20VC X.ai's Dennis Mortensen on Why There Is No Incumbency Advantage in Artificial Intelligence

Summary Notes


In this episode of the 20 minutes VC, host Harry Stebbings interviews Dennis Mortensen, the founder of X.ai, a company behind the AI personal assistant, Amy. Mortensen shares the journey of X.ai from its inception, emphasizing the challenges and extensive work involved in training Amy to understand and schedule meetings like a human assistant. With over $30 million in funding from notable investors like Firstmark, DCM, and SoftBank, X.ai aims to democratize the luxury of personal assistants through Amy's capabilities. Mortensen also discusses the competitive landscape, the future of AI startups in relation to big tech companies, and X.ai's pricing strategy, which aims to make Amy accessible to both individuals and enterprises. The episode touches on the broader impact of AI on productivity and the potential for AI to transform traditional job roles.

Summary Notes

Introduction to Dennis Mortensen and X.AI

  • Dennis Mortensen is the founder of X.AI, an AI startup that has developed an artificially intelligent secretary named Amy.
  • X.AI is considered one of the best-funded AI startups, having raised over $30 million.
  • Investors include Firstmark, DCM, Crunch Fund, SoftBank, and others.
  • Amy is designed to be so lifelike that she is asked out on dates once a month.

"He's the founder of our favorite artificially intelligent secretary, Amy. It is of course Dennis Mortensen, founder at X.AI." "And X.AI is now one of the best funded AI startups, having raised over $30 million from our friends at Firstmark."

These quotes introduce Dennis Mortensen as the founder of X.AI and highlight the success and lifelike quality of the AI secretary Amy, as well as the significant funding the company has received.

Venture Capital Unlocked Course

  • Venture Capital Unlocked is a two-week course offering insights into venture capital.
  • The course is run by Stanford Professional Development Center and 500 Startups.
  • It features strategies from top investors like Jason Lemkin, Mark Suster, and Dave McClure.
  • The enrollment deadline is July 1st.

"It's an incredible two week course where you get to learn the tips, tactics and strategies of some of the valley's best investors." "And it's jointly run by Stanford Professional Development center and 500 startups."

These quotes describe the Venture Capital Unlocked course, emphasizing its educational value and the high-profile investors involved, as well as the institutions that run the course.

Lisa Mattress Endorsement

  • Lisa mattress is mentioned as a high-quality mattress with a fully online purchase experience.
  • The mattress is described as scientifically engineered with memory and latex light foam.
  • It can be delivered in the US, UK, or Canada, with a promotional discount offered.

"There was nothing like climbing into the scientifically engineered three layered mattress with two inches of memory foam and two inches of latex light foam." "So if you live in the US, UK or Canada, you can also get your mattress delivered to your door."

The quotes promote the comfort and convenience of the Lisa mattress, highlighting its scientific engineering and delivery options.

Origin Story of Dennis Mortensen and X.AI

  • Dennis Mortensen moved to New York as part of the terms of an acquisition by Yahoo.
  • He previously built and sold a predictive analytics venture that was acquired by Outbrain in 2013.
  • After the acquisition, the team decided to address the pain of meeting scheduling by creating an intelligent agent, which led to the creation of Amy and X.AI.

"Short stories. One for where our prior, prior company got acquired by Yahoo." "So I spent the last eight years here and we built up post having integrated into Yahoo, a predictive analytics venture out of New York as well, that got acquired by outbrain in 2013."

These quotes outline Dennis Mortensen's entrepreneurial journey, including the acquisition of his previous company by Yahoo and the founding of X.AI to solve meeting scheduling issues.

Core Technology Behind Amy and Andrew

  • The development of Amy and Andrew required significant effort in defining the conceptual model and assembling a training dataset.
  • Defining time alone took a year and a half due to the complexity of human language.
  • There was no pre-existing dataset for training, so the team had to start from scratch.
  • Annotating the data for training is a meticulous process, with a 26-page set of guidelines just for labeling entities.

"That alone, we probably spent a year and a half coming up with the right model, because humans will say stuff like, we'll meet up later this afternoon upon my return before the demo." "And I'll just give you. So whoever's listening here can start cry in the background, just a small hint of what it means to annotate this data."

These quotes explain the challenges and complexity involved in creating the AI technology behind Amy and Andrew, emphasizing the time and detail required to accurately model and understand human communication for scheduling meetings.## AI Training and Data Labeling Challenges

  • AI training requires meticulous data labeling, which is a significant challenge.
  • The process is not as simple as enlisting a few engineers to work with tools like TensorFlow.
  • It involves a lot of groundwork and is typically devoid of PhD-level input in the early stages.

"It is a massive undertaking, and I think anybody who believes that it's about getting five good engineers into the basement and we can start hacking away on Tensorflow come Sunday is probably going to be quite surprised."

This quote emphasizes the complexity and the underestimated difficulty of preparing data for AI training, highlighting that it's not a job for a small, inexperienced team.

