Speaker 1: This is Masters in Business with Barry Ridholts on Bloomberg Radio.
Speaker 1: This week on the podcast, I have an extra special guest.
Speaker 1: His name is Steve Murray and he has a storied
Speaker 1: background in the world of venture investing. He is currently
Speaker 1: a partner at Revolution Growth. He spent twenty years at
Speaker 1: soft Bank working with a legendary list of companies, and
Speaker 1: we very much get in the weeds about startup and
Speaker 1: venture investing. If this is an area that is of
Speaker 1: an interest to you as either a career or just
Speaker 1: a passing fancy, if you're intrigued by technology, finance, startups, fintech,
Speaker 1: UH sports technology, wearable technology, well then you're going to
Speaker 1: find this conversation quite intriguing. So, with no further ado,
Speaker 1: my conversation with Steve Murray, I'm Barry Ridholts. You're listening
Speaker 1: to Masters in Business on Bloomberg Radio. My special guest
Speaker 1: today is Steve Murray. He is a managing partner at
Speaker 1: Revolution Growth of venture capital funds that specializes in technology, software, wearables,
Speaker 1: and a number of other fascinating UH tech subjects. He
Speaker 1: was a partner and managing director at SoftBank for twenty years,
Speaker 1: working with such companies as Yahoo, e Trade, Geo Cities,
Speaker 1: Ziff Davis, BuzzFeed, and many others. He is a current
Speaker 1: board of director member at Fitbit, where he has served
Speaker 1: since Steve Murray, Welcome to Bloomberg. Welcome. Thank you for
Speaker 1: having me, Barry. I appreciate it. So let's start with
Speaker 1: soft Bank, because you were there for twenty years, um,
Speaker 1: both as a director and a partner for for a
Speaker 1: large part of that. What did you do with SoftBank
Speaker 1: A TOF bank or many years is a long time.
Speaker 1: I can't imagine that I was there for that long,
Speaker 1: but it was. It was a lot of fun, I
Speaker 1: guess in summary, I got to sort of be on
Speaker 1: the front row of the sidelines of the commercial development
Speaker 1: of the Internet. So what I did, what I did
Speaker 1: functionally as I started there, I started is really ramping up. Really,
Speaker 1: the Internet was just starting, and soft Bank had just
Speaker 1: acquired companies like Ziff Davis, Kingston Technologies, Comdex trade Shows,
Speaker 1: and plus I trade Shows, and so there were seven
Speaker 1: different operating units that had had been put together here
Speaker 1: in the US and outside of Japan. There was a
Speaker 1: grand total of four people that worked for soft Bank.
Speaker 1: So I joined initially from an infrastructure perspective to really
Speaker 1: put together all the information systems, the accounting, legal, tax
Speaker 1: and other activities for the and and managing that reporting
Speaker 1: into Japan and working with them on their strategies there.
Speaker 1: That quickly, as the commercial development of the Internet sort
Speaker 1: of moved along rapidly, the tasks that I were doing
Speaker 1: really moved much more into the investing side of life,
Speaker 1: which really starting in current out of early two thousands,
Speaker 1: I spent most of my time on the investing side.
Speaker 1: What what was the relationship between Yahoo and soft Bank
Speaker 1: way back? Yeah, so that's a that's a one of
Speaker 1: the great stories of lore, which is um uh soft
Speaker 1: Bank made an investment in Yahoo and owned about a
Speaker 1: third of Yahoo at the same time that they made
Speaker 1: the investment in in Yahoo US. At the time, that
Speaker 1: was a huge investment. I think it was about a
Speaker 1: hundred million dollars and they bought a third of it. Right,
Speaker 1: put things in context, right, it was a a pre
Speaker 1: I p O investment where Masioshi Son and Jerry Yang
Speaker 1: got together and decided that Massa wanted to be a
Speaker 1: big partner here in the US of of Yahoo's but
Speaker 1: also at the same time they created Yahoo Japan which
Speaker 1: was a real partnership. Actually, I think it was a
Speaker 1: sixty forty partnership or something like that between soft Bank
Speaker 1: as the controlling and managing partner of that entity and
Speaker 1: Yahoo US. They also created Yahoo Korea, Yahoo UK and
Speaker 1: some other things, So there was really a global partnership
Speaker 1: that was set up, and that really was on some
Speaker 1: level the basis for a lot of soft Banks US
Speaker 1: and other Internet activities. Really, you know, that's the flagship
Speaker 1: investment early on in the soft Bank story on the Internet.
Speaker 1: So it's funny to think of you as a venture
Speaker 1: investor because your background is that of an accountant. And
Speaker 1: and maybe it's my bias, but I think of accountants
Speaker 1: as steady risk averse dotting eyes and crossing teas and
Speaker 1: making sure double entry accounting adds up. How did you
Speaker 1: transition from a staid profession of an accountant to something
Speaker 1: that's got a touch of cowboy in it? Yeah, I'd
Speaker 1: say a touch of cowboy might be an understatement someday,
Speaker 1: but I guess it takes all types. Um and uh.
Speaker 1: I actually really enjoyed my time at Deloitte and was
Speaker 1: my background is. I was a c p A for
Speaker 1: a while. I was in the accounting and auditing function
Speaker 1: within UH within Deloitte for six years, So my first
Speaker 1: six years of my career were there spent. I spent
Speaker 1: an inordinately large amount of time on companies, and I
Speaker 1: think why it translated to my soft bank activities, it's spent.
Speaker 1: I spent a large amount of my time on companies
Speaker 1: that were heavily transaction orientated, So companies like Prime Mark
Speaker 1: that was buying a lot of data service companies at
Speaker 1: the time, a company like Hardcore General at the time
Speaker 1: that was buying Hardcore Brace, Jovanovitch and Neeman Marcus and
Speaker 1: other things. So I was I was involved in the
Speaker 1: assignments that I ended up being on were very transactional orientated,
Speaker 1: a lot of acquisitions, and they were doing a lot
Speaker 1: of activity. Accounting skills would come in very handy with that.
Speaker 1: Accounting skills come in very handy. I do find that
Speaker 1: my background of accounting skills is actually quite helpful with
Speaker 1: the companies, particularly as they scale. As they say there's
Speaker 1: there's uh, there's nothing like that ruins a good story
Speaker 1: like facts, and accountants on some level have facts, which
Speaker 1: is how are the companies doing versus their plan? How
Speaker 1: much cash is left in the bank, Can we last
Speaker 1: another year or five years? How would we be viewed
Speaker 1: relative to comparable companies in the marketplace? So um, Although,
Speaker 1: for sure, you know the venture capital market is a
Speaker 1: lot of art project, not necessarily a pure science project.
Speaker 1: I think having the background and accounting actually has been helpful.
Speaker 1: So tell us a little bit about Revolution Growth. What
Speaker 1: sort of companies do you invest in? And gives some
Speaker 1: examples of of some of the companies you're working with currently. Sure. So,
Speaker 1: Revolution Growth is a growth fund based out of Washington,
Speaker 1: d c uh. It was started maybe ten years ago
Speaker 1: by three folks that previously we're partners together at A
Speaker 1: o L. So it was Steve Case, Ted leonss and
Speaker 1: Don Davis started Revolution. That's the murderous row. There we go, right,
Speaker 1: I have three more podcasts. I'm sure they'd be happy
Speaker 1: to come. So the three of them started Revolution a
Speaker 1: number of years ago really to do what at the time,
Speaker 1: they were trying to figure out what was big and
Speaker 1: what was next for them in their careers after they
Speaker 1: left the A O L situation after that merger, and
Speaker 1: they ultimately created a series of investment funds, one of
Speaker 1: them being Revolution Growth. Revolution. Growth invests in companies that are,
Speaker 1: as the name would suggest, at the growth stage, so
Speaker 1: bigger companies, not smaller, but not generally not billion dollar companies.
Speaker 1: Generally companies that have twenty thirty fifty hundred million dollars
Speaker 1: of revenue. We generally invest twenty to fifty million dollars
Speaker 1: in each opportunity. We usually have a pretty significant minority ownership,
Speaker 1: so we don't We're not a private equity shop where
Speaker 1: we take control of businesses. We are more like a
Speaker 1: venture capital UH even on on some level structured like
Speaker 1: an early stage venture capital from where we own five
Speaker 1: percent of a business ten percent of a business, but
Speaker 1: we get involved as the business is really starting to scale.
Speaker 1: And so the types of businesses that we get involved
Speaker 1: in generally our technology related businesses, but they can be
Speaker 1: across a number of different verticals. Right, So we have
Speaker 1: UH companies actually as diverse and versus some of the
Speaker 1: folks that we work with as co investors um in
Speaker 1: fast casual restaurants, So we're investors in Sweet Green, We're
Speaker 1: investors in Cava that are both using technology to change
Speaker 1: the supply chain and change the ordering patterns and change
Speaker 1: the So that's a fast casual thing that we think
Speaker 1: is really big. We're involved in UM fintech, so we've
Speaker 1: recently made an investment in a company called Talo, which
Speaker 1: is doing UH micro loans in in developing nations through
Speaker 1: the use of information on people's cell phone. We're involved
Speaker 1: in sports related technologies like draft Kings where I'm on
Speaker 1: the board, sport Radar, which we're involved in. I'm sure
Speaker 1: we'll get to that topic later. UH. We're involved in
Speaker 1: UH data companies places like Uptake in Chicago, Tempest in Chicago,
Speaker 1: Interactions in Boston. So those are the types of companies.
