Latest / The Neon Show / Which SaaS Companies Will Survive Anthropic and OpenAI? | Tim Guleri, Sierra Ventures

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Which SaaS Companies Will Survive Anthropic and OpenAI? | Tim Guleri, Sierra Ventures · The Neon Show

• 0:00
  SPEAKER_00: Intellectual curiosity is what builds a great incoming bunch of effort.
• 0:06
  SPEAKER_00: Second is instinct work ethic.
• 0:08
  SPEAKER_00: The best deals don't just walk to the door.
• 0:10
  SPEAKER_00: And the last one is they have to be a killer.
• 0:13
  SPEAKER_00: They have to know how to hunt.
• 0:15
  SPEAKER_00: You can't teach that.
• 0:17
  SPEAKER_00: You have to have 80% of that.
• 0:18
  SPEAKER_00: You know, I can teach you the other 20% because the best deals have multiple people on them.
• 0:25
  SPEAKER_00: Having done this for, you know, uh two and a half decades, that's the only way to stay in the game.
• 0:35
  SPEAKER_01: Tim, uh, I love your journey, right?
• 0:37
  SPEAKER_01: You you grew up in India, you grew up in an army background, moved around, you know.
• 0:42
  SPEAKER_01: You mentioned in one of your earlier podcasts that how your father taught you box on.
• 0:47
  SPEAKER_01: That if you if you get hit, you know, come back again, wear the gloves, and start boxing again.
• 0:54
  SPEAKER_01: Right?
• 0:55
  SPEAKER_01: That have would have given you so much resilience in your life.
• 0:58
  SPEAKER_01: That's correct.
• 0:59
  SPEAKER_01: And and while growing up, you know, you mentioned that you went to Punjab Engineering College, came for your master's in Virginia, where your scholarship got suspended.
• 1:08
  SPEAKER_00: Correct.
• 1:09
  SPEAKER_01: Right.
• 1:09
  SPEAKER_01: So amazing resilient background, and then you built two companies, took them to combine 3.8 billion in exits, and this is 25 years ago, or more than 25 years ago, which is like today 38 billion almost.
• 1:24
  SPEAKER_01: So what keeps you you know, even after so much achievement, so humble, so grounded?
• 1:29
  SPEAKER_01: Uh that's the first thing that I've heard from our fellow entrepreneurs while doing my research, right?
• 1:34
  SPEAKER_00: Yeah, no, thank you for that.
• 1:36
  SPEAKER_00: I think um it's uh the uh gift that I've uh got from my parents, which is uh curiosity.
• 1:44
  SPEAKER_00: I'm just very curious as a person.
• 1:46
  SPEAKER_00: And um, you know, when you when you you know put that arc over many decades of of building companies and now being a VC, that's uh I think the gift that keeps giving uh to me.
• 1:58
  SPEAKER_00: That's one axis.
• 1:59
  SPEAKER_00: And the other is uh it's as I call the stripes on the zebra.
• 2:04
  SPEAKER_00: I just don't know any other way to operate.
• 2:05
  SPEAKER_00: So I just have one gear which is you know 120% all the time.
• 2:10
  SPEAKER_00: Um and when you combine that with this uh box-on you know mentality that my dad uh uh you know sort of imbued in me, which is you know, sometimes you know you take it on the chin and you fall flat on the ground and you you dust your shoulders and kind of move on.
• 2:27
  SPEAKER_00: And I applied that when I was in school, obviously that that incident that you're citing.
• 2:31
  SPEAKER_00: Um and um uh in fact uh that led me to sell door, you know, books door to door here in Sacramento, California, because I I was too proud to call my dad and say, hey, send me$2,000.
• 2:43
  SPEAKER_00: And that journey actually that summer was selling books door to door in 110 uh degree heat with a 40-pound bag.
• 2:51
  SPEAKER_00: Uh and those books actually were self-help books and Bibles.
• 2:54
  SPEAKER_00: So imagine the Punjabi guy selling Bibles door to door in Sacramento.
• 2:57
  SPEAKER_00: Uh that that gave me um, you know, this this inner um sort of gravitas that said, hey, if I can do this, I can do anything.
• 3:06
  SPEAKER_00: And by the way, that summer I did make club.
• 3:08
  SPEAKER_02: Yeah.
• 3:08
  SPEAKER_00: So I was one of the top sellers.
• 3:10
  SPEAKER_00: So uh I think it's it's just you know, being curious, uh having that that energy to already always be on.
• 3:18
  SPEAKER_00: I I guess that's just the way one happens to be.
• 3:22
  SPEAKER_00: And then on top of that, when you look at um, you know, willing to you know dust yourself off and kind of keep going, I think that's the the three things I'd mention.
• 3:32
  SPEAKER_00: Uh, but uh you've done your research, so it's good to see.
• 3:35
  SPEAKER_01: And and you uh you know, Sierra Ventures is one of the formidable names in seed today, you know.
• 3:40
  SPEAKER_01: You run the philosophy by founder love.
• 3:42
  SPEAKER_01: Obviously, would love to know what you mean.
• 3:44
  SPEAKER_00: Yeah, yeah, yeah.
• 3:45
  SPEAKER_00: Actually, uh the founder love comes from my uh entrepreneurial journey myself because I looked at what made me uh good during those days and what did I have to learn.
• 3:56
  SPEAKER_00: And so uh because I've been practicing venture capital for almost 25 years, I tried to distill it down to, you know, uh, TG loves entrepreneurs, so loves is the central word.
• 4:08
  SPEAKER_00: And it's an acronym.
• 4:09
  SPEAKER_00: So um I think L stands for what I just was mentioning, which is a learning mindset.
• 4:14
  SPEAKER_00: I think the best entrepreneurs have a learning mindset.
• 4:17
  SPEAKER_00: They uh come to the journey with certain developed muscles and certain muscles that have to be developed.
• 4:23
  SPEAKER_00: And the only way you're gonna develop as a full entrepreneur is you've got to have this learning mindset, right?
• 4:29
  SPEAKER_00: Uh the O is for obsession.
• 4:32
  SPEAKER_00: You just have to have an itch that you want to scratch so bad, a problem you want to solve so bad.
• 4:38
  SPEAKER_00: So that's uh the O.
• 4:41
  SPEAKER_00: V is really uh velocity and just speed of execution.
• 4:45
  SPEAKER_00: Because I think, and this was true when I was an entrepreneur 20 plus years ago.
• 4:49
  SPEAKER_00: It is so true now that you have to move with just you know breakneck speed, right?
• 4:55
  SPEAKER_00: Uh E is empathy.
• 4:58
  SPEAKER_00: I believe in uh servant leaders, uh, the ones that actually are there to serve their organization, you know, hire well and grow.
• 5:06
  SPEAKER_00: Uh I think that's that's really, really important because that's how you build great teams.
• 5:10
  SPEAKER_00: So this idea that um you have low ego and high output, right?
• 5:16
  SPEAKER_00: Uh so that's the you know the E part of it.
• 5:19
  SPEAKER_00: And um uh S is uh interestingly, and you'll relate uh with it, which is the art of storytelling.
• 5:25
  SPEAKER_00: I think you uh have to have the ability to be able to move a market, move a customer base, move an employee base.
• 5:33
  SPEAKER_00: And that comes from just this you know idea that you can narrate uh what is it that you're trying to build.
• 5:39
  SPEAKER_00: So that's the uh you know, the the founder love, a Sierra love uh I often talk about.
• 5:44
  SPEAKER_00: Um but that's uh I look look through that lens when I'm uh talking to entrepreneurs.
• 5:50
  SPEAKER_01: Yeah.
• 5:50
  SPEAKER_01: I think in in today's age, especially you know, when everything is you know driven by AI, uh uh a founder's deep technical ability combined with storytelling.
• 6:03
  SPEAKER_01: Uh that what I've seen is make some people like unstoppable.
• 6:07
  SPEAKER_01: For example, you know, Amjad from Replit.
• 6:10
  SPEAKER_01: Yes, he was telling a great story for a long period of time till his revenue and uh you know caught up.
• 6:17
  SPEAKER_01: Yes.
• 6:17
  SPEAKER_01: And which made Replit what it is.
• 6:19
  SPEAKER_01: Yes.
• 6:20
  SPEAKER_01: Today he talks about it, but he was first of all a phenomenal tech entrepreneur.
• 6:25
  SPEAKER_00: Yes, that is correct.
• 6:26
  SPEAKER_00: That is correct.
• 6:27
  SPEAKER_00: I think ultimately uh you know you have insight uh into a problem and you get started as an entrepreneur, and now you have to convince the rest of the world.
• 6:35
  SPEAKER_02: Yeah.
• 6:35
  SPEAKER_00: And the idea is that you have that insight which is not known.
• 6:39
  SPEAKER_00: So then you know it's your job to be able to articulate that.
• 6:42
  SPEAKER_00: And you have audiences, really, three audiences.
• 6:45
  SPEAKER_00: You have investors, you have customers, and you have employees.
• 6:47
  SPEAKER_00: There's no fourth audience, and of course, maybe your wife at home who's wondering how why do you ask crazy enough to start a company?
• 6:55
  SPEAKER_00: Yeah.
• 6:55
  SPEAKER_00: Uh, but those are the four audiences.
• 6:57
  SPEAKER_00: And um, if you don't perfect the art of storytelling, it becomes really hard to scale a business.
• 7:02
  SPEAKER_01: Yeah.
• 7:02
  SPEAKER_01: So so would you say across all the companies that became big in your career as a venture capitalist that you're part of, they had the art of storytelling in all of them?
• 7:14
  SPEAKER_00: Uh some uh more than others uh at the beginning, but the ones that succeeded, uh the entrepreneur learned that uh this is the earlier point I was making, that you walk into a situation with developed muscles and underdeveloped muscles.
• 7:29
  SPEAKER_00: So as an entrepreneur, if that's you know, you kind of internally know that this is something I need to work on, then that's what you should work on.
• 7:37
  SPEAKER_00: Uh but I'd say that um 80% of the ones that have succeeded, that was uh semi-developed to developed muscle of the entrepreneur.
• 7:46
  SPEAKER_00: Uh but through the journey, they definitely you know had the gift of of being able to convince the markets um on what they were building and then why that they should care.
• 7:56
  SPEAKER_01: So if you reflect back in your journey, what have been some of the misses?
• 8:02
  SPEAKER_00: Um I'll tell you a funny story.
• 8:05
  SPEAKER_00: So I when I joined Sierra in 2001, I built two you know CRM companies.
• 8:13
  SPEAKER_00: Um my partner Jeff Frasen pulls me into a meeting, and it's uh this entrepreneur called John Dillon, and uh the company is Salesforce.com.
