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Greg Sands Discusses Technology and Investment · Masters in Business

• 0:02
  Speaker 1: This is Masters in Business with Barry Ridholts on Boomberg Radio.
• 0:09
  Speaker 1: This week on the podcast, I have an extra special guest.
• 0:12
  Speaker 1: His name is Greg Sands. He is the founder and
• 0:16
  Speaker 1: managing partner at Cost to No A Ventures, of venture
• 0:19
  Speaker 1: capital firm that has been around for a decade or two.
• 0:23
  Speaker 1: He was the original product manager at a little firm
• 0:28
  Speaker 1: called Netscape, working with Jim Clark and Mark Andreeson. Uh.
• 0:33
  Speaker 1: Not only was he the first product manager, he put
• 0:36
  Speaker 1: together the business plan and he came up with the
• 0:39
  Speaker 1: name Netscape. And he is not just a technologist, but
• 0:44
  Speaker 1: a venture investor and a very insightful person who sits
• 0:49
  Speaker 1: really at the nexus of a number of fascinating aspects
• 0:54
  Speaker 1: of business, finance, technology. Go down the list. Uh, they're
• 1:00
  Speaker 1: out in Palo Alto. He is an early seed investor. UM.
• 1:05
  Speaker 1: I wouldn't even call it a stage or be a round.
• 1:08
  Speaker 1: He's earlier than that. Uh. They focus on a number
• 1:11
  Speaker 1: of really interesting technologies and platforms. If you're remotely interested
• 1:17
  Speaker 1: in anything having to do with angel or venture capital investing,
• 1:21
  Speaker 1: if you're intrigued or fascinated as I am about technology
• 1:26
  Speaker 1: and how it's going to develop and impact. Uh, the
• 1:29
  Speaker 1: economy and society at large. Then you're really gonna enjoy
• 1:33
  Speaker 1: this conversation. So, with no further ado, my interview with
• 1:39
  Speaker 1: Greg Sands of Costa no Ah Ventures. My special guest
• 1:47
  Speaker 1: today is Greg Sands. He is the founder and managing
• 1:50
  Speaker 1: partner of Coast to Noah Ventures. He was the first
• 1:54
  Speaker 1: product manager at Netscape Communications, where he not only wrote
• 1:58
  Speaker 1: the initial business plan in but coined the name Netscape.
• 2:03
  Speaker 1: Greg Sands, Welcome to Bloomberg. It's great to be here
• 2:06
  Speaker 1: with you. So you're a founder and a managing partner
• 2:10
  Speaker 1: at a venture capital firm. Is this the sort of
• 2:13
  Speaker 1: career path you were expecting to take? Your background is
• 2:16
  Speaker 1: not quite um total VC, although I guess in hindsight
• 2:21
  Speaker 1: we could say that, well, it isn't what I saw
• 2:24
  Speaker 1: myself doing as a kid. I grew up thinking I
• 2:27
  Speaker 1: wanted to be the Senator from the great state of Minnesota,
• 2:30
  Speaker 1: and much to my surprise, Al Franken holds that job
• 2:33
  Speaker 1: instead of me. So that's funny. I expected to be
• 2:37
  Speaker 1: a fighter pilot or an astronaut, so we had very
• 2:39
  Speaker 1: different goals, that's right, absolutely, and so that evolved as
• 2:42
  Speaker 1: I as I got into my career. Initially, at a
• 2:47
  Speaker 1: management consulting firm in Boston, made my way to business
• 2:50
  Speaker 1: school in at Stanford, so in the in the heart
• 2:53
  Speaker 1: of Silicon Valley, and then just started navigating my way
• 2:56
  Speaker 1: through the software. So so from Minnesota to Cambridge in
• 3:01
  Speaker 1: in outside of Boston to southern California. Did you how
• 3:05
  Speaker 1: did how did that transition go? I'm always surprised at
• 3:09
  Speaker 1: how people find their way to California and it's, oh
• 3:13
  Speaker 1: my god, it's beautiful. The geography is spectacular, the weather
• 3:16
  Speaker 1: is great. It's hard to leave there, isn't it. Well, yes,
• 3:19
  Speaker 1: and so you know we're we're we're in Palato in
• 3:22
  Speaker 1: the in northern California, near near San Francisco. And I
• 3:26
  Speaker 1: ended up, having spent seven years in Boston and Cambridge,
• 3:29
  Speaker 1: having the opportunity to head out there. And I didn't
• 3:32
  Speaker 1: know what I was getting into. I literally told people, Hey,
• 3:36
  Speaker 1: I'm I'm going to Stanford. I'm going to the beach.
• 3:39
  Speaker 1: And they said, it's not anywhere near the beach. Have
• 3:41
  Speaker 1: you ever been there? And I said no, but it
• 3:42
  Speaker 1: sounds great. The weather, everything is still spectacular. Boston's winters
• 3:47
  Speaker 1: are not not easy winters, well, they're easy when you
• 3:51
  Speaker 1: spent the first eighteen of them in Minnesota. I guess
• 3:53
  Speaker 1: it's all relative, isn't it. So so let's talk a
• 3:56
  Speaker 1: little bit about, um, what you were doing at at
• 4:00
  Speaker 1: uh sutter Hill. You started at a very story I
• 4:04
  Speaker 1: guess the first venture capital firms sutter Hill goes back
• 4:08
  Speaker 1: to the early sixties. Yeah, that's right, goes back to
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  Speaker 1: the early sixties, and it's the longest running venture capital
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  Speaker 1: firm on the East Coast. There were a couple of
• 4:15
  Speaker 1: earlier firms, but that don't still exist now, don't aren't
• 4:18
  Speaker 1: they also out in Palo Alto or y? I mean
• 4:21
  Speaker 1: then the original am I misremembering the original Sandhill VC?
• 4:26
  Speaker 1: Or or were they not not on sand Hill? But
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  Speaker 1: you would think of him as basically the original West
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  Speaker 1: Coast venture capital firm and a storied firm. Uh. You know,
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  Speaker 1: a great group of people, very high integrity, great values,
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  Speaker 1: performed exceptionally well, incredible companies video and just the list
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  Speaker 1: of of companies that they backed were astonishing. And you
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  Speaker 1: were there for more than a decade. What was that experience? Like? Well,
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  Speaker 1: I came in having been basically uh GM of business unit,
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  Speaker 1: most recently at ne Tscape. So I had never been
• 4:58
  Speaker 1: a professional investor, and I came in there was a
• 5:01
  Speaker 1: group of five partners or managing directors who had all
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  Speaker 1: been there at least, you know, really thirteen to twenty
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  Speaker 1: five years, and so I got to learn the trade
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  Speaker 1: of venture capital. And so even in our at Coastineau,
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  Speaker 1: we talked a lot about the old school craft a
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  Speaker 1: venture capital and being a partnered entrepreneurs and being a
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  Speaker 1: company builder. And I really did get to learn that
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  Speaker 1: with an extraordinary group of people and feel really fortunate
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  Speaker 1: to have been able to do that. What were some
• 5:31
  Speaker 1: of the companies you worked on when you were at
• 5:33
  Speaker 1: a Sutter Hill so Yoku, which is about the world's
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  Speaker 1: third largest video property now owned by Ali Baba, but
• 5:40
  Speaker 1: went public on the New York Stock Exchange and was
• 5:42
  Speaker 1: had a five billion dollar markets going to say, that's
• 5:44
  Speaker 1: a good exit to Ali Baba. That's right now, that's
• 5:46
  Speaker 1: an excellent one. Quinn Street, which is a public company.
• 5:49
  Speaker 1: It was a guy in twenty power point slides. That's
• 5:52
  Speaker 1: a performance marketing company. And one that I that I
• 5:56
  Speaker 1: love but isn't very well known as a company called
• 5:59
  Speaker 1: mrs Said Systems. It was a call center performance management
• 6:02
  Speaker 1: software company. That's and we uh, we are they still
• 6:07
  Speaker 1: independent or they were brought by Nice Systems, which is
• 6:10
  Speaker 1: a billion dollar public software company and uh, and one
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  Speaker 1: of the two founders there is working with us at
• 6:18
  Speaker 1: Coast to know Mark selco Oh really, that's really that's
• 6:20
  Speaker 1: really interesting. I recall you did something with feed burner.
• 6:25
  Speaker 1: Was that at sutter Hill. So back at Cutter Hill,
• 6:27
  Speaker 1: I was an investor at feed Burner. So Brad felt
• 6:30
  Speaker 1: from founder group and I let around and so I
• 6:35
  Speaker 1: was I was an observer on the board and worked
• 6:37
  Speaker 1: with Dick Costello and team and it was a terrific experience.
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  Speaker 1: One of the things that was very interesting about it
• 6:45
  Speaker 1: is that Fred Wilson came in a year later and said,
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  Speaker 1: I turned it down at the last round, but now
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  Speaker 1: all of my friends in the publishing industry are using it,
• 6:54
  Speaker 1: and I want in. He's a blogger. I've been blogging
• 6:57
  Speaker 1: for a hundred years. When Google acquired FeedBurner, everybody I
• 7:01
  Speaker 1: know is using feedbourder as a way of shooting out
• 7:04
  Speaker 1: their daily update. To to this was this was back
• 7:08
  Speaker 1: in the day when everybody was using block feeds and
• 7:11
  Speaker 1: not actually going to specific websites. But FeedBurner was a
• 7:15
  Speaker 1: great property and that was a good exit. Was that
• 7:17
  Speaker 1: was a good exit. And yet one of the things
• 7:19
  Speaker 1: that I think is most interesting is that the investors
• 7:22
  Speaker 1: actually wanted to keep going. We felt like there was
• 7:24
  Speaker 1: a bigger, broader opportunity when we were when we were offered,
• 7:28
  Speaker 1: UH Google UH came and offered to buy the company,
• 7:32
  Speaker 1: and Dick Costelo, to his credit, he looked at us
• 7:35
  Speaker 1: and we put together basically effectively a competing offer that
• 7:38
  Speaker 1: would provide some founder liquidity. But he looked at us
• 7:41
  Speaker 1: and he said, we have in fact won the war
• 7:45
  Speaker 1: for the hearts and minds of bloggers, and we are
• 7:47
  Speaker 1: deployed everywhere, but we haven't yet figured out how to monetize,
• 7:50
  Speaker 1: for example, how to use to insert ads in the
• 7:53
  Speaker 1: RSS feeds. And if we had figured out monetization, I
• 7:56
  Speaker 1: would press on the gas and go for it. But
• 7:58
  Speaker 1: I don't think we've eliminated that risk in a business,
• 8:00
  Speaker 1: and as a result, I recommend that we that we
• 8:03
  Speaker 1: take this offer and we sell. And that's I think
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  Speaker 1: a great example of the partnership between great founders and
• 8:10
  Speaker 1: leaders and great investors, and that Dick Costello has been
• 8:14
  Speaker 1: involved in other tech startups, hasn't he yes, as it
• 8:17
  Speaker 1: turns out he he ended up leading Twitter, and he's
• 8:20
  Speaker 1: now has his own company and is a is A
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  Speaker 1: is a great friend and a and a great leader.
