grexit it behind us some of the biggest successes in tecate it behind some of the biggest successes in tech history. hasventure capital firm backed 170 now public companies, four of them worth more than $10 billion. david c andoday john lily. zee.avid

you really put greylock on the map in silicon valley. how did you do that? david: it was really a partnership effort. in the early 2000, we made a move to say that every partner should have an operating background. that allows us to connect better and help build companies. john, you were the ceo of mozilla. i was doing experiments and playing around the edges at apple. i wouldn't want to work in most firms. i like people who make things. i greylock, everybody -- at greylock, everybody values making things.

emily: you did find facebook and linkedin. you convinced reid hoffman to join the firm. how did you do that? david: we believe that if you come from product and you have that background and have that network, there is an authenticity trade in 2005, when investment, it seemed small. it was just students. it seemed like an insane valuation. people look like that and said i had lost my mind. even partners inside greylock. john: one of the characteristics of our partnership is that we like to disagree. there were some partners saying

that this would ruin the firm. this is a big mistake. do these people still work there? john: some of them do. emily: your behind some of the newer hits. had you fill the shoes of david? john: you don't try. i really believe in kevin. i had enough affinity for the category and product that i really wanted to do it. emily: why didn't read think it would work? -- reid john: i don't know. emily: is there a formula to finding these things? john: airbnb is another

example. david: dialectic combined with respect for each other. if you aren't making some mistakes, you are probably not doing your job. bill gurley has been called "newman." "newman?"r david: there are times when john has no idea what i am talking about and vice versa. if you bring in a fast company you bringe arguing,

in a social networker, it's stressful. hand, do you want to play in the big leagues or not? emily: what's the competition for deals like right now? john: it's intense. at some level, i would say it has never been more competitive. on another level, it's the same five or six firms. there is too much money out there right now. david: i think there is not a lot of fear, just a lot of belief. those are worrisome times and can be dangerous if unchecked. on the other hand, there is only a handful of firms that we find ourselves competing with again and again. there is a sort of boundary to that. john: it's easy to start a

company but it's not easy to get them all the way to the finish line. gurley says we are in a risk bubble. david: i think there is a lot of money and optimism in the system which is causing pricing to be higher and expectations to be higher. i think we are asking to take higher risks probably since 1999 or 2000. i would say that the believe that mobile is a fundamental shift and probably only in the third inning right now, you can see how that is changing the world where businesses that would have been terrible like airbnb now are enabled by mobile in ways that were not possible before. you can also look at public companies right now as a it's not and say,

clear that they are overvalued if you look at their multiples. there are a bunch of mixed signals that lead to an environment where risk is mispriced for us. use the termyou bubble? john: we talk about prices being expensive but we make our decisions based on the entrepreneurs. as long as we are out finding the opportunities, yes. the prices we are paying are higher, but we are finding great entrepreneurs. we are trying to find companies that are worth 10 billions or more. it is a really matter if you are doesn't reallyt matter if you are overpaying in the early stages. emily: why take on the risk? companies have huge bank

accounts because they have been able to raise at such non-diluted levels and bring in a lot of capital. it's almost unprecedented. that's the opportunity for those companies to build real businesses within those lack of capital constraints, but it is also the risk. -- thatpoint, those music stops and you are either sitting down or not. new: i think there is a gold to be built and another microsoft to be built. there are some companies that feel expensive that will turn out to be cheap. some things are wildly overpriced. some things feel wildly overpriced and look the opposite in retrospect. david: hours are all priced exactly right. dropbox for example, you guys invested in it but you didn't get a board fee. why? hn: we were a wildly expensive

b round. but it will turned out to be a pretty good bargain for us because they were writing a very large wave. emily: how do you protect yourself as investors? david: we don't tend to use financial engineering. we don't have liquidation in a most everything we do. but you are talking about unusual liquidation. we don't do anything fancy there. our biggest thing is alignment with the entrepreneur. most tend to misaligned the entrepreneur. that comes out at the weirdest moments. bytend to manage our risk picking well and having a diversified portfolio. there are ally: of these unicorns worth more than a billion dollars. but are they really? david: valuations are just

numbers. liquidhese things become markets, until you have buyers and sellers on market, you don't know what the numbers are. if you want to be a public company, you have to cross the chasm of being held and accounted for on public company metrics. if you can't, the valuations you carry from the early days can really hurt you. is the opportunity to be acquired. you need a choirs that are -- aquirers who have the wherewithal to buy you. emily: what about burn rates? do those concern you? john: sure. what else matters besides if people love the product. day, private the companies run losses. that's why venture capitalists exist.

we have a weird situation wire -- where we have companies that have so much capital that it becomes really hard to frame the burn rate too high because they have enough capital to go on for years. you think there is too much arrogance in silicon valley? david: yes. people who change the world believe in themselves pretty robustly. fearnk there is a lack of which is a little scary. i don't think there is too much arrogance. you said twitter is a big mistake that you didn't invest. what do you think about its future now? ♪ emily: i want to throw a few

examples out there. uber at $50 billion. would you put money in uber at $50 billion? david: i have not looked at uber's financials in recent times. hard to say. it would be a high bar.

