20VC Why Product Market Fit Is Like Porn, How The Entrance of Facebook and Google Into Enterprise Software Effects Traditional Enterprise Companies & The Future Pricing Model For The Enterprise with Dennis Mortensen, Founder @ X.ai

In this episode of "20 minutes vc," host Harry Stebbings interviews Dennis Mortensen, founder and CEO of X.AI, a leading AI startup known for its intelligent personal assistant, Amy. Mortensen shares insights on the company's journey towards creating an efficient scheduling solution that uses plain English and has garnered significant funding from Firstmark, DCM, and IA Ventures. He discusses the evolution of X.AI's product-market fit, the nuances of pricing and packaging for enterprise adoption, and the company's strategic focus on becoming a standard in the industry. Mortensen also touches on the future of AI in organizational structures, the cultural influence of his Danish upbringing on his optimistic leadership style, and recommends the "Exponential View" newsletter for staying informed on industry trends.

• Harry Stebings is the host of the 20 Minutes VC podcast.
• He can be found on Snapchat and shares his thoughts on mojitovc.com.
• The podcast often features guests from the venture capital and startup ecosystem.

Welcome back. You are listening to the 20 minutes vc with your host Harry Stebings, found hanging out on Snapchat at htebbings or writing some more academic and pertinent thoughts on the very appropriately named mojitovc.com.

This quote introduces the host of the podcast, Harry Stebings, and provides information on where listeners can find more of his content.

• Dennis Mortensen is the founder and CEO of X AI.
• X AI is a well-funded AI startup that has raised money from Firstmark, DCM, and IA Ventures.
• The company's product, Amy Andrew, is an AI personal assistant for scheduling meetings.

For round two, I'm delighted to welcome Dennis Mortensen, founder and CEO at X AI, one of the most exciting startups in the AI space, with also the status of being one of the best funded AI startups.

This quote introduces the guest, Dennis Mortensen, and gives background information about his company, X AI, highlighting its position in the AI industry and its funding status.

• Amy Andrew is an AI personal assistant created by X AI.
• It allows users to schedule meetings using plain English.
• Amy has a lifelike persona to the extent that users have asked her out on dates.

You Amy Andrew, the artificially intelligent personal assistant that lets people schedule meetings using plain English and nothing more than a CC. To Amy at X AI, their female Persona.

This quote describes X AI's product, Amy Andrew, emphasizing its user-friendly nature and the surprising lifelike quality of its AI persona.

• Dennis Mortensen's aha moment for founding X AI came from personal pain.
• He counted 1019 meetings scheduled in a year without any assistance.
• The frustration led to the idea of creating an intelligent agent to handle such tasks.

My aha moment was less of an epiphany and just really just one long 20 year pool of pain... I got to either go hire an assistant, but being an entrepreneur, you're just too frugal, too stupid, too many things to go spend the having somebody help you out.

This quote explains the personal experience that led Dennis Mortensen to found X AI, highlighting the pain point of scheduling numerous meetings without help.

• Dennis Mortensen believes product-market fit is when the market adopts the product without aggressive selling.
• The lack of need for persuasion indicates a good product-market fit.
• X AI's product fits this description as it addresses a common pain point without needing elaborate explanations.

It's like porn, I will tell you when I see it... if you have to aggressively sell your product, as in persuade people to why they have a pain and why your particular solution removes that pain, you are working an uphill battle.

This quote by Dennis Mortensen provides his perspective on product-market fit, likening it to an unmistakable recognition and emphasizing the ease of adoption as a key indicator.

• Dennis Mortensen disagrees with the notion that merely building a product will attract customers.
• He stresses that product-market fit is when there is a noticeable demand and the company struggles to keep up with the market.
• He clarifies that this does not happen simply because a product is created, but rather when it truly meets market needs.

No, I don't. I think it's a lovely thought and I think we as engineers and product makers can very easily fall in love with what we've given birth to... But just because you created it doesn't mean that the guy across the street have any interest.

This quote conveys Dennis Mortensen's stance on the misconception that building a product is enough to guarantee its success, emphasizing the importance of actual market demand.## Product Foundation and Business Edition Packaging

• Dennis Mortensen emphasizes the need for careful consideration when transitioning a user-focused product to a business edition.
• The transition involves understanding how individual tools can become team-oriented.
• The key is to move beyond simply multiplying the price by the number of seats to offer genuine team value.
• Dennis suggests a three-dimensional approach to creating a business edition: administration, product features, and changes to core utility.

"And I think really the industry go no further than chat to the guys over at G suite at Google or office at Microsoft for where what they have is a single user focus."