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  Speaker 1: What does a product manager do in a tech startup?
• 8:29
  Speaker 1: So product manager is really the person who connects market
• 8:34
  Speaker 1: to technology. So ultimately that person decides what you're going
• 8:39
  Speaker 1: to build and then works with the engineering team to
• 8:42
  Speaker 1: make sure that, uh, what you're delivering basically meets the
• 8:48
  Speaker 1: requirements that you've mapped out. So it's a combination of
• 8:52
  Speaker 1: making it work, making sure the features are as promised.
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  Speaker 1: Are you involved in the branding or marketing or is
• 8:59
  Speaker 1: that a different team. It's done differently at different times,
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  Speaker 1: but mainly mainly not mainly the there's a separate marketing organization,
• 9:09
  Speaker 1: and there the product management often does product marketing, so
• 9:14
  Speaker 1: articulating the features and benefits and capabilities of that product,
• 9:17
  Speaker 1: but not of the company as a whole. So you
• 9:19
  Speaker 1: put together the first business plan effectively for Netscape. How
• 9:24
  Speaker 1: what was the thought process like behind it? It was
• 9:27
  Speaker 1: clear that if this worked, it was going to be revolutionary,
• 9:30
  Speaker 1: but how was the company ever gonna make any money?
• 9:32
  Speaker 1: It was fascinating exercise. So we did, in fact have
• 9:37
  Speaker 1: the company and innovated on on a whole variety of things,
• 9:40
  Speaker 1: including public beta, including affiliate programs and the like. But
• 9:43
  Speaker 1: it really was a very early version of a freemium
• 9:46
  Speaker 1: business model where the product was free for personal use
• 9:50
  Speaker 1: and use in educational institutions, but we charge businesses. And
• 9:55
  Speaker 1: so that's basically what we came up with. And I
• 9:58
  Speaker 1: will point out that working with Jim Clark, and you know,
• 10:02
  Speaker 1: with his guidance, we came out and we had a
• 10:05
  Speaker 1: plan that said the first year of revenue we were
• 10:07
  Speaker 1: going to do a little over fifty million dollars. And
• 10:10
  Speaker 1: then they hired three vps who are all much more
• 10:12
  Speaker 1: experienced than I. I was a kid, a puppy dog,
• 10:15
  Speaker 1: and they came in and said, you know what are
• 10:18
  Speaker 1: you doing? We actually are going to be responsible for
• 10:20
  Speaker 1: delivering this. This is ridiculous. They lowered the plan to
• 10:23
  Speaker 1: thirty five and then we went out and did eight.
• 10:26
  Speaker 1: So Jim Clark is a fascinating character. I love Michael
• 10:30
  Speaker 1: Lewis is the new new Thing. Tell us a little
• 10:33
  Speaker 1: bit about working with Jim Clark. Well, Jim has an
• 10:36
  Speaker 1: amazing capability of spotting mega trends and assembling incredible people
• 10:43
  Speaker 1: to do it before the trends are understood. A well
• 10:45
  Speaker 1: known he's we can all see a trend when it's
• 10:48
  Speaker 1: fully robust, but his genius is really this is where
• 10:52
  Speaker 1: the trend is going to go. Am I over didn't
• 10:54
  Speaker 1: know it's exactly right. And so to his credit, he
• 10:57
  Speaker 1: went out and saw this thing coming and he went
• 11:02
  Speaker 1: and grabbed Mark and Reason, who was also a kid
• 11:07
  Speaker 1: years old right at the time, and said, this is
• 11:10
  Speaker 1: the guy who has been the innovator in the category.
• 11:12
  Speaker 1: I want to work with him. We can go do
• 11:15
  Speaker 1: this together. And there aren't very many people who are
• 11:18
  Speaker 1: already luminaries, who have already started and led public companies
• 11:23
  Speaker 1: who go and look to a twenty one year old
• 11:26
  Speaker 1: right and say we're going to do this together. We're partners,
• 11:28
  Speaker 1: and and be right in his selection of people. And
• 11:32
  Speaker 1: by the way, Andreason was a prior guest. It's one
• 11:35
  Speaker 1: of everybody's favorite interviews because he is just fascinating. So
• 11:39
  Speaker 1: you were working with him in the early days, tell
• 11:42
  Speaker 1: us a little bit about Mark. What was that like? So, uh,
• 11:45
  Speaker 1: it was really clear that not only was Mark brilliant,
• 11:49
  Speaker 1: but he was just learning at an incredible rate. And
• 11:53
  Speaker 1: so I know about you but at twenty one, I
• 11:55
  Speaker 1: had no judgment about anything, certainly not about guilties. And
• 11:59
  Speaker 1: he us was a voracious reader and a voracious learner
• 12:05
  Speaker 1: and sought out mentors and got better and better and better.
• 12:10
  Speaker 1: And to me, that was really the most striking thing
• 12:12
  Speaker 1: about Mark in those days. That's that's fascinating you say
• 12:15
  Speaker 1: that because when I sat down with him out in
• 12:18
  Speaker 1: Palo Alto to do our conversation, he described Mark Zuckerberg,
• 12:24
  Speaker 1: founder and CEO of Facebook, as quote a learning machine
• 12:28
  Speaker 1: and pretty much that's how you're describing andrees. And it's
• 12:31
  Speaker 1: interesting each of you have described you describing him, him
• 12:36
  Speaker 1: describing Zuckerberg more or less in the same way. That's right.
• 12:40
  Speaker 1: So so let's talk a little bit about um, the name.
• 12:43
  Speaker 1: Where did the name Netscape come from? So the I
• 12:49
  Speaker 1: had been keeping a notebook of possible names. I'd led
• 12:54
  Speaker 1: brainstorming exercises with the engineering team, and we came up.
• 12:59
  Speaker 1: We were just coming up with anything. The company was
• 13:02
  Speaker 1: founded as Mosaic Communications. There was saber rattling about trademark
• 13:06
  Speaker 1: infringement and lawsuits from from who else, from the University
• 13:10
  Speaker 1: of Illinois. So Mark had been at the University of
• 13:12
  Speaker 1: Illinois and it created the freeware product Mosaic There gotcha.
• 13:16
  Speaker 1: That's that's not an unreasonable claim on their part. I
• 13:19
  Speaker 1: agree with that. And so one day I was Jim Clark,
• 13:24
  Speaker 1: Mark and Reason and Mike Homer, who was our new
• 13:26
  Speaker 1: vice president of marketing, pulled me into Mark's office, which
• 13:29
  Speaker 1: was a tiny little office with stacks of paper and
• 13:32
  Speaker 1: boxes of honeycombs everywhere, and they said, this is critical.
• 13:35
  Speaker 1: We really need to do something about it. And I've
• 13:38
  Speaker 1: been working on it. We've all been working on it.
• 13:40
  Speaker 1: We had nothing that was any good. And it literally
• 13:42
  Speaker 1: just popped into my head that you've the this visual
• 13:47
  Speaker 1: view of the Internet and the ability to navigate across it.
• 13:51
  Speaker 1: And I said how about Netscape? And everyone looked around
• 13:55
  Speaker 1: and they said, yeah, that might be it and we
• 13:58
  Speaker 1: walked out of the room and that was it. Bank
• 14:00
  Speaker 1: just like that. Yeah, that that's unbelievable. So Netscape goes
• 14:04
  Speaker 1: public in nine fourteen months after the company was founded,
• 14:11
  Speaker 1: which is an incredibly short period of time. Uh. People
• 14:14
  Speaker 1: looked a little askance at it, thinking it was well,
• 14:17
  Speaker 1: they have a business model, but look at the valuation.
• 14:20
  Speaker 1: It just blew up on I p O. Was there
• 14:23
  Speaker 1: any sense in that this was starting to become unhinged,
• 14:29
  Speaker 1: or was that still so early days that hey, we
• 14:32
  Speaker 1: rang the bell, let's move on to the business of
• 14:35
  Speaker 1: running the company. It was really more the ladder, I
• 14:38
  Speaker 1: think it was the way I think of it. There
• 14:40
  Speaker 1: were kind of two phases of that bubble, and we
• 14:43
  Speaker 1: were at the beginning of phase one. So we really
• 14:47
  Speaker 1: did have a sense that we were doing something special
• 14:49
  Speaker 1: and remarkable, that we were in the right place at
• 14:51
  Speaker 1: the right time. And you know, it literally was siege mentality,
• 14:56
  Speaker 1: and we were just after it every day, no room
• 14:59
  Speaker 1: for rest, no room to think about it, sitting at
• 15:01
  Speaker 1: the eye of the hurricane. But the company, if you
• 15:05
  Speaker 1: think about it in the context of today's internet companies
• 15:08
  Speaker 1: and technology companies, it had an eight billion dollar market cap,
• 15:12
  Speaker 1: which is which is a big market cap, a little
• 15:14
  Speaker 1: rich but but enormous potential, but enormous potential. It actually
• 15:20
  Speaker 1: mainly drifted down, and then at the end the acquisition
• 15:24
  Speaker 1: by A. O. L really was about an eight billion
• 15:26
  Speaker 1: dollar acquisition, so it did end up getting back to
• 15:30
  Speaker 1: that number, but it pretty quickly drifted down after it
• 15:33
  Speaker 1: after the early days when you were at Netscape, after
• 15:36
  Speaker 1: the I P. O. There was a tremendous amount of
• 15:39
  Speaker 1: potential and it looked like, hey, this could be a
• 15:43
  Speaker 1: giant company that really brings the Internet forward to the
• 15:48
  Speaker 1: twentieth century until the beheamoth from Redmond's Washington named Microsoft,
• 15:54
  Speaker 1: said hey, we want a piece of that. When did
• 15:57
  Speaker 1: you guys realize that, oh, these guys is are really
• 16:00
  Speaker 1: going to put a herd on us. It was about
• 16:02
  Speaker 1: a year in. It was about a year in and
• 16:05
  Speaker 1: they had started writing a little bit about it, and
• 16:07
  Speaker 1: at some point we saw Bill Gates memo on it,
• 16:10
  Speaker 1: and then you could really start to see them attempt
• 16:14
  Speaker 1: to make a difference. And it took them out about
• 16:16
  Speaker 1: another year to warm up. But by the end of
• 16:18
  Speaker 1: year two they had gotten their guns trained on us
• 16:22
  Speaker 1: and started having a pretty substantial impact on the business.
• 16:27
  Speaker 1: What once they built Internet Explorer into Windows. Every piece
• 16:33
  Speaker 1: in the world comes with their web browser. Why would
• 16:36
  Speaker 1: anyone have to download Navigator? Well, it's particularly challenging if
• 16:42
  Speaker 1: Steve Bamber Bill Gates is calling the CEO of your
• 16:45
  Speaker 1: hardware manufacturer and telling them if you include Netscape Navigator,
• 16:50
  Speaker 1: they'll stop selling you Windows. And hence the subsequent anti
• 16:54
  Speaker 1: trust trial which ultimately Netscape. Was there a settlement, Well, yeah,
• 16:59
  Speaker 1: there were no Ultimately there there was a settlement. It
• 17:03
  Speaker 1: was frankly long. It was two years after the sale
• 17:06
  Speaker 1: to a well, so it wasn't fast enough to have
• 17:08
  Speaker 1: any useful impacts as old patent litigation and any trust
• 17:12
  Speaker 1: litigation tends to be um And then eventually the any
• 17:16
  Speaker 1: trust case was settled. And but that created a Cambrian
• 17:20
  Speaker 1: explosion of people freed from the oppressive thumb of Microsoft.
