20VC Why AI Models are not a Moat, Where Does the Value in AI Accrue; Startups or Incumbents, What the World Has Got Wrong About AI, Why AI Needs a New Story and Who is the Right People to Tell it with Cris Valenzuela, CoFounder & CEO @ Runway

In a conversation with Harry Stebbings on "20 VC," Chris Valenzuela, CEO and co-founder of Runway, discusses the transformative potential of generative AI in content creation. Runway, having raised over $285 million, is innovating in generative AI models and has garnered customers from various media and creative industries. Valenzuela emphasizes that AI is more than chatbots and that the industry needs to move beyond horror stories to embrace AI as a creative tool. He reflects on learning from rejections during fundraising, the importance of aligning with investors, and the company's growth beyond its current valuation. Valenzuela also highlights the significance of hiring for the ability to "figure things out" and the need for humility in a rapidly evolving field. He predicts that AI will become so integrated into society that it will no longer be referred to as AI, much like the internet today.

• AI extends beyond chatbots and is not confined to transient trends.
• The importance of models is diminishing as the AI field evolves.
• Investors who avoid pattern-seeking behavior are considered good investors.

"AI is not just chatbots. I think models are not a mode. Models eventually don't matter."

This quote emphasizes the speaker's belief that AI is a broad field and that the significance of AI models is declining over time.

"Good investors are the ones that are not looking for patterns."

The speaker suggests that superior investors focus on unique qualities rather than common patterns when evaluating investment opportunities.

• Runway is a company specializing in generative AI models for content creation.
• It has raised significant funding from prominent investors.
• The company's technology is used in various industries, including film and media.

"Runway today and character AI eye on Thursday."

Harry Stebbings introduces Runway as one of the two AI companies being featured on the podcast.

"The company that trains and builds generative AI models for content creation."

Harry Stebbings describes Runway's core business, highlighting its focus on generative AI for creative purposes.

"To date, Chris has raised over $285,000,000 for the company from the likes of Luxe Capital, Felicis, CO2 amplify, and Nvidia, to name a few."

Harry Stebbings outlines the significant funding raised by Runway and some of its high-profile investors.

"Runway's customers include Academy nominated movies, tv."

Harry Stebbings mentions the prestigious clientele of Runway, showcasing its impact and reach within the entertainment industry.

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• Runway was founded by individuals from diverse backgrounds who met in art school.
• The founders experimented with AI in creative contexts, leading to the company's inception.
• The concept of founder-product fit is exemplified by the alignment of the founders' skills and interests with Runway's mission.

"Runway's journey dates back to 2015 2016, where I met my cofounders Alejandro and Anastasis in actually art school."

The speaker, Chris, recounts the early days of Runway and the diverse backgrounds of its founders.

"We started just tinkering and playing around with state of the art AI at that time."

Chris explains the experimental nature of their initial work with AI, which laid the groundwork for Runway.

"We didn't found the company. I think the company founded us."

Chris reflects on the organic development of Runway, suggesting that the company was a natural outcome of their collaborative efforts.

• Being an outsider can lead to fresh perspectives and innovative approaches.
• Chris identifies as an outsider in multiple domains, which influences his creative process.
• Runway represents the convergence of art and science, a product of Chris's unique background.

"I think being an outsider is both a blessing and a curse in the sense that it allows you to really reason from first principles."

Chris discusses the advantages of being an outsider, including the ability to approach problems with originality and without preconceived notions.

"Runway, I think it's the manifestation of that. It's a company that merges art and science by being able to be in between."

Chris describes Runway as a fusion of disciplines, a direct result of his and his co-founders' outsider status.

• Chris's motivation includes escaping traditional constraints and pursuing his passions.
• His background in a tradition-bound culture drives his desire for innovation and exploration.
• The pursuit of curiosity led him to art school and eventually to the intersection of AI and art.

"I'm running away a little bit from that tradition and trying to figure out more of the things I'm passionate about, the things I'm curious about."

Chris expresses his drive to break away from traditional expectations and to follow his own interests, which led to the creation of Runway.

• Chris fears stagnation and the lack of intellectual and creative progress.
• He views discomfort as a sign of potential growth and innovation.
• The desire to avoid mediocrity propels him to continually challenge himself and his company.

"I think I'm fearful of people not pushing themselves both intellectually and creatively and maintaining a status quo."

Chris shares his concern about complacency and its negative impact on personal and corporate growth.