Speaker 1: So they tend to be companies that, when we we
Speaker 1: get involved in them, tend to have substantive revenue, but
Speaker 1: not a billion dollars of revenue. We tend to put
Speaker 1: twenty to fifty million dollars to work. In almost every instance.
Speaker 1: We're on the board of these companies, and we serve
Speaker 1: to try to, you know, help them out, get them
Speaker 1: through their journey, and use the experiences and references and
Speaker 1: networks that we have to try to make them and
Speaker 1: make them successful. You referenced soft Bank earlier, and I
Speaker 1: have to ask you they now have a venture funds
Speaker 1: it's a hundred billion dollars. That's an insane amount of
Speaker 1: money for something like that. Uh, what does this say
Speaker 1: about what's going on in that space? And is this
Speaker 1: part of what's driving valuations that at firms like uber
Speaker 1: and we works through the roof? Well, clearly there's been
Speaker 1: a lot of talk about SoftBank's vision fund UM. I
Speaker 1: think it's actually it's really an amazing thing. And what
Speaker 1: does it say about the market and what does it
Speaker 1: say about where we are in the market and things?
Speaker 1: I think if we take a half a step back,
Speaker 1: what it says is certainly something like this was not
Speaker 1: possible ten years ago as an example, So what's changed
Speaker 1: that true? A decade ago you could not have had
Speaker 1: a fund this side, don't I mean outside of the
Speaker 1: financial I don't believe so just it wasn't the appetite
Speaker 1: for it, or it wasn't the capital for it. I
Speaker 1: think maybe a combination of both. But I think what
Speaker 1: UM has come to more clarity for people, which makes
Speaker 1: something like this possible, although it is an invent of
Speaker 1: one so you can't make too many broad conclusions about it.
Speaker 1: And it is sponsored by Massa, who is one of
Speaker 1: the world's great dealmakers. So I'm not suggesting that there
Speaker 1: will be multiple more hundred billion dollar funds, but I
Speaker 1: think what it does suggest is that the world has
Speaker 1: recognized the importance of tech aology and major industries and
Speaker 1: therefore the ability to deploy big amounts of capital in those.
Speaker 1: So things like industries like real estate, industries like healthcare,
Speaker 1: financial systems and others are really now being fundamentally changed
Speaker 1: by technology in a way that it's really just starting
Speaker 1: to happen, although there's been a lot of talk about it,
Speaker 1: you know, the industrial complex and the like, those things
Speaker 1: are really now starting to change materially, and those give
Speaker 1: real opportunities to deploy real amounts of capital. We say,
Speaker 1: we see this with a bunch of different opportunities that
Speaker 1: that's up Bank is deploying. So I think that they
Speaker 1: are a hugely influencial investor in the marketplace. I don't
Speaker 1: think a fund like this was possible ten years ago.
Speaker 1: I'm not sure there's ten more of them that are
Speaker 1: coming down the path, but I do think it speaks
Speaker 1: to the importance of technology in major industries that maybe
Speaker 1: previously had been a bit more immune to it. So
Speaker 1: not too long ago, I had a conversation with Benic
Speaker 1: Devans of Andrews and Horowitz, and his comment was, there
Speaker 1: aren't um technology companies anymore. Everybody's a technology company. If
Speaker 1: you're not using tech in in the most optimal or
Speaker 1: most productive way, you're just going to be left behind.
Speaker 1: I think that's a fair and accurate summary. I do
Speaker 1: think there are obviously some and many companies that are
Speaker 1: using it more effectively. There are industries that allow for
Speaker 1: it to be used more effectively. The pace at which
Speaker 1: some of these industries are going to be able to
Speaker 1: adopt the technology is not at the same pace that
Speaker 1: we've seen in some other industries. So as an example,
Speaker 1: when you talk about health care and you talk about
Speaker 1: you know, money supply, and you talk about things like
Speaker 1: that that are heavy heavily regulated, the pace at which
Speaker 1: some of these changes are going to be happening is
Speaker 1: not gonna be like how long it took Facebook to
Speaker 1: be published. For changes in there, it's going to take.
Speaker 1: So let's talk a little bit about health I see
Speaker 1: you're wearing the bigger what is that called the versa?
Speaker 1: This is all the ionic Oh, the ionic, so that's
Speaker 1: the big fit. But I'm wearing the charge to my wife.
Speaker 1: I had the original one, which I had, truth be told,
Speaker 1: I didn't love, but my wife. I got this from
Speaker 1: my wife and she liked it so much that I
Speaker 1: went out and got my own. You've been heavily involved
Speaker 1: in wearables. Where is that sector going, especially since you
Speaker 1: mentioned health? What might these things mean for a sedentary
Speaker 1: overweight nation. It's I think the existing status of wearables
Speaker 1: means a lot for a sedentary overweight nation, which is
Speaker 1: that it provides basic information around things like how active
Speaker 1: you are, what is your what's your pulse, how much
Speaker 1: sleep have you gotten? Things that are very basic in theory.
Speaker 1: But those pieces of information, when provided to people and
Speaker 1: easy to use formats with easy to use devices, change
Speaker 1: behavior for many many users. I could tell you from
Speaker 1: pro and experience. When I had the original fitbit and
Speaker 1: I was doing ten fifteen thousand steps a day, I
Speaker 1: became a little obsessive with it, and then I I
Speaker 1: had a couple of glitches with it, and I kind
Speaker 1: of got bored with it, and I put it down,
Speaker 1: and the phone is still tracking most of my travel.
Speaker 1: And I noticed that those ten thousand a day without
Speaker 1: something on your wrist just disappeared and it. Once I
Speaker 1: got this back again, suddenly it's all right. My office
Speaker 1: is down on four the street. We're on fifty eight street.
Speaker 1: I don't need to take a subway. I could walk,
Speaker 1: And besides, that's gonna add me two thousand steps. It
Speaker 1: really makes a significant thing, it really does. The mindfulness
Speaker 1: piece of it, which you're referring to, is really the
Speaker 1: key piece of the first generation of these things, which
Speaker 1: is really we're on maybe the first and a half
Speaker 1: generation of these things. So we started out with really
Speaker 1: basic trackers that did a pretty good job of tracking steps,
Speaker 1: but they were really electronic pedometers, if you will, right,
Speaker 1: And then they married that with really easy to use
Speaker 1: mobile software which makes you able to look at a
Speaker 1: little bit more. They've added sensors to things, and I
Speaker 1: don't know if you use the other ones that do
Speaker 1: things like your heart rate, you know, which is actually
Speaker 1: for lots of people quite interesting, what's my what's very
Speaker 1: pretty chill? What's your and and people sometimes say when
Speaker 1: I'm working out, I should get to thirty or forty
Speaker 1: beats a minute. Okay, how is that? You can drill
Speaker 1: into that in your mobile app after your workout and
Speaker 1: look at how that goes. The other feature that I
Speaker 1: use a lot, and I don't know if you do,
Speaker 1: but many users do, and it actually has really influenced
Speaker 1: me is the sleep function my wife uses that I
Speaker 1: like to take off anything from my winning band is
Speaker 1: the only jewelry I have on it in your bed.
Speaker 1: But that's just a function of getting used to it.
Speaker 1: And I would so the sleep thing for me, as
Speaker 1: somebody that travels every week and has a lot of
Speaker 1: functions that I attend to and are in different cities
Speaker 1: a lot I find, particularly as I'm not getting younger,
Speaker 1: My my vibrancy, my health, everything seems to directly correlate
Speaker 1: with the number of hours of sleep I get, it seems.
Speaker 1: And so as an example, I was looking yesterday, was
Speaker 1: talking to somebody about this. Yesterday evening. I looked at
Speaker 1: my fitbit data on my phone yesterday as I was
Speaker 1: traveling someplace, and I noticed that it has been over
Speaker 1: a month since I've had more than seven hours of sleep.
Speaker 1: I said, you know, something is not good there. I
Speaker 1: gotta fix that, right. So there's a mindfulness piece of
Speaker 1: it there. You've got to report at the end of
Speaker 1: a week, says your average sleep has gone up or
Speaker 1: down since last week, and so those basic things that
Speaker 1: are being provided now materially change people's behavior. Where is
Speaker 1: it going? I think is is the next step, and
Speaker 1: I think of it is around health. So they'll be
Speaker 1: just as they added functions around things like pulse and
Speaker 1: things like sleep, they there will be things that will
Speaker 1: add things around blood sure, perhaps blood sugar contact. You
Speaker 1: could imagine a whole series of sensors that get added
Speaker 1: into whether it's a risk device or something else that
Speaker 1: feeds a central depositor depository like a mobile application. And
Speaker 1: the real key will be when that can be integrated
Speaker 1: into your health system. If you will your doctor, If
Speaker 1: you imagine your doctor at some point getting your report
Speaker 1: about what's going on with you, and and a check
Speaker 1: engine light if you will goes off and says, hey, Barry,
Speaker 1: you know, looks to me like your blood sugar levels
Speaker 1: pretty low. You might want to get home and get something.