• 17:25
  Speaker 1: And at the same time you end up going to
• 17:28
  Speaker 1: the starting uh as a venture capitalist. What was it
• 17:32
  Speaker 1: like in the mid to late nineties when there was
• 17:36
  Speaker 1: a lot of cash going to startups and a lot
• 17:38
  Speaker 1: of innovation and software and semiconductor and hardware. That was
• 17:43
  Speaker 1: really you know, it must have been an amazing period
• 17:45
  Speaker 1: of time. It was an amazing period of time. So
• 17:47
  Speaker 1: I started in September of ninety eight, so I think
• 17:50
  Speaker 1: of that, I think remember the Asian Flu that period
• 17:52
  Speaker 1: in there, so that's right when I started. And basically
• 17:54
  Speaker 1: coming out of the Asian Flu was phase two of
• 17:57
  Speaker 1: the bubble, which is about ten x on phase one
• 18:00
  Speaker 1: of the bubble, and it really was quite insane. And
• 18:04
  Speaker 1: did you realize you were in a bubble in real time,
• 18:07
  Speaker 1: because everybody says, well, you know, you can only identify
• 18:09
  Speaker 1: it after the fact, but you're right in the thick
• 18:12
  Speaker 1: of it is are people looking around and saying, hey,
• 18:15
  Speaker 1: we've valuations have become unhinged from reality. In nine and
• 18:20
  Speaker 1: early two thousand, I think it was pretty clear. And
• 18:23
  Speaker 1: so you know, one of my I was sitting with
• 18:26
  Speaker 1: a very experienced group of investors and we were just
• 18:29
  Speaker 1: looking at a whole bunch of things where you'd say,
• 18:32
  Speaker 1: you know, we're not gonna We're just not gonna do it.
• 18:34
  Speaker 1: We're not going to touch it if it goes into
• 18:36
  Speaker 1: those into those kind of categories. But it's still the
• 18:39
  Speaker 1: case that I can think of one specific example where
• 18:43
  Speaker 1: someone was offering US fifty million dollars for a company,
• 18:47
  Speaker 1: which was an irrationally high price, but that but the
• 18:50
  Speaker 1: comps were much higher. In the end, the company turned
• 18:54
  Speaker 1: down the acquisition and it, you know, ended up being
• 18:57
  Speaker 1: worth less than a hundred million dollars. Regretted, regretted not
• 19:00
  Speaker 1: selling into the bubble. That's right. So there's one of
• 19:02
  Speaker 1: the one of the legends of the of the venture
• 19:04
  Speaker 1: capital industry. When the bubble finally blew up, said basically,
• 19:11
  Speaker 1: you know, thank God had ended, because I was just
• 19:13
  Speaker 1: holding on to my principles, like I was just about
• 19:16
  Speaker 1: to let go. I couldn't hold on anymore that that
• 19:19
  Speaker 1: crowd enthusiasm. It's really easy to get swept up, both
• 19:24
  Speaker 1: positively and negatively. When the crowd is surging. It's it's
• 19:28
  Speaker 1: a siren call that is really difficult to resist. And
• 19:32
  Speaker 1: it sounds like you successfully navigated that. I think it's
• 19:36
  Speaker 1: an overstatement to say I said, well, so I you know,
• 19:40
  Speaker 1: I was the new guy, and so you were a
• 19:42
  Speaker 1: little cautious to begin with. Well, no, I would say
• 19:45
  Speaker 1: that I was the new guy, so I was unencumbered.
• 19:47
  Speaker 1: I mean, the venture capitalist is most dangerous when they
• 19:49
  Speaker 1: start because you don't know very much and you've got
• 19:52
  Speaker 1: a clean slate. You're not sitting on ten boards already.
• 19:55
  Speaker 1: And I was the guy who knew the internet stack,
• 19:57
  Speaker 1: so I wasn't doing crazy consumer internet things. It's still
• 20:00
  Speaker 1: I made I went too quickly. I made nine effectively
• 20:05
  Speaker 1: pre revenue venture capital investments over an eighteen month period.
• 20:08
  Speaker 1: Early seed, very early stage. Yeah. Uh, you know in
• 20:12
  Speaker 1: ninety nine there wasn't anything called the seed financing, so
• 20:15
  Speaker 1: they were you know, Series eight financings and formation just
• 20:19
  Speaker 1: very early. That's right. And so in Quinn Street, which
• 20:21
  Speaker 1: is now a public company with three hundred million dollars
• 20:23
  Speaker 1: in revenue, was the one that paid for the other eight.
• 20:26
  Speaker 1: I have to ask you, Coast to Noah, there's nobody
• 20:28
  Speaker 1: on your team page named Coasta Noah Where And I
• 20:31
  Speaker 1: keep mangling unfortunately the name Where does the name Coasta
• 20:35
  Speaker 1: Noah come from? So the Coast Sinowans are the Native
• 20:38
  Speaker 1: American tribe that occupied from Big Sir all the way
• 20:41
  Speaker 1: to the tip of the San Francisco Peninsula. And so
• 20:43
  Speaker 1: it's a way of uh sort of situating both in
• 20:47
  Speaker 1: place and also I think recognizing that, uh, the development
• 20:53
  Speaker 1: of Silicon Valley is has layers and is built on
• 20:57
  Speaker 1: the shoulders of giants. So we try to on are
• 21:00
  Speaker 1: the old school craft of the past as well as
• 21:03
  Speaker 1: having some ways in which we're uh modern and innovating.
• 21:06
  Speaker 1: So one of the things we always hear about early
• 21:09
  Speaker 1: mover advantages it's the second mass that gets the cheese.
• 21:13
  Speaker 1: How accurate is that? Is there a big advantage to
• 21:16
  Speaker 1: being first or is timing more important? So the answer,
• 21:21
  Speaker 1: as in most things that involve investing, is it depends
• 21:25
  Speaker 1: but I and so there are many examples of each.
• 21:28
  Speaker 1: I do think it's the case that, you know, one
• 21:30
  Speaker 1: of the things, you know, we in investing companies that
• 21:33
  Speaker 1: change the way the world does business, but we are
• 21:35
  Speaker 1: trying to focus on things that have platform capabilities that
• 21:38
  Speaker 1: can build ecosystems. And I do think it is the
• 21:41
  Speaker 1: case that when you're talking about platforms, it is often
• 21:46
  Speaker 1: the case that the first mover to be in market
• 21:49
  Speaker 1: and start attracting users and the data that comes with
• 21:54
  Speaker 1: it and the applications that get built on top of
• 21:57
  Speaker 1: it really does have a significant advantage. So you say
• 22:00
  Speaker 1: you want to invest in companies that can change the
• 22:03
  Speaker 1: world's of business, in what way? How can a startup
• 22:07
  Speaker 1: or an early venture funded entity really have an impact
• 22:11
  Speaker 1: on the giant world of business. It's amazing, actually the
• 22:15
  Speaker 1: impact that they can have. So, for example, all companies
• 22:18
  Speaker 1: that sell the businesses use a form of account based marketing.
• 22:22
  Speaker 1: You sell the companies, not to individuals. And on the
• 22:25
  Speaker 1: other hand, there wasn't really any way to do that
• 22:27
  Speaker 1: in the context of online or digital advertising. So demand Base,
• 22:31
  Speaker 1: which is a portfolio company, basically identified a way of
• 22:35
  Speaker 1: matching those two pieces of data together and by the
• 22:38
  Speaker 1: time they got distributed to hundreds of companies using it,
• 22:42
  Speaker 1: it is a self refreshing data advantage. And it is
• 22:44
  Speaker 1: now the platform for account based marketing. And there you know,
• 22:48
  Speaker 1: Google isn't doing it, Facebook isn't doing it, Salesforce isn't
• 22:51
  Speaker 1: doing it, Adobe isn't doing it, Oracle isn't doing it.
• 22:54
  Speaker 1: And so it really is the case that you can
• 22:57
  Speaker 1: sometimes take this kernel of an insight and turn it
• 23:00
  Speaker 1: into something really special. Would would we call that middlewhere
• 23:03
  Speaker 1: how would you describe what they all know? I would
• 23:06
  Speaker 1: call it a I would call it a business to
• 23:08
  Speaker 1: business marketing application for account based marketing. That that's quite fascinating.
• 23:13
  Speaker 1: Tell us about some other types of companies that you
• 23:15
  Speaker 1: invest in. Well, so there's another one. We're here at
• 23:18
  Speaker 1: Bloomberg and Elation is an enterprise data catalog for data
• 23:22
  Speaker 1: driven companies. And the problem is that end users, people
• 23:26
  Speaker 1: who are analytic in nature, spend hours, dozens of hours,
• 23:31
  Speaker 1: sometimes a third of their time looking for the right
• 23:33
  Speaker 1: data and trying to understand what it means before they
• 23:36
  Speaker 1: can do any analysis. And so Elation is a company
• 23:38
  Speaker 1: that we incubated from scratch, and it basically helps those
• 23:43
  Speaker 1: end users find what they're looking for and understand what
• 23:45
  Speaker 1: it means. And this is an example of something that
• 23:48
  Speaker 1: comes out of ten years of research of looking at
• 23:50
  Speaker 1: a field called master data management that I would argue
• 23:53
  Speaker 1: fundamentally doesn't really work. Master data management, that's right, which
• 23:57
  Speaker 1: is where the idea was, the human are going to
• 24:00
  Speaker 1: document all the data and write down what it means.
• 24:03
  Speaker 1: And it turns out that this is a place where
• 24:06
  Speaker 1: the dawn of artificial intelligence combined with humans is able
• 24:11
  Speaker 1: to do something that humans alone couldn't do. And as
• 24:13
  Speaker 1: a result, it's incredibly useful for companies like eBay and
• 24:18
  Speaker 1: uh and other large enterprises who have masses of data
• 24:22
  Speaker 1: that the end user can't possibly get their arms around.
• 24:25
  Speaker 1: That's interesting. So let's talk a little bit about not
• 24:29
  Speaker 1: the investing aspect of it, but the business of venture
• 24:34
  Speaker 1: capital investing. You've just raised is it the third fund?
