Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Hello and welcome to another episode of The Odd Laws podcast.
Speaker 2: I'm Joe Wisenthal.
Speaker 1: And I'm Tracy Alloway.
Speaker 2: Tracy, I love being out on the West Coast. I
Speaker 2: love being in San Francisco. We did a live episode
Speaker 2: last night. I love coming out here.
Speaker 1: It's been fun. We also had some really good Chinese
Speaker 1: food afterwards.
Speaker 2: We had really good Chinese food.
Speaker 1: Oh and I woke up to the dulcet tones of
Speaker 1: the San Francisco parakeets this morning. That was fun.
Speaker 2: There's wee protests happening. I don't know what, so I've
Speaker 2: been waking up to the sound of protests. It seems fitting.
Speaker 2: I think I've mentioned it in a million tweets and
Speaker 2: another episode. I've taken a few way Moo rides, which
Speaker 2: is amazing. I love that. But you know, we talked
Speaker 2: to a lot of I guess traditional normy investors most
Speaker 2: of the time, and when we're out on the West Coast,
Speaker 2: we have to talk to vcs because that's a it's
Speaker 2: certainly in San Francisco.
Speaker 1: Our VC is not normis well, humans.
Speaker 2: Different, you know, their offices feel different. They invest in
Speaker 2: sort of wildly uncertain markets in the way that say,
Speaker 2: someone investing in the treasury market is not. It's fun,
Speaker 2: it's different. It's always eye opening from my perspective.
Speaker 1: The interesting thing is, I think like ten or twenty
Speaker 1: years ago, I think a lot of people would have
Speaker 1: expected the VC world to move more towards the traditional
Speaker 1: investment world, and instead it feels like the traditional investment
Speaker 1: world has moved more towards VC.
Speaker 2: Yeah, I think that's completely right. Actually, I mean, I
Speaker 2: think like all of culture has kind of become VC
Speaker 2: of five because everyone is just looking for, you know,
Speaker 2: the lottery ticket. The lottery ticket in various ways, big
Speaker 2: high conviction bets, and you sort of hope that one
Speaker 2: of them, whether it's a bet on a presidential election,
Speaker 2: in a sports game, a cryptocurrency, one's career, et cetera.
Speaker 2: You want to find that right tail outlier, which has
Speaker 2: been the VC mentality since the beginning of the industry.
Speaker 1: Right, everyone is a VC now, so we should talk
Speaker 1: more about the industry.
Speaker 2: We should you if everyone is a VC, we should
Speaker 2: talk about what a VC actually actually does in doing
Speaker 2: now in your twenty twenty four I'm very excited. We
Speaker 2: do have the perfect guest. We are here in the
Speaker 2: offices of Index Ventures and we're going to be speaking
Speaker 2: to Index Ventures partner Nina A Shadyn. Nina, thank you
Speaker 2: so much for coming on the podcast.
Speaker 3: Thank you so much for having me. I'm excited to
Speaker 3: chat with you guys today.
Speaker 2: What does a partner at Index Ventures do?
Speaker 3: Well, our job is to find exceptional entrepreneurs, really build
Speaker 3: trust with them and be part of their journey in
Speaker 3: building a generational company.
Speaker 2: Setting aside what a partner does or investor, you know
Speaker 2: there's a lot of VC firms. Does Index Ventures have
Speaker 2: like a specific sort of differentiator or mission or raison
Speaker 2: debt lived different than anyone else?
Speaker 3: Yeah, well, I think to answer that, it's helpful to
Speaker 3: know a little bit about the history of Index. So
Speaker 3: Index started in Europe almost thirty years ago and was
Speaker 3: one of the first VC funds to really believe that
Speaker 3: entrepreneurship could come from anywhere, not just Stanford's Silicon Valley.
Speaker 3: And we've really had a global mindset, and so today
Speaker 3: we have offices in New York, San Francisco and in London.
