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