• 24:38
  Speaker 1: Third fund? Right? So first to the lay person, why
• 24:41
  Speaker 1: do we keep rolling out different funds if it's the
• 24:44
  Speaker 1: same group of people investing in the same types of technology,
• 24:47
  Speaker 1: What what's the thinking behind this vintage, that vintage and
• 24:51
  Speaker 1: the following So it really is a result of the
• 24:56
  Speaker 1: fact that limited partners so investors, which are often endowed
• 25:00
  Speaker 1: ments are large financial institutions want to ensure alignment of
• 25:03
  Speaker 1: interests and no conflict of interests, so they generally tend
• 25:07
  Speaker 1: to say, hey, we'll make an investment decision up front,
• 25:10
  Speaker 1: and then you invest in a group of companies and
• 25:12
  Speaker 1: support those group of companies all out of one pool
• 25:14
  Speaker 1: of capital, and five years later, when you're investing in
• 25:18
  Speaker 1: another group of companies, keep those companies together so that
• 25:21
  Speaker 1: you don't use somebody else's money to bail out a
• 25:24
  Speaker 1: bad investment earlier. Vintage makes sense, makes a lot of sense.
• 25:28
  Speaker 1: So you're running three funds um simultaneously. Some are fully invested.
• 25:33
  Speaker 1: How how long does it take? So here it is
• 25:35
  Speaker 1: let's let's say a new fund launch is January one?
• 25:40
  Speaker 1: How long and it's a hundred million dollars? How long
• 25:43
  Speaker 1: will it take to deploy that hundred million dollars? And
• 25:46
  Speaker 1: you're fully invested. So the way it works is typically
• 25:50
  Speaker 1: in the next three years, will make all the new
• 25:52
  Speaker 1: commitments to companies three years three years. So over that
• 25:56
  Speaker 1: period of time we will invest in something like seventeen
• 26:01
  Speaker 1: or eighteen companies, and of that maybe of the capital
• 26:05
  Speaker 1: will be called and already invested in those companies, but
• 26:08
  Speaker 1: six will be reserved for follow on rounds in those companies.
• 26:12
  Speaker 1: Let me take apart those let's unpack those numbers a
• 26:14
  Speaker 1: little bit. So eighteen companies over thirty six months. That
• 26:19
  Speaker 1: means essentially you're deciding on a company every other month.
• 26:24
  Speaker 1: Is it that spread out or is it a little
• 26:26
  Speaker 1: more bunched together? What's the process like to manage? All Right,
• 26:32
  Speaker 1: we're making this decision, we're ending this company. How do
• 26:34
  Speaker 1: you paste that? How do you source that? First? We've
• 26:37
  Speaker 1: got a team of five person investment team and we
• 26:41
  Speaker 1: basically work as a team to attack our most important
• 26:44
  Speaker 1: opportunities and talk to customers and prospects, talk to technologists
• 26:48
  Speaker 1: to do technical due diligence, spend lots of time talking
• 26:52
  Speaker 1: to founders to see how they think because so much
• 26:54
  Speaker 1: is unknown that you're fundamentally investing in people and products.
• 26:58
  Speaker 1: And I've heard that repeatedly. Is we're not buying technologies,
• 27:02
  Speaker 1: We're buying a founder. We're investing in a founder and
• 27:06
  Speaker 1: their vision. Is that a fair descriptor? Or are you
• 27:09
  Speaker 1: buying technology? Are you investing in new technologies? I would
• 27:12
  Speaker 1: say we're investing in the founder's vision. And ability to think.
• 27:19
  Speaker 1: And that's the part that I think people don't really
• 27:21
  Speaker 1: talk about because there are all of these. To me,
• 27:25
  Speaker 1: the thing that people think of founders as I want
• 27:28
  Speaker 1: Steve Jobs, and he's going to be right a hundred
• 27:30
  Speaker 1: percent of the time over the next twenty years. And
• 27:32
  Speaker 1: I'm just back in his vision. And what we look
• 27:35
  Speaker 1: at is I want Steve Jobs who doesn't have reality
• 27:38
  Speaker 1: distortion field. I want Steve Jobs who is completely immersed
• 27:42
  Speaker 1: in reality, who has situational awareness, who knows what is possible,
• 27:46
  Speaker 1: who knows what market needs and can navigate assemble to
• 27:51
  Speaker 1: pieces and get themselves to the right spot. You mentioned
• 27:56
  Speaker 1: when you were at Sutter Hill you did nine investments
• 27:59
  Speaker 1: right away. One of them was really successful, paid for
• 28:02
  Speaker 1: the other eight ones not so successful. In general, what
• 28:06
  Speaker 1: do the statistics look like of a hundred investments um
• 28:11
  Speaker 1: that are made. How many of your losers, how many
• 28:14
  Speaker 1: break events, how many of your minor winners, and how
• 28:17
  Speaker 1: many are the you know, unfathomable home runs that pay
• 28:20
  Speaker 1: for the previous nine nine and then some Well, so
• 28:23
  Speaker 1: I can only talk about my experience, which I think
• 28:25
  Speaker 1: is frankly different than the industry as a whole, which
• 28:27
  Speaker 1: is another question why, but we'll get to that. Yeah.
• 28:30
  Speaker 1: So in my experience, I'd say one out of ten
• 28:35
  Speaker 1: are great winners, meaning ten times your money or better
• 28:39
  Speaker 1: ten x wow. Yeah, so on one out of ten,
• 28:41
  Speaker 1: and then it really is the case that about uh,
• 28:45
  Speaker 1: I'd say, uh, two thirds end up being winners of
• 28:50
  Speaker 1: some you know, of some material variety meaning you know, yes,
• 28:56
  Speaker 1: you two x to you know, four or five x,
• 28:58
  Speaker 1: which doesn't make a venture capital, but it's better than
• 29:00
  Speaker 1: a stick in the eye. And uh. And then out
• 29:04
  Speaker 1: of you know, out of ten, you'll have to where
• 29:07
  Speaker 1: you get your money back and one where you write
• 29:09
  Speaker 1: it off. And that is very different than the industry is.
• 29:12
  Speaker 1: I was gonna say, mine, you tell me if my
• 29:14
  Speaker 1: understanding is wrong. That or outright money losers, and the
• 29:18
  Speaker 1: next or break evens, and then some more do one x,
• 29:23
  Speaker 1: two x, three x, and then there's that one home
• 29:26
  Speaker 1: run that pays for everything, and then some that that
• 29:28
  Speaker 1: a fair assessment of the industry as a whole. I
• 29:32
  Speaker 1: think that's right. The reasons are one that the consumer business,
• 29:38
  Speaker 1: which we don't really do, is much more volatile, is
• 29:41
  Speaker 1: not only a hits business, but it's also a luck
• 29:43
  Speaker 1: business that you know, a great team assembled on a
• 29:46
  Speaker 1: validated problem in the business to business world can usually
• 29:50
  Speaker 1: figure something out right, So so that's certainly one I think.
• 29:54
  Speaker 1: The second is we're as early stage investors were all
• 29:57
  Speaker 1: former product managers. We think like product people, so we're
• 30:01
  Speaker 1: used to doing Uh. It isn't just a hey, let's
• 30:05
  Speaker 1: take a flyer on this. We're asking the same questions
• 30:08
  Speaker 1: that the founder should be asking his or herself, which
• 30:11
  Speaker 1: is what the customers care about. Is this a big
• 30:14
  Speaker 1: enough problem to be worth addressing? Do the set of
• 30:17
  Speaker 1: technologies that are available at this time can we actually
• 30:21
  Speaker 1: solve this problem in a meaningful way. If so, how
• 30:24
  Speaker 1: much is it worth to a customer? And you know
• 30:27
  Speaker 1: so because we both make that set of assessments in
• 30:30
  Speaker 1: a really nuanced way up front. And then we've got
• 30:33
  Speaker 1: an operating team that helps these typically product oriented founders
• 30:37
  Speaker 1: build the sales and marketing and commercial infrastructure that they
• 30:40
  Speaker 1: need for their product, their customer, their price point, their market.
• 30:44
  Speaker 1: We think that we have higher ods of success. That's
• 30:46
  Speaker 1: really fascinating. We have been speaking with Greg Stands of
• 30:50
  Speaker 1: cost to Noah Ventures. If you enjoy this conversation, be
• 30:53
  Speaker 1: sure and check out the podcast extras where we keep
• 30:56
  Speaker 1: the tape rolling and continue discussing all things venture capital investing.
• 31:01
  Speaker 1: You can find all the podcast extras wherever fine podcasts
• 31:04
  Speaker 1: are sold Apple iTunes, Overcast, SoundCloud, or Bloomberg dot com.
• 31:09
  Speaker 1: Be sure and check out my daily column on Bloomberg
• 31:12
  Speaker 1: View dot com. You can follow me on Twitter at
• 31:15
  Speaker 1: rit Halts. We love your comments, feedback and suggestions right
• 31:20
  Speaker 1: to us at m IB podcast at Bloomberg dot net.
• 31:24
  Speaker 1: I'm Barry rid Holts. You're listening to Masters in Business
• 31:27
  Speaker 1: on Bloomberg Radio. Welcome to the podcast. I don't know
• 31:43
  Speaker 1: why I do that every week. I just it's I
• 31:46
  Speaker 1: like this part of stuff. Greg. Thank you so much
• 31:48
  Speaker 1: for doing this. I've been I've been looking forward to
• 31:51
  Speaker 1: doing this. And you know what I forgot to say earlier,
• 31:54
  Speaker 1: I'll say it here just for um completing its completeness
• 31:59
  Speaker 1: is say um, my disclosure is we have a mutual
• 32:03
  Speaker 1: friends who is a senior executive at Dimensional Fund Advisors,
• 32:08
  Speaker 1: And my disclosure is I'm an investor in d f
• 32:12
  Speaker 1: A funds. My client clients over healths wealth management investing
• 32:15
  Speaker 1: their funds. And I probably should have said that during broadcast.
• 32:19
  Speaker 1: I don't know if I want to move that back
• 32:20
  Speaker 1: there or not. But there's the disclosure. Although I make
• 32:23
  Speaker 1: no um that that's fairly well known and fairly public.
• 32:27
  Speaker 1: But we met through someone from dimensional and I always
• 32:31
  Speaker 1: feel better disclosing more rather than less. Let's let's keep
• 32:35
  Speaker 1: talking about venture investing because some of the questions we
• 32:39
  Speaker 1: didn't get to I think are really interesting. Starting with
• 32:43
  Speaker 1: you reference luck on the consumer side, the question I
• 32:48
  Speaker 1: have is how important is luck across the board the
• 32:52
  Speaker 1: board when it comes to technology or venture investing. Is
• 32:56
  Speaker 1: serendipity all that important? Or is it more rigorous? And
• 33:03
  Speaker 1: here's our process and here's the outcome and randomness doesn't matter. Uh,
• 33:08
  Speaker 1: You're both are true. I mean, look, look place a
• 33:10
  Speaker 1: huge role. It would be completely disingenuous to say that
• 33:13
  Speaker 1: it doesn't. I do think that it has a uh
• 33:17
  Speaker 1: that there's an element of you put yourself in lucky places, right,
• 33:23
  Speaker 1: and so you navigate to those and you think you
• 33:25
  Speaker 1: way through them, and you work with the best people
• 33:26
  Speaker 1: that you can so you can increase your odds of
• 33:29
  Speaker 1: getting lucky. Is that what it's probability plus randomness that
• 33:34
  Speaker 1: that's really interested? And I wanted to ask you about, um,
• 33:39
  Speaker 1: some of the companies. We talked about the success ratio.