• 8:24
  SPEAKER_00: Um and uh people may not remember, but in that day, uh John had was uh had become the CEO and and and uh Mark Penioff, who I have a lot of love and respect for, um was chairman of the board.
• 8:39
  SPEAKER_00: Um and um my partner said, Hey, you you know CRM, come and take a look at this company.
• 8:45
  SPEAKER_00: And um, I loved what they were doing because I just built CRM and they were you know the one of the first companies that was delivering cloud native.
• 8:53
  SPEAKER_00: Yeah.
• 8:53
  SPEAKER_00: But the issue was they had 3% monthly churn.
• 8:56
  SPEAKER_00: So you run the math on that, you're you know, losing, you know, over you know, 30, 40% of your customer base, right?
• 9:04
  SPEAKER_00: And my partners said, there's no way this is gonna work.
• 9:08
  SPEAKER_00: And uh I was trying to convince them.
• 9:10
  SPEAKER_00: I'm a junior partner first.
• 9:13
  SPEAKER_00: So uh but uh lost that argument.
• 9:16
  SPEAKER_00: Uh and uh that was one of the biggest misses in my career.
• 9:20
  SPEAKER_00: Um but I I look back and I I don't I don't cry over it too much.
• 9:24
  SPEAKER_00: Uh you reminded me of that story because uh that that learning, the fact that you know you shouldn't over-index on uh these churn numbers, you have to like pull yourself out and see you know if the if these uh this particular company moves up market or changes the product in a particular way, these numbers will change.
• 9:43
  SPEAKER_00: So segmenting the market becomes really important, which is the way we should have looked at that deal.
• 9:48
  SPEAKER_00: We should have segmented the customer base and looked at the churn at the top of the pyramid and we would have come to a different conclusion.
• 9:55
  SPEAKER_00: But um, you know, water under the bridge, that was uh my biggest miss right early on in my career.
• 10:04
  SPEAKER_00: I think the the rubric uh we use at Sierra is that um if you uh like a company because of the space that they're innovating in, and and clearly like the team and the founder, uh, but are not sure about the economics of the business, um, it is okay to take a step back and write a small check uh because you have the seat at the table, uh, and then watch how the company does.
• 10:32
  SPEAKER_00: Uh that's a better format than than than you know um uh you know saying no.
• 10:38
  SPEAKER_00: Uh and that is actually why we love early state venture, because we we get to make those you are wrong.
• 10:44
  SPEAKER_01: I'm wrong all the time.
• 10:46
  SPEAKER_00: No, no, no.
• 10:46
  SPEAKER_00: And and that's you know, when you when you combine that, what's interesting is if you put a little bit of money, yeah, you you actually start learning that sector.
• 10:53
  SPEAKER_00: And and you know, then other deals become uh better because next time you look at something in a particular sector.
• 11:00
  SPEAKER_00: So it's a gift that keeps giving.
• 11:02
  SPEAKER_00: Um obviously you have to do it selectively because you don't want to end up with a portfolio of 100 companies in a single fund.
• 11:09
  SPEAKER_00: But uh I think we've perfected that art at Sierra, which is why the funds do well.
• 11:14
  SPEAKER_01: Yeah.
• 11:14
  SPEAKER_01: And what's your uh been some of the biggest learning through then ups and downs in the last 25 years in venture?
• 11:21
  SPEAKER_01: We have seen many cycles now.
• 11:22
  SPEAKER_00: Yes, yes, yes.
• 11:24
  SPEAKER_00: I think the the learning has been that um, you know, uh Silicon Valley in particular falls in love with uh a cycle, you know, which is which is beginning.
• 11:35
  SPEAKER_00: Like right now we're in the you know, sort of the second innings of AI, and there's all this capital flowing in, and the valuations are going crazy, and and you know, and you forget that uh ultimately the math has to foot, right?
• 11:51
  SPEAKER_00: Uh companies are measured on growth rates and and and revenue scale and EBITDA.
• 11:58
  SPEAKER_00: I mean, that that that is never going to change.
• 12:00
  SPEAKER_00: So uh one has to be rational about the the uh the potential of these companies that are being funded.
• 12:07
  SPEAKER_00: Yeah.
• 12:07
  SPEAKER_00: And when you're in the middle of a cycle, fund managers and and and people that have the control on the button on how much to put in and you know what valuation sort of get swept in the in the euphoria.
• 12:20
  SPEAKER_00: And at Sierra, we we are very aggressive as a firm, but we fundamentally are you know very grounded in the way we approach these valuation discussions.
• 12:30
  SPEAKER_00: Um I tell entrepreneurs all the time, raise more than you you think you'll you'll need because there's always a rainy day.
• 12:37
  SPEAKER_00: But don't uh build a company with stretch marks.
• 12:40
  SPEAKER_00: Don't build a company where your valuation is so far ahead of the fundamentals that you will disappoint somebody in the next round.
• 12:49
  SPEAKER_00: So build for the long arc, build in steps, uh get the right people at the right uh portion of the journey, and ultimately everybody's gonna be happy, right?
• 13:01
  SPEAKER_00: If you if you do that correctly.
• 13:03
  SPEAKER_00: But I think entrepreneurs that chase um inordinate amount of money at the wrong time or an inordinate amount of valuations, uh, it ends up you know biting you over the long arc.
• 13:14
  SPEAKER_00: And I think that's the big learning.
• 13:16
  SPEAKER_00: Um every every wave looks very similar.
• 13:19
  SPEAKER_00: You know, there's a euphoric time, and that's when you have to really tap the brakes.
• 13:23
  SPEAKER_00: Um and and you know, I think we're in one of those right now.
• 13:27
  SPEAKER_01: Yeah.
• 13:27
  SPEAKER_01: My my one of the learnings that I share with my portfolio founder is don't stress about dilution.
• 13:33
  SPEAKER_01: Nobody who made a billion-dollar company worried about I made 30 billion, and if I had diluted less, I would have made 40 billion.
• 13:40
  SPEAKER_00: Yeah, yeah, that's correct.
• 13:42
  SPEAKER_00: That's correct.
• 13:43
  SPEAKER_00: I think um I the way I talk about that is I I tell entrepreneurs that your your cap table is is uh is a finite resource.
• 13:54
  SPEAKER_02: Yeah.
• 13:55
  SPEAKER_00: So you have to very intelligently look at that and you think think through the arc of the growth of the company.
• 14:02
  SPEAKER_00: And um I think uh obviously that means that you have to worry about dilution uh at different stages of the company.
• 14:10
  SPEAKER_00: And uh you will be shocked at how many folks walk into me with a with a seed configuration or series A, where they're just already giving up so much of the company that there's nothing left for the founder and the team.
• 14:22
  SPEAKER_00: And that's the those are the people that we're backing.
• 14:25
  SPEAKER_00: So then I have to sit and talk up to the investors to you know balance the company because I will not step into a deal or do an investment where the cap table is messed up because I really care about the entrepreneur and I care about the management team, which is what's pulling the company forward.
• 14:43
  SPEAKER_00: Uh so uh you try not to make those mistakes.
• 14:46
  SPEAKER_00: I have a lot of conversations with my founders, uh and we are very diligent about what kind of dilution I'll be taking in the subsequent round.
• 14:53
  SPEAKER_00: So it's a finite resource, has to be managed for the long run.
• 14:56
  SPEAKER_02: Yeah.
• 14:57
  SPEAKER_00: Um, you know, think of it as a you know, a bottle of Gatorade and you're crossing the Sahara.
• 15:03
  SPEAKER_00: So how many steps do you want to take on the 10th mile and the 100th mile?
• 15:06
  SPEAKER_00: Yeah.
• 15:07
  SPEAKER_01: So besides from work, what are the other things that you do, you know, in your schedule?
• 15:13
  SPEAKER_00: You know, unfortunately, I'm uh quite obsessed with my work.
• 15:17
  SPEAKER_00: So I'm very 24-7.
• 15:18
  SPEAKER_00: Uh, I think you have to be, if you're uh you want to be good at this game.
• 15:22
  SPEAKER_00: Um my entrepreneurs know this.
• 15:24
  SPEAKER_00: I uh I joke that I run at entrepreneurial pace.
• 15:29
  SPEAKER_00: So, you know, weekends are you know, I'm taking calls, doing meetings, whatever.
• 15:34
  SPEAKER_00: Uh I do have a lot of love for um uh I race cars.
• 15:38
  SPEAKER_00: I have um uh love for anti-car racing.
• 15:41
  SPEAKER_00: I own a 1928 Bentley.
• 15:44
  SPEAKER_00: Uh, done uh long races in that.
• 15:46
  SPEAKER_00: Uh so that's my uh you know passion.
• 15:49
  SPEAKER_00: Um I do shut my brain off for like 30 days when I'm doing the long rally.
• 15:54
  SPEAKER_00: So I've uh uh raced from Peking, China all the way to Paris, which is the longest uh road rally in the world called Peaking to Paris.
• 16:01
  SPEAKER_00: Uh also driven from um Peru to Oshua, which is the end of the uh South American continent.
• 16:08
  SPEAKER_00: So yeah, that that's um that's uh it's kind of like running a startup because this car fails and you have to fix it and get it back on the road.
• 16:16
  SPEAKER_00: So uh I have a lot of love for that.
• 16:18
  SPEAKER_01: Also uh many folks are commenting that you know, we see venture investing is changing in the AI world.
• 16:24
  SPEAKER_01: For example, uh anthropic is an anomaly, but still taking the case, you know.
• 16:30
  SPEAKER_01: Um they raised their first round at 100 at 600 and then subsequent rounds, and still it was seeming so expensive for everyone.
• 16:39
  SPEAKER_01: But whoever participated uh, you know, yeah as a fund, uh they made legendary outcomes.
• 16:46
  SPEAKER_01: Yes.
• 16:46
  SPEAKER_01: So what is still acceptable, not acceptable in venture capital when these kind of things are happening today?
• 16:53
  SPEAKER_00: Yeah.
• 16:54
  SPEAKER_00: I think uh the power law, which is uh what drives uh venture capital return, is is is very much in uh effect in any cycle where two to three percent of all the companies make uh majority of the returns, right?
• 17:09
  SPEAKER_00: Um however, one must not mistake the spikiest of the spike in that two or three percent as the rest of the market.
• 17:18
  SPEAKER_00: And I would consider anthropic being the spikiest of the spike.
• 17:22
  SPEAKER_00: I think the rest of the companies will be normal in the sense that they'll you know tap out between 10 billion and 100 billion, you know, which is what average uh tech companies do.