Speaker 1: You might want to get get something to eat, or
Speaker 1: eat an apple or something, or geez, your pulse is
Speaker 1: way high. You have the symptoms of somebody that looks
Speaker 1: like you might be having some hard issues that you
Speaker 1: might want to go to your doctor. But so if
Speaker 1: you think about some of where this is going. I
Speaker 1: think in the next phase is around this check engine
Speaker 1: light for yourself. So, without getting to graphic, I've read
Speaker 1: about sensors that can be put into a toilet where
Speaker 1: they can check things like blood sugar, and actually check
Speaker 1: for proteins associated with cancer. This is so small and
Speaker 1: doesn't have, you know, a giant battery, but I would
Speaker 1: imagine the next couple of generations of sensors are going
Speaker 1: to be able to pick up all sorts of stuff that,
Speaker 1: you know, hard to even imagine. Yeah, the real trick
Speaker 1: in all this is figuring out what pieces of sensors
Speaker 1: people would be willing to wear or use regularly so
Speaker 1: that the data comes through regularly, because with periodic data
Speaker 1: is and as valuable as regular data. So there's this
Speaker 1: constant battle between battery life. You know, so this ionic
Speaker 1: device lasts four or five days, you could put more
Speaker 1: sensors on it to do more things. It might last
Speaker 1: four or five hours, in which case, what do you
Speaker 1: need to watch for that last four or five hours
Speaker 1: that's of no value to So there's a they're the
Speaker 1: constant push and pull and struggle and and researches around
Speaker 1: how do you create sensors that identify things that make
Speaker 1: the form factor usable enough for people to wear on
Speaker 1: a regular basis. Related to wearables, I have to ask
Speaker 1: the question why did Google glass flame out so spectacularly?
Speaker 1: It seemed like an interesting piece of tech, but it
Speaker 1: never caught on except for some very specific niches. Yeah,
Speaker 1: I think it ties back to what we were just
Speaker 1: talking about with respect to sensors and battery life and usability.
Speaker 1: It appears as if the form factor never got to
Speaker 1: a point where people really wanted to wear it. It
Speaker 1: looked kind of geeky, it looked kind of weird, and
Speaker 1: you know what we've seen with the fitbit devices and
Speaker 1: I think it will be applicable for a lot of wearables.
Speaker 1: Is that the fashionable piece of this is very important.
Speaker 1: You know, can you is this something that you would
Speaker 1: wear in public and and and use? Um So, I
Speaker 1: think I think that might have impacted Google Glass. But
Speaker 1: the thought of a surgeon who has Google Glass on
Speaker 1: and wants to pull up a you know, either the
Speaker 1: X ray or the m R, a you or some
Speaker 1: other resource makes perfect sense for that absolutely. I think
Speaker 1: what you what we'll see, particularly for those types of
Speaker 1: applications on the I've seen something like that that's on
Speaker 1: the construction floor where actually it was I think of
Speaker 1: something with Boeing or or Lockheed or something where somebody
Speaker 1: who was putting together the intricate pieces of a wing
Speaker 1: of a plane can look at the through his glass
Speaker 1: blueprints through blueprints right on the throughs. So those are
Speaker 1: the types of applications that I think are easy to use,
Speaker 1: much more likely to have early success. I think the
Speaker 1: form factor for general commercial use hasn't quite got there.
Speaker 1: And how significant is the Apple Watch as a player
Speaker 1: in this space because you're your Fitbit watch about the
Speaker 1: same form factor as the Apple Watch, the same size. Yeah.
Speaker 1: Everything Apple does is they do a great job. They
Speaker 1: have a real a loyal fan following. They're passionate, they
Speaker 1: make great products that they're they're following loves um, you know.
Speaker 1: So they're they're they're a credible competitor, and I think
Speaker 1: that they will have and continue to be one of
Speaker 1: the real leaders in the wearable category for sure. I
Speaker 1: want to talk a little bit about a fund associated
Speaker 1: with revolution growth called Rise of the rest O r TR,
Speaker 1: and the concept is so intriguing. Most of the venture
Speaker 1: investing seems to take place in San Francisco and New
Speaker 1: York and Boston. But Revolution Growth does a bus tour,
Speaker 1: five cities, five days, five thousand dollars, and they do
Speaker 1: sort of a local pitch competition. Tell us more about
Speaker 1: the idea behind that, and who's driving that literally driving it,
Speaker 1: driving above the bus, right, So, so the idea really
Speaker 1: is Steve Case's idea, um and it's something that he's
Speaker 1: been and it and it started as an idea and
Speaker 1: and some activities around a bus tour. They've recently done
Speaker 1: their seventh bus tour. Really that many wow, And it's
Speaker 1: half a million per tour or half a million per city,
Speaker 1: half a million per tour generally, although sometimes he finds
Speaker 1: a way to involve a couple of the runner ups
Speaker 1: sometimes get something as well, but apparently that's not to
Speaker 1: be known. So the activity really is Steve's, and it's
Speaker 1: one of a personal passion of his, and it's one
Speaker 1: that the firm Revolution has adopted generally, right, which is
Speaker 1: in essence, the ideas around good company development and entrepreneurial
Speaker 1: spirit are not solely located in New York, Boston and
Speaker 1: San Francisco San Jose region. And if you look at
Speaker 1: where the distribution of capital is about somewhere between seventy
Speaker 1: and seventy eight percent of the venture capital money is
Speaker 1: spent in those three areas. And so there are a
Speaker 1: number of other great cities in the country that can
Speaker 1: and should be producing more entrepreneurial based technology companies. It's
Speaker 1: important for the country, it's important for the people in
Speaker 1: those communities, and it's a real business opportunity. So we
Speaker 1: combine all those three and that's really the impetus behind
Speaker 1: Rise of the Rest. Rise of the Rest has become
Speaker 1: much more than a bus tour, right, So it started
Speaker 1: really as a bus tour. It's now become a real
Speaker 1: platform of folks. There's a real team there as you
Speaker 1: As you mentioned earlier, there's now a fund associated with it.
Speaker 1: Hold on a second, I just have to read a
Speaker 1: few of the names who are affiliated with this fund,
Speaker 1: because it's just the noodles. Jim Barksdale of nets Gay,
Speaker 1: Jeff Bezos of Amazon, Tory Birch, Steve Case, Ray Dalio,
Speaker 1: John Dor, Henry Kravis, Michael Milkin's, Sean Parker, Howard Schiltz,
Speaker 1: Eric sch Mintmigut Whitman. That's just the like first half
Speaker 1: and the rest of it is just as impressive. How
Speaker 1: on earth did a group of rock stars like that
Speaker 1: come together to fund a concept like this? That's just
Speaker 1: a mind blowing list of investors. It is an amazing list.
Speaker 1: I'm not sure that list of investors has ever been
Speaker 1: put together in a fund. And now I have another
Speaker 1: twenty two podcasts to do based just on that list.
Speaker 1: I think it speaks to the power of the idea.
Speaker 1: Uh as. The first phases of this were the investments
Speaker 1: were funded mostly from Steve Case's personal UM resources, and
Speaker 1: as he traveled around the country and as he talked
Speaker 1: to people that he had known and worked with and
Speaker 1: interacted with, what he heard was, Geez, this is a
Speaker 1: great idea. I want to be part of it. And
Speaker 1: a decision was made about a year ago to to
Speaker 1: institutionalize that activity, at least in terms of the deploying
Speaker 1: of capital around a fund and based on the names
Speaker 1: of people you can imagine. Um. You know, they really
Speaker 1: thought that this was a powerful idea. They believe that
Speaker 1: it is important for the country, important for the growth
Speaker 1: of entrepreneurship across the country. I mean, anybody that runs
Speaker 1: companies in Boston, New York and San France. Cisco knows
Speaker 1: that labor shortage type hiring and retaining engineers is tight
Speaker 1: um cost of living cause we're living through the roof,
Speaker 1: so there's lots of things that make it challenging. There's
Speaker 1: those are great places, and there are great companies and
Speaker 1: they will continue to be. So the rise of the
Speaker 1: rest is not, you know, sinking of these other places.
Speaker 1: It's that these other opportunity there are places where new
Speaker 1: opportunities can to be created, and we should be really
Speaker 1: sponsoring those. And so that's really what that's all about.
Speaker 1: There was a New York Times article some weeks ago
Speaker 1: about a bunch of Silicon Valley venture capitalists who suddenly
Speaker 1: had become completely enamored with Detroit. The cost of living
Speaker 1: is incredibly cheap. There's a huge engineering and and um
Speaker 1: technology talent pool there that they didn't expect to see.