• 33:43
  Speaker 1: I want to ask you about some of the companies
• 33:44
  Speaker 1: that got away and what you learned about that, and
• 33:48
  Speaker 1: some of the companies that maybe this wasn't a great investment.
• 33:50
  Speaker 1: So so let's start with the first one. And the
• 33:53
  Speaker 1: reason this question came to mind is a number of
• 33:57
  Speaker 1: venture firms have a page on their site where, hey,
• 34:01
  Speaker 1: we missed this opportunity to invest in Uber. We could
• 34:04
  Speaker 1: have been an early investor in Amazon. We said no,
• 34:06
  Speaker 1: it's almost like a badge of honor that hey, here's
• 34:09
  Speaker 1: our process. It doesn't lead us here, but we stick
• 34:12
  Speaker 1: to the process, and and here's how it didn't work out.
• 34:15
  Speaker 1: Any stories along those lines, anybody, Yeah, well, this is
• 34:18
  Speaker 1: this This is a inauspicious time to note that Fred
• 34:23
  Speaker 1: Wilson introduced me to Mango dB for its Series A financing.
• 34:28
  Speaker 1: Mango dB went public yesterday. I think Dwight Merriment is
• 34:32
  Speaker 1: an extraordinary founder and technologist. Uh. It was based in
• 34:37
  Speaker 1: New York. Uh, there was no sort of business partner
• 34:41
  Speaker 1: or commercial partner with him at that time. And it's
• 34:44
  Speaker 1: an and and it's an open source company, and it
• 34:46
  Speaker 1: is you know, open source doesn't monetize as well as
• 34:51
  Speaker 1: what you would think of, as you know, proprietary software,
• 34:53
  Speaker 1: and so it has the category has to take off
• 34:57
  Speaker 1: and be incredibly important, which no sequel has, and you
• 35:00
  Speaker 1: have to win. You can't be number two. And so
• 35:03
  Speaker 1: in the end, I you know, for me, the thing
• 35:06
  Speaker 1: that I that I learned from that is when you
• 35:08
  Speaker 1: have a uh an anchor founder who is a great
• 35:12
  Speaker 1: technologist and a pied piper for other technical talent, that
• 35:17
  Speaker 1: those can be really interesting opportunities. There will be a
• 35:20
  Speaker 1: question over time of how you graft the sales and
• 35:23
  Speaker 1: marketing and business leadership into the company, but that can
• 35:27
  Speaker 1: be a very good formula. And that's one that I
• 35:29
  Speaker 1: missed and I would have imagined that you know, between
• 35:33
  Speaker 1: Oracle and Microsoft, isn't that like a giant, and then
• 35:36
  Speaker 1: you throw in salesforce. Beyond that is then the of
• 35:40
  Speaker 1: the database market or am I naive about that? Oracle
• 35:43
  Speaker 1: itself is the database market. So so you're running into
• 35:47
  Speaker 1: a monopoly. But that is sequel, which is basically a
• 35:51
  Speaker 1: very heavy weight UH database. I nine, I I don't
• 35:54
  Speaker 1: even know what we're up to, probably eleven and right.
• 35:56
  Speaker 1: But then in the in the world of no sequel,
• 35:59
  Speaker 1: and then loop, which is cloud Era and her works
• 36:02
  Speaker 1: and the like. There's been an explosion of lighter weight
• 36:07
  Speaker 1: databases to manage less structured data and so that that
• 36:11
  Speaker 1: has been a really important megatrend and they were on
• 36:14
  Speaker 1: the front edge of it, and that was So the
• 36:17
  Speaker 1: question is what was the takeaway? Was anytime there's a fail,
• 36:20
  Speaker 1: I always want to say personally or anyone else, So
• 36:23
  Speaker 1: what was the lesson from that? What? What did you
• 36:25
  Speaker 1: take away from that? One got away? I think it
• 36:29
  Speaker 1: is this idea that, particularly in the infrastructure category, that
• 36:35
  Speaker 1: that building the entire company around a great technologist as
• 36:41
  Speaker 1: a is a can be a really important way to
• 36:44
  Speaker 1: build those companies. So I think the model that I
• 36:46
  Speaker 1: grew up in is you build company around great CEO,
• 36:50
  Speaker 1: and so I think the the the idea that you
• 36:52
  Speaker 1: can build around great technologists and graft on that business
• 36:55
  Speaker 1: leadership over time because in an incredible technology infrastructure categories
• 37:02
  Speaker 1: tend to be driven more by technology than by uh
• 37:06
  Speaker 1: than by you know, relationship to to customer. I may
• 37:11
  Speaker 1: be quoting and reason I'm not sure where this came from.
• 37:14
  Speaker 1: Actually it is injuries and it's you could possibly teach
• 37:18
  Speaker 1: a technologist the CEO and related business skills. But it's
• 37:22
  Speaker 1: all but impossible to teach a CEO that technology visionary insight,
• 37:28
  Speaker 1: that that is something that you have and can't learn.
• 37:32
  Speaker 1: But hey, many good technologists can learn the business side
• 37:36
  Speaker 1: of it. And I'm slightly mangling that, but but absolutely
• 37:40
  Speaker 1: Mark Mark is absolutely on record on that, and I
• 37:42
  Speaker 1: would I would actually, uh for for my purposes and
• 37:47
  Speaker 1: our purposes, i'd actually so there are a few Jensen
• 37:52
  Speaker 1: Wongs from Nvidia, but there aren't that many either. And ultimately,
• 37:56
  Speaker 1: you know, a technologist to remain CEO needs to go
• 38:00
  Speaker 1: a boot camp on sales, boot camp on marketing, needs
• 38:03
  Speaker 1: to own those and off and so ultimately the you know,
• 38:07
  Speaker 1: this is what I talk when I talk about grafting
• 38:09
  Speaker 1: those on. They need to know who to hire and
• 38:12
  Speaker 1: how to manage them, and so they can, Yes, they
• 38:15
  Speaker 1: can often learn it, but they've got to be a
• 38:17
  Speaker 1: learning machine like Mark himself was, or like Mark Starberg was,
• 38:21
  Speaker 1: and some will end up, uh, you know, some will
• 38:25
  Speaker 1: end up doing that, and some will end up, you know,
• 38:28
  Speaker 1: not succeeding in learning all of all of those skills
• 38:32
  Speaker 1: and will need a partner in another form. And what
• 38:34
  Speaker 1: we try to be is is a UM is a
• 38:39
  Speaker 1: great long term partner that helps them understand where they
• 38:41
  Speaker 1: are and understand where they need to be in order
• 38:45
  Speaker 1: to lead the company. I guess I have to go
• 38:47
  Speaker 1: to boot camp myself. Then, UM, let's talk a little
• 38:50
  Speaker 1: bit about the space. Venture capital and private equity both
• 38:54
  Speaker 1: seem to be pretty competitive, attracting a lot of UM
• 38:58
  Speaker 1: new and expanded UH players in the space. How competitive
• 39:03
  Speaker 1: is venture investing these days? Well, it's highly competitive, but honestly,
• 39:07
  Speaker 1: it's always been highly competitive. So people will say, oh,
• 39:11
  Speaker 1: there's too much money slashing around and then like and
• 39:13
  Speaker 1: my my view is everybody always thinks there's too much
• 39:17
  Speaker 1: money in their own asset class. Welcome to life in
• 39:19
  Speaker 1: perfect competition, right, So that that kind of leads to
• 39:23
  Speaker 1: my next question. You guys really are an early a
• 39:26
  Speaker 1: or seed investor, meaning you're looking at technologies when they're
• 39:30
  Speaker 1: still very new, when the companies are still very new. UM,
• 39:34
  Speaker 1: there may or may not be any sort of revenue
• 39:36
  Speaker 1: yet why that space and does that provide you guys
• 39:40
  Speaker 1: with any sort of advantage over some of your peers? Absolutely?
• 39:44
  Speaker 1: The I mean the two reasons to be an early
• 39:47
  Speaker 1: stage investor from a sort of financial or strategy point
• 39:50
  Speaker 1: of view, are fundamentally about ownership, you know, being able
• 39:55
  Speaker 1: to buy you know, big chunks of companies, and about
• 39:58
  Speaker 1: multiples of capital. And so it isn't a category where
• 40:02
  Speaker 1: you can invest very much money, where you can raise
• 40:05
  Speaker 1: really big funds, where you can have enormous fee income,
• 40:08
  Speaker 1: but it is the place where you can earn the
• 40:09
  Speaker 1: biggest multiples of the capital. Now, I will also point
• 40:12
  Speaker 1: out that personally, the reason why I'm an early stage
• 40:17
  Speaker 1: investor is because that's what I love doing. That's the
• 40:20
  Speaker 1: time in the company's life that I'm most interested in.
• 40:23
  Speaker 1: That it's the time where you build the foundational relationship
• 40:26
  Speaker 1: with partners, that helping them navigate through this process of
• 40:29
  Speaker 1: launching first product and great use old three of them. Now,
• 40:32
  Speaker 1: who do we hire? Who else can possibly sell this?
• 40:35
  Speaker 1: And what does that person look like? And how do
• 40:37
  Speaker 1: we go do it? That's the most fun that there
• 40:39
  Speaker 1: is in business. So how intimately are you involved with
• 40:43
  Speaker 1: the companies once you found them? It's not here's a check,
• 40:46
  Speaker 1: we'll we'll follow up with you every quarter. You're much
• 40:49
  Speaker 1: more hands on. So yes, unequivocally, founders and management teams
• 40:55
  Speaker 1: are running companies, you know, Just to be clear, but
• 40:58
  Speaker 1: I'll use the example of Elation where they incubated in
• 41:03
  Speaker 1: our office for a year, so they were up to
• 41:06
  Speaker 1: fifteen or sixteen people by the time they left, and
• 41:09
  Speaker 1: so there was an almost daily interaction and a debrief
• 41:13
  Speaker 1: after they came back from customer meetings and strategy conversations
• 41:17
  Speaker 1: and you know, all of these team building conversations on
• 41:20
  Speaker 1: a highly regular basis. And that both is great fun,
• 41:23
  Speaker 1: but I think it it really helps because it is
• 41:26
  Speaker 1: lonely at the top. It's lonely being a founder. It's
• 41:29
  Speaker 1: lonely being a CEO and having someone who is there
• 41:35
  Speaker 1: but frankly whom you trust and who you're willing to
• 41:38
  Speaker 1: be open with and you know, even vulnerable with. I
• 41:41
  Speaker 1: don't know the answer to X. Can you help me
• 41:43
  Speaker 1: think about why? Is I think a huge asset? So
• 41:48
  Speaker 1: what about the macro environments of the economy, the stock
• 41:53
  Speaker 1: market when you're when you're looking at a company a
• 41:55
  Speaker 1: founder of technology, does that come into the calculation or
• 41:59
  Speaker 1: is it, Hey, the next five years are gonna elapse
• 42:02
  Speaker 1: regardless of where we are with the market cycle. It
• 42:05
  Speaker 1: really is more the ladder we are are. Fundamental discipline
• 42:09
  Speaker 1: is micro and bottoms up the way I like to
• 42:11
  Speaker 1: say that to our team is the company is the
• 42:13
  Speaker 1: unit of analysis here, right, and so we go do
• 42:16
  Speaker 1: those fundamentals. Let me repeat that the company is the
• 42:19
  Speaker 1: unit of analysis here as opposed to what as opposed to, uh,
• 42:26
  Speaker 1: the market. So there are thematic investors who I think
• 42:29
  Speaker 1: sometimes do a very good job at saying we're gonna
• 42:32
  Speaker 1: go invest in this category and we're gonna interview every
• 42:35
  Speaker 1: company and we're gonna pick one because we're smart enough
• 42:38
  Speaker 1: to know that this is the one important thing. So
• 42:40
  Speaker 1: it's top down. Hey, the social networking thing is big,
• 42:43
  Speaker 1: Let's go find a social company that's right. And so
• 42:45
  Speaker 1: I think the what I refer to as the bulge
• 42:47
  Speaker 1: brack adventure firms tend to think, hey, there's you know,
• 42:50
  Speaker 1: there's something moving in this category, and we've got to
• 42:54
  Speaker 1: have one, and they so they do this top down process.
