to be a legendary category defining company. 100%. It won't be. It's impossible.

59:24You said about people and kind of reading people in a deal. When did you most misread someone and how did that shape your mindset? I think one of the things that I've done wrong in the past is I think that I have thought that someone couldn't scale because they have bad communication skills. and I've misread that. And then I didn't realize how easy it would be for them to learn how to do it. I think that sometimes because I feel like I do a lot of in-person interviews and a lot of those things, that sometimes I also end up making the mistake of reading too much on the surface and not going deep enough.

1:00:05I think I've gotten better at it, but that's one of the things that I've done with hiring is I've fallen for the resume trap too. Like I've definitely fallen for it. And I think that's a huge mistake. You mentioned OpenAI and Sam as the deal maker as well with this. Very good. I liked it. I heard that you cold called Sam in the summer of 2022. Can you just tell me about that before we do a quick one? Yeah. So it wasn't a cold call. We cold emailed them. And we cold emailed Sam and Jason Kwan. What we had basically done was we went on r slash legal advice, which is basically like a subreddit for asking legal questions.

1:00:38and we grabbed a bunch of those questions, ran a chain of thought product that we had basically built on top of it and gave it to a bunch of landlord attorneys. And then we basically said, just like, look at these questions and tell me if you would send the answer. We didn't say anything about AI to the consumer who asked the question. And of 86 out of 100 questions, three out of three said, this is a perfect answer. I'm done. And we cobbled all that together and we just sent a cold email to Sam Altman and Jason Kwan. The idea was basically, hey, hey, did you guys know that, you know, at this point it was GPT-3 and just the API was public.

1:01:12I think the end of 2021 or beginning of 2022, they had an API. Did you know it was this good at legal? That was it. That was basically the subject line of the email was like, did you know it was this good at legal? And we met them like pretty recently after that. How did that go? It went well. We had a call with Jason first and just kind of talked about like, what is our strategy as a company and what would we build? And then we had a final pitch to kind of the rest of the OpenAI C-suite, actually the morning of July 4th, 2022. too. Yeah, it was like 11 a.m. on July 4th and we did a pitch to the rest of the company.

1:01:41Do you get nervous for these? Like when you go into a Sequoia and you pitch the partnership? Yes. I had a weird thing where like I didn't know who any of these guys were. And so like when we were doing our series. So it's so funny because like you don't know. And like for me as a venture nerd, I'm like, holy shit. Yeah, you're like everything about every one of them. I mean, like now I do. But back then I didn't know anything. I didn't even have friends in tech. And so when we did, we did our seed and we didn't go to anybody else. It was just OpenAI. And then for our Series A, we did like - How much did they invest and for how much?

1:02:13I don't remember what the post actually was, but the pre-investment was like, it was like 4 million or something like that. And anyway, what happened at the Series A was we went and met with basically like, I think it was like 10 VCs or something like that in like 48 hours, right? And I quite literally did not know who the VCs were. Like, I didn't know. Like, my co-founder was from tech and he like knew and he basically gave me advice and things like that. So I actually think I had like a weirdly unique view of the VCs because my entire judgment of them was just how that first meeting went. Like, I didn't know that like Sequoia was in this tier and this one was in this tier and, you know, whatever.

1:02:54I didn't know any of that. I didn't even know who they were. 10 VC meetings. How many term sheets did you get? I think like half or something like that. Yeah. Which was the worst? The worst term sheet or the worst meeting? Worst meeting. Oh, I'm not going to say that publicly. It's worth a go. There was one. There was one. Why was it bad? Just tell me that. Yeah. So there was one where the person was quite literally on their phone. It was a Zoom and they were on the phone the entire time during the pitch. Did not even make eye contact. Literally zero. They were just taking notes. Yeah. No, I think they were texting a friend.

1:03:26Can't believe this knob is still talking about legal. Yeah, I was just like, what are we doing here? That was the worst one. That is absolutely amazing. Listen, I want to move into a quick fire round. What have you changed your mind on in the last 12 months? So I said earlier that a lot of company building has changed. I actually think a lot of it remains the same. And so there's a lot of kind of just like core first principles of scaling a company that I am much more focused on that I wasn't focused on in the beginning. I'll give you the dumbest example ever. For the first like two years of the company, when I was doing like revenue projections, I never, and this is embarrassing, really embarrassing.

1:04:02I never was like, huh, if I want to hit this amount of net new ARR, you need to hire this many AEs at this quota. And this is how long it takes to ramp them. So you need to have hired them at this point before you do that. I'm dead serious. Like I never even thought about that. Right. And it's these really core like laws of physics about companies that remains the same. Like there's no different in AI. And I think like in the past, maybe what have I learned in the past 12 months? Maybe it's more what have I learned in the past like 18, like the second half of the company basically, is how much of a lot of the company building is actually the same.