Speaker 1: How realistic is it to think of parts of the
Speaker 1: Midwest Pittsburgh, Milwaukee, Detroit and other cities outside of the
Speaker 1: core current technology venture capital areas really developing a burgeoning
Speaker 1: texting I think it's very realistic, and I think we're
Speaker 1: seeing it. Two of the most exciting companies in our
Speaker 1: portfolio in Chicago. It's just in the West Loop and
Speaker 1: it's one amazing If you walk into I think it's
Speaker 1: six hundred West Chicago Avenue where these two companies, Temples
Speaker 1: and Uptake are located, you would think you're in Silicon Valley.
Speaker 1: The offices are, you know, vibrant, and there's young folks
Speaker 1: coming in and out of the building all day long,
Speaker 1: and there's the activity level is really buzzing. So Chicago's
Speaker 1: for sure one of those areas that's coming along. Um.
Speaker 1: I've done some stuff down in Atlanta, Atlantis coming along's
Speaker 1: coming along. Um. We just did the investment in tallah
Speaker 1: that we referred to earlier, which is in Santa Monica,
Speaker 1: right outside of el I mean, there's so that we
Speaker 1: believe that there are. Pittsburgh is where Google has their
Speaker 1: autonomous uh and I think Uber has a lot their
Speaker 1: autonomous work being done there. So a lot of these
Speaker 1: cities that have great universities, a lot of young folks
Speaker 1: are support of local community. They can do this and
Speaker 1: and we're really starting to see this. So this isn't
Speaker 1: a press release. This is a real commitment to those areas.
Speaker 1: We stayed in the hotel right across the street, from
Speaker 1: the new Google building, and our office in Chicago is
Speaker 1: at a WEE works right around the corner from that.
Speaker 1: It's amazing, it really is. Let's talk a little bit
Speaker 1: about the modern era of venture investing, because it seems
Speaker 1: so different than the two thousands, with the housing boom
Speaker 1: and bust and the Great Financial Crisis, and of course
Speaker 1: the insanity of the will we had, the dot com
Speaker 1: boom and bust and and and that situation. I've noticed
Speaker 1: that lots and lots of companies are staying private much
Speaker 1: longer than they used to. The number of I p
Speaker 1: o S are down. What's the driver behind that? Well,
Speaker 1: as they say, probably part of it is because they
Speaker 1: can all that all that capital we talked around gives
Speaker 1: them an opportunity to not go public. One reasons, really,
Speaker 1: I think is one is um because of some of
Speaker 1: the regulations that's happened around Sarbanes Oxley and other things,
Speaker 1: the cost and complexity of being a public company has
Speaker 1: gone up, and so there's certainly some piece of it
Speaker 1: is that it's just difficult. It's expensive. Oftentimes, particularly technology
Speaker 1: based companies d prioritize building the infrastructure to support that
Speaker 1: over the next product more sales and marketing, expand into
Speaker 1: international activities and the like. And so there's a part
Speaker 1: of it that is, hey, we don't want to do that,
Speaker 1: and then there's a what what? So it's more let
Speaker 1: me interrupt you. It's more than just regulations. It's building
Speaker 1: out human resources, accounting, payroll compliance, all that stuff. They
Speaker 1: just want to capture market share and sell more and
Speaker 1: varied products. Yeah, if you think about what drives a
Speaker 1: founder to start a company and what drives the founder
Speaker 1: every day to picking a new payroll company, that's what
Speaker 1: they're enthusiastic, picking a cybersecurity expert and and reviewing compliance
Speaker 1: with Sarbanes Oxley for a one C or whatever. I mean,
Speaker 1: for sure there's some piece of it that is not
Speaker 1: prioritized with a lot of companies. So what But what
Speaker 1: has enabled it? I believe as as you referred to
Speaker 1: earlier as really the access of capital to allow for
Speaker 1: the growth without having to tap the public market. So
Speaker 1: that you as a venture capitalist, you as a person
Speaker 1: running of funds, you're looking for an exit eventually, I
Speaker 1: got to imagine that the big backers of shops like
Speaker 1: Uber aren't. Yeah, take your time whenever you get around
Speaker 1: to it will be patient. I think these folks are
Speaker 1: waiting for an exit. And Uber perhaps is a good example.
Speaker 1: If they would have gone public a year ago, they
Speaker 1: might have missed that whole. Gee, here's a haircut on
Speaker 1: your last high water mark valuation. Certainly could have been
Speaker 1: And for sure, venture investors have limited partners and of
Speaker 1: institutions that need money back at some point. That said,
Speaker 1: if you talk to a lot of them, I'm sure
Speaker 1: you hear from others that if they find a great
Speaker 1: company that continues to grow at a fast pace and
Speaker 1: it's continuing to gain market share and developing opportunity, that's
Speaker 1: not something they want to get out of quickly. Right. So,
Speaker 1: on some level, by these companies, the best of them
Speaker 1: not going public, it allows some of these venture investors
Speaker 1: to hold longer and capture more of the upside, where
Speaker 1: perhaps in previous years, when the company goes public, they're
Speaker 1: under a lot more pressure to sell their shares because
Speaker 1: there's a public market for that. Now, I recall in
Speaker 1: the nineties and maybe that's an aberrational period, but every
Speaker 1: now and then a company would come public with a
Speaker 1: very small float. Perhaps that was the thinking behind it.
Speaker 1: All Right, we'll sell ten percent of our holdings, but
Speaker 1: we think this is worth a lot and we don't
Speaker 1: really need the money, so we willing to let it
Speaker 1: ride a little bit. That's right, And and that was
Speaker 1: also particularly in the nineties, Really the I p O
Speaker 1: event was much more of a financing event, right, which
Speaker 1: is they had they got access sitting in boardrooms during
Speaker 1: that time, the question about when to go public was
Speaker 1: when do we need to raise our next round? And
Speaker 1: what would be the benefits of being public? And some
Speaker 1: of them would be access to more capital, some of
Speaker 1: them would be we now have a public currency which
Speaker 1: we can use for acquisitions and the like. And with
Speaker 1: the the world that has changed now where there there
Speaker 1: aren't five soft bank vision funds, but there are certainly
Speaker 1: five multi billion dollar funds that are focused now on
Speaker 1: later stage technology based companies that are private. And so
Speaker 1: the availability of capital I can't imagine it's ever been
Speaker 1: more great than it is right now. Are we creating
Speaker 1: a giant damn behind which there's all this pent up
Speaker 1: demand to go public or pent up demand for for
Speaker 1: more companies, And at some point, not too far off
Speaker 1: in the future, we're gonna see a wave of I
Speaker 1: p O s coming out. I don't know. There's been
Speaker 1: a lot of talk about this wave of I p
Speaker 1: O s for a number of years, and it doesn't
Speaker 1: seem to have happened. I do think some of these
Speaker 1: companies that are private, some of these big companies there,
Speaker 1: B and B and others, they could go public anytime
Speaker 1: they want. Uh. They don't have to wait for a
Speaker 1: good market, a bad market, whatever. There are companies that
Speaker 1: are our size and scale. Many of them are achieving
Speaker 1: or past profitability. They're starting to show real leverage in
Speaker 1: their model. They're starting to show that they're they're able
Speaker 1: to add new products and new services onto what they're
Speaker 1: doing in a very effective and efficient manner. They've built
Speaker 1: out their management team so they are operating almost as
Speaker 1: if they are a public company. When the within the
Speaker 1: shell of within the veil of privacy, if you will,
Speaker 1: and you know so, I think those will happen. Whether
Speaker 1: they happen this month, next month, next year, it's unclear.
Speaker 1: So let's talk a little bit about valuation. I've had
Speaker 1: other vcs like Mark Andreeson tell me valuation is irrelevant.
Speaker 1: Their business model is looking for the needle in a haystack.
Speaker 1: And whether Facebook returns ten thousand times your initial investment
Speaker 1: or twenty thousand times, it's a relevant at pace for
Speaker 1: a lot of other um investments that don't work out.
Speaker 1: You have the accounting background, what do you think of
Speaker 1: of valuation when you're trying to choose amongst early stage companies? Yeah,
Speaker 1: I guess maybe this is where some of my accounting
Speaker 1: background would probably put me in a slightly different uh
Speaker 1: point of view there. I think as it relates to
Speaker 1: super early stage investments where you're really betting on a
Speaker 1: team and an idea, whether you invest that two million
Speaker 1: pre or ten million pre probably doesn't matter too much.