• High performance is associated with the ability to learn and adapt.
• "Just figure it out" is a core value and motto at Runway, emphasizing problem-solving and self-sufficiency.
• Chris believes that learning how to learn is a superpower that enables endless possibilities.

"If you learn how to learn, you can figure out anything. And that's like a superpower."

Chris highlights the importance of being a self-starter and the power of learning as key to high performance.

• Chris prefers a hands-on approach to learning, building systems from the ground up to understand them fully.
• He emphasizes the value of persistence and active engagement in the learning process.
• Engaging with mentors and peers is crucial when facing learning obstacles.

"Being hands on and being active on learning by doing something really helps make sense of the world."

Chris advocates for a practical approach to learning, where direct experience plays a significant role in understanding complex subjects.

• Every aspect of building and running a company is a learning experience for Chris.
• Willingness to make mistakes and learn from them is essential for personal and professional development.
• Recent learning experiences at Runway involve understanding how their AI models are used by creatives and the assumptions that need to be reevaluated.

"More recently, we've learned a lot with what we're doing with gen one and gen two, which are our two latest video generation models."

Chris discusses the iterative learning process involved in developing and releasing new AI models at Runway.

"The moment you put them out, most of those assumptions are going to be changed."

Chris acknowledges the dynamic nature of technology and the need to adapt assumptions based on real-world usage and feedback.## Utilization of AI Models in Creative Contexts

• The application and assumptions about AI models in creative fields are subject to rapid change.
• It's important to focus on the value provided by AI models rather than preconceived notions of their utility.
• The creative potential of new mediums like video generation must be explored through experimentation and community engagement.

"You have around how models are going to be used in a creative context might change rapidly."

This quote emphasizes the unpredictability of how AI models will be used creatively and the need for flexibility in their application.

"And so keeping the value at the center and less of what you think people might get out of those models is really, really critical."

Here, the speaker stresses the importance of focusing on the intrinsic value of AI models rather than speculating on their potential uses.

• Early release of technology allows for community feedback and practical use cases to shape development.
• The decision to build in public versus private depends on the novelty of the technology and the clarity of its value proposition.
• Runway chose a public development approach to closely collaborate with the artistic community.

"Why did you decide to release knowing that maybe it was challenging for people to use in full."

Harry Stebbings questions the rationale behind releasing a product that may not be fully user-friendly.

"In our case, this is something new...the only way to move forward the field and the intersection of creativity and artificial intelligence was we build by as close as we can with the community that we're building towards."

The response justifies the early release as a means to advance the field through direct community engagement.

• AI is often misunderstood as a replacement for human roles rather than an enabling tool.
• The media's portrayal of AI has been skewed by the success of language models like Chat GPT.
• There is a need for diverse narratives to showcase the broader capabilities and roles of AI in creative processes.

"Has the media got AI wrong in terms of replacement, not enabler?"

Harry Stebbings challenges the common media narrative that AI is a replacement rather than an enabler.

"A lot of the discourse...comes from the place of extrapolating the current state of language models and the challenges they have."

The speaker criticizes the narrow view of AI as merely language models and calls for a more nuanced understanding of its capabilities.

• Screenwriters and other creatives fear AI may replace their roles due to a lack of understanding of AI's actual function in the creative process.
• AI should be seen as a tool for experimentation and enhancement rather than a direct substitute for human creativity.

"Why do screenwriters strike if it's an enabler? What do they not see?"

Harry Stebbings questions why creatives would oppose AI if it's meant to aid their work.

"A lot of the discourse around replacements comes from this rather unsophistic view of the world..."

The speaker explains that fears of replacement stem from a simplistic view of AI's role in creative work.

• The effectiveness of AI models can depend on their size, with larger models generally performing better in multimodal tasks.
• There is potential for smaller, more specialized models depending on the desired application.

"What's more important and data size or model size?"

Harry Stebbings asks about the relative importance of model and data size in AI effectiveness.

"I think size of model matters...But at the same time, it depends, depends on what you're trying to do."

The speaker acknowledges the significance of model size but also points out the need for specificity.

• A single AI model is unlikely to meet all needs, just as the internet supports a variety of e-commerce sites.
• AI should be viewed as a general-purpose tool with the potential for diverse applications and model types.

"You think we'll see the verticalization of models, or like Richardsocher with you very much pronounces the importance of a single model to rule them all."

Harry Stebbings inquires about the trend towards specialized models versus a one-size-fits-all approach.

"Yeah, I don't think there's going to be a single model to rule them all."

The speaker dismisses the idea of a universal model, advocating for a diverse ecosystem of AI models.

