Greylock's Service-Oriented Ethos Drives Enduring Success - Episode Hero Image

Greylock's Service-Oriented Ethos Drives Enduring Success

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TL;DR

  • Greylock's enduring success stems from a persistent service-oriented ethos, prioritizing founder support over firm self-promotion, which has guided its evolution through diverse market cycles.
  • The firm's apprenticeship model, immersing junior partners in all aspects of deal-making and portfolio management, accelerates development and fosters deep, long-term relationships.
  • Greylock actively cultivates a flywheel effect by nurturing founder relationships, leading to repeat investments and a continuous pipeline of new ventures originating from its ecosystem.
  • A deliberate focus on "market makers" rather than "market takers" allows Greylock to generate alpha by identifying and constructing proprietary opportunities at both early and late stages.
  • The firm's "input-based" performance management system emphasizes consistent execution of core activities, enabling long-term conviction in partners despite short-term output variability.
  • Greylock's approach to company initiation prioritizes founders with strong execution capabilities in markets with low inherent risk, mitigating market uncertainty.
  • The firm's specialist teams, deeply integrated into partner meetings and decision-making, provide critical support to early-stage companies, acting as an "Iron Man suit" for founders.

Deep Dive

Greylock Partners has endured for 60 years by combining persistent core values with continuous reinvention, positioning itself as a service-oriented firm dedicated to supporting entrepreneurs. This enduring ethos, centered on being a supportive partner rather than a star, allows Greylock to navigate evolving market dynamics and maintain its relevance.

The firm's success is built on several durable pillars. Firstly, its foundational ethos of serving entrepreneurs, exemplified by the "best supporting actor" mentality towards founders, has remained constant. This people-oriented approach, prioritizing the entrepreneur's success, guides its operations. Secondly, Greylock's brand, built over decades through successful investments, accrues credibility that benefits new portfolio companies. This flywheel effect, where early successes build trust with customers and engineers, reinforces the firm's reputation. Finally, the firm's network, encompassing industry connections and limited partner relationships, compounds over time, creating a distinct advantage. Greylock actively cultivates this network, not just through direct investments but also by fostering relationships with individuals who may later found companies or join portfolio firms. This deep, intimate engagement allows the firm to identify and support promising ventures from their earliest stages, often before market validation is apparent.

A critical aspect of Greylock's strategy is its "apprenticeship model" for talent development. By immersing junior partners in every facet of the investment process, from board meetings to executive interviews, the firm ensures deep learning and rapid development. This is supported by a performance management system focused on "inputs" -- measurable activities and behaviors like market coverage, responsiveness, and domain leadership -- rather than solely on short-term outputs, which can be influenced by luck. This input-based approach incentivizes long-term, causally impactful work, aligning partner incentives with founder success and mitigating the principal-agent problems that plague other firms. This focus on deep partnership and internal development allows Greylock to maintain a concentrated portfolio, prioritizing meaningful engagement with a select group of companies, rather than pursuing a broad, transactional strategy.

Action Items

  • Develop input-based performance management system: Define 18 measurable inputs across "see, decide, win, build, and internal partnership" dimensions for evaluating partner effectiveness.
  • Create a "prepared mind" framework: Document 5-10 key market sectors, identify 3-5 admired competitor firms per sector, and track their financings weekly to ensure market visibility.
  • Implement a founder-centric service model: Train all partners to prioritize entrepreneurial needs, measuring impact through metrics like engineer placements (e.g., 19 placed at Resolve in 14 months).
  • Audit early-stage investment criteria: For 3-5 new investments, explicitly assess market risk versus execution risk, prioritizing opportunities with zero market risk.
  • Establish a "serendipity" initiative: Schedule 1-2 out-of-network founder meetings monthly and attend 1 industry event weekly to counteract insularity and maintain a beginner's mind.

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Key Quotes

"Greylock started as an east coast firm uh it actually moved to the west coast in the 2000s and it's gone through generations of of partners and generations of investing and one of the things that's interesting about the firm is like we've navigated completely different sectors so like if you rewind by the way it's interesting we have some of the original partner group is still alive wow and comes to our limited partner meetings and they're 90 in their 90s yeah and so i talked to them about like how was venture in the 60s and the 70s"

Saam Motamedi explains that Greylock has a long history, dating back to 1965, and has successfully adapted by navigating through vastly different investment sectors over the decades. This adaptability, even involving partners from its earliest days, highlights the firm's resilience and capacity for evolution.