Speaker 1: I think it starts to matter a lot more as
Speaker 1: you get further up the valuation train. So does it
Speaker 1: matter if you invest in the next best travel company
Speaker 1: that has a lot of traction at a two million
Speaker 1: valuation versus a billion valuation? I think it matters actually
Speaker 1: a lot in many instances. In actually most instances, it's
Speaker 1: easy to point to a Facebook and say, hey, you're
Speaker 1: going to make twenty thou times your money. Doesn't really
Speaker 1: matter if you make ten thousand times your money, of
Speaker 1: course it does not. The that's really an exception. Most
Speaker 1: of the companies follow into a much more predictable pattern
Speaker 1: of what they can exit at. Ultimately, as you know,
Speaker 1: what does that bill curve look like of those that
Speaker 1: don't make it, those that break even, and those that
Speaker 1: deliver a profit. It depends when you invest. Uh, if
Speaker 1: you're pure early stage investors, most of them that are
Speaker 1: honest with you would tell you that certainly thirty or
Speaker 1: forty of their companies never make it. That's the earlier stage,
Speaker 1: the much more challenging it is. You're really casting a
Speaker 1: wide neck because so many of them are going to fail.
Speaker 1: At the stage that we invest in, which is really
Speaker 1: the growth stage where there's been there's lots of work
Speaker 1: left to be done, but there's a existing revenue stream
Speaker 1: and there's a product in the marketplace where you can
Speaker 1: see things like margin and things like that. The failure
Speaker 1: rate should be much much lower should be of the companies.
Speaker 1: But you also lose the fifty or a hundred times
Speaker 1: x because you're in at a higher valuation and transpoint.
Speaker 1: But you could still see a ten or twenty x
Speaker 1: return and that pays for a lot of companies that
Speaker 1: for sure don't don't break even for sure. We were
Speaker 1: discussing earlier about some of the companies that have stayed
Speaker 1: UM private, and I referenced Duber. What about a company
Speaker 1: like Tesla that went public and just has this massive
Speaker 1: cash burn? Should they have stayed private and continue to
Speaker 1: tap the venture markets or does this make sense for them?
Speaker 1: I I, you know, I don't know enough to know.
Speaker 1: I don't know all the details of why they decided
Speaker 1: to do what they've do. It seems to have worked
Speaker 1: out okay for them. They're obviously going through some challenges now,
Speaker 1: but people love the product. They've be able to access
Speaker 1: a lot of public funds. Um recently they just did
Speaker 1: another three billion dollar bond bond offering that worked out
Speaker 1: pretty well. And the CEO Ellen is obviously one of
Speaker 1: the world's great visionaries that people want to back and
Speaker 1: want to support. Uh So why they decided to go
Speaker 1: public when they did is not clear, but it seems
Speaker 1: to have worked out okay for them. So you referenced funding,
Speaker 1: an idea and a team. Um, which is more important?
Speaker 1: Is it the idea that grabs your attention? Is it
Speaker 1: the team and how they execute or is it some
Speaker 1: ineffable combination. Yeah, it's I'm sure it's It depends a
Speaker 1: little different on each one, and I think it depends
Speaker 1: a little bit more on the stage of investments. So
Speaker 1: the earlier we go, the more it's simply dependent on
Speaker 1: the team. Right. So it's because what we find is
Speaker 1: great teams can find the opportunity. You know, if you're
Speaker 1: if you're in a general market area where you think
Speaker 1: there's a great opportunity and you have a superior team,
Speaker 1: they will find where those nuanced opportunities will be. They're
Speaker 1: almost never exactly where you start. I use this uh
Speaker 1: analogy with a lot of people because my sons are
Speaker 1: all they they're competitive sale racers, And I said, when
Speaker 1: you're running one of these companies, you're you know where
Speaker 1: you need to go. You're at point A and you
Speaker 1: need to get to point C. The problem is the
Speaker 1: people that you don't realize that the captain of the ship,
Speaker 1: if you will, is actually in a sailboat, not a
Speaker 1: motor boat. So you have to go. And so if
Speaker 1: you try to go in a sailboat from point A
Speaker 1: to point C, if the wind is not exactly where
Speaker 1: you think it is, you ain't going anywhere, right. And
Speaker 1: too many people say, geez, I know where I'm going,
Speaker 1: and I keep going and I'm running into this wall.
Speaker 1: The really talented managers of these companies and founders, they say, geez,
Speaker 1: I know where I'm going, but I have to go
Speaker 1: here first and then there and then there, and I'm
Speaker 1: going to read the t leaves along the way, and
Speaker 1: it's it's actually fun to be a part of those
Speaker 1: We have been speaking with Steve Murray. He is a
Speaker 1: partner at Revolution Growth Venture Funds. If you enjoy this conversation,
Speaker 1: be sure and stick around for the podcast extras. Will
Speaker 1: we keep the tape rolling and continue discussing all things
Speaker 1: venture related. We love your comments, feedback and suggestions right
Speaker 1: to us at m IB podcast at Bloomberg dot net.
Speaker 1: You can check out my daily column at Bloomberg dot com.
Speaker 1: Follow me on Twitter at rit Holts. I'm Barry rit Holts.
Speaker 1: You're listening to Masters in Business on Bloomberg Radio. Welcome
Speaker 1: to the podcast, Steve, thanks so much for doing this.
Speaker 1: I have a list of questions we didn't get to.
Speaker 1: I have to um bounce off view before we start
Speaker 1: with our favorite questions. UM, your New York and DC based.
Speaker 1: I have to ask, what's the difference between venture or
Speaker 1: even private equity? Firms on the East Coast versus those
Speaker 1: out in Silicon Valley. And I say this as a
Speaker 1: person who has been to a number of Silicon Valley
Speaker 1: venture firms, and every time I walk out of one
Speaker 1: of them, I kind of scratched my chin and say,
Speaker 1: I could live in California if I had to, I
Speaker 1: could survive this. In New York. It seems they're role
Speaker 1: in big offices and it's lovely and everything, but it's
Speaker 1: a totally different vibe. Yeah, the weather in UH in
Speaker 1: northern California is certainly superior to Boston or New York,
Speaker 1: to say the least. I agree with that, that's agree.
Speaker 1: So I actually think the differences between the coasts and
Speaker 1: how they approach things has changed a little bit over time,
Speaker 1: and they have become are similar. Partly is that some
Speaker 1: of the firms and the West Coast have opened up
Speaker 1: New York offices, and some of the firms in New
Speaker 1: York and Boston have opened up Silicon value firms. Actually,
Speaker 1: most of the successful firms on either coast now have
Speaker 1: a presence in the coast that they weren't in. So
Speaker 1: I think there's some of that that there's a little
Speaker 1: bit more of similarity. That said, I do think there
Speaker 1: is something to the you know, the the old adage
Speaker 1: that they're the more risk tolerant on the West Coast.
Speaker 1: They're more for sure, and they're the acceptance of failure
Speaker 1: is a little higher, and on some level, particularly on
Speaker 1: the early stage, I find that the West Coast investors
Speaker 1: almost look like, look at somebody's failure as a CEO
Speaker 1: as a badge of honor, not as a you know,
Speaker 1: a black mark. Hey, this guy tried, They went for it,
Speaker 1: they swung for the fences. Now I just um said
Speaker 1: this guy and it's mostly been guys. Do you see
Speaker 1: an each changes taking place with more women, more people
Speaker 1: of color, less um, less just male dominator technology. Yeah,
Speaker 1: for sure, they're they're less pro topia every everything for
Speaker 1: the venture from the venture firms themselves, uh, to the
Speaker 1: firms and the companies running there's there's a clear uh
Speaker 1: emphasis on diversity, and there's real business reasons for it.
Speaker 1: The research suggests that you get people in a room
Speaker 1: with different points of view and you come up with
Speaker 1: a better outcome. So let's group think. I think there's
Speaker 1: a there's a lot a lot of ways to go there,
Speaker 1: and obviously there's been some some you know, very public
Speaker 1: and bad stories that have come out in the last
Speaker 1: couple of years. But that's probably catalyzing change faster, is
Speaker 1: my my guess. So you sit at a unique perch
Speaker 1: where you're looking at things that are changing. What is
Speaker 1: the next industry that's going to be disrupted? Is it healthcare?
Speaker 1: Is it finance? Schools? In fintech, which I know is
Speaker 1: an area, uh you like, is it even something like
Speaker 1: food or transportation? What what's the next disruption that's going
Speaker 1: to take place? I think there's all of those, but
Speaker 1: so here's but there's one that's maybe more more current
Speaker 1: than Okay, an interesting topic to talk about, which is
Speaker 1: the Supreme Court will rule within the next thirty days
Speaker 1: on a case called Paspo, which is the state of
Speaker 1: New Jersey sued the federal government essentially around thing about
Speaker 1: states rights. But depending on which way the Supreme Court rules,
Speaker 1: it could allow for legalized sports gambling on a state
Speaker 1: by state basis. Legalized sports gambling. So currently there's gambling
Speaker 1: allowed in Las Vegas. You can bet on different um
Speaker 1: teams and stuff. Isn't that is that not allowable on
Speaker 1: a state by state basis currently? So you are now
Speaker 1: seemingly making the argument that New Jersey is making, which
Speaker 1: is why does Nevada get to allow for this and
Speaker 1: the other states not? It doesn't make much sense there,
Speaker 1: So that that's the essence of the conflict. There's lots
Speaker 1: of legal nuanced and you with your legal background, would
Speaker 1: be able to read the briefings, I'm sure, and be
Speaker 1: able to summarize them, do you, Lord No, under no circumstances.