• 42:58
  Speaker 1: And so ultimately, as I as I said, products and people,
• 43:03
  Speaker 1: the only way that macro really comes into it is
• 43:07
  Speaker 1: UH one, we have to be sure that we can
• 43:10
  Speaker 1: finance the company. Right, so there'll be other capital available
• 43:13
  Speaker 1: and meaning you work with other vcs, well you'll co
• 43:17
  Speaker 1: invest with and I assume you have relationships with people
• 43:20
  Speaker 1: all over. We have relationships with people all over who
• 43:22
  Speaker 1: will lead a B in, a C and a D round.
• 43:25
  Speaker 1: So that's one, and then the second is as we
• 43:27
  Speaker 1: work with companies, the question is this is actually where
• 43:32
  Speaker 1: the macro environment plays a stronger role. Is ah, how
• 43:37
  Speaker 1: willing are you to get over your skis in pursuing
• 43:42
  Speaker 1: growth at any price? And I would say that the
• 43:46
  Speaker 1: Bulish bracket firms who have big funds, they gotta return
• 43:48
  Speaker 1: four billion dollars if you've got a one and a
• 43:51
  Speaker 1: half billion dollar fund. And they tell companies your job
• 43:55
  Speaker 1: is to strap on the rocket boosters, and you may
• 43:57
  Speaker 1: go into the side of the cliff, or you may
• 43:58
  Speaker 1: get into orbit, but job is to maximize the number
• 44:01
  Speaker 1: that get into orbit. And I think one of the
• 44:03
  Speaker 1: advantages of a boutique firm like us is that we
• 44:06
  Speaker 1: can work with founders and say, look, we can, uh,
• 44:09
  Speaker 1: let's build on a solid foundation, let's prepare ourselves for
• 44:13
  Speaker 1: explosive motion, but let's um be thoughtful about how much
• 44:18
  Speaker 1: to invest in growth and and and when to when
• 44:23
  Speaker 1: to accelerate, and when to tap on the brakes. And
• 44:25
  Speaker 1: I think we're oftentimes a better partner to companies than
• 44:29
  Speaker 1: even the biggest names in the business. So you mentioned
• 44:31
  Speaker 1: earlier the fee versus the performance side. So with a
• 44:35
  Speaker 1: hedge fund it's two and twenty. Venture capital is not
• 44:38
  Speaker 1: all that different now it's typically two and two and twenties.
• 44:41
  Speaker 1: So if you're on a hundred times less money, well,
• 44:44
  Speaker 1: if you're a one of the bulge firms that have
• 44:47
  Speaker 1: billions and billions of dollars, that two percent is not insubstantial.
• 44:51
  Speaker 1: When I'm hearing from you as an early investor, A,
• 44:56
  Speaker 1: there isn't enough capacity to put billions of dollars to work.
• 44:59
  Speaker 1: It's that's why these are a hundred and fifty and
• 45:01
  Speaker 1: two hundred million dollar UM funds. And be the upside
• 45:06
  Speaker 1: to you is to be right more than wrong, and
• 45:09
  Speaker 1: it's the performance side. So if they're looking at three
• 45:13
  Speaker 1: x on the performance side, you guys are looking at
• 45:15
  Speaker 1: a bigger numbers. That Am I catching that? Right? Yeah?
• 45:19
  Speaker 1: I think it's it is right that A we are
• 45:22
  Speaker 1: striving for higher multiples of capital. And you know, I
• 45:27
  Speaker 1: think any of the LPs who actually look at the
• 45:30
  Speaker 1: numbers say that people who are raising multi billion dollar
• 45:34
  Speaker 1: funds have a hard time return in Uh, you know,
• 45:37
  Speaker 1: reacts right, but but yeah, we're you know, we're we
• 45:39
  Speaker 1: are striving for uh, you know for four and five
• 45:44
  Speaker 1: and six and seven X. Doing ten X on a
• 45:47
  Speaker 1: fund is extraordinary. It has been done. But it's an
• 45:50
  Speaker 1: and you know, and peoples on or a Facebook or
• 45:53
  Speaker 1: a Google or something that's just that's absolutely off the chain. Um,
• 45:57
  Speaker 1: what's the process like raising money? Who are the venture investors?
• 46:02
  Speaker 1: I don't mean by name, but academic endowmonds, pension funds.
• 46:07
  Speaker 1: Who who are your LPs? Yeah? So I started out
• 46:10
  Speaker 1: five years ago and I never raised a dime in
• 46:12
  Speaker 1: my life really and so and so I really went
• 46:16
  Speaker 1: to co investors who had worked with on boards other
• 46:19
  Speaker 1: venture capitalists, and a couple of them, people like Fred
• 46:22
  Speaker 1: Wilson and Bradfeld, introduced me to some of their LPs.
• 46:26
  Speaker 1: And then I just anytime someone would refer me, I
• 46:29
  Speaker 1: just kept talking. And it turns out that the university
• 46:34
  Speaker 1: endowments and hospital endowments are a big group that there
• 46:39
  Speaker 1: are uh for small funds. The pension funds really show
• 46:44
  Speaker 1: up in the form of fund of funds that effectively
• 46:47
  Speaker 1: our wholesalers they disaggregate pension funds just because they have
• 46:49
  Speaker 1: too much money. Pension fund needs to write a hundred
• 46:52
  Speaker 1: million dollar check, not a ten million dollar check. UH
• 46:55
  Speaker 1: and fund of funds also aggregate money from family offices,
• 46:59
  Speaker 1: and sometimes family offices come direct. So those are really
• 47:02
  Speaker 1: the three main categories endowments, fund of funds, and family offices.
• 47:07
  Speaker 1: So you said you never raised money before five years ago.
• 47:10
  Speaker 1: I'm in the exact same situation. What are your experiences
• 47:14
  Speaker 1: like speaking to investors and prospective investors? How how does
• 47:19
  Speaker 1: that go? And how you obviously have been very successful?
• 47:22
  Speaker 1: How did you learn how to pet that animal? I
• 47:29
  Speaker 1: honestly trial and air. I didn't know what I was doing.
• 47:34
  Speaker 1: I was young and stupid, naive, and I just marched
• 47:37
  Speaker 1: into it. And I do think that there's a look,
• 47:39
  Speaker 1: there's a great lesson there that you can, you know,
• 47:42
  Speaker 1: just learned by doing. I did work with UH, a
• 47:46
  Speaker 1: lawyer who was also council that Sutter Hill, so I'd
• 47:51
  Speaker 1: had twenty years of trust in history and working with him,
• 47:54
  Speaker 1: who could be a little bit of a river guide
• 47:56
  Speaker 1: to that. We didn't use any you know, external consultants,
• 48:00
  Speaker 1: and I think over time I've been able to incorporate
• 48:04
  Speaker 1: advice from other venture capitalists, from people on our team
• 48:09
  Speaker 1: who have helped improve our storytelling around that, because I
• 48:13
  Speaker 1: really started out saying I've got a point of view
• 48:16
  Speaker 1: of what we want to do and who we are,
• 48:20
  Speaker 1: and all I wanna do is authentically represent that and
• 48:23
  Speaker 1: people for whom that's good enough, great, and where it's
• 48:26
  Speaker 1: not good enough, so be it. It becomes a sort
• 48:29
  Speaker 1: of self selecting group of people. That's right, it's a
• 48:32
  Speaker 1: it's a mutual fit um. And you referenced machine learning
• 48:36
  Speaker 1: and artificial intelligence earlier. I would really not be doing
• 48:41
  Speaker 1: my job if I didn't ask you. Lots of people
• 48:44
  Speaker 1: seem to be concerned about the upcoming singularity and eventual
• 48:50
  Speaker 1: robot revolution. Is are these fears overblown? Have we been
• 48:54
  Speaker 1: watching too many sci fi movies? Well? I think those
• 48:59
  Speaker 1: beers are overblown. But I do think that it's right
• 49:03
  Speaker 1: to say that the the Cambrian explosion in AI, which
• 49:07
  Speaker 1: it really is right. People have been working on it
• 49:09
  Speaker 1: for decades, but that's you know it really you know,
• 49:13
  Speaker 1: the proliferation of data, the availability of huge amounts of
• 49:17
  Speaker 1: compute in the cloud, and modest improvement in the algorithms
• 49:22
  Speaker 1: have really led us to be able to do a
• 49:25
  Speaker 1: different set of things. And so every business application, for example,
• 49:29
  Speaker 1: will have AI fully infused, and I do think that
• 49:32
  Speaker 1: that has employment implications. Were coming off a period where
• 49:36
  Speaker 1: wage stignation has been a problem for forty years one time,
• 49:40
  Speaker 1: that's right, and I think that will there will continue
• 49:43
  Speaker 1: to be the elimination of certain job categories. At the
• 49:47
  Speaker 1: same time, there are extraordinary new opportunities. I'll give you
• 49:50
  Speaker 1: one example. We've got a company called bug Crowd, which
• 49:53
  Speaker 1: is bug crowd bug Crowd which helps companies orchestrate a
• 49:58
  Speaker 1: bug bounty program so that so in other words, they
• 50:01
  Speaker 1: want users to identify issues with their software so they
• 50:05
  Speaker 1: could fix them more or less in real time and
• 50:08
  Speaker 1: so right, so that the good guys can find them
• 50:10
  Speaker 1: before the bad guys find them. Is this security specific
• 50:13
  Speaker 1: or is it everything? It is security specific. And they
• 50:15
  Speaker 1: have over forty security researchers on the platform who are
• 50:22
  Speaker 1: working with companies like Visa and Fiat Chrysler and PayPal
• 50:26
  Speaker 1: to identify those kinds of vulnerabilities. And there are people
• 50:30
  Speaker 1: really making a living really as security researchers. In other words,
• 50:35
  Speaker 1: they're trying to hack a company, and when they identify
• 50:38
  Speaker 1: the hack, they let so really, had had one of
• 50:41
  Speaker 1: the credit companies um actually right, had Equifax done this,
• 50:47
  Speaker 1: they could have saved themselves a lot of time and headachain.