Speaker 3: And the way that we think about investing is first
Speaker 3: and foremost, it is truly all about the people. So
Speaker 3: when we hear a pitch, we actually spend a ton
Speaker 3: of time diligencing the entrepreneur and trying to build a
Speaker 3: foundation of trust to understand what motivates this person, what
Speaker 3: is truly this person's spike, And we try to see
Speaker 3: them in many different settings in our office, in their office,
Speaker 3: in a comfortable situation, in an uncomfortable situation, in a
Speaker 3: professional setting, or you know, having dinner at a restaurant,
Speaker 3: And so we spend a lot of time really getting
Speaker 3: to know the individual, because at the end of the day,
Speaker 3: when you're investing in capital, you're really taking a bet
Speaker 3: on the trajectory of someone, which oftentimes is really hard
Speaker 3: to see when you're talking to a very young, first
Speaker 3: time founder.
Speaker 1: This gets into something that I've always wanted to ask
Speaker 1: a VC person, but what are you doing for founders
Speaker 1: besides writing checks? Because I hear a lot about the relationship,
Speaker 1: and the pitch is always, well, we have great relationships
Speaker 1: with our founders and we really build them up as
Speaker 1: both people and businesses. What does that actually mean?
Speaker 3: Yeah, well, I can tell you. At Index we don't
Speaker 3: pride ourselves on being the cheerleader for a founder. Many
Speaker 3: of v school of many vcs, they show up to
Speaker 3: board meetings and they're the cheerleaders, which is an important role,
Speaker 3: right you want to have that positive energy in the
Speaker 3: board meeting. For us, we really want to be business
Speaker 3: builders along with the founder. So what does that mean Exactly?
Speaker 3: Number one, we try to be a mirror to the entrepreneur.
Speaker 3: So that could mean in a board meeting if they
Speaker 3: have a blind spot on let's say, like an executive
Speaker 3: that they've had around that has been incredibly loyal to
Speaker 3: them for years. It's often hard to see, you know,
Speaker 3: because we are going to all of these board meetings
Speaker 3: in the quarter, we can kind of calibrate, hey, this
Speaker 3: cro is excellent, or hey maybe you've outgrown this particular
Speaker 3: person and you need to think about, you know, augmenting
Speaker 3: them or putting them into a different role. So being
Speaker 3: a mirror is difficult because oftentimes you have to share
Speaker 3: with the entrepreneurs something that they don't want to hear
Speaker 3: or maybe they don't see yet. And so that's one
Speaker 3: thing that we definitely think about. Second, you know, I
Speaker 3: think being able to know exactly what is going on
Speaker 3: at a company and not feeling like a lot of founders,
Speaker 3: I didn't appreciate this for a long time. They would
Speaker 3: have so much anxiety preparing for a board meeting. You know,
Speaker 3: they would tell me, like the night before they wouldn't sleep,
Speaker 3: They'd be all worried about what's going to come up
Speaker 3: in a board meeting. A lot of founders have a
Speaker 3: fear of getting fired by their board that I never,
Speaker 3: you know, really thought about or appreciated, because for us,
Speaker 3: we're like, it's all about the founder. We're here to
Speaker 3: back you and your vision. And so I think being
Speaker 3: able to have a conversation that kind of transcends the
Speaker 3: board meeting, where for example, on the first company that
Speaker 3: I took a board seat of, I wou'd actually fly
Speaker 3: down the day before the board meeting and spend a
Speaker 3: ton of time with everyone who is going to speak
Speaker 3: in the board meeting. Plus they're like minus ones to
Speaker 3: really get a good sense of what's going on in
Speaker 3: the company, what are they worried about, what are some topics,
Speaker 3: And then before the board meeting, I talk to the
Speaker 3: CEO and say like, hey, these are some of the
Speaker 3: things that are on my mind. Just so they didn't
Speaker 3: feel like they were blindsided. So taking that extra effort
Speaker 3: to feel like an extension of the company, not just
Speaker 3: like I show up, I grill you at the board meeting,
Speaker 3: and then I go away.