Speaker 1: In essence, that is the conflict that's being resolved, or
Speaker 1: that's being that that's at at that issue right now.
Speaker 1: The reason I think that's so important is that sports
Speaker 1: and the media around sports has changed so much in
Speaker 1: the last few years. How people engage with sports, whether
Speaker 1: it's through the mobile device, whether it's through uh fantasy sports,
Speaker 1: both regular league's fantasy sports or daily fantasy sports like
Speaker 1: at DraftKings. The engagement with sports has changed so much
Speaker 1: over time. But the import of sports to the television
Speaker 1: bundle and places cut the chord. You're not seeing live sports,
Speaker 1: that's right, So that this is a big thing. There's
Speaker 1: a strong opinion amongst many people that know much more
Speaker 1: about it than I do, that the Supreme Court will
Speaker 1: in fact overrule. This makes sense and allow for states
Speaker 1: to decide on their own what they want to do.
Speaker 1: That will kick off an enormous game of musical chairs
Speaker 1: around who's doing what. Everybody wants to have their hand
Speaker 1: in that pie. The leagues, the states, want, the operators,
Speaker 1: the media companies. Everyone seems to be positioning there. There's
Speaker 1: a number of states that have already begun to file
Speaker 1: legislation in the event this passes. So this is a
Speaker 1: real game of musical chairs that could start any day.
Speaker 1: And you think this will be explosive. I think if
Speaker 1: it happens, it's going to be really interesting to watch.
Speaker 1: I have a buddy. So I'm not a fantasy sports guy,
Speaker 1: and I'm too old to be the Nintendo I forgot
Speaker 1: the name of the the game where people were running
Speaker 1: around swiping things in in um Pokemon. I'm too old
Speaker 1: to be a Pokemon ghost sort of guy. But I
Speaker 1: have a buddy. Shout shout out to Lend Parissi, who
Speaker 1: created a company that combined fantasy sports with Pokemon Go.
Speaker 1: He got it patented. They were just funded and essentially,
Speaker 1: when you put your fantasy NFL or basketball team together,
Speaker 1: you run around your city and your's, Oh, there's Lebron
Speaker 1: James and you're swiping him like he's a Pokemon go egg.
Speaker 1: When he told it to me, I said, dude, I
Speaker 1: don't do any of that stuff, And I gotta think
Speaker 1: kids are gonna love that. That just seems like a
Speaker 1: crazy good idea. Um, is this the sort of insanity
Speaker 1: that we're gonna be dealing with? As all these different
Speaker 1: kind steps cross fertilize each other and cross pollinate, you
Speaker 1: end up with just a million new ideas and a
Speaker 1: million new businesses. It's very clear that if from sports,
Speaker 1: which is a big and important business in in the U.
Speaker 1: S and and internationally, that the way in which the
Speaker 1: consumers consume that content has changed dramatically and will continue
Speaker 1: to change. That could be where things like virtual reality
Speaker 1: and augmented reality player role like with your Friends Company
Speaker 1: an AI are gonna apply to this. You think about
Speaker 1: a situation where you're sitting at your house on a
Speaker 1: Friday night, you don't feel like going into the Yankees game,
Speaker 1: but maybe for fifteen dollars, you can be essentially at
Speaker 1: the front row in your with put your headset on,
Speaker 1: and you you're there. The game's going on. You hear
Speaker 1: it all, you see the ball flying by, There's those
Speaker 1: types of things. So there's a lot of ideas that
Speaker 1: are going on. What the consumers actually fall in love with?
Speaker 1: Who knows, I don't know. I have three teenage boys
Speaker 1: and they have never seen addictive behavior like their's right
Speaker 1: now with a game called Fortnite. Of course that's it's
Speaker 1: just and so, but if a year ago somebody had
Speaker 1: shown me that game, I would have said, I don't
Speaker 1: see why somebody would want to do that. They and
Speaker 1: all their friends and everybody I knows friends play it
Speaker 1: all the time. So what consumers actually hang onto I
Speaker 1: don't know, but there is, there has started to be,
Speaker 1: and there will continue to be an enormous amount of
Speaker 1: innovation around the activities around sports because they're so popular,
Speaker 1: because the usage patterns have changed so much. And I
Speaker 1: do think this sixty nine. Nobody knows what the number is,
Speaker 1: but it's a big, big number of billions. That is
Speaker 1: that is bet illegally in the US through off shore.
Speaker 1: It's a lot more than that. It's hundreds of billions
Speaker 1: of dollars. It's an insane, insane amount of money, and
Speaker 1: that very soon could be very soon measured in years
Speaker 1: not days, could be now bet legally, huh that? And
Speaker 1: so every any profits from it, taxes it, except for
Speaker 1: the you know Mark Twain called gambling attacks on the stupid,
Speaker 1: but except for the people on the losing end. There's
Speaker 1: a lot of activity that's going to take place, and
Speaker 1: the people the proponents of this would certainly say, well,
Speaker 1: there are people on the losing end of it. Now,
Speaker 1: sure you're not adding to the number of people. Well,
Speaker 1: you might be attracting more people once it comes out
Speaker 1: from the black market. That's certainly a reasonable guess. Certainly
Speaker 1: could be. I remember having a conversation with somebody that's
Speaker 1: involved in one of the operators in Europe, a good
Speaker 1: friend of mine who actually lives in New York here,
Speaker 1: and he said, you know what's interesting is he said,
Speaker 1: when we have a tennis match in Europe where the
Speaker 1: number hundred player beats the number three player, we actually
Speaker 1: go to the logs and see who bet on what when,
Speaker 1: and if there's some unusual activity, if that happens here
Speaker 1: in the U s what do you how do you
Speaker 1: find any data? But what you actually don't. It's a
Speaker 1: way to keep the sport clean and you know they're
Speaker 1: currently enough twelve step programs UM certainly for for angry
Speaker 1: birds and candy crush that if it gets to be
Speaker 1: a problem someone I don't mean to make loud of this.
Speaker 1: I know they're people who have issues with it, but UM,
Speaker 1: it's fascinating to to see what takes place. So so
Speaker 1: that's one area sports, Give me one more area and
Speaker 1: then we'll jump to our favorite UM questions. What else
Speaker 1: do you see as the next area that perhaps people
Speaker 1: aren't paying attention to? We could we really like a
Speaker 1: lot of the areas of UM in fintech and infint tech.
Speaker 1: Fintech Yeah, oh, in within finte I thought you meant
Speaker 1: like newborn technology, and like, what what are we doing
Speaker 1: with no, not infantech, in infant infant technology. So give
Speaker 1: us a couple of examples. So a couple of examples
Speaker 1: is our most recent investment in in Tala Tala. As
Speaker 1: I mentioned what what, So, what we like to see
Speaker 1: is what are they doing now that has changed the
Speaker 1: fundamental value proposition of what is being offered? So as
Speaker 1: an example of this company is taking information that exists
Speaker 1: on somebody's phone for people that are jet almost almost
Speaker 1: universally do not have a bank account, and they're making
Speaker 1: a credit decision based on that activity. Just so you
Speaker 1: give them access to your phone and they determine based
Speaker 1: on what you're doing with your aliate, can you give
Speaker 1: me access to these five things? They say, yes, please,
Speaker 1: I would like a loan of X. They say okay,
Speaker 1: based on that I've correlated that activity with other people,
Speaker 1: and this means that you're good or not a good
Speaker 1: credit risk. I actually read something about an attempt to
Speaker 1: create a credit score based on your social media activity?
Speaker 1: Anything along? Is that similar to this or or is
Speaker 1: that part of that part of the same concept, which
Speaker 1: is how can you use And it informs a lot
Speaker 1: of the investment decisions we make in the companies that
Speaker 1: we like a lot, which is are you using the
Speaker 1: availability of data that either didn't exist previous slee or
Speaker 1: wasn't it didn't exist at the pace at which exists
Speaker 1: now to do something different. Um. We have a company
Speaker 1: and Chicago that we talked about a couple of times, Uptake,
Speaker 1: which is using data from sensors on industrial equipment to
Speaker 1: do things like tell you that the tractor that's going
Speaker 1: across the farm in Iowa is just about ready to
Speaker 1: have a problem, you better go change that oil or
Speaker 1: you and so things like that. Those are amazing opportunities
Speaker 1: within industries that previously didn't have a lot of technology.
Speaker 1: Now there's data, but somebody has to do something with
Speaker 1: industrial self diagnostic equipment correct that. That's just wild um
Speaker 1: fascinating and and Venmo type stuff where you're you're swapping
Speaker 1: money back and forth without a bank in the middle.
Speaker 1: Is that really gonna Yeah, that's happening, not counting crypto
Speaker 1: just talking on an app that theoretically is hackable. Are
Speaker 1: people gonna be able to trust that? Well? That that's
Speaker 1: the question. I think there's a lot out of those
Speaker 1: activities that happen and then there's an event, and then
Speaker 1: there's can you trust them? Can you not? There's obviously
Speaker 1: there is no question a growing concern appropriately so around
Speaker 1: where does my data? Said? Who has access to it? Um?