• 17:33
  SPEAKER_00: And so you have to underwrite as a venture capital firm, early state venture capital firm, getting an unfair share of those companies, right?
• 17:42
  SPEAKER_00: You can't sit here and and and change your fund strategy that you know we gotta get into the next anthropic, or you know, we should just change our fund strategy and just chase those deals because every anthropic had to come through the early stage gate.
• 17:55
  SPEAKER_00: So our game is to just be like we were talking before, uh we started recording, like stay close to the ground, stay close to the best founders, stay uh, which is why we really love the fact that Sierra is 44 years in the valley.
• 18:10
  SPEAKER_00: We have deep roots, and we know how the game is played seven less below the earth, right?
• 18:15
  SPEAKER_00: And that's kind of where the best ideas are formed.
• 18:18
  SPEAKER_00: So if you stay in the pocket, you will find, you know, plenty of uh enthropic looking companies in that two to three percent power law.
• 18:28
  SPEAKER_00: Um but um the narrative, you know, which is obviously the the media helps that a lot where everybody's doing entropic chasing or secondaries, and I think I find that a little uh absurd, honestly.
• 18:42
  SPEAKER_00: Um so we're just trying to stay grounded and saying, hey, we just have to have an unfair share of that 3%.
• 18:48
  SPEAKER_00: And if we do that and I keep our funds at a normal size, we will be able to multiply capital for LPs.
• 18:54
  SPEAKER_01: Right now you're raising uh fund 14.
• 18:56
  SPEAKER_01: Correct.
• 18:57
  SPEAKER_01: Is that right?
• 18:57
  SPEAKER_01: Of$350 million.
• 18:59
  SPEAKER_01: Right.
• 19:00
  SPEAKER_01: What is your learning?
• 19:01
  SPEAKER_01: You know, still you have to have a founder's mindset to go out and raise a fund.
• 19:06
  SPEAKER_00: Sure.
• 19:06
  SPEAKER_01: Because every time the question of LPs are very different in every cycle.
• 19:11
  SPEAKER_00: Yes.
• 19:12
  SPEAKER_00: Yeah, I think for us it's uh we are fortunate that we have a very, very stable capital base.
• 19:18
  SPEAKER_00: Um our LPs have been with us for a long time, and part of it is because uh we run the same playbook uh and we obviously uh uh adapt it for every cycle, and this is a different cycle we're in.
• 19:30
  SPEAKER_00: So the first AI native fund was fund 13, which was raised in 2023.
• 19:34
  SPEAKER_00: And so that fund has uh uh all the DNA of what fund 14 is gonna look like.
• 19:40
  SPEAKER_00: Uh so um, but having said that, you know, we we do go and talk to our existing LPs and a handful of folks that have been following us that want to get into fund 14 on how we're gonna change our orientation to even make execution better.
• 19:55
  SPEAKER_00: Um but um you know it's it's um there's plenty of money coming to AI.
• 20:01
  SPEAKER_00: Uh so we're fortunate to be in the right zip code.
• 20:04
  SPEAKER_00: Uh and um yeah.
• 20:08
  SPEAKER_01: And you know, uh uh today the definition of software is is very fluid.
• 20:13
  SPEAKER_00: Yeah.
• 20:13
  SPEAKER_01: Right?
• 20:13
  SPEAKER_01: Even enterprise software.
• 20:15
  SPEAKER_01: So so some uh you know folks believe that true AI native is it looks more like services rather than B2B SaaS or software.
• 20:24
  SPEAKER_01: What's your view on it?
• 20:26
  SPEAKER_00: Yeah, I don't agree with that characterization.
• 20:28
  SPEAKER_00: So I'll I'll I'll uh make two broad comments, right?
• 20:31
  SPEAKER_00: So the first thing is that the reason I'm so bullish on AI uh as a um technology that is going to actually uh propel um, I mean, the society and industries over the arc of the next 20, 30, 40 years, right?
• 20:47
  SPEAKER_00: So we're super early in that cycle.
• 20:49
  SPEAKER_00: That's number one.
• 20:51
  SPEAKER_00: Number two is um the analogy you should think about is that you know the water is just starting to pour and it's it's making its way down the fissures and and affecting different industries which have been sleepy for a long, long time, right?
• 21:06
  SPEAKER_00: You think of um, you know, discrete manufacturing, you'll think of aeronautics, you'll think of space, oil and gas, you'll think of oil and gas, right?
• 21:15
  SPEAKER_00: So these are structured industries that have been around for 200 years, right?
• 21:21
  SPEAKER_00: And and lethargic, like 3% growers, 4% growers, right?
• 21:27
  SPEAKER_00: Uh with AI seeping through them, they're going to get that octane boost.
• 21:32
  SPEAKER_00: And you will see a lot of reinvention uh in these industries.
• 21:37
  SPEAKER_00: So that's just at a very broad uh level.
• 21:40
  SPEAKER_00: Um the second is net new industries are being born.
• 21:44
  SPEAKER_00: So this whole space, uh the idea that that that that spaces that that whole sector is getting reignited is is fascinating to watch, right?
• 21:54
  SPEAKER_00: Um so I feel that below the classic substrate of Tech investing, which were typically infrastructure and applications.
• 22:05
  SPEAKER_00: There's a whole new set of opportunity sets where venture capital dollars will flow.
• 22:12
  SPEAKER_00: And we're very bullish because Sierra's been doing it for over 20 years.
• 22:16
  SPEAKER_00: My partner Ben, as I was telling you, was a specialist in deep tech.
• 22:20
  SPEAKER_00: He's got a PhD from Princeton, made a lot of money in deep tech.
• 22:24
  SPEAKER_00: We have a new partner that does frontier tech.
• 22:27
  SPEAKER_00: And obviously, you know, we've made a lot of money in the app and infra space.
• 22:32
  SPEAKER_00: To your app question, I think the AI LLMs are diffusing again into these industries.
• 22:40
  SPEAKER_00: The shape of what a business application looks like is going to change.
• 22:44
  SPEAKER_00: And the way that application shows up at the doorstep of the CIO of Delta or CIO of Morgan Stanley is going to be different, where you're not going to get upgrades, you know, every six months is going to be a continuously upgrading cycle.
• 22:58
  SPEAKER_00: But I do not buy into the uh you know, sort of the narrative that, hey, all CIOs are going to be building ERP and CRM.
• 23:08
  SPEAKER_00: That makes no sense to me.
• 23:11
  SPEAKER_00: If you're the CIO of Delta, you better be an expert at logistics and flying and keeping airplanes on, you know, uh, you know, safe and flying.
• 23:20
  SPEAKER_00: That's your job.
• 23:21
  SPEAKER_00: Not building ERP software.
• 23:23
  SPEAKER_00: You buy the best agentic ERP software that is costless, easier to maintain, is easier to use, and that's gonna come from a new breed of companies that are innovating in the in the application space.
• 23:35
  SPEAKER_00: So um package applications, I think, will be very much alive.
• 23:39
  SPEAKER_00: They'll be re uh sort of imagined uh and they'll be very verticalized.
• 23:45
  SPEAKER_00: So we we believe a lot in uh a lot of value unpack is gonna happen.
• 23:49
  SPEAKER_00: Vertical application, we're very active in that uh category.
• 23:53
  SPEAKER_00: Uh, but I don't believe in the narrative that every CIO is gonna become an application.
• 23:57
  SPEAKER_01: So you don't believe in the in the market narrative of uh death of B2B SaaS?
• 24:02
  SPEAKER_00: No, not at all.
• 24:03
  SPEAKER_00: I think SaaS is gonna transform.
• 24:05
  SPEAKER_00: And and look, the companies that are not gonna transform quickly.
• 24:09
  SPEAKER_00: Uh we were talking about the, you know, uh our uh air table that just got bought, right?
• 24:14
  SPEAKER_00: That's a great example.
• 24:15
  SPEAKER_00: You know, they got bought for 2x.
• 24:17
  SPEAKER_02: Yeah.
• 24:17
  SPEAKER_00: Because, you know, they were gonna get anthropic.
• 24:20
  SPEAKER_02: Yeah.
• 24:20
  SPEAKER_00: That was very obvious.
• 24:22
  SPEAKER_00: And and so there's gonna be that sort of companies that just get wiped out.
• 24:26
  SPEAKER_00: And that's very true in every cycle.
• 24:28
  SPEAKER_00: It's a destructive cycle.
• 24:30
  SPEAKER_00: Yeah.
• 24:30
  SPEAKER_00: And out of that uh brush fire, you know, comes, you know, comes the next uh wave of great companies, and we're in the middle of that right now.
• 24:38
  SPEAKER_00: So I think all builders should be building.
• 24:40
  SPEAKER_00: Uh, they should not uh buy into this market narrative at all.
• 24:45
  SPEAKER_00: Uh I'm seeing amazing application companies being born, and you know, we we've invested in a handful of them, and they will look very different, but they will be packaged, somebody else will be maintaining them, not the CIO of Delta or the CIO of Morton Stanley.
• 25:00
  SPEAKER_00: Yeah.
• 25:00
  SPEAKER_00: Uh and that is gonna be the future.
• 25:02
  SPEAKER_01: You have back some of the legendary Indian entrepreneurs, like Deep Khalra from Make Matter, who are like the real OGs uh in India.
• 25:10
  SPEAKER_01: Tell us about your experience of investing in India and Indian entrepreneurs who started like basically in India and then probably moved to the US.
• 25:17
  SPEAKER_00: Yeah.
• 25:18
  SPEAKER_00: Look, I am um uh I'm on record saying this again, and I'll say it on your show that I think the golden age of Indian entrepreneur is upon us.
• 25:26
  SPEAKER_00: You will see some amazing uh world-beating entrepreneurs coming from India.
• 25:32
  SPEAKER_00: Um obviously we already have a lot of India-origin CEOs in the valley, uh, but I think that wave is gonna become even more pronounced.
• 25:41
  SPEAKER_00: Um, so when I came to Sierra in 2001, I was given the mandate to go open the India office, and I, being being you know, born and brought up in India, that was uh fun times.
• 25:52
  SPEAKER_02: Yeah.
• 25:52
  SPEAKER_00: When I landed there with a bag of cash in my hand, looking for entrepreneurs, there was no infrastructure software, no application software, it was only internet.
• 26:01
  SPEAKER_02: Yeah.
• 26:01
  SPEAKER_00: So I traveled and met with you know Barth Matrimony and and uh you know all the uh internet names at the time, including in the travel uh vertical.
• 26:12
  SPEAKER_00: Um and uh there was Yatra and there was Make My Trip.
• 26:16
  SPEAKER_00: Um I was just blown away by Deep.