Speaker 1: Like a sort of neutral Greek chorus almost right, that
Speaker 1: can spot the blind spots that the founders might not
Speaker 1: necessarily see and be like, hey guys, this is happening.
Speaker 3: Yeah, you really want to be that mirror.
Speaker 2: So it's interesting because in my mind when I think
Speaker 2: about public company boards, I always think of them as well,
Speaker 2: there's a cliche, there's a stereotype that many of them
Speaker 2: are rubber stamps, Yeah, for the chairman, the rubber stampds
Speaker 2: for the CEO, particularly on questions like compensation. And there's
Speaker 2: a lot of criticism of governance of public company boards.
Speaker 1: My dream job is to have sixteen board an enormous
Speaker 1: amount of money.
Speaker 2: Yeah, well, you don't even need enormous If you have sixteen,
Speaker 2: you just rack them up. What is it actually, I've
Speaker 2: never asked this. What happens in a private company board meeting? Typically?
Speaker 2: What's the agenda?
Speaker 3: Yeah? So typically, if it's a well run board meeting,
Speaker 3: the materials will get out, be sent out twenty four
Speaker 3: hours in advance, and usually it's in a memo format.
Speaker 3: Actually a lot of our founders write a CEO letter
Speaker 3: where they say here's what's on my mind, and it's
Speaker 3: like stream of consciousness, like what went well, what didn't
Speaker 3: go well, What they're struggling with, things that they want
Speaker 3: the board's view on. And then the ideal board meeting.
Speaker 3: As you come in, everybody has looked at what happens
Speaker 3: in the past quarter. What are the open questions? We
Speaker 3: collect some data to help the entrepreneur. If they're like, hey,
Speaker 3: I'm thinking about changing my usage from seat based or
Speaker 3: my pricing from seat based to more like usage base,
Speaker 3: how has that gone? What other companies have done this?
Speaker 3: You know, what should I be thinking about? And it's
Speaker 3: more of a discussion versus like a report. Those are
Speaker 3: the best meetings in boards.
Speaker 1: So one other thing I always wanted to ask a
Speaker 1: VC person is how much technical expertise do you actually
Speaker 1: need in this job? Does it get as granular as
Speaker 1: you're looking at someone's like source code and saying this
Speaker 1: looks really elegant or is it more about the business
Speaker 1: case and sort of refining the business model itself.
Speaker 3: Well, it probably depends on what you're investing in. Generally,
Speaker 3: we would do a lot of that technical diligence at
Speaker 3: the time of investing, to make sure that you know
Speaker 3: what the founder is saying is built the way that
Speaker 3: they're presenting it, and that there's no loopholes, and that
Speaker 3: we feel really good about the engineering team. So we
Speaker 3: will often bring in also deeply technical experts to help
Speaker 3: with that diligence, But in general, i'd say going forward,
Speaker 3: it's much more on the business building and also giving
Speaker 3: feedback on the team. Like you know, at the end
Speaker 3: of the day, because these companies start so small, the
Speaker 3: people that they are bringing around the table and what
Speaker 3: the bar of excellence is for the entrepreneur is really
Speaker 3: important because that's the foundation of who's going to build
Speaker 3: that next source code or that next product or that
Speaker 3: next go to market motion, And so that's where we
Speaker 3: spend the majority of the time, the business and the talent.
Speaker 2: How much of your success would be attributable to perhaps
Speaker 2: going out into the world and identifying promising founders or
Speaker 2: promising companies that are going to be the next big thing,
Speaker 2: And how much would it be there is a promising
Speaker 2: founder and a promising company that's the next big thing,
Speaker 2: and they want to call you. You are one of
Speaker 2: the first calls that they placed. This actually came up
Speaker 2: in another conversation we did recently about wanting to be
Speaker 2: a first call, which strikes me as slightly different than
Speaker 2: you bang the one to.