• The value of AI models lies not in their permanence but in the ability of creators to learn from and improve them.
• Continuous updates and feedback are crucial for the evolution of AI models.

"How do you think about model lifespan?"

Harry Stebbings asks about the expected longevity and maintenance of AI models.

"I think models are not a mode...What matters most is the people building those models, and how fast can you change and learn from those models."

The speaker suggests that the focus should be on the developers' ability to iterate and refine models rather than on the models themselves.

• Hallucinations, or unexpected outputs, can be a feature or a bug depending on the context of the AI model's use.
• In creative domains, allowing for a degree of unpredictability in AI responses can enhance the creative process.

"How do you think about hallucinations as a feature or a bug, especially given the artistry and creativity that's inherent in what Runway is."

Harry Stebbings asks about the role of hallucinations in AI models, particularly in creative applications.

"In a video domain, in an image domain, in a creative context, maybe you want to have the model rumble a little bit or go off the charge."

The speaker highlights the potential benefits of unpredictable AI behavior in creative contexts.

• Open AI ecosystems can reach a wider audience and benefit from community contributions.
• The choice between open and closed source depends on the company's goals and the products they aim to build.
• Runway balances open-sourcing significant models with maintaining proprietary models.

"Do you agree with him on the open beating close model, and how do you think about that?"

Harry Stebbings questions the speaker's stance on the superiority of open AI ecosystems over closed ones.

"I think open is always better...But at the same time, it really depends."

The speaker supports open AI ecosystems but acknowledges that the decision between open and closed source is nuanced.

• The biggest challenges for Runway's product and technology teams are not specified due to the incomplete transcript.

The final quote is incomplete, thus no summary or analysis can be provided.## Importance of Speed

• Speed is a critical factor in deploying and training models.
• The industry is currently constrained by limitations in compute resources.
• Efficiency in deploying models is also a significant consideration.

"The rate limit, I would say sometimes for us, is being able to move even faster, and those things come in place with sometimes compute."

This quote emphasizes the challenge of achieving greater speed due to computational limitations, highlighting the need for more powerful resources to accelerate processes.

• Hiring should focus on individuals who are capable of figuring things out and getting things done.
• Past hiring mistakes involved overemphasis on credentials and experiences rather than on candidates' drive and practical abilities.
• The interview process at Runway is designed to measure productivity and the ability to execute tasks.

"Focus on, again what we're discussing before, people that can figure things out and get things done."

This quote underlines the importance of practical problem-solving skills and execution ability over formal qualifications in the hiring process.

• Runway has developed an interview process that assesses candidates' productivity levels and execution skills.
• The process includes experiments and exercises to evaluate candidates' alignment with the company's values.
• Emphasis is placed on actions rather than words during interviews.

"It measures your productivity and your level... it measures your ability to get things done."

This quote describes the objectives of Runway's interview process, which aims to quantify a candidate's effectiveness and their fit with the company culture.

• Humility is considered a core value at Runway.
• Building a company requires the ability to acknowledge mistakes and adapt to change.
• The company looks for individuals who are open to asking questions and embracing change.

"Humbleness for us has been a core value."

This quote highlights the significance of humility in the company culture and its role in fostering an environment conducive to learning and growth.

• Skepticism towards fixed rules and recipes for company building is advised.
• Practical experience is considered more valuable than theoretical knowledge.
• The speaker suggests that founders should learn by doing rather than following prescribed methods.

"If you want to know about something, don't read recipes... Just do it yourself."

This quote conveys the speaker's belief that hands-on experience is the most effective way to understand and build a business, rather than relying on established guidelines.

• The speaker shares insights from fundraising as an outsider to Silicon Valley.
• Emphasizes the importance of focusing on the right investors and ensuring alignment.
• Founders should ask investors questions to gauge their understanding and vision for the company.

"Focus on the right investors and ask questions to the investors the same way they ask questions to you."

This quote suggests that founders should be as inquisitive with potential investors as investors are with them to ensure mutual understanding and alignment of goals.

• The speaker believes that while investors can provide introductions and support, the success of a company ultimately depends on the founder's efforts.
• Reliance on investors to significantly change or improve the company is considered misguided.

"No one is going to care about your company, about what you do more than you."

This quote emphasizes the primary responsibility of the founder in building and sustaining the company, rather than expecting investors to drive success.

• The Series A round was the most challenging due to skepticism about generative AI.
• Despite numerous rejections, persistence and belief in the vision were crucial.
• The speaker highlights the importance of conviction in the face of doubt from investors.