• 26:22
  SPEAKER_00: Um the first time I met him, he is um even back then, he was um, you know, I'm talking 20 years ago, um very uh insightful about how he read the market trends.
• 26:36
  SPEAKER_00: Uh clearly, uh, and he's talked about the near-death experience that Make Matrip had sort of in the uh you know uh the 2000 era, when he was walking from you know server to server with a floppy in his hand and loading inventory um uh onto the cloud.
• 26:53
  SPEAKER_00: Uh and just that that deep instinct on where the market's gonna go, super humble, uh a great storyteller, back to the acronym that I was I was using.
• 27:07
  SPEAKER_00: And uh I felt that uh he would move the market.
• 27:10
  SPEAKER_00: Um this was uh the first, second, and third meeting, and we were lucky to back him then uh in 2007, uh we took the company public.
• 27:19
  SPEAKER_00: Um I'm still fortunate to uh be on that board.
• 27:23
  SPEAKER_00: Obviously, we sold our position, but he moved me to an independent board member, and he remains a very dear friend.
• 27:29
  SPEAKER_00: And um I I call him the Jeff Bezos of India.
• 27:32
  SPEAKER_02: Yeah.
• 27:33
  SPEAKER_00: Uh he does blush when I say that, but I believe he's he's uh he's an OG.
• 27:38
  SPEAKER_01: Well, what are the other Indian bets that you took, like make my trip?
• 27:41
  SPEAKER_00: You know, we've taken several bets.
• 27:43
  SPEAKER_00: Uh we are in Loop Health, uh, which is a great company.
• 27:46
  SPEAKER_00: They're um just uh raised a large round uh from Vinod Um Kostla.
• 27:51
  SPEAKER_00: They're uh effectively doing the Kaiser Permanente in India, so providing manage um you know healthcare systems for uh B2B.
• 28:00
  SPEAKER_00: That's a very exciting project we've done.
• 28:02
  SPEAKER_00: Uh we've backed uh smallest.ai.
• 28:05
  SPEAKER_00: I'm a big believer in voice.
• 28:06
  SPEAKER_00: I think that's gonna be the new modality.
• 28:09
  SPEAKER_00: And uh here's a great example of um not just great entrepreneur uh Sudarshan, but also um great technology that is coming out of India.
• 28:19
  SPEAKER_00: So when I met Sudarshan first, and by the way, the the tip came from Make My Trip, because they were looking at uh the voice infrastructure, uh, and and Smallest was one of the people that they're looking at.
• 28:31
  SPEAKER_00: So the CTO called me and said, hey, you should look at this company.
• 28:34
  SPEAKER_00: So we jumped on it.
• 28:35
  SPEAKER_00: So by the way, that's the gift that keeps giving, uh, you know, being part of the Make My Trip story.
• 28:40
  SPEAKER_00: So I was uh struck by um the fact that the small team in India had taken on the global mandate to build LLMs themselves that are voice LLMs, which is fascinating.
• 28:51
  SPEAKER_02: Yeah.
• 28:52
  SPEAKER_00: Right.
• 28:52
  SPEAKER_00: And the way they'd done that was that he'd assembled a bunch of very smart kids from IT.
• 28:57
  SPEAKER_00: They were following all the research coming out of the top labs all over the world, and then taking the best research and implementing that faster than the large, you know, OpenAIs and the Anthropics here, because open AI and Anthropic were solving the general LLM problem, but these guys were hyper focused on voice.
• 29:16
  SPEAKER_00: And that's why the product is better even today, you know, beating the largest model and all tests.
• 29:21
  SPEAKER_00: So that's a great example of an entrepreneur meeting the moment and doing something deep and different out of India.
• 29:26
  SPEAKER_00: And I think that's gonna continue.
• 29:29
  SPEAKER_00: And um as an infrastructure investor, I am very, very bullish and um would love to do more.
• 29:35
  SPEAKER_00: So uh if any of your viewership is building uh deep technology and they want a partner uh for the long haul uh out of the US, please uh reach out.
• 29:44
  SPEAKER_01: India is doing well in space now.
• 29:46
  SPEAKER_01: Yeah, one of the companies, Skyroot.
• 29:48
  SPEAKER_01: Yeah, it's it's just launched Vikram 1.
• 29:51
  SPEAKER_00: Yes, I did see that on the news.
• 29:53
  SPEAKER_01: And I think today valued at$2 billion, completely unimaginable.
• 29:58
  SPEAKER_01: A space company coming out of India five years ago.
• 30:00
  SPEAKER_01: You know, nobody would have put a bet that is correct.
• 30:02
  SPEAKER_01: That is correct.
• 30:03
  SPEAKER_01: The company would become a$2 billion company, and that's just the starting for that.
• 30:06
  SPEAKER_00: Yes, yes, yeah.
• 30:08
  SPEAKER_01: So as a firm, how do you you stay disciplined?
• 30:12
  SPEAKER_01: Because there's there's so much out here, especially in Silicon Valley.
• 30:16
  SPEAKER_00: Yeah.
• 30:16
  SPEAKER_01: Uh right.
• 30:18
  SPEAKER_00: I think uh it's hard.
• 30:22
  SPEAKER_00: Uh I'll I'll I'll start by saying that, because sometimes you navel gaze and and yeah, and and try to say, hey, like, are we not reading the tea leaves correctly?
• 30:33
  SPEAKER_00: So um, you know, when I look at a round being announced, whether it's a you know seed round or 400 pre-raising, yeah, you know,$60 million or whatever.
• 30:43
  SPEAKER_00: Um, look, those are very smart investors.
• 30:45
  SPEAKER_00: They're seeing something that clearly I didn't see in that opportunity.
• 30:49
  SPEAKER_00: Uh, but I remind myself that every year there are um, you know, 10,000 B2B companies that are born.
• 30:55
  SPEAKER_00: Uh our investment cycle is three years, so that's 30,000 uh B2B companies, a pool to choose from, uh, out of which we're trying to choose 30.
• 31:04
  SPEAKER_00: So you can do the math, you know, right?
• 31:05
  SPEAKER_00: We can we can have many, many, many great funds out of that pool.
• 31:09
  SPEAKER_00: So we have to stay disciplined in our pocket.
• 31:11
  SPEAKER_00: However, we do know that times change, and so now valuations have shifted a little um, you know, up from when we started investing fund 13 and 23, and we've adjusted to that and we're aggressive as the next VC.
• 31:26
  SPEAKER_00: Um but um uh you know, we we shift the strategy in every fund cycle and try to be a nose on the ground.
• 31:35
  SPEAKER_00: And we look at our win and loss rates and see why we didn't win a particular deal.
• 31:39
  SPEAKER_00: And we we obviously, you know, uh we're street fighters, we we you know, we will show up and try to win the deal.
• 31:46
  SPEAKER_00: And and Sierra has a all hands-on-deck philosophy.
• 31:49
  SPEAKER_00: So if a partner brings a deal in, doesn't matter whether it's Shomick or Vignesh or Mark or Ben or myself, the whole partnership descends on it.
• 31:58
  SPEAKER_00: If you like it, we will win it.
• 32:00
  SPEAKER_00: Um, we move with speed and with clarity.
• 32:03
  SPEAKER_00: And we are a very prepared mind uh fund.
• 32:05
  SPEAKER_00: So we do a lot of work, and all a lot of work is already done when a deal walks in.
• 32:11
  SPEAKER_00: And we overlay on top of that our CXO network, uh, which is just an amazing resource.
• 32:16
  SPEAKER_00: So these are 80, you know, CIOs and CXOs that have been with us, by the way, for 24 years.
• 32:24
  SPEAKER_00: And we also have another group called EPL, which is engineering and product leaders.
• 32:28
  SPEAKER_00: So this is the CTO of Uber and CTO of you know Glean and so on and so forth.
• 32:34
  SPEAKER_00: That group we bring into action when we're looking at a new deal and we can get feedback in in literally 24 hours on an idea, and that helps us move with speed and conviction.
• 32:44
  SPEAKER_01: What I've heard from entrepreneurs while researching for the podcast is that the final step is the legendary dinner with Tim.
• 32:52
  SPEAKER_01: I would say that when you roll the toast and close, close the close the dealer.
• 32:57
  SPEAKER_00: I think I think uh celebrity dinner with any of my partners.
• 33:02
  SPEAKER_00: Look, I I I do like to have a good time while I'm helping entrepreneurs, uh otherwise, uh you know, work just it just becomes work.
• 33:09
  SPEAKER_02: Yeah.
• 33:10
  SPEAKER_00: So um I just I I invest in the relationship uh with these founders.
• 33:15
  SPEAKER_00: And the reason is um nothing other than the fact that um I take my job as a board member very seriously, and uh I am not here for just boosting the ego of a founder.
• 33:27
  SPEAKER_00: Um I think my job is like I'm a I'm a I'm a trainer, a fitness trainer.
• 33:32
  SPEAKER_00: Yeah, and I will show up and my job is to shout at your face if you're not lifting the weight that you I know you can lift, right?
• 33:40
  SPEAKER_00: So uh what this um this friendship lets you do, which is built over glasses of wine and you know, Siddharshan, for instance, was at my house last Thursday.
• 33:51
  SPEAKER_00: Um we were just talking about him, that um relationship depth lets you have honest conversations uh without uh breaking the bond.
• 34:05
  SPEAKER_02: Yeah.
• 34:05
  SPEAKER_00: So that's why it it balances itself out.
• 34:08
  SPEAKER_00: Uh and I um, you know, we're here to win.
• 34:11
  SPEAKER_00: We're not, this is not a charity.
• 34:12
  SPEAKER_02: Yeah.
• 34:12
  SPEAKER_00: You know, if you if you're taking money from Sierra, taking money from me, uh, we're alpha dogs.
• 34:19
  SPEAKER_00: We will fight till the end to be number one.
• 34:22
  SPEAKER_00: Yeah.
• 34:22
  SPEAKER_00: Right?
• 34:23
  SPEAKER_00: And in doing so, we take hard decisions, we move fast, we break glass, uh, and that sometimes becomes heated in the kitchen, which is okay, because when you leave the kitchen, you know, you're still friends.
• 34:35
  SPEAKER_00: So um it's a it's uh it's another way to say that these dinners are just natural and that's just the way we operate.
• 34:42
  SPEAKER_01: So I tell every entrepreneur, you know, um you can win anywhere in the in the world, but like winning in Silicon Valley, be it raising, beat customers, is really important because it's like really like the Olympics of tech that is getting played here.
• 34:56
  SPEAKER_00: It's a true statement.
• 34:57
  SPEAKER_00: Very true statement.