Speaker 1: Call that that, by the way, that was what the
Speaker 1: credit got. Yeah, but Nino also has a background in credit.
Speaker 1: Amazing to be a bond trader.
Speaker 3: Right, amazing.
Speaker 2: But I'm curious about like that dynamic, the importance of
Speaker 2: being a first call or a second call as opposed
Speaker 2: to an eighth call for certain types of deals, and
Speaker 2: like thinking about that sort of like that ranking for
Speaker 2: potential opportunities.
Speaker 3: Yeah, so maybe it's taking a step back. So the
Speaker 3: job of a VC is number one sourcing, which means
Speaker 3: being able to find interesting opportunities or having those entrepreneurs
Speaker 3: come to you.
Speaker 2: Yeah.
Speaker 3: Number two is of course doing the diligence, where you're
Speaker 3: making sure that you know the market thesis is right,
Speaker 3: the product is great, the team is excellent. Number three
Speaker 3: is winning, which I don't think a lot of people
Speaker 3: actually talk about. So people think that you know, you
Speaker 3: sit in this room in San Francisco, in this nice
Speaker 3: office and people just come to you, and you know,
Speaker 3: you say, oh yeah, this is a great idea, where
Speaker 3: do I sign the check? But that's not actually the case.
Speaker 3: Usually when you identify a great entrepreneur, chances are somebody
Speaker 3: else has also recognized this person is spectacular, and so
Speaker 3: actually being able to convince the entrepreneur that you are
Speaker 3: the person in the firm that is going to work
Speaker 3: the hardest, be there for the founder, and also that
Speaker 3: you have a really specific investment vision and thesis that
Speaker 3: aligns with their vision, I think is really important. So
Speaker 3: the process of you know, once you know you want
Speaker 3: to invest in this company, actually getting that founder to
Speaker 3: choose you is actually quite quite difficult and takes a
Speaker 3: lot of time. And then there's of course being a
Speaker 3: board member and then finally exiting the company IPO or acquisition.
Speaker 2: When it comes to winning, can you talk about the
Speaker 2: difference in twenty twenty four versus twenty twenty one, when
Speaker 2: the perception was that there were a handful of really
Speaker 2: large firms that would write a check within an hour
Speaker 2: that or maybe two hours or maybe a day. But
Speaker 2: I think in many cases like yep, this looks good,
Speaker 2: We're going to write your big check. I've never never
Speaker 2: going to talk to you again, but the check's there,
Speaker 2: et cetera. How real was that for you as a competitor,
Speaker 2: and what is that like? In twenty twenty four that competition.
Speaker 1: Also, Sorry just to tack onto it, but if you
Speaker 1: can't write the big check, what do you do instead?
Speaker 1: Do you send like red baskets and nicely written letters?
Speaker 1: What's your edge in that case?
Speaker 3: Okay, happy to give you an example there. So in
Speaker 3: twenty twenty one, yes, absolutely, that's accurate. It was crazy.
Speaker 3: We'd meet a company at nine am and by four
Speaker 3: pm they would send us a text or an email saying, hey,
Speaker 3: we have four term sheets, what's your decision? And you know,
Speaker 3: we sat a lot of those out for a couple
Speaker 3: of reasons. One, we didn't feel like we did our
Speaker 3: fiduciary duty by actually doing the diligence. And number two,
Speaker 3: it felt extremely transactional, you know, And I think that
Speaker 3: there were some players that had very large funds that
Speaker 3: could afford to do that kind of investing that have
Speaker 3: really exited the VC game today because they realized that again,
Speaker 3: unless you are getting the real, unfiltered view of what's
Speaker 3: going on in the company, it becomes very difficult to
Speaker 3: actually know. Like in these private companies, you know, what
Speaker 3: are the challenges, what's going well? Being able to have
Speaker 3: that authentic conversation with the entrepreneur. Now, you know a
Speaker 3: lot of those people have eggs did A lot of
Speaker 3: the smaller funds have not been able to raise a
Speaker 3: second time fund. I think that the players have consolidated
Speaker 3: back to a lot of these enduring platforms and institutions
Speaker 3: that have kind of gone through a lot of these cycles.