1:04:39And I probably should have listened to people a little bit more about that. You have Sequoia and Andreessen on the cap table. Yeah. How are they different to work with? I'm not asking for better or worse, but how are they different to work with? Yeah, I think that there's obviously like a difference in scale, right? Like A16Z is just like a lot bigger. I would say that A16Z is also like louder. And so they're a little bit more in like these other regions and other areas and things like that. Whereas Sequoia is, you know, it's just a different style, right? It's closer to, there aren't as many partners and things like that.

1:05:11Were you nervous pitching to Mark and Ben? You knew them coming in. Yeah, definitely. Yeah, definitely. I mean, I'm always nervous. And I think like one thing too, I think I said this earlier, but I think Keith Rebois says this, who I've actually never met in person. There's a couple people. I have a list actually at the top of like my doc. I have like an operating doc and I have a list of people and they all have like two words next to them. And it's like the thing that I've like learned from them or something like that. One of the things I think he was talking about at some point is like how important it is that you should be constantly stressed, like constantly stressed and do things that make you stressed every day.

1:05:45I strongly agree with that. Like really agree with that. Like I think the times that I've stagnated or the company has stagnated is every day. I don't have something that's like really stressful. The weeks that I do the best work or feel like I did the best work is every single like night before I go to bed, I'm like, oh shit. Like I have, like tomorrow is going to be, there's so many things, everything needs to go right. I'm really stressed, it's compounding, like massively compounding for you as an individual to just put yourself through that stress. I freaking love it. Pat tweeted like, hey, if you are like ambitious and you want to learn about working in AI applications, there's no better place to work than Harvey.

1:06:25Keith Raboy. My point is that dude, I love the way like you didn't see that, but like all VCs are just like, no. Yeah. I mean, but it's interesting. I think Pat also has this too, and all of my VCs do. And in particular, he really thinks of just constant, relentless application of force is what he says. And that's actually what I have next to his name. That's incredibly important. And I think that if you lose that as a company, the company is pretty much over. I think that you as a founder need to constantly, constantly be applying force. And it starts with applying force to yourself. And if you aren't applying force to yourself, you don't have that ownership mentality and you'll start to get weak.

1:07:09And I think that will trickle down to the rest of the company. A couple of other people on that list. And what do you have next to them? I have Brian Halligan's on there. And his is no. It's just the word no. And one of the things, he's been incredibly influential and helpful to me. And one of the things I had a problem with is just like saying no to things. and it's a huge, huge problem as you scale as a founder of figuring out an ability to actually block off time for yourself and to say, no, this is my priority. I'm saying no to everything else, right? And it's the same with, this is also probably one of the main things that hopefully I've improved on product is I used to every quarter just be like, and there's a P0 and then also there's a P0, 0 and then there's this and this and this, right?

1:07:55And I've started to be a lot more disciplined and try to be disciplined with my team of like every time that we do product planning, something should hurt. It should feel like a breakup. Like you are, you have to, there's has to be a couple of really good ideas that you say no to. And it's the same as across the entire company. And Brian Halligan has been really helpful with kind of teaching me how to do that for myself and how to do it with the rest of the company. I always go to the Johnny Ive, which is like, you know, prioritization is saying no to even really good ideas. Yeah, yeah, yeah. No, I think that's right.

1:08:25It should feel painful. It really should. And I didn't do that in the beginning. I was like, oh, we'll just do everything, whatever. And I think, having said that, I do think you can do more. And I think you can be very ambitious. But you do have to strike a balance between the two. Who do you not have on your board who you'd love to have on the board? I've always respected Founders Fund. Like, I've always really, really respected them. I've respected the hell out of their companies, too, and a lot of their founders. I respect them a lot. And we haven't ever worked with them. In a year's time, where is Harvey then?

1:08:53You did this great tweet yesterday, and it was like$190 million an hour. oh, I can't remember the customer base and I can't remember the other stats. It's all good. Such a VC. It's like revenue number. Great, that's the take. What does that tweet say in 12 months? I mean, we obviously have revenue targets and things like that. But what I want to switch from is a productivity software that is like a nice to have to closer to like an operating system that is like pretty much crucial to the industry. And so it's more how do we, how do we, we built a lot of different like features across the board, right?

1:09:25Like we very much like in Parker Conrad's voice, like built a compound startup, like very much. We haven't tied it all together yet. We've done a really good job of creating all the pieces, hasn't tied together. Maybe an interesting stat on this is our DAU over MAU for people that use four plus product lines is 74%. That's like Slack level, right? Slack was like 80 or something like that. It's incredibly high. The percentage of people that have used four plus products is very low. And it's doubling every quarter. but what I really want to care about next year is can we make this like infrastructure?

1:10:00Can we make it so it is like this is a core piece of a lawyer's work and day and they live in it? It's a move from product to platform. It's 100 % that and I think we've done a good job of creating all the features but now I want to combine all of them together so we can get to that 75 % DAU over MAU. That is how you really show that you've created something that's integral to the industry. Dude, it's such a pleasure to have you on the show. Thank you so much for doing it in person. and it makes such a difference and you've been incredibly amenable to my pressing. Well, thank you so much for having me, man.

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