• 34:58
  SPEAKER_00: And I think it just has to do with the culture and and and just the way the value works.
• 35:03
  SPEAKER_00: It's uh I tell people most of the work gets done after hours and weekends, you know, because that's where the relationships are very tight.
• 35:11
  SPEAKER_01: And and what I believe is it's a small place.
• 35:14
  SPEAKER_01: Uh uh reputation carries you a long way here.
• 35:17
  SPEAKER_00: Yes, that is very true.
• 35:18
  SPEAKER_00: Very, very true.
• 35:20
  SPEAKER_00: You have one call away from finding about you know anything about anybody, because uh those of us that have been in the valley, um, you know, I I moved here in in the early 90s.
• 35:32
  SPEAKER_00: Um it's uh it's a place, it's a gift that keeps giving.
• 35:35
  SPEAKER_00: I would not think of ever imagining not living here.
• 35:38
  SPEAKER_00: Um it's an amazing place.
• 35:40
  SPEAKER_00: Don't don't you imagine the life in vineyards chilling, uh you know, sipping great wine and I'd I do that too, but uh but but um you know we we uh we go do go up to Napa and Sonoma.
• 35:54
  SPEAKER_00: Uh we love wine.
• 35:55
  SPEAKER_00: But I I I think um back to the earlier point, it's just uh that is just not me.
• 36:01
  SPEAKER_00: I I just I am 24-7, unfortunately.
• 36:04
  SPEAKER_00: And my wife is now tell us about your family.
• 36:07
  SPEAKER_01: We'd love to know, you know, your family growing up here in the valley.
• 36:11
  SPEAKER_00: Uh two wonderful daughters.
• 36:12
  SPEAKER_00: I'm I've uh you know been married to my wife uh now for for many, many years, going uh close to I think uh 35 years now.
• 36:22
  SPEAKER_00: Um and um uh my goal, my girls are uh one of them is uh lives in Southern California.
• 36:29
  SPEAKER_00: She works in a in a tech startup, and my younger one is just starting a PhD in Austin in AI ethics.
• 36:37
  SPEAKER_00: Uh so she's uh she's done computer science from Stanford, but uh uh she's always had a deep um love for ensuring that AI um you know is used in a responsible way, and so that's her uh her life's work, and she's uh she's off to.
• 36:53
  SPEAKER_01: You must be really proud because your father, like you saw your father, amazing work ethics, and your girl saw you with amazing work ethics over the last 20, 25 years.
• 37:05
  SPEAKER_00: That is correct.
• 37:06
  SPEAKER_00: In fact, I remember uh you remind me of something I I said to somebody, uh, and I got the question when I sold Octane for three billion plus or whatever, uh, like you know, why why are you not retired?
• 37:19
  SPEAKER_00: And um, and and the line I used was I can't imagine seeing my girl seeing me in pajamas on a Monday.
• 37:27
  SPEAKER_02: Yeah.
• 37:28
  SPEAKER_00: Right?
• 37:28
  SPEAKER_00: Like I I cannot.
• 37:30
  SPEAKER_00: And uh and because you have to lead by example.
• 37:33
  SPEAKER_00: Yeah.
• 37:33
  SPEAKER_00: And um, and uh so that's what I did.
• 37:37
  SPEAKER_00: Um, I think I might have taken a month off, and then you know, I was at Sierra, right, after that.
• 37:43
  SPEAKER_00: Um so uh and and you know that's obviously translated into uh to great young ladies that have a lot of passion for what they do and uh and having you know they're also having fun in life.
• 37:56
  SPEAKER_01: Uh 25 years in venture, you know, what are the principles that have remained the same and what have changed?
• 38:03
  SPEAKER_00: Man, you ask very deep questions.
• 38:07
  SPEAKER_00: Um I think the principles are uh the learning mindset is number one because um if you don't have that um and you depend on what you came in with, you'll just become uh old in your thinking and your and and the way you approach technology.
• 38:30
  SPEAKER_00: And it's just not technology, it's also sort of the way the business gets prosecuted on the street.
• 38:35
  SPEAKER_00: You know, what does a sales guy look like, a new marketing person look like?
• 38:38
  SPEAKER_00: You have to always be repotting yourself.
• 38:41
  SPEAKER_00: So that's number one.
• 38:43
  SPEAKER_00: I think number two is um uh authenticity.
• 38:48
  SPEAKER_00: So you have to be uh very authentic about what you're really good at and what is the unique thing you can bring to a conversation with an entrepreneur, right?
• 39:00
  SPEAKER_00: And when you have that authenticity, then I think it's easier to um you know be in a conversation with an entrepreneur and speak with distinction.
• 39:09
  SPEAKER_00: Uh because entrepreneurs are very smart, they can, they can, they can smell when something is not real.
• 39:15
  SPEAKER_00: Um the third I would say would would be speed, uh, because that's the one constant and great venture in the venture world because entrepreneurs don't move slow.
• 39:26
  SPEAKER_00: So if you move slowly as a firm or personally, you're just gonna be left behind.
• 39:32
  SPEAKER_00: And I think those are the three constants.
• 39:33
  SPEAKER_00: And I think you know, I certainly apply them to myself and and to the firm.
• 39:37
  SPEAKER_00: And uh Sierra uh has a um you know very blue-collar ethic.
• 39:44
  SPEAKER_00: Yeah.
• 39:44
  SPEAKER_00: Uh we um, you know, we're a quiet firm, but we let the numbers do the talking.
• 39:51
  SPEAKER_00: Yeah.
• 39:52
  SPEAKER_00: Um and we're we're consistent in what we you know what we bring to the market.
• 39:56
  SPEAKER_00: So the brand is known for what it does.
• 39:59
  SPEAKER_00: And we don't believe we need to be like everybody else, because the beauty is the market is uh so big.
• 40:05
  SPEAKER_00: Yeah, so this is not a market where there's gonna be one winner.
• 40:09
  SPEAKER_00: Several funds can do very, very well.
• 40:11
  SPEAKER_00: You just have to be very convinced in your strategy and just show up to work.
• 40:16
  SPEAKER_00: Yeah.
• 40:17
  SPEAKER_01: And um overall, you know, the how the you know the plusilla last 25 years, the how the market rewards has changed, I be, I believe, right?
• 40:29
  SPEAKER_00: Say that again, ask a question.
• 40:31
  SPEAKER_01: For example, um, market would earlier reward, let's say to take a company public early on, let's say when when you are an entrepreneur, yeah, right?
• 40:40
  SPEAKER_01: Yeah.
• 40:41
  SPEAKER_01: And today the market is rewarding for company being as private as long as possible.
• 40:48
  SPEAKER_01: At least that's what I see from firms outside.
• 40:51
  SPEAKER_02: Yeah.
• 40:51
  SPEAKER_02: Right.
• 40:51
  SPEAKER_02: Yeah.
• 40:52
  SPEAKER_01: So how as a firm you perceive that for your own fund cycle, for your own returns, for your own being responsible to your own LPs.
• 40:59
  SPEAKER_00: Yeah.
• 41:00
  SPEAKER_00: Yeah, I think uh that's that's correct.
• 41:02
  SPEAKER_00: I I think uh so broadly speaking, I think the US does have an IPO problem.
• 41:07
  SPEAKER_00: I think the structure of the market has to change such that it allows companies that are doing 300, 400, 500 mil uh to go public.
• 41:15
  SPEAKER_00: Uh because if that doesn't happen, you don't have uh capital support from the from the public market to go on and become uh great companies.
• 41:25
  SPEAKER_00: So something will definitely uh need to change.
• 41:29
  SPEAKER_00: Uh every company can't stay private forever.
• 41:32
  SPEAKER_00: Um a few can that are in that you know, top of the spike.
• 41:36
  SPEAKER_00: Uh so I think structurally the markets will will have to change and they will uh in the in the coming uh decades, uh coming decade.
• 41:44
  SPEAKER_00: That's number one.
• 41:45
  SPEAKER_00: I think the second is that um uh because we do very deep IP-centric investing, um the uh idea that our companies, when they get to 10, 20, 30 million dollars in ARR, there's a very rich market for MA.
• 42:01
  SPEAKER_02: Yeah.
• 42:01
  SPEAKER_00: And that is, I mean, if you look at the numbers, that is always a gift that keeps giving.
• 42:07
  SPEAKER_00: So uh for us, you know, if we happen to sell a company, um uh, you know, we we sold a company recently to Palo Alto Networks, uh, right before that, another one to Salesforce.com.
• 42:18
  SPEAKER_00: Because the fund on a relative basis is small, you know, our funds are in the three to three fifty mil size, those numbers matter and they can create the X on the fund.
• 42:29
  SPEAKER_00: Uh so for us, uh, we uh that's why we like where we are.
• 42:34
  SPEAKER_00: From uh, you know, there's a line in venture capital that your fund sizes your strategy.
• 42:39
  SPEAKER_02: Yeah.
• 42:40
  SPEAKER_00: Uh and uh that is very true because you start doing weird stuff if the fund gets oversized.
• 42:47
  SPEAKER_00: So I start liking larger checks, uh chasing larger valuations, chasing sectors you should not be in, and all that uh are not optional when you're doing 3350.
• 42:58
  SPEAKER_00: You stay in your in your pocket and find the best companies.
• 43:02
  SPEAKER_00: So um so the MA gift it always keeps giving.
• 43:06
  SPEAKER_00: Having said that, we do have companies that you know we've seed funded and we have several in the portfolio that are now doing 200, 300, 400 million revenue.
• 43:16
  SPEAKER_00: And those will become public um as they you know get to those numbers.
• 43:21
  SPEAKER_00: So uh, you know, take the case of make my trip, it's doing a billion revenue and 200 million in EBITDA today, right?
• 43:28
  SPEAKER_00: So sometimes it just takes longer.
• 43:30
  SPEAKER_00: Yeah.
• 43:31
  SPEAKER_00: And uh we're a patient firm.
• 43:33
  SPEAKER_00: Uh, you know, we uh we like to come early and stay late, as I mentioned before.
• 43:39
  SPEAKER_00: So um the uh size of the price is gonna come from MA plus IPOs.
• 43:46
  SPEAKER_00: So I think we just you know we play both sides of that liquidity market.
• 43:50
  SPEAKER_00: Plus, uh there's also a very interesting secondary market developing where these companies, when they get to those interesting numbers, there's capital.
• 44:00
  SPEAKER_00: Coming in that allows funds like ours to liquidate.
• 44:04
  SPEAKER_02: Yeah.
• 44:04
  SPEAKER_00: Because we also have to, you know, manage a DPI distribution to pay in capital in a in the fun life.