"I think the number one thing is just the core values and ethos of the firm right and this is a firm that was founded on a service mindset actually like there's this really interesting letter one of the original partners wrote to the partnership that i found like a few years ago and i read it and he was i think he wrote it as he was like leaving you know and sort of graduating it was sort of a reminder to the partners of what the core ethos of greylock is and in it there's a line i love which is that the ambition of every greylock partner should be to win the oscar for the best supporting actor to the entrepreneur"

Saam Motamedi emphasizes that Greylock's enduring success is rooted in its core values and ethos, particularly its service-oriented mindset towards entrepreneurs. He illustrates this with a quote about partners aiming to be the "best supporting actor" to the entrepreneur, underscoring a commitment to supporting founders rather than seeking the spotlight.

"I think one of the core things that's unique about our talent model is we're a very sort of apprenticeship focused talent model and by the way if you rewind the clock and i think this is true for most of venture or it was certainly true of greylock like you go back to the original generations people joined greylock in like their mid 20s to mid 30s and they built their entire careers at the firm and there were many people who had multi decade tenures at greylock right and then i think what happened as venture evolved is like in the early 2000s there was a shift towards hiring people who were much more senior came out of really rich operating backgrounds"

Saam Motamedi describes Greylock's distinctive talent development approach as an apprenticeship model, contrasting it with a more recent industry trend of hiring senior operators. He notes that historically, individuals joined Greylock young and built long careers, and while the firm now incorporates experienced operators, its core strategy involves deeply developing talent from within.

"And so we do believe there's some size limit of which like that conversation begins to degrade now whether that's eight 10 12 13 like we could debate that but it's sort of in that range right and so i think it's hard to consistently make very good decisions when groups get beyond that in size you also have this dynamic where it's easy to hide like you don't want to allow low performers when it's big when it's big you know because like when it's small like at the extreme if it's just you and i like you're going to know if i'm carrying my weight or not"

Saam Motamedi articulates a belief that there is an optimal size for a venture partnership to maintain effective decision-making and accountability. He suggests that larger groups can lead to degraded conversations and make it easier for underperformers to go unnoticed, contrasting this with smaller teams where individual contributions are more transparent.

"And so for example like um and i don't want to create a commercial for our our uh our specialist team although i'd be happy to if if you let's just post this yeah yeah but like the level of like we measure the impact just like we measure the inputs we measure the impact very quantitatively by the way we measure things like how many engineers did we place at at our portfolio companies like we backed resolve when it got started last year and in the last 14 months we've been in business with them we've placed 19 engineers"

Saam Motamedi highlights Greylock's "specialist teams" as a key differentiator in their portfolio services, emphasizing that their impact is quantitatively measured. He uses the example of placing 19 engineers at a portfolio company called Resolve within 14 months to illustrate the tangible value and integration of these specialists into the firm's support for its companies.

"And so i think the largest outcomes in enterprise software have been horizontal a framing that ashim often uses internally that i really like and it's very simplistic is the following i think there's like 1 4 1 5 trillion of it spend worldwide okay there's 22 000 companies in the world that make north of a billion in rev okay those 22 000 companies control like 93 of it spend if you look at the biggest businesses in the world that are software businesses they have built products that could be consumed by most of those 22 000 workday service now salesforce palo alto networks crowdstrike microsoft 365 and microsoft's business right it's horizontal enterprise software"

Saam Motamedi argues that historically, the largest successes in enterprise software have been horizontal in nature, meaning they serve a broad range of companies across industries. He supports this by pointing to major software companies like Workday, Salesforce, and Microsoft, whose products are widely adopted by a vast number of large businesses.

Resources

External Resources

Books

  • "The Great Gatsby" by F. Scott Fitzgerald - Mentioned as an example of a book that has endured over time.

Articles & Papers

  • "100x ARR multiples are not actually expensive" (Unspecified Publication) - Discussed as an example of a piece that argued for high multiples based on projected growth, which proved to be a flawed assumption in the 2021 market.

