Why AI will eat McKinsey’s lunch — but not today

Managing Director of 55 -year -old Silicon Valley Venture Farm Navin Chad MefieldAI’s ability to transform people like advice, law and accounting is a big bet. Veteran investor, whose win includes Lift, Woo Mark and Hashikarp, recently discussed on TechCrunch Strikelivosy evening at Menlo Park Why does he believe that the “AI teammate” can produce software-national margins in the labor-intensive sector, and why startups now noticed the neglected markets with giants like accentors, even if he has ever confessed to the expectation of the Silic Valen. This conversation has been lightly performed for length and transparency.

You think that law agencies, consulting companies and accounting services will be fully re-imagined that work with software-national margins by a 5 trillion dollar market-AI-FIRST company. Prove it. What did you see outside of PowerPoint presentation?

I think an advantage of a firm in business for more than 50 years is that it has seen all the trends in this AI age from the mainframe to minicampute to PC, Internet, mobile, cloud, social and now. The example that I give is in the late 90’s, this idea of ​​e-Business came, which was: if I did a physical business if I was simply brick and mortar; I need to click and mortar. Then outsourcing becomes a tendency and offshoreing becomes a big trend. You have not been able to create a software service company without a presence in India or emerging markets. The same thing happened with supply chains and production – China and Taiwan Rose. So what is this new age with AI? Obviously, the AI ​​is a 100x power, and the AI ​​team is tied to the people, hopefully make them better. And I think it’s, and it will help to re -imagine the business.

Many of the repetitive tasks are about to be done by AI … and there will be two models. A is a ‘you grow biologically. The second is that you grow inorganically. The The

Can you give a specific example of how it will work?

What kind of work can an LLM or AI do? OK, tell me I have to implement the Salesforce. Who wants to do this? People will come and say, ‘I am your client manager. You have to implement the Salesforce. ‘It’s the same set of things. Use AI to do this and put people on the loop at all that AI cannot do.

Now, suddenly, if you start these types of things you can do less by humans and work more by AI and [customers] When simply pay for AI [they] Use it.

And market [entry] Never have to go after [big consulting and IT companies] Like accentor, infosis or TCS. Go behind the neglected people. 30 million small companies in the United States and 100 million worldwide that cannot afford knowledge workers. Provide services as their software. They say, “I need a receptionist i [create] Startup funding forms with some people [involvement] For the discussion. You do not compete with the pronunciation of the world. You go after the fragmented markets, where you charge per day instead of charging for a contractor instead of charging every hour.

Determine result-based prices than time-based billing.

It’s a result based, yes. The The Cloud billing is like this; Electricity is like this. The .II. If 80% of the work is done by AI, it may have 80% to 90% of gross margin. People may still have 30% to 40% margin. You can mix the margin of 60% to 70% and produce 20% to 30% knit income. And believe it, most service companies make money. Technology agencies are not. They live with the money of the initiative and then the money of the public market.

You simply led the series for a company by the name Grov A A few weeks agoThe This is an AI Tech Consulting Startup. What did you see among its primary customer pilots?

I think this is where the inorganic and organic combinations occur. [Gruve was founded by] Very successful founders who had previously done two service organizations [and] Bootstrapped, and their income is $ 500 million and $ 50 to $ 100 million for profit. They started this time and said, ‘What do we know? We know security. “So they have acquired a 5 million dollar protection consultation agency [that offers managed security services]The And they said, “Let’s take a look at the people. All growth from this point will happen through AI.” And they had grown from that [$5 million in revenue] $ 15 [million in revenue] In six months. They literally have an 80% gross margin. It is the result based. Customers like it. Cisco likes it. They say, “Hey, I’m not hacking. Why am I paying for all these security people?” If you outsource, [a vendor has traditionally charged] $ 10,000 a month. [Gruve] Say, ” [You pay us] Zero if you are hacked, if there is an event i will pay me if i look at it ”

Companies like McKinsi just can’t buy this AI power? They got big business that they don’t want to lose.