• 44:11
  SPEAKER_00: So that's a third option.
• 44:13
  SPEAKER_00: And that's actually quite quite attractive as well.
• 44:16
  SPEAKER_00: So we uh are always looking at those three.
• 44:20
  SPEAKER_00: And uh like I tell our LPs, I know my comp plan, which is to multiply capital.
• 44:25
  SPEAKER_00: And it's not uh value, it's it's it's distribution, right?
• 44:29
  SPEAKER_00: And um we're uh we're lucky to do that.
• 44:32
  SPEAKER_01: So what what gives a firm like Sierra longevity, right?
• 44:36
  SPEAKER_01: 44 years.
• 44:37
  SPEAKER_01: I I think we're hardly 10 firms in in Silicon Valley have that kind of longevity.
• 44:42
  SPEAKER_00: Yeah.
• 44:43
  SPEAKER_00: I think um there are a couple of things.
• 44:45
  SPEAKER_00: One is um one has to uh stay um keep your true north very steady uh because that's what uh compounds over time, that's the brand promise, and that's what entrepreneurs really uh get.
• 45:02
  SPEAKER_00: Uh that's the you know, sort of the the the um uh that's the sizzle on top of the stake.
• 45:09
  SPEAKER_00: When you take money from Sierra, the sizzle is the the brand promise, right?
• 45:14
  SPEAKER_00: Um because they're late estate funds that love to do business with us because they know the quality of the Sierra product when a company is raising an A or a B.
• 45:23
  SPEAKER_00: Yeah right um So the true North is really important.
• 45:27
  SPEAKER_00: I think the second thing that's important is um generational um shifts.
• 45:34
  SPEAKER_00: So when uh we have we take this very seriously, um you've met a few of my younger partners.
• 45:41
  SPEAKER_00: Uh it's an art, it's a very much a game where you learn on the job.
• 45:46
  SPEAKER_00: So, in the case of a few of them, you know, when they enter Sierra as a junior partner, they'll come and join board meetings and and we give them very tough projects.
• 45:56
  SPEAKER_00: So, for instance, you know, in this one company where Vignesh was with me, we were going through a CRO change and he led that project, right?
• 46:05
  SPEAKER_00: Uh and now it's muscle memory for him because he's leading his own deals, and now he he did one of them himself in one of his companies and did an amazing job.
• 46:15
  SPEAKER_00: So um generational transition has to be uh done in a very methodical way.
• 46:21
  SPEAKER_00: Uh, and I think that's what creates longevity.
• 46:24
  SPEAKER_00: Um, and the final thing is returns.
• 46:26
  SPEAKER_00: You have to, you know, make sure you're multiplying capital for your LPs, and uh, we take that very seriously.
• 46:32
  SPEAKER_00: So you get those three right, you I think you can be a hundred-year-old venture fund, which I hope Sierra is long after I'm gone.
• 46:40
  SPEAKER_01: So uh there's a lot of debate uh right now on social media about the venture that hey, now 3x growth year on year is not enough.
• 46:49
  SPEAKER_02: Yeah.
• 46:50
  SPEAKER_01: Do you still believe that?
• 46:51
  SPEAKER_01: Or do you think that generational companies can be made with the thesis that hey, if you consistently grow 3x over a period of long, long period of time.
• 47:00
  SPEAKER_00: Yeah.
• 47:01
  SPEAKER_00: No, I I do agree.
• 47:02
  SPEAKER_00: I think if you uh if you grow 3x, um you can still build a great company.
• 47:07
  SPEAKER_00: Um so I don't uh buy into the narrative around, you know, hey, you know, you see all these graphs on LinkedIn, you know, zero to hundred million dollars in nine months.
• 47:17
  SPEAKER_00: Eight months, nine months.
• 47:18
  SPEAKER_00: It's it's the thing you have to worry about, look at is what is the durability of that revenue.
• 47:23
  SPEAKER_00: You have to double-click uh and look at churn numbers and and land and expand and whether the you know the the the total contract value is growing up over time.
• 47:32
  SPEAKER_00: So the durability of the revenue actually is much more important.
• 47:36
  SPEAKER_00: And the the the the TAM into which, you know, the total market size into which that entrepreneur is or the company is innovating.
• 47:44
  SPEAKER_00: So um uh I do agree that uh AI um has changed the slope uh uh uh of growth expectation on what a uh a top decile company needs to look like to attract the best capital.
• 48:02
  SPEAKER_00: So that's a true statement.
• 48:03
  SPEAKER_00: But I don't think that that number is you know 0 to 100 in nine months.
• 48:08
  SPEAKER_00: I mean that that is a very uh you know chitsi way of looking at it.
• 48:12
  SPEAKER_00: You're not doing being intellectually honest.
• 48:15
  SPEAKER_00: So the way we look at it is say, hey, if you can grow you know 3x to 5x and it's durable revenue and it's a great founder, uh, and there's lots and lots of features to be built, uh, that's the those are the early numbers to inspect.
• 48:31
  SPEAKER_00: Because look at you know, one going to five, you know, five going to 15 or 20, this is mice nuts compared to where a company needs to be to be really a durable company, which is half a billion in revenue.
• 48:46
  SPEAKER_00: So for me, that's the goal, and you inspect that end goal through the early signs.
• 48:52
  SPEAKER_00: And uh, you know, I'm looking at a company right now.
• 48:55
  SPEAKER_00: Um, I was just in New York two days ago, where this is a founder I've made money with before, and um, you know, he's back talking to us.
• 49:05
  SPEAKER_00: And there um he did one year of research before he started this company, uh, after selling his last company when I where I was a seed investor.
• 49:15
  SPEAKER_00: And uh he now has line of sight to five million dollar contracts with uh which will be one of his first 10 customers.
• 49:25
  SPEAKER_00: And the speed of getting to a$5 million contract is you know four to six months, which is insane.
• 49:32
  SPEAKER_02: Yeah.
• 49:32
  SPEAKER_00: But the reason it's four to six months is because he's able to show these very large companies that the ROI on the five million dollar spend is twenty to thirty million dollars.
• 49:42
  SPEAKER_00: So when I see early signs like that, although the guy is today is you know doing about a million and ARR, I get very excited.
• 49:50
  SPEAKER_00: Um, you know, big TAM, yeah, known entrepreneur, right?
• 49:55
  SPEAKER_00: And and and very obvious ROI.
• 49:58
  SPEAKER_00: So I would do those deals, and this happens to be, by the way, in vertical uh you did this deal a couple of days ago?
• 50:04
  SPEAKER_00: No, I I haven't done the deal.
• 50:05
  SPEAKER_00: I'm I'm looking at it.
• 50:07
  SPEAKER_00: But this is the kind of deal that I got get excited by.
• 50:10
  SPEAKER_00: Uh and it answers your question, which is I don't think this guy needs to show 100x or you know zero to 100 in in nine months.
• 50:18
  SPEAKER_00: I'll be happy with this 3x as long as it's durable, and I can see the$5 million contract going to 20.
• 50:25
  SPEAKER_01: But second-time entrepreneurs like these who are already at a million and have complete visibility into 5 million from one, they are in the market raising 20, 25 million dollars.
• 50:36
  SPEAKER_00: Yeah.
• 50:37
  SPEAKER_01: Right.
• 50:37
  SPEAKER_01: So would you participate in these kind of deals or would you decide to stay away?
• 50:42
  SPEAKER_00: Well, in this particular case, um he is not raising 20 to 25.
• 50:48
  SPEAKER_00: He wants me on the board.
• 50:51
  SPEAKER_00: And um, you know, we're doing a special deal.
• 50:54
  SPEAKER_00: Sure.
• 50:55
  SPEAKER_00: Uh and he's he's happy to do it because you know we we've had a great relationship.
• 51:00
  SPEAKER_00: Um, you know, we we um we built a bond.
• 51:04
  SPEAKER_00: He was uh first-time CEO and last company.
• 51:07
  SPEAKER_00: When you backed him.
• 51:08
  SPEAKER_00: And I backed him and I was with him all the way through the exit.
• 51:11
  SPEAKER_00: So he's been with that journey with me.
• 51:13
  SPEAKER_00: Yeah um so I think the next round after if we hopefully invest will be that you know larger round.
• 51:20
  SPEAKER_00: This one is not that.
• 51:21
  SPEAKER_01: Got it.
• 51:22
  SPEAKER_01: So in in terms of uh ownership and valuation, what are some of the non-negotiables for you?
• 51:28
  SPEAKER_01: What are the lowest ownership that you will go to and what is the highest valuation that you will go up to?
• 51:33
  SPEAKER_00: Yeah, we uh we don't operate that way.
• 51:36
  SPEAKER_00: Uh we rather take a small position in a great company than a large company.
• 51:41
  SPEAKER_01: Like 5% or 6% position in a company.
• 51:43
  SPEAKER_00: Totally fine.
• 51:44
  SPEAKER_00: You know, the the company I was mentioning to you, um uh, you know, the Loop Health, which is in India, we're high single-digit owner, very, very happy with that investment.
• 51:55
  SPEAKER_00: My partner Mark's on that board.
• 51:57
  SPEAKER_00: Um, you know, uh obviously, if it is an early stage company and we're the first money in, you know, then we're in the sort of mid-teens to 20%, which is pretty typical.
• 52:12
  SPEAKER_00: And look, I tell entrepreneurs very simply, like, I'm on the same comp plan as you are.
• 52:16
  SPEAKER_02: Yeah.
• 52:17
  SPEAKER_00: Okay.
• 52:17
  SPEAKER_00: You're working for equity, I'm working for equity.
• 52:20
  SPEAKER_02: Yeah.
• 52:20
  SPEAKER_00: I just want the deal to be fair.
• 52:22
  SPEAKER_02: Yeah.
• 52:22
  SPEAKER_00: If I'm starting on ground zero with you and we're gonna make a$10 billion company, then I want to make$2 billion on that, you know, on that$10 billion, right?
• 52:32
  SPEAKER_00: With my 20% math, obviously loaded down, etc.
• 52:35
  SPEAKER_00: So uh because there's a shared uh North Star, those conversations become very, very easy.
• 52:42
  SPEAKER_00: Yeah, right.
• 52:43
  SPEAKER_00: And uh the other thing I tell my founders is that I will own, and you should test us um your next fundraise.
• 52:52
  SPEAKER_00: I am on your side, and because there's such good market signal on the deals that Sierra does, uh, we're lucky to have you know uh easier follow-on capital conversations.
• 53:04
  SPEAKER_00: Uh, but that's why I am manical about the product that gets produced in that you know, first check from Sierra to the next round.