Speaker 1: How do I protect against that? And part of that
Speaker 1: is an operational thing, and part of that is a
Speaker 1: cybersecurity thing. Right. There's not too long ago a Wall
Speaker 1: Street Journal article about these crypto billionaires who have created
Speaker 1: these bunkers for the secure storage of their codes and
Speaker 1: drives and things like that. Because legitimately, these things can
Speaker 1: get stolen and they just have to hope there's no
Speaker 1: e M electromagnetic pulse that wipes out the hard drive.
Speaker 1: But other than that, UM, that that's fascinating, all right,
Speaker 1: So let's jump to our favorite questions. I asked these
Speaker 1: of all our guests, and let's jump right into this.
Speaker 1: Tell us the most important thing people don't know about
Speaker 1: you or your background. The most important thing people don't
Speaker 1: know about me that where they would be surprised to know,
Speaker 1: perhaps given the nature of what I do. And so
Speaker 1: I'm a pretty energetic guy, and I travel a lot,
Speaker 1: and I see a lot of companies, and I sit
Speaker 1: a lot of boards, and I do a lot of
Speaker 1: outwardly facing things, and I'm a pretty introverted person that
Speaker 1: I most people would not expect. I would not have
Speaker 1: guessed that if I had to, If I had to
Speaker 1: make a guess, who were some of your early mentors. Well,
Speaker 1: I've been amazingly fortunate that. Um, I've had so many
Speaker 1: people in my career that have taken a real care
Speaker 1: about my career and me as a person. And so
Speaker 1: there's a long list of them. But at you know,
Speaker 1: I start at Deloitte and that was really um folks
Speaker 1: like Steve Richards and Bill Platt and Susan Riyo and
Speaker 1: Give Hammond and others. But there each one of them.
Speaker 1: I still to this day bring something to the table
Speaker 1: from them at soft Bank. And probably my best mentor
Speaker 1: and will be forever. My best mentor is Ron Fisher,
Speaker 1: who's still at SoftBank, who I had the pleasure of
Speaker 1: working with for for twenty years. Um. I got to
Speaker 1: Brad Feld was a mentor way back. He started at
Speaker 1: SoftBank way back when, and he and I continue to
Speaker 1: be friends and and he's currently at a Foundry boundary group.
Speaker 1: He's the you know, really the managing partner at Foundry.
Speaker 1: They've been hugely successful and he and I are working
Speaker 1: on something together now. And you know, one of these
Speaker 1: guys that's just such an honest and straightforward and involved guy. Um.
Speaker 1: I've had the pleasure of working with him and learned
Speaker 1: a ton from him. Although he wasn't a day to
Speaker 1: day mentor, having exposure to Massa over the years has
Speaker 1: certainly influenced me in a great way. So I've been
Speaker 1: very very fortunate. I've had people that you know, and
Speaker 1: now I have ted Leonsis and Steve case who who
Speaker 1: I learned from every day. I think one of the
Speaker 1: things that UM is so great about this business that
Speaker 1: we're in is that I get exposed to brilliant people
Speaker 1: every day that are either running these company, is on
Speaker 1: the board, people that I work with, And so I
Speaker 1: literally feel like I learned something new every day. And Uh,
Speaker 1: let's talk about venture investors. Who has influenced your approach
Speaker 1: to making these investments? Yeah, so I'd say Massa has
Speaker 1: influenced my approach Originally his and the influence there was
Speaker 1: his boldness, his willing to take enormous risk against the grain. Uh.
Speaker 1: He he was by you know, he was buying you know,
Speaker 1: mobile companies when that wasn't the right the thing to
Speaker 1: do out of favor if you will. Um, he has
Speaker 1: very you know, he raised a hundred billion dollar fund
Speaker 1: when everyone is saying, jeez, we must be at the
Speaker 1: end of a cycle, right, So this is a person
Speaker 1: that his boldness UM is really inspirational on some level.
Speaker 1: As I mentioned earlier, Brad Feld is somebody that's influenced
Speaker 1: my investing style. He his is very much understand the
Speaker 1: the company, the product of people, walk the hallways, see
Speaker 1: where things are going. Another guy that influenced my investment
Speaker 1: style that's here in New York as a guy named
Speaker 1: actually two people one uh Eric Hippo who runs lair
Speaker 1: Ho Pope Adventures, who um is sort of the ultimate
Speaker 1: uh professional, you know. He everything starts on time and
Speaker 1: ends on time, and decisions get made and you don't
Speaker 1: second guess your decisions, and you and you put you know,
Speaker 1: your very uh matter of fact and non emotional businesses.
Speaker 1: You have to make decisions, and you have to move on,
Speaker 1: and you have to go to the next one. I've admired,
Speaker 1: I've admired him a lot. I've admired, uh you know,
Speaker 1: I've worked with and he still remains a great friend.
Speaker 1: A guy who just recently was the CEO at Forbes,
Speaker 1: Mike Perlis, who's a great friend of mine, who really
Speaker 1: is a real people person, you know. He is the
Speaker 1: guy that walks the hallways and says, this guy and
Speaker 1: this guy don't seem to be getting along, and this
Speaker 1: gal is having a problem here, and how can I
Speaker 1: engage myself off and help this company? And he's all
Speaker 1: about leadership and clear vision and direction. And so from
Speaker 1: each one of these persons, I've learned something different. Let's
Speaker 1: talk about books. Tell us about some of your favorite books,
Speaker 1: be they finance or technology or not fiction nonfiction. What
Speaker 1: do you read? What do you enjoying? Yeah, sure so, Uh.
Speaker 1: I actually mostly don't read about finance and technology because
Speaker 1: I live it every day. But and time is short.
Speaker 1: But I actually get to read a lot because I
Speaker 1: travel a lot, so I read. I think I've read
Speaker 1: every John Grisham book and I love them because they're
Speaker 1: fun and they're easy, and you can read them in
Speaker 1: a couple and well along flight or two and it's
Speaker 1: other great. Um, I've read a couple recently that I
Speaker 1: really like. One is that I've probably many people have read,
Speaker 1: which is The Boys on the Boat. I like that
Speaker 1: because I'm a team guy. I'm a sports guy. I
Speaker 1: love I love how people can overcome adversity and gang
Speaker 1: together and accomplish something. And I get, you know, goose
Speaker 1: bumps on my back every time I hear those stories.
Speaker 1: And I read about success and things like that. So
Speaker 1: that that's a book that I've recently reread and enjoy it.
Speaker 1: I'm also reading. I just finished a book, uh that
Speaker 1: I that has a real influence on me called being mortal,
Speaker 1: which is about really it's a it's a book written
Speaker 1: by a doctor about the way, frankly, that we may
Speaker 1: have screwed up the aging process. We're treating the aging
Speaker 1: process as if it's a disease, not a condition, and
Speaker 1: it's fascinating. So I like reading all kinds of different things.
Speaker 1: I read something about that book, and if I'm remembering
Speaker 1: it correctly, part of the book is doctors die differently
Speaker 1: than lay people do because they understand what we do wrong.
Speaker 1: And I'm recalling the right one. It may be, But
Speaker 1: really the point of the thing of the of the
Speaker 1: article was that or the book was that we've made
Speaker 1: so many advancements in medicine that has allowed us to
Speaker 1: treat things, and we have. Therefore, when somebody gets older
Speaker 1: and they have a condition, we read them as if
Speaker 1: they're twenty five years old and they might have seventy
Speaker 1: more years to live. Doesn't make and what we end
Speaker 1: up doing as a society, as we end up making
Speaker 1: the last five years of somebody's life probably miserable, where
Speaker 1: they're going through surgeries and all kinds of other things,
Speaker 1: the likelihood of materially extending their life is not long
Speaker 1: and you spend enormous resources doing it, something like eight
Speaker 1: percent of the healthcare costs or in incurred in the
Speaker 1: last twenty of people's lives. And so there's all these things,
Speaker 1: and and so instead of that, what he proposes is
Speaker 1: something more along the lines of what hospice and others do,
Speaker 1: which is, say, what's important to you and how do
Speaker 1: I create an environment for you to enjoy as best
Speaker 1: you can your last remaining piece of your profound We
Speaker 1: we talked about what what excites you? Tell us what
Speaker 1: changes you're looking forward uh to the world of of
Speaker 1: venture investing in startup? What what are How is the
Speaker 1: industry itself shifting into the future. Yeah, and we've talked
Speaker 1: about a number of it. The company these are are
Speaker 1: there are staying private longer. The holding periods therefore are longer.
Speaker 1: So the idea of investing today and returning capital in
Speaker 1: a year or two is is much different. The size
Speaker 1: of the funds seems to be extending. I think partly
Speaker 1: due to that, which is that people are saying, geez,
Speaker 1: I have to be able to build a firm to
Speaker 1: support a company, particularly my best ones from soup to nuts.