Yes, I think all that is about to happen is the inventor’s dilemma comes here [the model] Cause [SaaS companies] Charge the monthly companies instead of five years ahead. Enterprise companies have also collected 20% maintenance feeThe It was hard [for them] This drug gets off and says, “Oh, I’ll charge you monthly.” Business model innovation was the main thing. They didn’t do it. So McKinsi and Accentor, with so much displacement they are going to be busy serving their clients [which is why I advise founders to] Go behind the neglected people. Strategies to a unique to go to a unique to go to a unique [an Accenture can’t come down market to serve]The

However, they too are about to imagine again. So these small companies, which are not competing with them today, identify my words: in 10 years they will compete with them. And those big companies – McKins, BCG, Accentor, TCS, Infosys – all have the inventor’s hesitation [and are asking themselves]: When do I do it? [When do I switch to an outcome-based AI model?] Because as a public agency, my earnings are about to come down to utility-based earnings from forecastable earnings.

You engraved $ 100 million To dedicate for the latest fall of “AI teammates” from your recently raised funds. What does an AI equipment vs. true AI teammate do?

There are plenty of Buzzords in the industry. At first it was Kapilots, then AI equipment, AI agent, AI teammate. So the Mefield thesis is an AI teammate who cooperates with a man to share and goes to better results. The technology that can be created can be agent technology or kapilot. It is revealed, “I am a HR teammate. I’m a sales engineer partner.” The purpose is not replaced; The purpose is to cooperate with the team together.

When people started talking about teammates and assistants, it was listening to the novel, I think if more people are losing their jobs if it looks shameless. What is Silicon Valley? Marketing?

Absolutely right, and I think we don’t need to do it in a sugarcot. We need to address it. The .ES, job displacement is about to be displaced, but people are smart. They are jockey. Here is the horse II. We will re -imagine ourselves. We will re -invent ourselves. Today, to spend on focus, but we can understand how to expand our markets, how to increase revenue. It comes with every technology wave. When Microsoft Word came to the PC on the desktop, people thought [executive assistants] Was out of business. Then Excel came, and the accountants who calculated – everyone thought they were out of business. We saw the same with Uber and lift. People thought the taxi drivers would leave. But what happened instead of this? The markets are expanded.

My thesis is, emerging markets like India, China and Africa were never landlines – you couldn’t dig the copper, so they went to wireless, cellular – this is going to happen to many markets. AI will do the job where people are not even available to serve that customer. So, in the long term, I’m very, very bullshit. In the short-run time, there will be pain, but there will be no pain, no profit.

Talking about coding, recently announced “Vibe-Coding “The Agreement focuses on the six-month-old Israeli company that has just reached $ 250,000 per month and reached $ 200,000 in monthly revenue. It was bought by another Israeli company Wex $ 80 million Cash Does that math mean you?

In fact, nowadays, no mathematics implies. We are in the AI ​​era you don’t know what is going to happen. I am surprised that with $ 2.4 million dollars [annual recurring] Revenue they were sold for only $ 80 million. I thought it would be 800 million dollars, didn’t it? [Laughs.] In today’s world, you don’t know. This is a marketplace.

How do you invest in that market?

That’s where the secret recipe comes from proven investors. They have crack the code. It is not science; This is an art. It’s like 10,000 hours [rule]: The more you practice it, the better you get. And the companies that have been around 50 or 60 years – we have seen all kinds of bubbles.

The number one rule is, you have your own answer star. There is discipline and no foomo, because for foamo sheep. And if you have these two or three things you have your own strategy and no fear, [you’ll do well]The Just to remember one thing: for people [in this audience] Those VC, we are in the business management business. We’re not about collecting the logo. We are taking small amounts of money and making them bigger.

This is the time of this part [of the cycle]Will make a lot of money. However I think 80% of people are about to lose money. They don’t know what they are doing.