People

  • Aniel - Mentioned as a co-founder of Workday and a former partner at Greylock.
  • Asim - Mentioned as a partner at Greylock who wrote the first check for Palo Alto Networks and served on its board for 18 years.
  • Benit - Mentioned as an early employee at Abnormal Security who later co-founded a new company with Greylock's support.
  • Brett - Mentioned as a friend in the venture capital space who pushes for ambition.
  • Charlie Munger - Mentioned for his advice on focusing on a few important things and studying rather than constantly talking.
  • Dave Doffield - Mentioned as a co-founder of Workday.
  • Evan Reiser - Mentioned as an initial product manager at Teleport who later co-founded Abnormal AI.
  • Greg Rosen - Mentioned as a friend in the venture capital space who pushes for ambition and was a guest on the podcast.
  • Jack Altman - Mentioned as the host of the podcast "Uncapped" and founder of Altcap.
  • Jerry - Mentioned as a partner at Greylock with significant operating tenure.
  • Josh McFarland - Mentioned as a former product manager at Google who started the company Teleport at Greylock.
  • Karen - Mentioned as an individual who helped build the Greylock Edge program and got married.
  • Kevin Kwok - Mentioned for providing an analogy about the "capital river" in venture capital.
  • Nicole - Mentioned as an early employee at Abnormal Security who later co-founded a new company with Greylock's support.
  • Nir Zuk - Mentioned as the founder of Palo Alto Networks.
  • Reed Hoffman - Mentioned as a venture capitalist with significant operating tenure before joining Greylock.
  • Sam Motamedi - Mentioned as a General Partner at Greylock Partners and the guest on the podcast episode.
  • Sanjay - Mentioned as a founding engineer at Teleport who later co-founded Abnormal AI.
  • Thanos Laskaris - Mentioned as an initial product manager at Teleport.
  • Wade Chambers - Mentioned as a former head of engineering at Twitter who became an EIR at Greylock.

Organizations & Institutions

  • Abnormal AI - Mentioned as a company incubated by Greylock, focused on email security.
  • Abnormal Security - Mentioned as a multi-billion dollar email security company where Greylock was a founding investor.
  • Altcap - Mentioned as the company founded by Jack Altman.
  • AWS - Mentioned in the context of the AWS re:Invent conference.
  • Braintrust - Mentioned as a portfolio company of Saam Motamedi.
  • Comcast - Mentioned as a company that Continental Cablevision eventually became part of.
  • Continental Cablevision - Mentioned as one of Greylock's first large successes, underpinning cable in the US.
  • Cogent - Mentioned as a new company co-founded by former Abnormal Security employees.
  • Cresta - Mentioned as a generative AI platform for contact centers where Saam Motamedi led the Series A.
  • Crowdstrike - Mentioned as a large horizontal enterprise software company.
  • Discord - Mentioned as a company backed by Greylock.
  • Etsy - Mentioned as a company that went public.
  • Fable Security - Mentioned as a new company co-founded by former Abnormal Security employees.
  • Facebook - Mentioned as a company backed by Greylock and in the internet/social network era.
  • Figma - Mentioned as a company backed by Greylock and as a potential early customer for new AI companies.
  • Founders Fund - Mentioned as a firm that is a market maker in late-stage venture rounds.
  • Google - Mentioned as the former employer of Josh McFarland.
  • Greylock Partners - Mentioned as the venture capital firm where Saam Motamedi is a General Partner and the primary subject of discussion.
  • Instagram - Mentioned as a company backed by Greylock.
  • LinkedIn - Mentioned as a company backed by Greylock.
  • Millennium - Mentioned as a company Greylock was an early investor in.
  • Microsoft 365 - Mentioned as a large horizontal enterprise software company.
  • New England Patriots - Mentioned as an example team for performance analysis.
  • NFL (National Football League) - Mentioned as the primary subject of sports discussion.
  • Nile - Mentioned as a company that went public.
  • Notion - Mentioned as a potential early customer for new AI companies.
  • Orb - Mentioned as a portfolio company of Saam Motamedi.
  • Palo Alto Networks - Mentioned as a company started at Greylock and a large horizontal enterprise software company.
  • Pro Football Focus (PFF) - Mentioned as a data source for player grading.
  • Red Hat - Mentioned as the largest open-source software company, invested in by Greylock.
  • Resolve - Mentioned as a portfolio company where Greylock placed 19 engineers in 14 months.
  • Salesforce - Mentioned as a large horizontal enterprise software company and a system of record.
  • ServiceNow - Mentioned as a large horizontal enterprise software company.
  • Slack - Mentioned as a company where Glenn Evans ran recruiting.
  • Snorkel AI - Mentioned as a portfolio company of Saam Motamedi.
  • Stryker - Mentioned as a company Greylock was an early investor in.
  • Sumo Logic - Mentioned as a company that went public, which Greylock helped start.
  • Teleport - Mentioned as an ad tech company started at Greylock by Josh McFarland.
  • The Warriors - Mentioned in the context of attending a game.
  • Tinder - Mentioned as a company that went public.
  • Twitter - Mentioned as the acquirer of a company co-founded by former Teleport employees.
  • Vertex - Mentioned as a company Greylock was an early investor in.
  • Viventures - Mentioned as a venture capital firm.
  • VIVA - Mentioned as an example of a vertical SaaS company that achieved significant success.
  • Workday - Mentioned as a company started at Greylock and a large horizontal enterprise software company.