• 53:12
  SPEAKER_00: Like what are the actual KPIs they're gonna deliver that the market's gonna get excited by?
• 53:17
  SPEAKER_00: And I know what those are, and my job is to make sure that we get there with the with the founder, yeah, you know, obviously going the board.
• 53:25
  SPEAKER_01: And uh uh as you mentioned, that you don't look at valuations, but uh any typical number that you say, like go to 60 to 100 or even beyond in I think um I think the the deals uh that are getting done now are range from you know 30 post to 100 post right now, right?
• 53:48
  SPEAKER_00: Um and uh that's where kind of infrastructure, you know, AI, like great founding teams, I'm talking about like the what I'll call responsible AIDS.
• 53:59
  SPEAKER_00: Um seeds are obviously still in that you know kind of 15 to 30 zip code, right?
• 54:04
  SPEAKER_00: When you're taking you know four or five million dots just to get off the ground.
• 54:07
  SPEAKER_00: And we do both.
• 54:08
  SPEAKER_02: Yeah.
• 54:08
  SPEAKER_00: Um and look, I think if there's more demand than supply, then we will play ball up to up to a you know reasonable amount.
• 54:18
  SPEAKER_00: But if it starts getting crazy and it's jump ball and the six VCs and you know it gets into like crazy town, I'm not a fan of party rounds.
• 54:28
  SPEAKER_02: Yeah.
• 54:28
  SPEAKER_00: Absolutely not a fan of party rounds.
• 54:30
  SPEAKER_00: You have you know four VCs, you've got this crazy valuation, and and honestly, nobody shows up to work.
• 54:36
  SPEAKER_02: Yeah.
• 54:36
  SPEAKER_00: You know, no, none of the guys show up to work because nobody has enough of a stake for it to matter.
• 54:43
  SPEAKER_00: And and I I still it it I scratch my head on why a founder would let that happen.
• 54:49
  SPEAKER_00: Because you really need a lead partner to be invested.
• 54:53
  SPEAKER_00: What that means is then they need to see that if the deal works, it'll be meaningful to them and to the fund.
• 54:59
  SPEAKER_00: So that's a better way to construct it.
• 55:01
  SPEAKER_00: So my general advice when somebody's raising, say 10, 15, 20 is that get your lead settled.
• 55:06
  SPEAKER_00: Hopefully it's us.
• 55:08
  SPEAKER_00: And then you know, we we fill in the rest, and then there's a clear, you know, person on point on the board, right?
• 55:16
  SPEAKER_00: And you need that as a as an entrepreneur.
• 55:19
  SPEAKER_00: Um uh and so those are the round configurations that we prefer.
• 55:24
  SPEAKER_01: And today, let's say in the last one or two years, how many of the companies that Sierra led or co-led were pre-revenue versus post-revenue?
• 55:32
  SPEAKER_00: I'd say 50-50.
• 55:35
  SPEAKER_00: And uh the reason I say 50-50 is because you have to uh remember that the distribution of the company we've done uh sit between our deep tech, uh frontier tech, and the enterprise practice.
• 55:50
  SPEAKER_00: And it's 50-50 across those two.
• 55:52
  SPEAKER_00: And deep tech and enterprise tech have zero revenue when we invest, right?
• 55:55
  SPEAKER_00: My partner Ben did a very interesting deal in the smart glass space, uh, which is you know, four professors from Oregon.
• 56:04
  SPEAKER_02: Yeah.
• 56:04
  SPEAKER_00: Um, and they have designed partnerships of some of these large uh companies that are building uh smart glasses.
• 56:10
  SPEAKER_00: That company is not going to be in revenue for a handful of years, right?
• 56:14
  SPEAKER_00: Um uh my partner Shomick has done a really interesting investment in um sort of anti um um, you know, uh sort of these these um ships that are in sea are also getting attacked by drones, you know, water drones.
• 56:32
  SPEAKER_00: And so there's a whole new class of uh warfare uh defense that is emerging to protect these ships against that.
• 56:40
  SPEAKER_00: Uh so he's done a very interesting Stanford team.
• 56:43
  SPEAKER_00: Uh he's backed that again.
• 56:44
  SPEAKER_00: They won't be in revenue for about a year, year and a half.
• 56:47
  SPEAKER_00: So that's that set, zero revenue.
• 56:50
  SPEAKER_00: I think the enterprise side, you know, when I say when we write the check and we've written the check, these are companies that might have like two or three pilots doing sub 500k.
• 57:01
  SPEAKER_00: And I think that's those are the investments we've made.
• 57:05
  SPEAKER_01: And when you are onboarding, let's say you mentioned you recently onboarded Shawmaker, the deep tech partner.
• 57:11
  SPEAKER_01: Yeah, what are the qualities that you are looking to add to the partnership when you are adding?
• 57:15
  SPEAKER_01: Because you will only add like once in five years uh a new member to the team or to the partnership.
• 57:20
  SPEAKER_00: Um well, so I'll answer both questions.
• 57:24
  SPEAKER_00: So I think um the the um qualities we are looking for are the same ones I mentioned before and very similar to the entrepreneurs we look for, honestly.
• 57:35
  SPEAKER_00: So one is uh you know the intellectual curiosity that I talked about, because uh having done this for you know uh two and a half decades, that's the only way to stay in the game.
• 57:46
  SPEAKER_00: So you have to always be, hey, I want to go read that paper.
• 57:49
  SPEAKER_00: Uh now that I've read the paper, I want to talk to that entrepreneur.
• 57:52
  SPEAKER_00: Now that I talk to an entrepreneur, I want to talk to the customer.
• 57:54
  SPEAKER_00: Then I'm gonna sit back and I'm gonna grind this into some sort of a framework.
• 57:58
  SPEAKER_00: Okay, now I understand how this space is moving, right?
• 58:01
  SPEAKER_00: That intellectual curiosity is what builds um a great incoming uh venture capitalist.
• 58:08
  SPEAKER_00: The second is um uh insane work ethic, because the best deals don't just walk through the door.
• 58:16
  SPEAKER_00: You have to shake the tree, you have to be in the network.
• 58:18
  SPEAKER_00: And so somebody that's 24-7 uh is what we what we look for.
• 58:24
  SPEAKER_00: Um and the third is really what I call the Sierra way, because uh we tend to be relatively humble uh you know people.
• 58:33
  SPEAKER_00: Uh so it's kind of that that ego and output equation I was talking about before.
• 58:38
  SPEAKER_00: Yeah.
• 58:38
  SPEAKER_00: Uh so we like people that are not you know too much into their own self, they're really letting their work show.
• 58:44
  SPEAKER_00: And uh truly the partnership matters, right?
• 58:48
  SPEAKER_00: Everybody gets to contribute uh to what Sierra's future is gonna be.
• 58:53
  SPEAKER_00: Um and uh so those three attributes would be probably um uh important.
• 58:59
  SPEAKER_00: And the last one is they have to be a killer, yeah.
• 59:02
  SPEAKER_00: They have to, you know, know how to hunt and they have know how to have the instincts to win.
• 59:09
  SPEAKER_00: Because um you can't teach that.
• 59:12
  SPEAKER_02: Yeah.
• 59:13
  SPEAKER_00: Okay.
• 59:14
  SPEAKER_00: Uh it's um uh you have to have 80% of that, you know.
• 59:18
  SPEAKER_00: I can teach you the other 20%, but this there has to be that instinct that once you lock onto a target and you know that's the target, you're just gonna bring it down because the best deals have multiple people on them, right?
• 59:31
  SPEAKER_00: And you have to you have to be able to win the best deals.
• 59:35
  SPEAKER_01: You have to be a killer to to win the best deals.
• 59:38
  SPEAKER_00: Absolutely.
• 59:38
  SPEAKER_01: Yeah, there is no forgiving in the business.
• 59:42
  SPEAKER_00: Yeah, yeah.
• 59:43
  SPEAKER_00: I still remember uh a quick story I'll tell you.
• 59:46
  SPEAKER_00: Um, and I think I I it's it's in one of the other podcasts.
• 59:50
  SPEAKER_00: So um uh the company I just sold to Salesforce.com, uh simulate out of out of um out of Boston.
• 59:58
  SPEAKER_00: And uh I'd flown back from Europe or something, and I was at the airport when I got a call from the CEO, um uh John Andrews, and he called me and said, tell me that you know he's going with another VC.
• 1:00:12
  SPEAKER_00: Uh so it was the dear John call, right?
• 1:00:15
  SPEAKER_00: Uh and I wouldn't take no for an answer.
• 1:00:19
  SPEAKER_00: I'm like, no, John, I I I don't care what the terms are, we're gonna be partners.
• 1:00:26
  SPEAKER_00: And then I you know went to my sales pitch.
• 1:00:29
  SPEAKER_00: And um he he was uh he told me later on, he was just shocked at my reaction, right?
• 1:00:35
  SPEAKER_00: And um anyway, he called his uh his co-founder, and then I ultimately ended up you know winning the deal.
• 1:00:42
  SPEAKER_00: Uh and I'm just saying that as an example where when you have conviction and you can show conviction to the founder, these things can't change.
• 1:00:52
  SPEAKER_00: That instinct where you have such conviction, yeah.
• 1:00:55
  SPEAKER_00: And maybe by the way, it could have been I ended up leading the round, I would be have would have been fine not being the lead check.
• 1:01:02
  SPEAKER_02: Yeah.
• 1:01:02
  SPEAKER_00: Okay.
• 1:01:02
  SPEAKER_00: But I wanted to be in that deal.
• 1:01:04
  SPEAKER_00: So it's one of those, you know, conviction-based things.
• 1:01:07
  SPEAKER_00: And now it turned out, you know, we made a lot of money, you know, because the sales sold to Salesforce.
• 1:01:12
  SPEAKER_00: But that killer instinct is the fourth leg of the stool.
• 1:01:16
  SPEAKER_00: Um, and I think if we get those four, that's a perfect CR partner.
• 1:01:20
  SPEAKER_00: And if you know anybody who's actually hiring, please uh please uh uh But how would you test that killer instinct?
• 1:01:27
  SPEAKER_00: You do it by you know doing reference checks and uh you know a killer when you meet a killer, right?
• 1:01:34
  SPEAKER_00: It's just it's just it's very obvious the way they behave and the way they talk and the way I mean by the way, killer instincts are not just about the deal, it's about closing anything.
• 1:01:45
  SPEAKER_00: Yeah, right.
• 1:01:46
  SPEAKER_00: You just need to be on the ball, right?
• 1:01:50
  SPEAKER_00: And uh it's easy to test uh when you when you get into a deeper conversation with these people.
