Navin Chaddha, managing director of the 55-year-old Silicon Valley Company Mayfield, is betting on the ability to transform people-heavy industries such as consulting, law and accounting. The veteran investor, whose victories include Lyft, Poshmark, and Hashicorp, recently discussed at Techcrunch Strictlyvc -Evening in Menlo Park Why he believes that “AI teammates” can create program-like margins in traditionally labor-intensive sectors, and why startups should target neglected markets instead of competing head-to-head with giants like Accenture- This conversation was edited lightly due to length and clarity.
You think lawyer companies, consulting companies and accounting services collectively a market of $ 5 will be completely reimagined by AI-first companies that operate with similar margins. Prove it. What have you seen beyond PowerPoint -presentations?
I think the benefit of a company that has been trading for over 50 years is that it has seen all the trends, from main frame to minicomputers to computers, to the Internet, to mobile, cloud, social and now this AI -era. The example I would give is in the late 90s, this concept of e-commerce came, which was: if I am a physical business, I cannot survive if I am just brick and mortar; I need to be clicking and mortar. Then outsourcing became a trend, and removal became a great trend. You could not build a software services company without presence in India or one of the emerging markets. The same thing happened with supply chains and manufacturing – China and Taiwan rose. So what is this new era with AI? Clearly, AI is 100X strength, and AI joins people, hopefully to improve them. And I think it is, and it will help Reimagini business.
Many of the repetitive tasks will be done by AI … and there will be two models. One is that you grow organically. The second is that you grow in inorganically. . .
Can you give a specific example of how this will work?
What are the types of things that LLM or AI can do? Well, say I need to carry out Salesforce. Who wants to go do that job? The man will come in and say, ‘I am your client manager. You need to carry out salesforce. ‘It’s the same set of things. Use AI as the horse to do it, and whatever AI can’t do, have the man in the loop.
Now, suddenly, if you start doing such things, you can have less work done by people and more work done by AI, and [customers] Just pay AI when [they] Use it.
And the market [entry] should not be to go after [big consulting and IT companies] Such as Accenture, Infosys, or TCS. Go after the neglected masses. There are 30 million small companies in the United States, and 100 million worldwide that cannot afford to pay for knowledge workers. Provide them service as software. They say, “I need a receptionist. I need a planner. I need someone to build my site …” AI must be used to [create] Initial financial forms, with some people [involvement] for negotiation. You do not compete with the accents of the world. You go after fragmentary markets, where instead of loading for an hour, instead of loading a monthly for an entrepreneur, you charge for an event.
So result-based pricing rather than time-based billing.
This is based on a result, yes. . . Cloud billing is so; Electricity is so. . . If 80% of the work is done by AI, it can have 80% to 90% gross margin. People can still have a margin of 30% to 40%. You could be mixed edges from 60% to 70% and produce 20% to 30% net income. And believe me, most service companies earn money. Technical companies do not. They live in corporate money and then public market money.
You just led the series A for a company called GRUVE A A few weeks ago. It is a launch of AI Tech Consulting. What have you seen in its early customer pilots?
I think the combination of inorganic and organic is happening here. [Gruve was founded by] very successful founders who have previously made two service companies [and] exclaimed, and got them to $ 500 million in revenue each, and $ 50 to $ 100 million in profits. They started -time and said, ‘What do we know? We know security. “So they got a $ 5 -million security consulting company [that offers managed security services]. And they said, “Let’s look at the people. All the growth of this point will happen with AI.” And they raised that from [$5 million in revenue] up to $ 15 [million in revenue] in six months. They literally have an 80% gross margin. It is based on a result. Customers love it. Cisco loves it. They say, “Hey, I’m not hacked. Why do I pay for all these security people?” If you subcontract, [a vendor has traditionally charged] $ 10,000 a month. [Gruve] says, ” [You pay us] Zero. If you hack, if there is an event, if I look at it, then you pay me. ”
Can’t McKinsey like buying these AI skills? They have big companies they don’t want to lose.