"Our series A was, I would say, the most challenging in the sense that we were pitching... generative AI company we wanted to build."

This quote reflects on the difficulties faced during the Series A fundraising round, particularly due to the novelty and skepticism surrounding generative AI at the time.

• Doubt can be beneficial as it encourages different thinking and risk-taking.
• Innovation often involves going against established patterns and norms.
• The speaker views doubt as an opportunity to pursue unique and potentially transformative ideas.

"Doubting is actually good... everyone is thinking one way and I'm thinking in another way."

This quote suggests that questioning the status quo can lead to innovative breakthroughs and distinguishes a founder's approach from the mainstream.

• Emphasizing the company's vision has become increasingly important in fundraising.
• The speaker has learned to prioritize conveying the long-term vision over immediate product features or metrics.

"Something I've learned a little more over time has been always emphasizing the vision of a company."

This quote reflects the speaker's evolved understanding of the importance of communicating a compelling vision to investors during fundraising rounds.## Importance of Vision and Team in Companies

• The success of a company is fundamentally tied to the quality of its people and their shared vision.
• Products and strategies evolve, but the core vision and team are constants that drive change.
• It's essential to continually emphasize and remind the team of the company's vision.

"What really matters in a company is the people that you have and the collective tissue of what brings them together."

This quote underscores the idea that the people within a company, and their ability to work together toward a common goal, are more critical to success than any individual product or service.

• Valuation is a market-derived figure and not the primary goal for a company.
• Focusing on valuation can lead to short-term decisions that are not in the company's best interest.
• Long-term vision and building towards the company's potential are more important than current valuation.

"If you're optimizing for evaluation, you're optimizing for the wrong thing."

The speaker emphasizes that striving for a high valuation should not be the main objective; instead, companies should focus on their long-term growth and vision.

• For some founders, particularly those without personal resources, venture capital is the only viable option.
• Raising capital from investors can be essential to achieving the company's goals and vision.
• There is a privilege in being able to bootstrap or do internal rounds which not all founders have.

"Raising capital and being a venture backed startup was really the only way of really achieving our goals and realizing our vision."

This quote reflects the speaker's belief that venture capital was essential for their startup due to their circumstances, including being immigrants without personal financial resources.

• Adding high-profile individuals to a company’s cap table isn’t necessarily transformative.
• The real change-makers in a company are the existing team members.
• Business deals, like having Disney create assets through Runway, are significant but the company needs multiple such deals, not just one.

"The only people going to change it are you and your team."

The speaker suggests that while high-profile individuals could be beneficial, the true drivers of change are the company's team members.

• The speaker appreciates profound and non-pattern questions in interviews.
• There is a belief that the transformative impact of AI is not yet fully understood or appreciated.

"I don't think we yet realize how transformative AI is going to be."

The speaker reveals a belief that the future impact of AI is still underestimated and that current perspectives may not align with future realities.

• Work and life are not separate but are integrated, especially when one is passionate about their work.
• It's possible to balance work commitments with family life by being thoughtful and caring.
• Company values, such as caring, play a role in how one approaches work-life balance.

"If you're passionate about what you're doing, if you need to give a little when you're raising a family, of course you can find the time."

The speaker expresses confidence that with passion and care, one can find a balance between work responsibilities and family life.

• The belief in the untapped potential of storytelling and movies.
• Physical location is not a necessity for AI founders, as evidenced by the speaker's location in New York.
• The speaker wishes people understood the early stage of their company, Runway.
• There is a desire for better and more nuanced stories within the AI community.
• The speaker had a misconception about the importance of fancy user interfaces (UIs) in the past.
• Building a company is inherently painful, but it's important to endure and not quit.
• Over time, one becomes more accustomed to the challenges of building a company.
• The speaker would choose to have dinner with their mother, emphasizing personal relationships over fame.
• AI will become a ubiquitous tool in society, much like the internet is today.
• In ten years, the speaker envisions Runway making the best movies.

"The best movies are yet to be made and the best stories are yet to be told."

This quote reflects the speaker's optimistic outlook on the future of storytelling and movie-making, influenced by advances in technology.

• AI will become so integrated into society that it will no longer be referred to as AI, but simply as tools.
• The speaker looks forward to a time when AI is a seamless part of everyday life.

"We're going to stop referring to it as AI. We're just going to think about it as tools."

The speaker predicts that AI will become so ingrained in society that it will no longer be a distinct concept but will be considered a standard part of various tools and processes.