emily: it's behind some of the biggest successes in tech history from facebook and linkedin to airbnb and instagram. greylock opened its doors in boston 50 years ago, but since landing in silicon valley in 1999, it's backed hit after hit. the venture capital firm has backed 170 now public companies, four of them worth more than $10 billion. joining me today on this edition of "studio 1.0" greylock partners david sze and john lilly. so great to have you guys here. thank you so much for doing this. david and john: thank you for having us. emily: david, you've been at the firm, what, like 15 years? david: 16th year. emily: 16 years now. john?

john: just four. emily: and david, you really put greylock on the map in silicon valley. how did you do that? david: well, first of all, i'd say, you know, it's really a partnership effort. i'll take some credit, but it's really a team effort, as always is at greylock. in the early 2000s, we made a move to say every partner should have an operating background and that allows us, we think, to connect better to the entrepreneurs to find the great opportunities to win them and help build those companies. emily: john, you were the ceo of mozilla, you started your career as a scientist at apple? john: i guess that mostly means i didn't shift code while i was at apple. [laughter] i was doing experiments and playing around the edges, but yeah. emily: so, why greylock? john: i wouldn't fit in at most firms. i wouldn't want to work at most firms. emily: why not? john: because i like people who make things and at greylock everybody was a good, high-integrity person, but also really valued at making things and products and operating. like david says, you know, and it's characteristic of david to answer the question like "you made greylock," and david is like "no, no, no, it's everybody else."

emily: so david, you did find facebook and you did find linkedin, and you convinced reid hoffman to join the firm. how did you do that? how do you do that? david: you know again, i think it really comes down to, um, we believe if you come from product and you have that background and you have that network, there is an authenticity. most people don't remember this, but in 2005, when facebook took the investment, the valuation was $500 million, which seemed, i think, to most people -- emily: they were just students on it at the time. david: right, and not that many, right? and so, it seemed like an insane valuation. i think many people looked at that and said dave sze and greylock have lost their minds. i think, and not just from the outside, i think partners inside greylock said this is insane and this is not what we do. emily: who said that? [laughter] david: we do have partners and i think one of the characteristics of our partnership is we like to disagree. we like to push each other. there were some partners that were saying this is going to ruin the firm. this is a huge mistake.

emily: facebook is going to ruin the firm? david: ruin the firm. emily: do these people still work at greylock? [laughter] david: some of them do, some of them have retired, but not because of that. emily: now john, you're behind some of the newer hits -- dropbox, instagram, tumblr. how do you fill the big shoes of david sze? john: what i've earned is that you probably don't try. and for me, instagram was a good example where i brought it in and people didn't love it. emily: really? john: yeah, i mean, reid wasn't quite sure it would work. you know, it's one of those things -- i really believed in kevin and i had enough affinity for the category and the product that i really wanted to do it. emily: why didn't reid think it would work? john: i don't know. reid said some words and who knows exactly what he meant. he thought it was interesting, but not huge. emily: is there a science to it? is there a formula to finding these things? john: i think with kevin it took a while for me to convince him to raise money, and i chased him for the better part of six months. david: i mean, airbnb is another example where this one was like, "i don't get it i don't get it," but reid was on the other side of that and pushed really hard to make it

through. we think that dialectic combined with the respect for each other allows us to get a really good outcome. emily: good that you owned that. [laughter] david: oh, i got lots of things, emily -- 15, 16 years in this business, if you're not making some mistakes like that, you're probably not doing your job. emily: the "new yorker" article about mark andresen -- in that piece, he called bill gurley of benchmark his "newman." who's your "newman?" do you have a "newman?" david: we may be each other's "newman." [laughter] john: i got to tell you, i don't think about pcs very much. i like being at a company. emily: but is there competition between you guys? david: i find john and i come at things from very different perspectives. and so, there's times when john is like "i don't understand what you are talking about." [laughter] and there's times i'll look at him and go, "i don't understand what you're talking about," and we'll hash it through. emily: i understand that disagreement can lead to better outcomes, but does it create tension? john: i mean, yeah, of course. you bring in a saas company and you're arguing with aneel bhusri, our partner aneel who is ceo of workday, which is one of the two or three best saas companies in the world. and you're arguing with him about the merits of the saas company.