• 1:01:55
  SPEAKER_01: Give me an example because there are a lot of listeners listening, so entrepreneurs are learning from it, new venture capitalists who want to enter into venture are listening and learning from it.
• 1:02:03
  SPEAKER_00: Yeah, yeah.
• 1:02:04
  SPEAKER_00: So I'll I'll I'll just give you a random example.
• 1:02:07
  SPEAKER_00: Uh there's a there's a guy that we're interviewing right now to be a CEO of one of my companies, and I can I can tell that he's a killer because he is uh actively thinking of every way to close me.
• 1:02:24
  SPEAKER_02: Yeah.
• 1:02:25
  SPEAKER_00: Okay.
• 1:02:26
  SPEAKER_00: Right.
• 1:02:26
  SPEAKER_00: He is in the interview process, he's talking to the other board members, you know, and I can see how his brain is working because uh every second day he'll check in with me.
• 1:02:38
  SPEAKER_00: Uh, when he has a conversation, he sends me his notes, right?
• 1:02:42
  SPEAKER_00: And you can see if I put him in a in a situation for go clear, close the deal, how he's gonna behave.
• 1:02:49
  SPEAKER_00: So that's a great example of transfer of behavior.
• 1:02:52
  SPEAKER_00: And that's how killers behave, right?
• 1:02:54
  SPEAKER_00: They just have an instinct and they they triangle it and they're getting closer and they're you know, they're navigating, and boom, uh, you take it down.
• 1:03:04
  SPEAKER_00: So um so you just watch for these little micro, like you know, I text them five seconds later, thumbs up, thumb, whatever, right?
• 1:03:13
  SPEAKER_00: Response.
• 1:03:14
  SPEAKER_00: Uh 11 p.m.
• 1:03:16
  SPEAKER_00: doesn't matter, 7 a.m.
• 1:03:17
  SPEAKER_00: doesn't matter, Saturday doesn't matter.
• 1:03:19
  SPEAKER_00: Like they're on the ball, right?
• 1:03:21
  SPEAKER_00: And that's the people you need.
• 1:03:23
  SPEAKER_01: So you have five partners in the firm, right?
• 1:03:25
  SPEAKER_01: Yeah.
• 1:03:25
  SPEAKER_01: Doing 30 companies in a span of three years, which means roughly five to six companies per partner.
• 1:03:31
  SPEAKER_02: Yeah.
• 1:03:31
  SPEAKER_01: So like a partner is getting one or two shots per year.
• 1:03:36
  SPEAKER_01: So it means they need to be make it really meaningful to make it happen.
• 1:03:40
  SPEAKER_01: Yeah.
• 1:03:41
  SPEAKER_00: Yeah, we uh we tend to be um you know very collaborative as a partnership.
• 1:03:45
  SPEAKER_00: So my partner Mark uh uh brought a deal yesterday.
• 1:03:49
  SPEAKER_00: We saw for the first time we're trying to close them today.
• 1:03:52
  SPEAKER_00: And and happens to be an entrepreneur that is of Chinese origin.
• 1:03:56
  SPEAKER_00: So Ben, who's my partner, who's Australian Chinese, is at this meeting.
• 1:04:00
  SPEAKER_00: It's like I told you, all hands on deck, right?
• 1:04:03
  SPEAKER_00: And this company has two term sheets and so on and so forth.
• 1:04:06
  SPEAKER_00: So um so I think we are uh very methodical uh about which sectors we are looking at.
• 1:04:15
  SPEAKER_00: We discuss that every Monday, we talk about our learnings.
• 1:04:18
  SPEAKER_00: So people generally know which forest you are hunting in so they can be helpful.
• 1:04:24
  SPEAKER_00: Um so the prepared mind idea is uh is is runs deeply in the firm.
• 1:04:29
  SPEAKER_00: And that lets us actually respond very, very fast when we see the right deal.
• 1:04:33
  SPEAKER_00: Like this investment that came in yesterday, we met the entrepreneur at 5 p.m.
• 1:04:37
  SPEAKER_00: Yeah for the first time.
• 1:04:38
  SPEAKER_00: The space we've been looking at for the last, you know, I think nine months.
• 1:04:44
  SPEAKER_00: And why we started looking at the space is because one of our EPL members said this is a huge problem for them.
• 1:04:50
  SPEAKER_00: So um so space development, uh sharing that with the partnership.
• 1:04:57
  SPEAKER_00: And when you see the right company acting with speed and clarity, are the things that sort of come together.
• 1:05:05
  SPEAKER_00: And look, if I do no deal in 26, nobody's gonna come and say, hey, you're a slouch man, pick it up.
• 1:05:12
  SPEAKER_00: It just doesn't.
• 1:05:13
  SPEAKER_00: Um you're okay if you don't do a deal because you know the right entrepreneur didn't come through.
• 1:05:18
  SPEAKER_00: But uh we average about you know a couple of deals a year.
• 1:05:24
  SPEAKER_01: Per partner.
• 1:05:24
  SPEAKER_00: Per partner.
• 1:05:25
  SPEAKER_00: Yeah.
• 1:05:28
  SPEAKER_01: And and let's talk about, you know, this is the last part of the podcast.
• 1:05:31
  SPEAKER_01: Some of your best companies where you had the privilege of sitting on board.
• 1:05:34
  SPEAKER_01: Obviously, we discussed about make my trip.
• 1:05:37
  SPEAKER_01: What are the some of the other ones?
• 1:05:39
  SPEAKER_00: Gosh, there's so many, so many examples.
• 1:05:41
  SPEAKER_00: Um, what what in particular do you want me to highlight?
• 1:05:44
  SPEAKER_01: So probably, you know, the the the the founders where you know the team had given up, you had given up, but it was a turnaround, or companies where you didn't expect and went out to become five, ten billion or bigger outcomes.
• 1:05:57
  SPEAKER_00: Yeah, yeah, yeah, yeah.
• 1:05:59
  SPEAKER_00: I think.
• 1:06:00
  SPEAKER_00: I think the one that I'll mention is one of my first investments, which is a company called SourceFire.
• 1:06:07
  SPEAKER_00: SourceFire was they were an open source company that invented this device called the IPS, so intrusion prevention system.
• 1:06:18
  SPEAKER_00: This is basically what sits next to a firewall and makes sure that all the traffic that's coming in gets cleansed before it gets into the pipe.
• 1:06:26
  SPEAKER_00: And the founder Marty Roche used to work for the NSA in DC.
• 1:06:33
  SPEAKER_00: And he was the founder and CEO of the company when we invested.
• 1:06:39
  SPEAKER_00: Now this company happened to be in DC, and the local VCs were completely ignoring it because of whatever reason.
• 1:06:45
  SPEAKER_00: But when we found the company, we jumped on it and wrote the Series A check.
• 1:06:50
  SPEAKER_00: I think six and a half pre and three, you know, three million dollars.
• 1:06:55
  SPEAKER_00: Yeah, 20 years back.
• 1:06:56
  SPEAKER_00: That deal would not happen today.
• 1:07:10
  SPEAKER_00: Who was the CEO till the company became public.
• 1:07:16
  SPEAKER_00: And then we um changed CEOs because we had a very rough sort of first couple of quarters as a public company.
• 1:07:27
  SPEAKER_00: And then we had one of our board members become the CEO, who later then passed because of health reasons.
• 1:07:40
  SPEAKER_00: And the company ultimately got sold to, you know, to Cisco Systems for you know multiple billion dollars.
• 1:07:47
  SPEAKER_00: And it was a 12-year journey.
• 1:07:50
  SPEAKER_00: And the reason I'm mentioning that is that founder was the ballast of the company all along.
• 1:07:57
  SPEAKER_00: For a guy at the time who was in his early 30s when I invested, to all the way he was in his mid-40s by the time you know we went through multiple CEOs and the market shifting and all these, you know, chucks and dive.
• 1:08:12
  SPEAKER_00: He just grew as a founder.
• 1:08:14
  SPEAKER_00: And he was the reason why we were able to continue just the company kept cranking.
• 1:08:21
  SPEAKER_00: The second tier of management, the company was the same.
• 1:08:25
  SPEAKER_00: Our head of sales, um, you know, Tom McDonough, our head of uh, you know, engineering, our head of product, everybody was stable because of Marty and Marty's vision.
• 1:08:39
  SPEAKER_00: And you know, we had to do the, you know, depending on you know which era you look at, the CO changes and so on and so forth.
• 1:08:46
  SPEAKER_00: So I give that as an example of um a company that where the founder, um, and this is the conversation I have with Suddarshan, you know, which is like your company will change many times before you get to the promised land.
• 1:08:59
  SPEAKER_00: Yeah, your job is to be that ballast, because people will come here not because of the CEO, they'll come here because of you, you know, and Akshat was the founder, right?
• 1:09:09
  SPEAKER_00: The two founders.
• 1:09:11
  SPEAKER_00: So uh so that's a very, very good example of uh very humble beginnings to a very great outcome.
• 1:09:17
  SPEAKER_00: And I'm very pleased to say that Marty owns multiple boats, and he's a big sailor, by the way, because you know uh they live in around the Chesapeake Bay.
• 1:09:26
  SPEAKER_00: I mean, whenever I talk to him, he talks about a bigger boat.
• 1:09:28
  SPEAKER_00: And that gives me a lot of pleasure because he deserves it.
• 1:09:32
  SPEAKER_00: And uh just a phenomenal guy and um a great uh great story.
• 1:09:36
  SPEAKER_01: Well, thank you so much, Tim.
• 1:09:38
  SPEAKER_01: I really enjoyed our conversation, learned a lot from you.
• 1:09:41
  SPEAKER_00: Thank you for the invite.
• 1:09:42
  SPEAKER_00: You do such a great service for um I think entrepreneurs not just in India but worldwide, because you know, this media really brings the stories out.
• 1:09:51
  SPEAKER_00: So thank you for the invite, and uh I'm happy to come back on the show and uh share.
• 1:09:55
  SPEAKER_01: Thank you so much.
• 1:09:55
  SPEAKER_01: Would love to have the part two, you know.
• 1:09:57
  SPEAKER_01: Of course.
• 1:09:58
  SPEAKER_01: Thank you very much.
• 1:09:58
  SPEAKER_01: And would love to work together more.
• 1:10:00
  SPEAKER_00: Yes, yes.
• 1:10:01
  SPEAKER_00: I have to look at some of those hot deals we were talking about.
• 1:10:05
  SPEAKER_00: Thanks again.
• 1:10:06
  SPEAKER_00: Thanks again.
• 1:10:06
  SPEAKER_00: Cheers.
• 1:10:07
  SPEAKER_00: Cheers, thank you.