Yes, I think what will happen is where the innovator’s dilemma comes. When business software companies that were eternal licensed companies saw SaaS companies appear, they didn’t want to adopt [the model] Because [SaaS companies] Loading companies monthly instead of five years forward. The corporate companies also earned a 20% care fee. It was hard [for them] To remove that drug and say, “Oh, I’ll charge you monthly.” The innovative business model was the key issue. They didn’t do it. So McKinsey and Accenture, with so much blur, they will engage in serving their clients [which is why I advise founders to] Go after the neglected masses. Find out a unique iron market strategy and serve someone they [an Accenture can’t come down market to serve].
But they will also be reinforced. So these small companies that do not compete with them today, mark my words: in 10 years they will compete with them. And those big companies – McKinsey, BCG, Accenture, TCS, Infosys – all have the innovator’s dilemma [and are asking themselves]: When do I do it? [When do I switch to an outcome-based AI model?] Because as a public company, my revenue will go down from predictable income to utility-based revenue.
You carved $ 100 million From your newly revenue funds to dedicate to “AI -sams” past fall. What does a real AI make a team against AI -ilo?
There are many mouthpieces in the industry. First it was co -pilots, then AIs, AI agents, AI -Sam teammates. So Mayfield’s thesis is that AI -a teammate is a digital companion who collaborates with a person on shared goals and achieves better results. The technology on which it could be built could be action technologies or co -pilots. The manifestation of it is, “I’m a teammate of RH. I’m a store -engineering teammate.” The goal is not to replace; The goal is to work together and collaborate together.
When people started talking about teammates and helpers, it sounded a novel, but I wonder if that will look cunning while more people lose their work. Does Silicon Valley have Market problem?
Quite right, and I think we don’t need to sugar it. We have to deal with it without delay. . . Yes, there will be jobs, but people are smart. They are the joker. The horse here is ai. We will reimaginate ourselves. We will reinvent ourselves. Today the focus is to cut costs, but we will find out how to expand our markets, how to increase revenue. This happens with every technological wave that comes. When Microsoft Word came to computers on the desktop, people thought [executive assistants] were out of trade. Then Excel came, and accountants who made calculations – everyone thought they were out of trade. We saw the same thing with Uber and Lyft. People thought taxi drivers would leave. But what happened instead? The markets have increased.
My thesis is, like emerging markets like India, China and Africa never had phones – you couldn’t dig copper, so they went wireless, cellular – this will happen with many markets. AI will do the job where people are not even available to serve that customer. So, long -lasting, I’m very, very bullish. In short, there will be pain, but no pain, no gain.
Speaking of encoding, just announced “VIBE encoding “Agreement centered on a six-month Israeli company, which has just reached 250,000 users a month and $ 200,000 in monthly income. It was purchased by another Israeli company, WIX, for for $ 80 million in money. Does that mathematics make sense for you?
Indeed, these days, no mathematics makes sense. We are in the AI -era. You don’t know what will happen. I’m surprised that with $ 2.4 million in [annual recurring] Revenue they only sold for $ 80 million. I thought there would be $ 800 million, right? [Laughs.] In today’s world, you don’t know. It’s a marketplace.
How do you invest in that market?
This is where the secret recipe comes from people who are proven investors. They cracked the code. It is not science; It is an art. It’s like the 10,000-hour [rule]: The more you practice this, the better you get. And the companies that were about 50 or 60 years old – we saw all kinds of bubbles.
The number-one rule is, has your own North Star. Have discipline and have no Fomo, because Fomo is for sheep. And if you have those two or three things, your own strategy and no fear, [you’ll do well]. Just remember one thing: for people [in this audience] Those who are VCs, we are in the business management of money. We are not about collecting logos. We aim to take small sums and make them bigger.
During this part [of the cycle]a lot of money will be made. But I think 80% of people will lose money. They don’t know what they are doing.