This quote highlights the current industry standard where products like G Suite and Microsoft Office are primarily designed for single users.

"So I think we've done thought about this on three dimensions, really."

Dennis introduces the three dimensions that they considered when creating a team edition of their product.

• Essential administrative features are required for managing a team.
• These features include adding and managing team members, billing consolidation, and providing basic analytics.

"One, there is the absolute necessary requirement to put some admin in place to manage a team."

Dennis notes the importance of administrative capabilities in a team edition product, which are fundamental yet not glamorous.

• Teams require specific features that may be well-known to enterprises.
• Examples include domain customization, such as having an assistant named Amy@Company.com.
• Product features should cater to the organizational needs and integrate seamlessly.

"Two, I think there's certain features, as in product features, that comes along with a team that the enterprises which you speak to almost know by heart."

Dennis explains that certain product features are expected by enterprise teams and need to be included in a business edition.

• In a team setting, the core utility of a product often requires modification.
• This could involve permissions management, like who can access, edit, or share files in Dropbox.
• Unique team settings might include travel considerations and meeting verifications within an organization.

"And then I think, perhaps most interestingly, as the third item changes to the core utility, that means, let's take Dropbox as an example here for where if you save a file and it's a single user setting, you've saved a file."

Dennis describes how the core utility of a product like Dropbox changes when adapted for team use, focusing on collaborative features and permissions.

• Awareness of competition, whether weak or strong, is crucial as it indicates market interest.
• The goal is to establish a product as the standard in the market before major competitors emerge.
• Dennis aims to make Amy and Andrew at x.ai a standard in their market, creating a dominant position.

"I think you should always be aware of the fact that come tomorrow there'll be a competitor and that competitor can be a weak one or it can be a strong one, but they always arrive."

Dennis acknowledges that competition is inevitable and a sign of doing something worthwhile.

"I think we have a chance here in turning Amy and Andrew at XLAI into a standard so that it becomes this almost single agent market."

Dennis expresses his ambition to make their product the default choice in the market, akin to a monopoly.

• Evaluating the move into the enterprise space involves considering monetization strategies.
• Dennis uses Dropbox as an example of a successful transition to enterprise with a focus on revenue generation.

"So how do you evaluate the thought process then behind the move into enterprise and the pricing of a business product as a result?"

Harry Stebings, with his venture capitalist perspective, is interested in the monetization aspect of entering the enterprise market.

"Again, I'm just using Dropbox as an example. I'm a huge admirer of what they built over the years."

Dennis expresses admiration for Dropbox's business strategy and their success in the enterprise space.## Market Timing and Product Launch

• Companies often retrospectively recognize the potential benefit of earlier product launches.
• The importance of seizing market opportunities before competitors is highlighted.
• Delaying a product launch can lead to missed opportunities and advantages for competitors.

"I think they built a splendid business. What I do think, though, if you really ask them hand on heart, should you not have launched that business edition a little bit earlier? They would say yes."

This quote implies that the company in question acknowledges, in hindsight, that an earlier launch of their business edition product would have been advantageous.

• The company's strategy was always geared towards launching a business edition of their product.
• Product design and packaging were key considerations in preparation for the launch.
• The launch date and time for the business edition were clearly defined and anticipated.

"For us, it's been a drive towards launching the business edition and it's been a focus on how do we best package this business edition."

The quote indicates that the company's efforts were concentrated on developing and launching a business edition, with a strong emphasis on its presentation and market fit.

• Pricing is critical, with the company aiming to decrease complexity in their billing.
• Market research, including interviews and surveys, was conducted to determine an optimal price point.
• Anxiety about overspending on unused licenses was a concern among potential clients.

"We tried very hard, did kind of interviews and surveys on about 5000 people to figure out the price point."

This quote explains that extensive market research was undertaken to establish a pricing strategy that would be acceptable to customers.

• The company adopted a fair billing policy similar to Slack's, allowing clients to pay only for active users.
• The billing policy aims to alleviate concerns about paying for unused services.
• The policy was a key decision in the company's pricing strategy, moving away from a traditional per-seat model.

"So we're going to be selling the business edition at $59 per seat but under a fair billing policy. Meaning that whoever uses it will pay for it."

The quote describes the company's pricing model, which charges clients only for the users who actively utilize the service, thus offering a more flexible and fair billing approach.

• Enterprises need to prepare for the integration of AI applications, with security and compliance as primary concerns.
• The future of AI agents in the enterprise is expected to be lightweight and protocol-based, requiring minimal integration.
• The concept of "bring your own agent" is emerging, analogous to the previous trend of "bring your own device."