Speaker 3: And by the way, I think founders realize that those
Speaker 3: who took the money from those firms that were more
Speaker 3: like I think someone else through this phrase out like ATM,
Speaker 3: like VCATM. When times got tough, those players were not
Speaker 3: around because they weren't on the board. They had totally
Speaker 3: set expectation of that and the founders realized they really
Speaker 3: needed someone to help them walk through how to do
Speaker 3: their first riff, or how to restructure the company, or
Speaker 3: what to do take a down round or take debt.
Speaker 3: So I think less players now and then also founders
Speaker 3: have really re centered on the original value proposition of
Speaker 3: venture capital, which is having someone along your side who
Speaker 3: can really help you build this business.
Speaker 1: And then how do you compete? Do you have any
Speaker 1: interesting instances of I guess being really creative when pitching
Speaker 1: to a potential founder.
Speaker 3: Yeah, I want to share all my secrets, but okay, okay,
Speaker 3: So look, I think winning is this incredible art where
Speaker 3: you have to really try to get as many data
Speaker 3: porns about the entrepreneur as you can. So, for example,
Speaker 3: even before I meet a founder, let's say that I'm
Speaker 3: really excited about and I have a thesis about I
Speaker 3: will watch every single podcast video Twitter LinkedIn post to
Speaker 3: try to gauge, like, what is this person like? Are
Speaker 3: they going to respond to a super aggressive Hey, I'm leaning,
Speaker 3: let's do this, let's go Which some founders love that?
Speaker 3: Or are they more like, I want to get to
Speaker 3: know you. Maybe I invite them over to my house,
Speaker 3: they get to meet my husband and my kids. Maybe
Speaker 3: we bond over our love for Formula one, or maybe
Speaker 3: they want to hear about my values as a board member.
Speaker 3: So I try to custom tailor the interaction with the
Speaker 3: founder based on the data that I can get outside
Speaker 3: in and of course that means talking to other people
Speaker 3: that know them and try to understand what they care about.
Speaker 3: And then in terms of the winning, you know, I
Speaker 3: think the heart is part that a lot of people
Speaker 3: don't share is once you've issued a term sheet to
Speaker 3: someone and you know that they have term sheets from
Speaker 3: other VC firms, like, what happens in that gap of
Speaker 3: time until they sign? And so I try to map
Speaker 3: out the entire process of Okay, if they're going to
Speaker 3: sign by X date and most likely we're going to
Speaker 3: give them a term sheet on this date, what needs
Speaker 3: to happen in that gap of time And it could
Speaker 3: be like this touch point, this thoughtful note, this special
Speaker 3: you know event that we're going to invite them to.
Speaker 3: And so I map that all out ahead of time,
Speaker 3: and as the conversation goes, I'm continuously like tweaking what
Speaker 3: I do in which order.
Speaker 1: Joe, you kind of did that to me when you
Speaker 1: were trying to get me to go to Bloomberg.
Speaker 3: I remember that, and it was successful.
Speaker 1: Yes, it was successful, which.
Speaker 2: Actually dovetails into a question, which is that we have
Speaker 2: listeners who many of them you know, some of them
Speaker 2: in college, and maybe one of the things they think
Speaker 2: about is venture capital and it looks pretty cool, like
Speaker 2: you really do seem to meet a lot of very
Speaker 2: interesting people, if nothing else. In this industry, some people
Speaker 2: make a lot of money. Your offices are a lot
Speaker 2: nicer than say other offices where people might go into
Speaker 2: the investing realm. But like, you don't know if you're
Speaker 2: good at So if I were in college and I
Speaker 2: was like, I want to be VC, but I don't
Speaker 2: know if I'm good at it, what would like you
Speaker 2: have to know about yourself to know if like, oh,
Speaker 2: this is a path I want to pursue.