Speaker 1: I don't want to miss out I've talked to a
Speaker 1: number of early stage investors who have now started to
Speaker 1: create follow on investment funds because some of their best
Speaker 1: companies that otherwise would have been private or sold are
Speaker 1: now still private companies raising money and they want to
Speaker 1: participate in those, but they don't fit within the constructs
Speaker 1: of their early stage small fund. They they are now
Speaker 1: adding different people call it different things, a select fund
Speaker 1: or a follow on fund or something like that. So
Speaker 1: I think that the things that are changing, or how
Speaker 1: do you serve the needs of the company in a
Speaker 1: better way, given the changing landscape that we exist in.
Speaker 1: A lot of it is international too. I think that
Speaker 1: will be another thing that will see more of, which
Speaker 1: is more firms. Just as we've talked about earlier, more
Speaker 1: of the East Coast firms they do have a West
Speaker 1: Coast presence, and likewise, I actually think more of the
Speaker 1: U S firms will have an international presence over time, Europe, Asia,
Speaker 1: the least, ETCETERA. Tell us about a time you failed
Speaker 1: and what you learned from the experience. Well, I fail
Speaker 1: every day in something particularly and I'm reminded of that
Speaker 1: by my three teenage sons. I think I actually fail
Speaker 1: more in their eyes every as they get older, although
Speaker 1: I think my older one that's eighteen now is starting
Speaker 1: to come out of that phase. I think he's realizing
Speaker 1: that I'm not quite as dumb as he might have
Speaker 1: thought a year or two ago. But I noticed that
Speaker 1: the older I got, the smart on my parents got.
Speaker 1: So there's some correlations. It is an interesting correlation. The
Speaker 1: topic for another one perhaps, UM. I'd say the two
Speaker 1: or three times that I've failed in terms of an
Speaker 1: investment bad is when and what I've learned about it
Speaker 1: is really the value of people's ethics and people's integrity.
Speaker 1: And so in a couple of different situations where we've
Speaker 1: where we've you know, where I have known that the
Speaker 1: person that we were dealing with was something less than
Speaker 1: the type of quality individual that I want to be
Speaker 1: associated with. I'm sort of over life on things like that,
Speaker 1: and so that's happened to me twice where I sort
Speaker 1: of knew that the person wasn't gonna be the kind
Speaker 1: of person I really wanted to work with, but you know,
Speaker 1: the opportunity was exciting and the progress in the business
Speaker 1: was great, and in both cases it's come to bite
Speaker 1: me right back in the behind. What do you do
Speaker 1: for fun when you're not in the office, What do
Speaker 1: you do to kick back and relax. Well, I mentioned
Speaker 1: my three sons. So I have three sons. Two of
Speaker 1: them are in high school, so I love to and
Speaker 1: then I have another one in seventh grade. I love
Speaker 1: to spend time with them. I love to go to
Speaker 1: their sporting events. I love UH. For many years I
Speaker 1: was the coach of their hockey team, so I enjoy
Speaker 1: contributing and participating with the kids and their friends and
Speaker 1: doing that kind of stuff. I like to work out,
Speaker 1: that's sort of I find, like we talked about earlier
Speaker 1: with sleep. The other thing that correlates to happiness for me,
Speaker 1: UH seems to be if I can get a workout in,
Speaker 1: so I try. I love to work out. I love
Speaker 1: to be outside. I love to be I love to
Speaker 1: fish and that kind of thing. But I really like
Speaker 1: spending time with my family. If a millennial or a
Speaker 1: recent college grad came up to you and said they
Speaker 1: were interested in a career in venture investing, what sort
Speaker 1: of career advice would you give them. It's it's a
Speaker 1: question that I get, as you might imagine a lot
Speaker 1: from millennials and recent college grads. Friends of friends and
Speaker 1: and others. The the good and bad news. I think
Speaker 1: on that particular question is the honest answer is there's
Speaker 1: no clear easy path into the venture community. Uh, some
Speaker 1: folks have. As you pointed out earlier, my background is
Speaker 1: not sort of classic out of that there. So there's
Speaker 1: people that have come from legal backgrounds and accounting backgrounds,
Speaker 1: and they've come from product backgrounds, and they've come from
Speaker 1: banking backgrounds. So there really is a collection of different
Speaker 1: types of people that have come through it. What I
Speaker 1: would advise what I do advise them to do is
Speaker 1: if if you're passionate about startups, then get involved in one.
Speaker 1: And that could be as um small as volunteering if
Speaker 1: you will are helping out at the local tech stars
Speaker 1: or something like that, or it could be maybe on
Speaker 1: nights and weekends you're helping your friend that's doing and
Speaker 1: then they's saying you have not everybody is ready to
Speaker 1: say I'm gonna move to Silicon value, and do you
Speaker 1: think if that's what you want to do, go do it.
Speaker 1: So it's not it's not just go to a big school,
Speaker 1: get a degree in finance and engineering and you're ready.
Speaker 1: There's a lot of different paths, and they all can
Speaker 1: lead to different things. And I think some firms obviously
Speaker 1: have more of a technology product engineering bend some people.
Speaker 1: Some firms have more of a investment banking bend. Some firms.
Speaker 1: I think the best ones have a mix of other
Speaker 1: Some people have more operators. I think the best firms
Speaker 1: really as we talked about earlier, with diversity, diversity of experiences,
Speaker 1: it's important, but it's it's a it's a tricky path
Speaker 1: because there isn't a clean one where you can say,
Speaker 1: go get this degree and get this job, and you'll
Speaker 1: end up at this place. It's not my experiences, it's
Speaker 1: not quite that. It's not like there are thousands and
Speaker 1: thousands of vcs and millions of open slots. It's a
Speaker 1: pretty small that's all community too. And and our final question,
Speaker 1: what do you know about the world of venture investing
Speaker 1: today that you wish you knew twenty thirty years ago
Speaker 1: when you were first getting started. I guess the easy
Speaker 1: answer would be Amazon, Facebook, Google, Right, Well, that's that's hindsight.
Speaker 1: What should you have bought thirty years ago? But but
Speaker 1: what did you learn from None? Was Amazon an option?
Speaker 1: Did you say pass by the way, there was a
Speaker 1: thing that I started noticing not too long ago, maybe
Speaker 1: it was long ago, that a lot of the websites
Speaker 1: of various venture firms list these are all the companies
Speaker 1: we passed on, and it's just an sane list of
Speaker 1: the great we passed on Apple, eBay, Amazon, Why why
Speaker 1: share that? So it's a little self deprecating. But also
Speaker 1: they probably don't list here are the other fifteen times
Speaker 1: that list that we passed on that somebody else thought
Speaker 1: was a great idea that failed. Right, So there's an
Speaker 1: equal number of those. So sometimes the best deals, as
Speaker 1: they say, they are the ones that you don't do.
Speaker 1: So let me let me bring it back to what
Speaker 1: years ago stands out what would have been really helpful
Speaker 1: to know years ago. Not a crystal ball about the future,
Speaker 1: but part of your process. So one of the things
Speaker 1: that I think I have learned over time is that
Speaker 1: people don't change right as much as they would like to.
Speaker 1: People talk about changing, but it's hard. It's changing people
Speaker 1: is very very hard. Not people you can move deck
Speaker 1: chairs around, but the fundamental things that drive people to
Speaker 1: behave a certain way very hard to change. So don't
Speaker 1: waste a lot of time trying to do that. Secondly,
Speaker 1: is that uh failure of these companies that are doing
Speaker 1: this really really hard stuff is okay, they can adjust,
Speaker 1: they can do things that I think I was, like
Speaker 1: most people naive that the business plan is the one
Speaker 1: that they should go execute on. You spend all this time,
Speaker 1: you get trained along the way, there's gonna be a
Speaker 1: business plan and here's how we're gonna do step bay
Speaker 1: and step B and step see. And I've realized over
Speaker 1: time that never works. So don't show me a fifty
Speaker 1: page business plan because I don't want to see it.
Speaker 1: Tell me about how you're thinking about things. How do
Speaker 1: you think about challenges, how do you think about opportunities?
Speaker 1: And those are the those are the things that I
Speaker 1: wish I knew. Huh, quite quite fascinating. We have been
Speaker 1: speaking with Steve Murray, here's a partner at Revolution Growth,
Speaker 1: a early stage ventured capital firm. If you enjoy this conversation, well,
Speaker 1: be sure to look up and entered down an inch
Speaker 1: on Apple iTunes at any of the other two hundred
Speaker 1: such conversations that we've had. You can find any of
Speaker 1: them i Tunes, Bloomberg dot Com, overcast wherever final podcasts
Speaker 1: are sold. We love your comments, feedback and suggestions right
Speaker 1: to us at m IB podcast at Bloomberg dot net.
Speaker 1: I would be remiss if I did not thank our
Speaker 1: crack staff who helps put together this podcast each week.
Speaker 1: Medina Parwana is my audio engineer, slash producer, Taylor Riggs
Speaker 1: is our booker, and Michael Batnick is my head of research.
Speaker 1: I'm Barry Results you've been listening to Masters in Business
Speaker 1: on Bloomberg Radio