Incumbency Issue in AI

  • There's a common concern among VCs about large corporations having massive proprietary data sets.
  • Dennis Mortensen suggests reevaluating the value of these data sets in the context of intelligent agents.
  • Existing data sets may not be as advantageous as presumed due to the need for specific types of data that align with new AI paradigms.

"They most certainly have massive data sets, but I think we need to just take a step back and reevaluate whether they are worth anything in this new software paradigm..."

The quote questions the actual value of large data sets owned by incumbents when considering the specific needs of AI training for intelligent agents, suggesting that these data sets might not provide a significant advantage.

Data Set Relevance in AI Startups

  • Dennis Mortensen argues that the traditional advantage of large data sets may not apply to the new paradigm of intelligent agents.
  • He points out that data for training AI, like an intelligent agent for scheduling meetings, can't rely on historical data.
  • Startups may have the advantage of collecting new, relevant data that larger corporations may struggle to obtain due to privacy concerns or organizational challenges.

"There's not much preexisting data set that you can really take advantage of."

This quote indicates that preexisting data sets may not be as useful for training AI in new applications, leveling the playing field for startups.

Interaction Between AI Startups and Corporates

  • Traditional productivity tools have assisted with tasks, but the new AI paradigm involves handing over tasks to intelligent agents.
  • Dennis Mortensen believes enterprises will adopt AI agents rather than develop their own, similar to the adoption of ERP and CRM systems.
  • He foresees most of X AI's revenue coming from enterprises adopting these intelligent agents.

"This new setting is a setting where you will hand that job over to an agent."

This quote highlights the shift in productivity tools from assisting to autonomously completing tasks, indicating a major change in how enterprises will operate.

Vision for AI in the Enterprise

  • Dennis Mortensen envisions a democratization of AI assistants in the enterprise, making them accessible to all levels of employees.
  • The goal is to allow employees to focus on their core competencies rather than administrative tasks like scheduling meetings.
  • The use of AI agents is seen as a way to increase efficiency and productivity.

"Amy is for them so that they don't have to do this."

This quote encapsulates the vision of providing AI assistants to all employees to eliminate time-consuming tasks, thereby democratizing access to what was once a luxury.## Democratization of Assistance

  • Agents are becoming superhuman, capable of tasks beyond human ability.
  • These agents work tirelessly at all hours and in all languages, managing tasks like rescheduling meetings.
  • The development of such agents democratizes access to what were once considered luxuries.

"I'm very optimistic about this kind of idea of agents democratizing access to what used to be luxuries."

This quote emphasizes the speaker's belief in the potential of AI agents to make luxury services accessible to a broader audience, highlighting their superhuman capabilities.

Fundraising Journey

  • The fundraising journey for AI startups is long and difficult.
  • The initial pitch was honest about the challenges and the possibility of not having a marketable product immediately.
  • The seed round raised $2 million for a proof of concept, not a product.
  • The A round focused on proving the solution and engineering the product.
  • The B round raised $23 million to bring a professional product to market.

"For these $2 million, you will get an answer. Not a product, not customers, not revenue, not really much."

This quote reflects the candid nature of the initial fundraising pitch, which was about funding research to determine the feasibility of the project rather than promising immediate tangible results.

Runway and Financial Strategy

  • The company is frugal with its investments.
  • The $23 million raised provides a significant runway well into the future.
  • Revenue generation is expected to begin in the near future, further extending the runway.

"So we're in very good shape in that regard, especially because come early autumn, we will start to make some revenue, and that will only extend that Runway."

The speaker is explaining that their current financial status is strong and will be bolstered by anticipated revenue, which will extend their operational runway without additional funding.

Pricing Strategy

  • The goal is to create a product for the masses, not just a select few.
  • The pricing model will be based on software SaaS products, with examples like Dropbox and Salesforce.
  • Three editions are planned: a free edition, a professional edition, and a business edition.

"I'm very confident you'll see us be in market with three editions, a free edition where you can schedule a few meetings in the name of Amy or Andrew at X AI, a professional edition for where you can schedule unlimited meetings, tune the signature, and do some of those pro things you would expect and pay me 29, $39, whatever that might be, a month."

This quote outlines the proposed pricing tiers for the product, indicating a strategy that offers different levels of service to accommodate a range of customer needs and budgets.

Competitive Landscape

  • The competitive market for personal assistant AI is varied, with different business models.
  • Some competitors use human labor to supplement their AI offerings.
  • The speaker's company aims to be a scalable software company, differentiating from competitors who charge more for human-assisted services.

"Potentially a good business for Clara in having humans employed at an hourly wage, figuring out through good software how you can slice and dice them and sell them between two to $500, which is what they charge, which is not necessarily expensive compared to having a full time human assistant in your office, but is still an outsourcing play of sorts."

This quote compares the business model of a competitor who charges a higher price for a service that includes human labor, highlighting the difference from the speaker's AI-only approach.## Virality and Network Effects in Software Solutions

  • The inherent virality and network effects are crucial for software solutions to scale.
  • A software that solves the challenge of scale can potentially dominate the market.
  • The concept of "Amy speaking to Amy" exemplifies a positive outcome of network effects.