• 50:49
  Speaker 1: That's right, And so this is an example of a
• 50:51
  Speaker 1: job that didn't exist five years ago. But people can make.
• 50:54
  Speaker 1: People can make really good incomes and six figures, seven figures,
• 50:59
  Speaker 1: six figures and uh, you know high five figures and
• 51:03
  Speaker 1: six figures, and people can do it at their convenience,
• 51:06
  Speaker 1: and they can do it wherever they are, and there
• 51:07
  Speaker 1: are examples. Uh, there was a story recently about a
• 51:12
  Speaker 1: thirteen year old kid in Bangladesh working out of internet
• 51:15
  Speaker 1: cafes who taught himself to hack with YouTube videos and
• 51:20
  Speaker 1: he is supporting his family. That's amazing. That's totally amazing.
• 51:24
  Speaker 1: So it sounds like you are really focused at a
• 51:27
  Speaker 1: very interesting stage of technology. And it also sounds like
• 51:31
  Speaker 1: you really enjoy what you do. I love what I do.
• 51:33
  Speaker 1: So on that note, let's jump to our uh standard
• 51:37
  Speaker 1: questions we ask all our guests. UM, let's start with
• 51:41
  Speaker 1: tell us the most important thing that people don't know
• 51:45
  Speaker 1: about your background. So I didn't know what I wanted
• 51:49
  Speaker 1: to do out of college, and so while I was
• 51:52
  Speaker 1: figuring that out, my very first job was as the
• 51:55
  Speaker 1: receptionist at the Houghton Mifflin publishing company that I got
• 51:59
  Speaker 1: through a temp agency. Okay, Holton Mifflin was a huge publisher. Yeah,
• 52:03
  Speaker 1: so you know, textbook publisher. And to me, the point
• 52:06
  Speaker 1: of that is, career is long, and your job is
• 52:10
  Speaker 1: to navigate and to learn and to put yourself on
• 52:13
  Speaker 1: a path and go on a journey. And your first
• 52:16
  Speaker 1: job isn't the destination? Very interesting? Tell us about some
• 52:20
  Speaker 1: of your early mentors who helped guide your path. Well,
• 52:24
  Speaker 1: I would say coming out of my first real professional job,
• 52:28
  Speaker 1: which was at a management consulting company now known as Mercer,
• 52:32
  Speaker 1: so one Adaran sly Watsky, who is author of The
• 52:36
  Speaker 1: Profit Zone and a handful of other books, really taught
• 52:39
  Speaker 1: me to think and understand business. I was a political
• 52:42
  Speaker 1: science major, so that to me was a real opening
• 52:47
  Speaker 1: and I learned a ton. Now. The thing that's also
• 52:50
  Speaker 1: interesting is that my uh, the other person I'd put
• 52:53
  Speaker 1: on that list is Steve Leavitt, author of fre Economics.
• 52:56
  Speaker 1: So he was my uh classmate and my colleague on
• 53:00
  Speaker 1: that case. And I jokingly say I did some of
• 53:05
  Speaker 1: my best work when I was teamed up with Steve Lovett.
• 53:08
  Speaker 1: You know, I also did some of my best work
• 53:09
  Speaker 1: at an escape when I was teamed up with Ben Horowitz.
• 53:11
  Speaker 1: It turns out, you know, working with Steve taught me
• 53:13
  Speaker 1: how to work with people who are smarter than I
• 53:15
  Speaker 1: am and to still contribute and and collaborate in a
• 53:19
  Speaker 1: way that is really highly productive. And that's ultimately, I think,
• 53:22
  Speaker 1: a really important skill that that's really very interesting. Um
• 53:27
  Speaker 1: venture capitalists. Who who influenced your approach to VC investment? Well,
• 53:33
  Speaker 1: I I've mentioned Fred Wilson before, but he Fred, Fred
• 53:37
  Speaker 1: Wilson is in Union Square Ventures and is pointed by
• 53:42
  Speaker 1: the way, I'm literally pointing square, that's right, and and
• 53:46
  Speaker 1: notably the early investor in Twitter, which I also passed on.
• 53:50
  Speaker 1: But you know, Fred, there are lots of great business opportunities.
• 53:56
  Speaker 1: But Fred helped really teach me the value of platforms,
• 54:03
  Speaker 1: platforms and ecosystems. And that's how you take the ten
• 54:07
  Speaker 1: x opportunity and turned it into the fifty or opportunity.
• 54:10
  Speaker 1: Ecosystems and platforms. Yes, that's really interesting, and I'm gonna
• 54:14
  Speaker 1: do something I never do. Fred. You keep saying, no,
• 54:17
  Speaker 1: I've had Mark on, I've had Greg on, come on,
• 54:21
  Speaker 1: step up, let's let's let's get you out of downtown
• 54:25
  Speaker 1: and up to midtown for an hour or two. Um,
• 54:28
  Speaker 1: this is everybody's favorite question. Tell us about some of
• 54:32
  Speaker 1: your favorite books, fiction, nonfiction, technology, venture, investing, or what
• 54:37
  Speaker 1: have you. So you know, to me, the book that
• 54:42
  Speaker 1: basically every educated adults should read is Sapiens. The predecessor
• 54:47
  Speaker 1: of that fifteen years earlier was guns, germs, and steel.
• 54:50
  Speaker 1: But to me, those explain who we are as you know,
• 54:55
  Speaker 1: as a people and how we got here. And to me,
• 54:59
  Speaker 1: in the context of something like Sapiens, it's fascinating to
• 55:04
  Speaker 1: look at uh, language and money as early API s right,
• 55:11
  Speaker 1: application programming interfaces, ways of exchanging information or exchanging goods,
• 55:17
  Speaker 1: and so I love having that sort of universal and
• 55:20
  Speaker 1: historical perspective. Have you gotten to Homodaeus yet? This is
• 55:23
  Speaker 1: follow up? So I found Sapiens to be a little dark. Um,
• 55:28
  Speaker 1: agriculture leads to disease. It was a little, But Homodaeus
• 55:33
  Speaker 1: is just a little dystopia view of the future of mankind.
• 55:38
  Speaker 1: He's a fascinating writer. I love the way he contextualizes
• 55:42
  Speaker 1: of physics, biology, and chemistry, the way he puts that
• 55:45
  Speaker 1: into a broader context. In the beginning of Sapiens, I
• 55:48
  Speaker 1: found that really to be a fascinating thing. Give us
• 55:51
  Speaker 1: a guns, germs and steel sapiens. How we got to now,
• 55:55
  Speaker 1: which is Steven Johnson, So it basically the second person
• 55:58
  Speaker 1: who's recommended that it's fabulous. And so this idea that
• 56:01
  Speaker 1: things that we just take for granted were fundamental innovations
• 56:06
  Speaker 1: and have had as big and implication implications for uh,
• 56:11
  Speaker 1: for for the human race as things like transistors that
• 56:15
  Speaker 1: are not that that we acknowledge have had. So an
• 56:17
  Speaker 1: example would be glass, right, right, you don't even think
• 56:20
  Speaker 1: twice about it, that's right, and not not only glass,
• 56:23
  Speaker 1: but safety glass. Think about what that did for automobiles
• 56:26
  Speaker 1: and who even thinks twice about that? Exactly right? So
• 56:29
  Speaker 1: but but you know before glass, you were you either
• 56:33
  Speaker 1: had light or you were cold. It was one of
• 56:36
  Speaker 1: the one. Right, Um, how about not? How about fiction?
• 56:40
  Speaker 1: All of us read nonfiction because we can rationalize the
• 56:44
  Speaker 1: time as well, it's work related. But how often do
• 56:47
  Speaker 1: you step back and read something that's just fiction? I
• 56:50
  Speaker 1: would say about what I read is fiction? I basically
• 56:54
  Speaker 1: pick about one out of five from my wife's book clubs,
• 56:58
  Speaker 1: and there are the person that I so, by the way,
• 57:04
  Speaker 1: I'll read anything that Michael Lewis writes, I'll read UM,
• 57:08
  Speaker 1: but I really love Michael Sabone, And for me, that
• 57:11
  Speaker 1: started with Cavalier and Clay. Michael Sabone, Cavalier and Clay
• 57:16
  Speaker 1: I am not familiar with. So it is a so
• 57:19
  Speaker 1: it actually is a New York story. But it's two
• 57:21
  Speaker 1: kids who start out in Eastern Europe, you know, who
• 57:24
  Speaker 1: migrate to New York and then they basically start a
• 57:26
  Speaker 1: comic book company and they and they, you know, I
• 57:30
  Speaker 1: think they end up on the on the Lower East Side,
• 57:32
  Speaker 1: and they navigate their way through and it's uh. But
• 57:35
  Speaker 1: he has an amazing human insight and turn of a phrase.
• 57:40
  Speaker 1: And so for me, when I'm reading a book UH
• 57:44
  Speaker 1: with a truly great author, I find myself periodically I
• 57:48
  Speaker 1: just laugh out loud where they just capture humanity in
• 57:52
  Speaker 1: a in a way that I had never thought of,
• 57:55
  Speaker 1: and it gives unique insight. But it also is just funny.
• 57:58
  Speaker 1: It makes my wife crazy when we're we're coming. I
• 58:02
  Speaker 1: read Ready Player one on a flight back from Europe.
• 58:04
  Speaker 1: I pretty much killed the whole book on a flight,
• 58:07
  Speaker 1: and parts of it are really funny and I start
• 58:10
  Speaker 1: laughing out loud and she just gets embarrassed. By by
• 58:14
  Speaker 1: my Hyena. Like before, in the middle of a of
• 58:19
  Speaker 1: a room, I watched her I get an elbow and
• 58:21
  Speaker 1: then she turns red and it's actually pretty funny. I'm
• 58:24
  Speaker 1: gonna have to check that book out. That sounds really fascinating.
• 58:28
  Speaker 1: Um the venture capital industry, tell us about what's changed
• 58:32
  Speaker 1: since you've become a VC. What what are the big
• 58:34
  Speaker 1: shifts that have taken place. Well, I think twenty years
• 58:38
  Speaker 1: ago it felt much more like an ivory tower where
• 58:41
  Speaker 1: people came to pay homage to venture capitalists, and venture
• 58:44
  Speaker 1: capitalists made pronouncements about whether or not they were going
• 58:46
  Speaker 1: to fund. And I would say that there's been a
• 58:49
  Speaker 1: huge so some of there's been a proliferation of seed
• 58:55
  Speaker 1: funds and incubators, so there are many more sources of capital,
• 58:58
  Speaker 1: and there's a transparency and so there are reputation effects
• 59:02
  Speaker 1: and the like which you see in a bunch of
• 59:06
  Speaker 1: um you know uh that I think ultimately holds venture
• 59:11
  Speaker 1: capitals and and their firms accountable for being truly good partners.