and you bring in a social-networker and you're arguing with reid or david about it. so, that's stressful. on the other hand, you want to play in the big leagues or not? emily: how would you rate competition for deals right now? john: it's intense. i think it's intense at every level. emily: is it more competitive than ever? john: it seems pretty competitive four years to me. david: at some level, i would say, it's never been more competitive. on the other level, when you get underneath that a little bit, it's the same five or six firms, maybe minus one or two, maybe plus one or two -- there's too much money out there right now. i think that risk is mispriced. i think there's not a lot of fear. there's just a lot of belief, and not a lot of fear, and those are worrisome times. i think it can be dangerous if unchecked. but on the other hand, if you look at it, there's only a handful of firms that we really find ourselves competing with again and again. so, there is a sort of boundary to that. john: it's easier to start a company, but it's not easier to get them all the way to the finish line. so, reid and i are spending a

lot of time thinking about what it means to scale, and what magnitude scaling really is. emily: bill gurley says we're in a risk bubble, and companies and investors are taking on too much risk. how would you guys describe it? david: i think we're being asked to take on a lot of risk. i think there is a lot of money in the system, and i think there is a lot of optimism that's causing pricing to be higher, that's causing expectations to be higher. and i think we're asking to take higher risks than probably since 1999-2000 timeframe. on the flipside, i would say, i believe that mobile is a fundamental shift and is probably only in the third inning right now still. you can see how that is changing the world where businesses that would've been terrible businesses -- and uber and airbnb, etc., in previous generations now are enabled by mobile in ways that weren't possible before. and i think you can also look at public companies right now as a benchmark and say -- it's not clear there the equivalent companies in the public markets it's not clear that they're so overvalued if you look at their multiples. and so, there's a bunch of sort

of mixed signals that leads to an environment, i think though, where risk is mispriced for us. emily: would you use the term "bubble?" david: you know, we don't sit around and talk about a bubble or not. we certainly talk a lot about those prices being expensive, but we make our decisions on a very micro-basis based on is this a great entrepreneur to be with or not? so, as long as we're out hustling and finding the entrepreneurs and the opportunities, yes, i think we're feeling the prices we're paying are higher and we're asked to take on risk, but we're finding great entrepreneurs, too, that we're excited about what they're doing. john: we're trying to create companies that are billions, or to ten billions or more of value, so it doesn't matter too much if you're overpaying, but you really have to keep your eye on what your target is. emily: it doesn't matter if you overpay? john: at the early, early stages. emily: why take on the risk if it's too expensive? david: we have companies that are out there that are exciting companies that are losing a lot of money that have huge bankrolls, huge bank accounts now because they've been able to raise such non-dilutive levels

and bring in a lot of capital, almost unprecedented. and so, that's the opportunity for those companies to build real businesses within those capital, lack of constraints, in that case. but, it's also the risk because at some point, that music stops, those chairs stop, and you're either sitting down, or you're not. emily: john, do you think we're in a bubble? john: i think there's a new google to be built. there's a new office suite, like a microsoft, to get built. there's some really big, important companies that will feel expensive, and then turn out to be cheap. the truth is some stuff is wildly overpriced and will look obviously so, and in retrospect, there's some stuff that feels wildly overpriced and will look the opposite, in retrospect. david: our job is to make sure that ours aren't the ones that are wildly overpriced. [laughter] john: ours are all priced exactly right. emily: you know, a dropbox for example -- you guys invested in dropbox, but you didn't get a board seat. why did that happen? john: because we were the "b" round, which is a wildly, expensive "b."

but it'll turn out, in retrospect, to be a pretty good bargain for us because they were riding a very, very large wave that just got bigger and bigger and bigger. emily: how do you protect yourself as investors? how do you hedge your own risks? david: you know, we don't tend to use financial engineering, if there's a way to do that. emily: so, you do not have liquidation preferences? david: not in almost everything we do, but you're talking about unusual liquidation preferences, right? emily: right. david: and protection, downside protection? emily: yes. david: we don't do anything fancy there. our biggest thing is alignment with the entrepreneur and those tend to misalign the entrepreneur. and that comes out in these times in the weirdest moments just when you don't want it, and that misalignment can hurt you. we tend to manage our risk by picking well and having a diversified portfolio. emily: there are all of these unicorns -- they're worth more than a billion dollars, but are they really because of these liquidation preferences, and does that mean all of these valuations are inflated? john: well, the truth is, valuations are just numbers about how much capital you put

