James Currier, General Partner at NFX

HumanX partnered with Jared S. Taylor of Slice of Technology to produce a podcast interviewing our expert speakers. Enjoy the following transcript of this groundbreaking conversation.

Jared S Taylor: It always seems like your firm is at the forefront of companies that go on to be unicorns, creating substantial impact in the industries that you invest in. When AI became more mainstream over the last two years, what were the initial worries you had about the space and have those worries gone away or been replaced by new ones?

James Currier: I wouldn't say we have any worries. I was there when the internet browser came out in ‘94 and we were there when the mobile phone came out in 2008. We were there in 2009 when crypto came out and we’ve been here since AI first debuted in 2016. These are technological innovations that then provide a substrate to add ecosystem platforms for us to develop all sorts of stuff. And most of the businesses aren't gonna be any good. That was true back in 1994 to 2000, and then the crash came. And we see this over and over again. 

Now, most railroads probably didn't work back in the 1800s. So this is a natural process of it. Our job is to try to invest in the ones that get big and try to avoid the ones that fail. But in general, we're gonna have a lot that fail. Even though we look at 8,000-10,000 companies a year and have a big team, most ideas don't end up working. That doesn't mean the founders are bad. It doesn't mean that the technology is bad or that we should have concerns. It's just that we have to go through that creative process. And we can use some patterns from the past to help us inform what we think might work in the future. 

There's hurdles to overcome, but I’ve worked with founders for companies that grew to be worth more than $10 billion.

Jared S Taylor: One of your colleagues recently wrote about market sizing and how what your company really looks for is a wedge. I would love to dig a little bit deeper into that as it relates to Gen AI. What wedges have you been seeing in terms of market size that are really exciting you?

James Currier: From my perspective, the wedge is about how you peel open the market size, but it isn't the market size. For instance, Facebook used the wedge of college photo sharing to get real identities in a social network. So the TAM, I think, is actually very different from the wedge itself. 

What you're looking for is a combination. You have to have a dialogue between what's the long -term opportunity or the mid -term opportunity and what's the immediate wedge we use to open up these markets. Because if you don't have a good wedge, you don't have a low enough CAC, you don't have enough acceleration to get away from your customer, to get away from your competition, and the incumbents are going to have time to come in and squash you. You have to find enough of a wedge to edge out your competition and also the incumbents who are going to want whatever TAM you find that they hadn't. 

Jared S Taylor: What’s your advice for startups to compete with some of today’s incumbents? Obviously some of these companies are not going to get the immediate traction that they need to warrant an investment from you or get on your radar, right? But that doesn't mean they’ll never garner interest from you or your colleagues. How should startups compete with some of these larger companies in the AI world?

James Currier: From my perspective, the best way to get attention is to break down pre-existing systems. People have their mindsets about how things are supposed to work. For example, within the recruiting space, people may utilize an applicant track system, or ATS, and then try to add in AI to make it process faster. But why don't you just get rid of the ATS altogether? After all, AI should be able to handle every part of the process through email automation. People are not typically willing to think that big, so you need to take that opportunity. Find a way to revolutionize the industry you’re in. 

Another way is to have a business model that breaks its own mold. For instance, instead of selling people software to accomplish something, sell them a service. Say: “I'll do it for you, and it'll come back to you in four hours rather than two weeks”. Break whatever you have been doing in the past and be future-focused. 

One last option is to find customers who are new to the game. You can try to sell something to the old enterprise folks, but what if you actually empowered a new generation of businesses to compete at providing value? They are going to grow up on your software. They are going to use it as their infrastructure and operating system for their business. Put them in business with your software, and you don't have to compete with the incumbents. 

Jared S Taylor: It seems like we're seeing a little bit of a shift towards smaller, more frequent exits in the venture capital space. Do you think we'll continue to see this? Is this going to become more of the norm in the next couple years?

James Currier: Yes. Because we have so many incumbents in the software space, you're going to see either quicker, smaller acquisitions or you're going to see the ones that are intended to get big actually break through and get bigger than we can imagine, because the markets are that much bigger. Thirty years ago, nobody was using software; now everybody's using it. 

We've now emerged into this new vista where the incumbents are in our business. The incumbents of the old world were in concrete, steel, and automobiles, but now they’re in software. That means you're going to have to be much more aggressive, much quicker, and much smaller. But also, when you do break through, your opportunities are that much greater because now you have 4 billion people using software and you can reach them instantly with your product. This industry is always evolving. 

When I got into this business in ‘94, we had 150 general partners in the United States on .nfx .com. There are now 32,000. There are venture capitalists building up profiles and looking to invest, and this is the way founders should look for investors in my opinion. And I think it's only going to grow within the next ten years. I predict there will be 60,000 venture capitalists within the next decade. 

Our surface area of technologies for robotics and climate and bio and crypto and everything else is now much bigger than it was 30 years ago. So we need founders who want to push the envelope as well as investors who can facilitate their business. And with AI touching every industry, as I believe it will, I think we’re going to see businesses flourishing for the next 30 to 40 years. AI is going to be right at the center of our future.

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