there are not a lot of public companies at that level. there would have to be numbers where you can see them crossing that chasm already. emily: john? john: i am looking for companies where i get 5, 10, 15 times returns. i could imagine them as a $500 billion company, i suppose. emily: really? john: but it is probably not where i would put my dollars today. i think it is a big opportunity, but i would not invest venture dollars right now. i would put it somewhere else. emily: let's talk about companies you know. what could disrupt facebook? david: if they cannot stay current in providing value, that is their biggest risk. john: the only thing that could unseat them is a platform shift. they nailed it moving to mobile. they had some missteps, but the strength of their network gave them a little more time. on mobile, who else is there? emily: look at history. microsoft beat ibm, google beat microsoft, facebook are beating google in mobile. john: mark is using market cap. he used 10% of his market cap to buy whatsapp. he is aggressively using the

asset that he has, market capitalization, to find the next wave and make sure he is there. david: and in most of those examples, complacency snuck in. mark is the least complacent guy you're going to meet. emily: chamath palihapitiya, early facebook employee, just said he thinks the facebook killer is going to be built in two or three years. john: i do not think that is right. you really need a new platform to emerge. it is not obvious to me what the platform is. we are early on mobile. what is possible is that we are starting to internalize what it means to have a tiny supercomputer connected to the global internet in our pockets all the time. strapped to your wrist or whatever. it is not vr, ar, that will suddenly disrupt the market. something that looks like a toy for a little while. but i do not think the next two or three years will be when that happens. david: i am a big chamath fan, but he has been known to exaggerate at times.

emily: can snapchat disrupt facebook? john: it is unlikely to displace facebook because it is not the same thing. they will be big companies for a long time. emily: you said twitter is a big mistake, that you did not invest. what do you think about twitter's future now? there is a lot of questions as to what their place in history will be. david: any time you have been a successful company and you carry a high public valuation, you have a target on your back. you will be criticized. they have time to figure out how to stay relevant, how to stay valuable. john: i think we forgot how transformative twitter has been. now with periscope and meerkat, you can see things real time, live. that is likely to persist. the way early twitter users used twitter is not the way that users use it today. there is something twitter is losing moving away from that. but being a global place where

people can talk about things is a neat, unique position. emily: why is meerkat not dead? why does it have a chance? john: meerkat is doing really well. madonna released her latest single on it. one button and you are broadcasting to the world. it feels like an opportunity space that is very large. david: i think it is too early to write the story of the winner or loser in that cycle. emily: there has been a rise in angel investing. angel list has created a structure by which you can invest in a person who invests in companies. how does that impact you guys? do you worry about that? john: there are more companies getting created no matter how you look at it. our goal is to figure out which ones are interesting. emily: that is a politically correct response. john: it really isn't. when you have a billion dollars to deploy, you can cash in different places and still be

fine. focusing on signal and not being distracted by noise is the challenge. emily: what do you do on a daily basis to make sure you are connecting with the entrepreneur you want to back? david: there is a lot of shoe leather. a lot of going out and hitting the street and connecting. finding that moment. you want to hit the moment the person is ready to start a company. you have to be there at the right time. john: everytime we touch somebody, we try to say, how can we help? how can we make this a valuable meeting for you? emily: venture capital firms have had a problem with succession. how do you make sure greylock is around for another 50 years? ♪ emily: what are the hot trends

now, what are you most excited about? where's the next opportunity? john: search and intent. how you find what you want. the search engine we started from scratch coming out is called jack mobile.

if you ask 100 people whether google is perfect for search, 99 will tell you it is finished. but you ask, every question you asked google, it knew the answer? then they say, that is not really true. there are a lot of questions, in this age of context, that google is not good at answering. google is all about web and documents. the old world. david: for me, the future of digital media is social networking. i stay close to home on those topics. john: we will probably not do meal replacement drinks. emily: there are five different kinds of munchery. david: that one we think is real. we have a company called sprig that is growing like crazy. emily: there are 5, 10 companies that do what they do. munchery, doordash. john: but how many restaurants are there? people eat multiple times a day. practically every day. this one feels to me like, when

you're investing in things, what you're trying to do is frequency and habits, things that are foundational. there will be competition. how do you make great food people love and be operationally excellent at scale? that's the key. emily: what about wearables? you are wearing the apple watch. john: i am wearing it. i do not know what to make of it. i think they will ultimately be important. there is interesting population data on what people did to live five years longer. as a consumer category, they are a puzzle. i am an apple fan boy, for sure. i think this will not be a great product for a little while. version two and three, when you do not carry a phone, just a watch, that feels like a real thing. emily: are there any apps in the future? what is the future of apps? john: the naive view is things stay proprietary and open.

since we grew up in the era of the web, that's what a lot of people think. i think it's unlikely to be true. i think something new will happen. some new platform will happen. there are too many smart people with access to too many consumers for interesting explosions to come out of left field. emily: ellen pao versus kleiner perkins trial. what did you see in that? david: let's see. i guess i would see a no-win situation for anybody. it was a tragedy all the way around. emily: why? david: it is something that is not good for venture, not good for kleiner, not good for ellen. it turned out to be something where there is a lot of drama and a lot of pain. i am not sure what good came out of it. i am hoping there will be some. there are some good lessons there about how you treat employees. maybe some lessons about

document retention. maybe some thoughts about how you build your firm. john: at the meta-level, the pressure it puts on our industry to make sure we are representative of full diversity is very good. david: until a firm votes with their feet and their wallets, they can be judged harshly. emily: part of the reason kleiner found itself in this position is venture capital firms have historically had a problem with succession. how do you make sure greylock is around for 50 years? david: greylock at 50 years could sometimes get told it is too old or stodgy. the reality is, over 50 years, you cannot continue to survive and thrive unless you make innovative changes. like some of the partners surprising me and saying, we should do facebook, it is the look towards innovation and willingness to change that keeps us going. emily: john lilly, david sze, thank you for joining us. it has been great to have you here. ♪ emily: gamers and movie stars

and "bloomberg west." we have invaded downtown san diego for comic-con. from "star wars" to zombies and virtual-reality, we have it all. ♪ emily: i'm emily chang and this is a special "bloomberg west" live from comic-con in san diego. coming up, movie games and movie studios are using virtual reality. i will be joined by the man responsible for sony's project morpheus. w