Speaker 3: Yeah, so first, you know, it goes without saying for
Speaker 3: me at least that I think this is one of
Speaker 3: the most incredible jobs in the entire world because you
Speaker 3: are getting to be on the front row seat of
Speaker 3: technology and innovation and the people you interact with. I mean,
Speaker 3: every day I have to pinch myself that I'm getting
Speaker 3: to meet.
Speaker 2: These concentrations that, by the way, about our jobs.
Speaker 3: Yeah, it's incredible, right, Like you get to meet these
Speaker 3: incredible people who are putting their life on the line
Speaker 3: to pursue something because they think, you know, this business
Speaker 3: or this product or this broken system needs to be fixed.
Speaker 3: And so you know, if even and that sentence inspires you,
Speaker 3: you know, I would certainly encourage you to think about
Speaker 3: venture capital. The beauty is right now, there's so much
Speaker 3: information about VC. When I tried to get into venture
Speaker 3: capital back in twenty fifteen twenty sixteen, there was nothing
Speaker 3: like VC. Firms didn't have websites, there was no YouTube, videos, podcasts.
Speaker 3: So the first thing I would say is try to
Speaker 3: determine if you get excited listening to invest like the
Speaker 3: best or some of these you know a lot of
Speaker 3: these vcs that share their journey and how they think
Speaker 3: about their day to day and what the trade offs
Speaker 3: are of investing, you know at this stage. Second, I
Speaker 3: would say, in order to be good at this job,
Speaker 3: you kind of have to have some raw ingredients. One
Speaker 3: of them is definitely thriving in ambiguity. So when you
Speaker 3: show up at a VC fund, usually you're given a
Speaker 3: laptop with a blank calendar and a lot of type
Speaker 3: A people try to get into VC myself included, right
Speaker 3: like where it's like give me the milestones, tell me
Speaker 3: what the goalposts, and I'm just going to like crush them. Well,
Speaker 3: when you get to VC, you don't really have that.
Speaker 3: It's like make magic, make money, find great entrepreneurs, and
Speaker 3: you're like where do I start? So you really need
Speaker 3: to love thriving in ambiguity and kind of breaking.
Speaker 2: Down your job to fill up that calendar. It's your job,
Speaker 2: and no one else is going to tell you like
Speaker 2: how to No one is.
Speaker 3: Going to tell you how to spend your time. Of course,
Speaker 3: like you get some guidance on like hey, find a market,
Speaker 3: go deep, find the founders. So that's one thrive in ambiguity.
Speaker 3: The second thing is being able to take the ball.
Speaker 3: So oftentimes VC firms are pretty lean. That means a
Speaker 3: lot of responsibility for a young person. So that means, hey,
Speaker 3: you met a great founder at a conference, Like it's
Speaker 3: on you to figure out, like how we get a
Speaker 3: second meeting? You know, do you write them a really
Speaker 3: thoughtful email? Do you invite them to this dinner? Follow up?
Speaker 3: Follow up?
Speaker 1: Fall up?
Speaker 3: And then the third thing that I don't think a
Speaker 3: lot of people really appreciate is these very long feedback cycles. Right,
Speaker 3: So again type A people are usually like very you know,
Speaker 3: driven by positive affirmation because you know, you do something,
Speaker 3: you do well, great, next thing, next.
Speaker 1: Thing, you get the sort of immediate feedback.
Speaker 3: Yeah, exactly, the dopamine hit of like I'm good at
Speaker 3: this at VC. Like in VC, you really don't get
Speaker 3: that because it's like years before you know, and you know,
Speaker 3: anyone that tells you like any company has only been
Speaker 3: like good news and up into the right is lying
Speaker 3: to you because it is such an emotional rollercoaster. Things
Speaker 3: go wrong, you know, things go right. You think you're
Speaker 3: a genius one day, and then the next day it's
Speaker 3: it's very humbling. So I think, like those are core
Speaker 3: attributes that you should have. And then finally, of course,
Speaker 3: you need to be able to sell yourself. And that's
Speaker 3: where a lot of people, I think feel very uncomfortable,
Speaker 3: you know, because it's one thing if you can sell
Speaker 3: a product. It's another thing if you can convince someone
Speaker 3: to take a bet on you as a board member.