"here there's both an opportunity to take advantage of the inherent virality and the network effects that comes from two ames touching each other. And that only works at scale. And I actually think that whoever solves the software challenge will have this opportunity to take the market."

This quote emphasizes the importance of virality and network effects in achieving market dominance for software solutions, especially when the software interacts with itself at scale.

The Concept of Scheduling Nirvana

  • "Scheduling nirvana" refers to the seamless interaction between two instances of the same scheduling software.
  • The process requires no human intervention and is considered "magic" when it works correctly.

"We call it scheduling nirvana around the office because we're geeks, but it is lovely when it happens because nobody is talking to anybody, just magic."

The quote describes the ideal state where scheduling software operates so effectively that it feels like a magical, automated process without human interaction.

Personal Preferences and Inspirations

Favorite Book: "How to Get Rich" by Felix Dennis

  • Dennis Mortensen appreciates the honesty in Felix Dennis's book.
  • The book is valued for its candidness and the author's willingness to share his journey without concern for politeness or business repercussions.
  • Mortensen finds inspiration in the book to be more truthful with himself and others.

"One book, which will sound completely silly and a little bit off putting, but I really like it nevertheless. So there's a british entrepreneur called Felix Dennis who wrote a book called how to Get Rich... He just doesn't give a shit. And I am a huge fan and I think once every eight months I read it."

This quote explains Mortensen's admiration for the book "How to Get Rich" due to its honesty and the author's disregard for potential backlash, which Mortensen finds refreshing and inspiring.

Preference for New York Over Silicon Valley

  • Dennis Mortensen expresses a strong preference for New York, where he intends to continue his future endeavors.

"I am. Very long New York. I am never moving out to the valley. And if I'm doing anything in the future, it's going to be in Manhattan."

The quote reveals Mortensen's commitment to New York as his chosen location for personal and professional activities, rejecting the idea of moving to Silicon Valley.

Favorite Blog: "Wait But Why"

  • Mortensen enjoys "Wait But Why" for its deep dives into complex topics.
  • He specifically mentions the post on the Fermi paradox as an example of the blog's compelling content.

"Favorite blog and newsletter is probably. Wait, but why? I've somehow fallen in love with that of late."

This quote indicates Mortensen's preference for the blog "Wait But Why," praising its ability to explore and explain complex subjects in an engaging way.

User Behavior with AI Scheduling Assistants

  • Users sometimes interact with AI assistants as if they were human, attempting to engage in social activities.
  • Mortensen finds these interactions both amusing and indicative of the technology's ability to simulate real relationships.

"I continue to go back to this one story where a male guest were trying to charm Amy into a set of drinks on a Friday night, and I was obviously just a little bit sad to begin with on behalf of my gender, but also a little bit excited on behalf of Amy and our technology and where we're at in life, that we can create this institute where there's a real relationship going on here at some level."

The quote reflects on a humorous incident where a user attempted to socialize with the AI assistant, showcasing the technology's convincing interaction capabilities.

The Future of Amy and X.AI

  • Dennis Mortensen aims to revolutionize the way formal meetings are scheduled, eliminating the need for traditional email coordination.
  • He envisions a future where the inconvenience of manual scheduling is a distant memory.

"Here's the thing. There is a little bit above 10 billion formal meetings being set up in the US alone every year... I'm chasing those. No more, no less."

This quote outlines Mortensen's ambitious goal to transform the scheduling of billions of formal meetings in the US through his AI technology.

Acknowledgments and Opportunities

Gratitude for Introductions and Time

  • Thanks are given to Matt Turk for introducing Dennis Mortensen and to Mortensen for sharing his journey.

"And again, I'd like to give a huge hand to Matt Turk at first. Mark for the intro to Dennis today and Dennis for giving up his time to reveal the incredible x AI journey."

The quote expresses appreciation for the connections made and the time spent discussing the journey of X.AI.

VC Unlocked Program

  • VC Unlocked is a crash course for those interested in venture capital.
  • The course offers networking opportunities and insights from top investors.
  • A deadline is mentioned for enrollment in the program.

"If you'd like to join the world of VC and invest in incredible companies like X, AI and Dennis, or even improve your status within the VC industry itself, then VC unlocked really is for you."

This quote promotes the VC Unlocked program as an educational and networking opportunity for aspiring venture capitalists and those looking to invest in companies like X.AI.

Lisa Mattress Endorsement

  • The speaker endorses Lisa mattresses for their "universal fit" and trial period.
  • A promo code is provided for a discount on the mattress.

"But with Lisa, their mattresses are designed to take the guesswork out of buying a mattress... So take advantage and check out lisa.com VC and enter the promo code VC 75 for a whopping $75 off."

The quote is a promotional endorsement highlighting the advantages of Lisa mattresses, including a trial period and a discount offer for listeners.

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