in and how much you diluted. until these things become really liquid markets, until you have buyers and sellers in the market, you just don't know what the numbers are. david: if you want to be a public company, you are going to have to cross the chasm to being held and evaluated on public company metrics. if you can't cross those chasms, the valuations you're carrying from the early days, particularly if they're at these high levels, can really hurt you. and then, of course, there's the opportunity to be acquired, and so, you need acquirers that are willing to value you for strategic or whatever reasons and have the wherewithal, in their own cap tables, to buy you to justify that. and if you don't have those two things, you get in a lot of trouble. emily: what about burn rates? do those concern you? [laughter] john: sure. what else matters, really, other than product and whether people love it, and how much you're spending? emily: have you been warning your companies? david: yes, we have. i think we look at companies -- i mean, at the end of the day, private companies run losses. that's why venture capitalists exist and other forms of capital. we have a weird situation where we have companies that have so

much capital because they've been able to raise it, that it becomes really hard to frame "is this burn rate too high now?" because even at that burn rate, they have enough capital to go on for years. emily: do you think there's too much arrogance in silicon valley? john: i say there's always been too much arrogance. i think you talk to -- look at guys like andy grove and steve jobs. people who are going to change the world believe in themselves pretty robustly. it's like, move out of my way, i'm just going to make this happen. so, i think there's a lack of fear. i think a lack of fear is a little scary. but, i don't think there's too much arrogance. emily: you've said twitter is a big mistake that you didn't invest in twitter. what do you think about twitter's 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. so, hard to say. it would be a high bar. there are not a lot of public companies that are at that

level. so, they would have to be numbers where you can see them crossing that chasm already. emily: john? john: i think i'm 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's probably not where i'd put my dollars today. i think it's a big opportunity, but i wouldn't invest my venture dollars right now. i'd put it somewhere else. emily: so, let's talk about companies that you know. what could disrupt facebook? david: if they can't stay current in providing value to that scale of a user, that's their biggest risk, i think. john: the only thing that could unseat them is a platform shift. they nailed it to mobile. they had some missteps, but the strength of their network gave them a little more time. now on mobile, who else is there really? emily: right, but look at history. so, microsoft beat ibm, google beat microsoft, facebook is beating google in mobile. john: that's right. i think mark is using his market cap. so, he used 10% of his market cap to buy whatsapp. i think he's really aggressively using the asset that he has,

which is his market capitalization, to find the next wave and make sure he's there. david: i also think that in most of those examples, eventually complacency snuck in, and mark is the least complacent guy you're going to meet. emily: chamath palihapitiya, social-capital partnership, early facebook employee, he just came out saying he thinks the facebook killer is going to be built in the next two to three years. it's going to happen. john: i do not think that's right. i think you really need a new platform to emerge, and it's not obvious to me what that platform is. we're still relatively early on mobile. now, i think what's possible is that we're all starting to internalize what it means to have a tiny supercomputer connected to the global internet in our pockets all the time. all the time. or strapped to your wrist or whatever. emily: exactly. john: it's not vr, ar, that's suddenly going to go disrupt the markets. it's going to be something that looks like a toy for a little while. but i don't think the next two or three years is going to be exactly when that happens. david: i'm a big chamath fan, but he's also been known to exaggerate a little bit at times in his excitement.

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

people can -- the best people in the world can talk about things is a neat and unique position. emily: why isn't meerkat dead? why does meerkat still 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 is 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. ♪

♪ ♪ ♪ get excited for the 1989 world tour

with exclusive behind the scenes footage, all of taylor swift's music videos, interviews, and more. xfinity is the destination for all things taylor swift. emily: he is an uncommon breed in the world of enterprise technology. aaron levie is known for his colorful sneakers, his magic tricks, and ironic tweets. but there is no underestimating his ambition to dominate the flight of business to the cloud. he started building websites when he was 13 and met the kids who would become his co-founders as far back as middle school. but unlike places like facebook and twitter, where tales of early infighting are legend, all four of box's co-founders still work there together a decade later. joining me today on "studio 1.0," box ceo and co-founder,