• 59:16
  Speaker 1: So certainly that's one. The other is, you know, there
• 59:20
  Speaker 1: are two and a half billion cell phones in the
• 59:21
  Speaker 1: world right so the markets that we can address are
• 59:26
  Speaker 1: much bigger, and I would say twenty years ago the
• 59:30
  Speaker 1: only venture capital was really only proven in Silicon Valley Boston.
• 59:35
  Speaker 1: At that point, it kind of fallen off the map.
• 59:37
  Speaker 1: And there really is there is innovation everywhere, and there
• 59:41
  Speaker 1: is and so both in a lot of pockets in
• 59:43
  Speaker 1: the US outside of Silicon Valley, but also in you know,
• 59:48
  Speaker 1: we found some really interesting investments in Australia. There's obviously
• 59:52
  Speaker 1: a ton of work being done in London and Estonia
• 59:55
  Speaker 1: and parts of Scandinavia, obviously Estonian Scandinavia. I don't think
• 59:59
  Speaker 1: a lot of people bowl would think that's obvious. I
• 1:00:02
  Speaker 1: mean New York, Chicago, Boston, Austin, San Francisco, Seattle, Shore, Estonia.
• 1:00:08
  Speaker 1: What is happening in Estonia? Well, I think so, the
• 1:00:11
  Speaker 1: the Russian Soviet Empire had a long history of computer
• 1:00:15
  Speaker 1: science and so but there are you know, starting with
• 1:00:20
  Speaker 1: Skype and some and some other companies, there have been uh,
• 1:00:24
  Speaker 1: some really impressive companies and even more really impressive technologists
• 1:00:29
  Speaker 1: that have come out of those places. So often they
• 1:00:32
  Speaker 1: will set up end up setting setting up headquarters in
• 1:00:37
  Speaker 1: Silicon Valley or elsewhere, but that kernel of innovation is
• 1:00:41
  Speaker 1: coming from all over the world. So Silicon Valley is
• 1:00:43
  Speaker 1: infamous for having the full critical mass of people, capital, technology,
• 1:00:51
  Speaker 1: access to universities, access to great companies. It's all right
• 1:00:55
  Speaker 1: there in one place. How essential is that? Do you
• 1:00:59
  Speaker 1: get that in a New York or Seattle or or
• 1:01:01
  Speaker 1: in Essotonia or do you have to have ties to
• 1:01:05
  Speaker 1: Silicon Valley as as the motherland? Well, I'd say Silicon
• 1:01:11
  Speaker 1: Valley in its in sort of the breadth and depth
• 1:01:13
  Speaker 1: of its market is really unique in the world. I mean,
• 1:01:15
  Speaker 1: it is a very very unique place. That said, you
• 1:01:18
  Speaker 1: can build really interesting companies plenty of other places, and
• 1:01:22
  Speaker 1: you know, we do have companies all over the country.
• 1:01:25
  Speaker 1: I think for companies that are even farther away, you know,
• 1:01:29
  Speaker 1: so outside the US, it ends up being very important
• 1:01:33
  Speaker 1: to have some connection to two Silicon Valley and the
• 1:01:38
  Speaker 1: ability to do that. Sometimes that's opening up a sales
• 1:01:42
  Speaker 1: and marketing office. Sometimes it's having headquarters there and keeping
• 1:01:45
  Speaker 1: product development where the company was started. But I think
• 1:01:48
  Speaker 1: even in Europe, the most successful venture capital firms are
• 1:01:52
  Speaker 1: ones that have significant Silicon Valley ties, so they can
• 1:01:55
  Speaker 1: help the companies translate back and forth. Very very interesting.
• 1:02:00
  Speaker 1: We briefly touched on this before but I want to
• 1:02:02
  Speaker 1: revisit it in this context. Tell us about a time
• 1:02:06
  Speaker 1: you failed personally, I don't mean a failed venture investment,
• 1:02:09
  Speaker 1: a time you failed, and what you learned from the experience.
• 1:02:13
  Speaker 1: We all fail multiple times in our lives, and I
• 1:02:17
  Speaker 1: would say, um, the most dramatic one, even though it
• 1:02:22
  Speaker 1: wasn't actually a failure, was what it felt like raising
• 1:02:25
  Speaker 1: fund one for the first time. And you know, I
• 1:02:28
  Speaker 1: talked about not having done it. I had not really
• 1:02:31
  Speaker 1: ever had a sales job. I hadn't been turned down
• 1:02:33
  Speaker 1: that many times in my life, I believe, uh, you know,
• 1:02:37
  Speaker 1: I had probably about a hit rate, but that means
• 1:02:41
  Speaker 1: about turned down, right, And actually it was in its
• 1:02:45
  Speaker 1: own way, it was kind of crushing, and it happened
• 1:02:48
  Speaker 1: that it happened at a time when there were a
• 1:02:50
  Speaker 1: couple of things going on in my family, including a
• 1:02:53
  Speaker 1: you know, a young daughter at that time who tore
• 1:02:55
  Speaker 1: ra c L and the like. And for me, the
• 1:02:59
  Speaker 1: the ultimate lesson and the of going through that was
• 1:03:04
  Speaker 1: really adopting this idea of the growth mentality. So you know,
• 1:03:08
  Speaker 1: Carol tax book is sort of a seminal piece on
• 1:03:11
  Speaker 1: that that what's the name of that book. I think
• 1:03:15
  Speaker 1: it's called I think it's just called mentality, but I
• 1:03:21
  Speaker 1: could be wrong about that, but it basically summarizes this mindset.
• 1:03:25
  Speaker 1: Mindset there you go that your job is just to learn.
• 1:03:29
  Speaker 1: Your job isn't to win, your job isn't to be right,
• 1:03:32
  Speaker 1: your job is just to learn. It comes back to
• 1:03:33
  Speaker 1: what we talked about with Andreson and Zuckerberg. Your job
• 1:03:36
  Speaker 1: is to learn. And so when you basically take the
• 1:03:39
  Speaker 1: pressure off because that I, hey, I have to succeed,
• 1:03:43
  Speaker 1: I can't fail, ended up being a monkey on my
• 1:03:45
  Speaker 1: back and breaking through to the other side to say, hey, look,
• 1:03:49
  Speaker 1: we're just gonna do our best and we're gonna learn.
• 1:03:51
  Speaker 1: And by the way, I'm gonna be better next year
• 1:03:52
  Speaker 1: than I am now. And it was really um I
• 1:03:57
  Speaker 1: would really recommend that, uh that people pick up Carol
• 1:04:03
  Speaker 1: Drects mindset And it was a it. It really did
• 1:04:08
  Speaker 1: shift the way that I approached my work. Fascinating. Tell
• 1:04:12
  Speaker 1: us what you do outside of the office to relax
• 1:04:14
  Speaker 1: either mentally, you're feasibly Most importantly, I'm a cyclist, so
• 1:04:18
  Speaker 1: I'm a road cyclist. We have, you know, incredible territory,
• 1:04:22
  Speaker 1: so I can write up my front door for two
• 1:04:24
  Speaker 1: to three hours and be you know, up in the
• 1:04:26
  Speaker 1: Santa Cruz Mountains and uh, you know, surrounded by the redwoods,
• 1:04:31
  Speaker 1: which I've decided are my spirit animal. And you know,
• 1:04:34
  Speaker 1: and I do that most Saturday mornings with you know,
• 1:04:37
  Speaker 1: a couple of of really good friends. And that's just
• 1:04:40
  Speaker 1: my way to decompress and put my life in context
• 1:04:44
  Speaker 1: and have some fun. So we we hadn't touched on
• 1:04:47
  Speaker 1: this earlier. If if a millennial or a recent college
• 1:04:51
  Speaker 1: grad came up to you and said, Hey, I'm thinking
• 1:04:53
  Speaker 1: about going into filling the blank technology venture investing, et cetera,
• 1:04:58
  Speaker 1: what sort of advice would you of them? Uh? Number one,
• 1:05:02
  Speaker 1: surround yourself with the best people that you can. And
• 1:05:05
  Speaker 1: by the way, that doesn't mean the most famous people
• 1:05:08
  Speaker 1: or the people that other people think are great. Right,
• 1:05:10
  Speaker 1: your value system your lens, because that's the only way
• 1:05:14
  Speaker 1: that your lens will get better over time is to
• 1:05:16
  Speaker 1: focus on on that. The second is work on things
• 1:05:21
  Speaker 1: that you find interesting, because you're never going to be
• 1:05:25
  Speaker 1: great at something that you don't love. It just takes
• 1:05:29
  Speaker 1: too much time and energy. And then the third thing
• 1:05:31
  Speaker 1: I just layer back in is uh. And by the way,
• 1:05:35
  Speaker 1: I was talking to a young woman at an event
• 1:05:37
  Speaker 1: that we held last night on diversity in in Tech
• 1:05:40
  Speaker 1: called Seat at the Table and the Life is Long
• 1:05:46
  Speaker 1: beyond a journey learn. I like that philosophy and our
• 1:05:51
  Speaker 1: final question what is it that you know about venture
• 1:05:54
  Speaker 1: investing today that you wish you knew twenty years ago
• 1:05:58
  Speaker 1: when you were first starting. So I will point out
• 1:06:02
  Speaker 1: that the thing that I was taught very early on
• 1:06:06
  Speaker 1: that's foundational is people, people people, and you know that's
• 1:06:10
  Speaker 1: what the sutter Hill orientation. The thing that I didn't
• 1:06:14
  Speaker 1: fully understand that I wish I knew was platform, platform platform.
• 1:06:19
  Speaker 1: I think that's the thing that again it takes the
• 1:06:21
  Speaker 1: ten x opportunity and turns it into the hundred x opportunity.
• 1:06:24
  Speaker 1: And so that is ultimately the thing that we are
• 1:06:30
  Speaker 1: most looking for in these early stage companies. You don't know,
• 1:06:34
  Speaker 1: but you say, if we're successful, if A and B happen,
• 1:06:38
  Speaker 1: can the next chapter be this extraordinary platform opportunity? Thank you, Greg,
• 1:06:44
  Speaker 1: that that's really quite fascinating. Everybody makes fun of me
• 1:06:47
  Speaker 1: for using that word, but it's fascinating. We have been
• 1:06:50
  Speaker 1: speaking with Greg Sands of Coast to No A Ventures.
• 1:06:54
  Speaker 1: If you enjoy this conversation, be sure and looked up
• 1:06:57
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• 1:07:00
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• 1:07:03
  Speaker 1: any of the other hundred and fifty nine or so
• 1:07:06
  Speaker 1: such conversations we've had previously. We love your comments, feedback
• 1:07:11
  Speaker 1: and suggestions right to us at m IB podcast at
• 1:07:15
  Speaker 1: Bloomberg dot net. I would be remiss if I did
• 1:07:18
  Speaker 1: not thank my crack staff who helped me put together
• 1:07:22
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• 1:07:28
  Speaker 1: Taylor Riggs is our booker. Michael Batnick is my head
• 1:07:32
  Speaker 1: of research. I'm Barry Ritolts. You've been listening to Masters
• 1:07:36
  Speaker 1: in Business on Bloomberg Radio