"These agents, and I'm so bullish on this future of agents, will be so lightweight that they would probably exist on existing protocols."

This quote predicts that AI agents will be easy to integrate into enterprise systems because they will operate on pre-existing protocols, such as email, which reduces the complexity of adoption.

• Employees are increasingly adopting AI tools independently to address work-related pain points.
• The lack of need for formal integration allows for grassroots adoption within organizations.
• Employees use AI tools for convenience and efficiency, sometimes without official company endorsement.

"But those companies, they just have employees in pain. And since there's no integration, they just sign up for it and start using it as saying, I don't care, I just need this pain to disappear."

The quote illustrates how individual employees are driving the adoption of AI tools to solve immediate problems, bypassing the need for formal enterprise integration processes.## Bottom-Up Adoption Style

• Agreement on the effectiveness of bottom-up adoption in business strategies.
• Transition into a quick-fire interview format.

No, I agree very much with the bottoms up adoption style.

• The quote emphasizes the speaker's concurrence with the concept of bottom-up adoption, suggesting it is a favorable approach in business.

• "Shoe Dog" is recommended for its inspirational narrative.
• The founding story of Nike is characterized by an unintended success.
• The book serves as a source of motivation during challenging times.

I just finished Shoe Dog, which is the founding story of Nike. Not too many learnings per se, because he actually really never wanted through Nike, but he ended up with it. But it's such a romantic story, and it's one of those books for where when you're in your darkest hour, you hold that book a little bit and it provides some light.

• The quote suggests that while "Shoe Dog" may not be rich in explicit lessons, it offers an emotionally compelling story that can be comforting and inspiring in difficult times.

• The speaker's upbringing in Denmark, the "happiest country," has instilled a sense of enthusiasm and optimism.
• Optimism has been a significant asset in the speaker's role as CEO, especially during financial challenges.

I think that unbridled enthusiasm, which I have, serves me well. So even when it gets dark, I tend to be quite optimistic to that last moment where.

• The speaker attributes their optimistic outlook and enthusiasm to their Danish upbringing, which has been beneficial in their leadership role, particularly when facing adversity.

• AI will shift value from answers to questions within organizations.
• Employees closest to customers will become more valuable due to their ability to ask pertinent questions.
• The organizational hierarchy may invert, with lower-level employees gaining importance.

But I think the question is, what is of value? And if the question is the most valuable part, because the answer will become easy when we have AIs, then I think there'll be a whole new bunch of employees, actually, those at the bottom of the organization, those that are closest to the customer, they'll become the most valuable because they have very intimate relationships firsthand with customers and will have all the right questions.

• This quote highlights the anticipated shift in organizational value from providing answers to formulating the right questions, a change driven by the advent of AI technology. Employees with direct customer contact are expected to become more valuable due to their unique insights into customer needs.

• "Exponential View" is recommended for its insightful content.
• Despite the general inundation of emails, this particular newsletter is anticipated and valued.

There is a newsletter by a guy in your end of the world, by the way, called the exponential view, and you should check it out.

• The recommendation of "Exponential View" suggests it stands out among the multitude of information sources available, offering valuable content that the speaker looks forward to receiving.

• The goal is for X.AI's AI assistants, Amy or Andrew, to be responsible for scheduling events in users' calendars.
• Continuous improvement of event-related details is a priority.
• Focus is on becoming the best at scheduling meetings, not diversifying into other areas.

Anybody listening to this still with us should pull out their phone, jump into their calendar app, look at that. 17 events they have on the calendar for next week. If I didn't put them there, then I haven't done my job yet.

• The quote conveys the ambition for X.AI's AI assistants to become an integral part of users' scheduling processes, aiming to enhance the efficiency and accuracy of calendar event management.

• Thanks are extended to individuals who facilitated the show.
• Encouragement to follow the hosts on social media.
• Introduction to Workable, a recruiting software for companies.

So fantastic to have Dennis on the show and a huge hand to him for giving up the time today.

• This quote is an expression of gratitude towards the guest for participating in the show, illustrating the importance of acknowledging contributions in a professional setting.

• Workable is an all-in-one recruiting solution for ambitious companies.
• It offers a range of features for efficient hiring processes.
• Available on desktop and mobile, with a free trial option.

Workable is the all in one recruiting software for ambitious companies.

• The quote introduces Workable as a comprehensive tool designed to streamline the recruitment process, highlighting its value proposition for growth-oriented businesses.