Websites & Online Resources

  • Greylock Partners Website (https://greylock.com/) - Provided as a resource for more information on Saam Motamedi.
  • X (formerly Twitter) (https://x.com/saammotamedi) - Provided as a resource for more information on Saam Motamedi.
  • X (formerly Twitter) (https://x.com/jaltma) - Provided as a resource for more information on Jack Altman.
  • linktr.ee/uncappedpod - Provided as a resource for the podcast.

Other Resources

  • AI Applications - Mentioned as a sector with significant potential for new companies.
  • Capital River - An analogy used to describe the momentum and funding cycle for successful companies.
  • Carry Business - Refers to the profit share venture capitalists earn from successful investments.
  • Courses & Educational Resources - Not explicitly mentioned.
  • Data Infrastructure - Mentioned as an area of focus for Saam Motamedi.
  • Durable Components to Great Firms - Mentioned as a topic covered in the podcast.
  • Enterprise Software - Mentioned as a sector of focus for Saam Motamedi and Greylock.
  • Fee Business - Refers to revenue generated by venture capital firms through management fees.
  • Founders Fund - Mentioned as a firm that is a market maker in late-stage venture rounds.
  • Generative AI - Mentioned as a key area of focus and transformation.
  • GPLP Relationship - Mentioned as a relationship pioneered by Greylock that underpins venture capital firms.
  • Horizontal SaaS - Discussed as a traditional model for large enterprise software companies.
  • Incubations - Discussed as a difficult but potentially rewarding strategy for venture firms.
  • Intelligent Applications - Mentioned as an area of focus for Saam Motamedi.
  • Investments - The core activity of venture capital firms.
  • Labor Replacement - Discussed as a driver for the growth of vertical SaaS companies.
  • Market Maker - A strategy in venture capital involving creating proprietary opportunities.
  • Market Taker - A strategy in venture capital involving participating in auction processes.
  • Market Risk - Risk associated with the viability and demand for a product or service.
  • New Pricing Model - Mentioned as a factor enabling new disruptive horizontal companies.
  • New Unit of Value for Work - Mentioned as a factor enabling new disruptive horizontal companies.
  • Old School Venture - Described as having more friendship and collaboration than current venture practices.
  • Operating Backgrounds - Mentioned as a common hiring trend in venture capital.
  • Outcome Based Pricing - Mentioned as a new pricing model enabling new disruptive horizontal companies.
  • Palo Alto Networks - Mentioned as a company started at Greylock and a large horizontal enterprise software company.
  • Partnership - The structure of venture capital firms where individuals pool resources.
  • Portfolio Services - Services offered by venture capital firms to support their portfolio companies.
  • Prepared Mind - The state of having deep knowledge in a specific market area.
  • Principal Agent Problem - A conflict of interest where an agent's interests diverge from the principal's.
  • Recruiting - A key portfolio service offered by Greylock.
  • Research & Studies - Not explicitly mentioned.
  • SaaS - Software as a Service, a common business model.
  • Seed and Early Stage Investing - Greylock's focus for enterprise software entrepreneurs.
  • Sector Reviews - Internal Greylock meetings to discuss market trends.
  • Service Mindset - An ethos of prioritizing the needs of entrepreneurs and LPs.
  • Social Engineering Attacks - Mentioned in the context of Abnormal Security's focus.
  • Specialist Teams - Greylock's term for their portfolio support teams.
  • System of Record - A centralized database or platform that stores critical business data.
  • Talent Model - Greylock's approach to hiring and developing employees.
  • Term Sheets - Preliminary agreements outlining the terms of an investment.

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