Speaker 3: And you know, being able to articulate like your personal
Speaker 3: pitch and why you I think is really important.
Speaker 1: So you mentioned trying to get into VCS circa twenty fifteen.
Speaker 1: Can you talk a little bit more about your previous
Speaker 1: job history, because I was saying earlier before we started
Speaker 1: the podcast, but honestly, one of the most eclectic bios
Speaker 1: I have ever read. So in addition to being a
Speaker 1: high old bond trader at City, you also worked at
Speaker 1: a bakery in Istanbul for unknown reasons.
Speaker 3: Yeah, yes, sure, so I grew up in the Bay Area.
Speaker 3: I'm Armenian. My parents moved to US from Iraq. Actually
Speaker 3: we're part of the Armenians that originally lived in the
Speaker 3: southern part of Turkey before the Armenian Genocide. And basically
Speaker 3: my parents raised me with this philosophy that I was
Speaker 3: so lucky to have the right to work in the US.
Speaker 3: My dad, who had the equivalent of a PhD in
Speaker 3: electrical engineering, when he moved here, he had to wait
Speaker 3: seven years for a green card, and so, you know,
Speaker 3: I grew up with this perspective that, wow, I'm so
Speaker 3: lucky to be able to even work in the United
Speaker 3: States and of course speak English, and so that really
Speaker 3: always drove me, and of course my Armenian heritage. And
Speaker 3: so when I got to college, as many immigrant kids do,
Speaker 3: it was either like become a lawyer or a doctor,
Speaker 3: and I thought, you know, I'd love to be a lawyer.
Speaker 3: So I originally decided to study pre law, and then
Speaker 3: I interned at a law firm one summer and I
Speaker 3: was like, this.
Speaker 1: Is just terrible. It was.
Speaker 3: It was just like I knew that it would take
Speaker 3: so long for me to like actually do what I
Speaker 3: thought a lawyer did based on what I saw on TV.
Speaker 3: So I asked a couple of my friends who had
Speaker 3: done some finance internships what their experience was like, and
Speaker 3: most of them were investment banking, which honestly sounded very
Speaker 3: similar to doing the you know, lawyer path of just
Speaker 3: sitting and doing spreadsheets and power points. But a few
Speaker 3: of my friends had done trading, and I just it
Speaker 3: just struck me as wow, like here's something where you
Speaker 3: can like form conviction very quickly. You have an opportunity
Speaker 3: to put your money where your mouth is. And I
Speaker 3: was like, this seems like the most intense job I
Speaker 3: could possibly do after college. So if I do this
Speaker 3: as like a training ground worst case scenario, any other
Speaker 3: job after this would be like a cake walk. And
Speaker 3: so I was really fortunate to get this offer at City,
Speaker 3: and I really wanted to be on the high old
Speaker 3: bond desk because the number one trader, this guy Scott Goodwin,
Speaker 3: who now runs an incredible fund himself called Diameter, was
Speaker 3: running that desk, and I really wanted to learn from him. However,
Speaker 3: I had this terrible timing of graduating college in two
Speaker 3: thousand and eight cool and so a lot of the
Speaker 3: funds called individuals and were like, hey, would you defer
Speaker 3: your offer for a year? And I had like my
Speaker 3: apartment in New York, setup, roommate, the whole thing. So
Speaker 3: long story short, I applied for a Rockefeller Fellowship, which
Speaker 3: asks you, if you could go anywhere in the world,
Speaker 3: where would you go and what would you do? And
Speaker 3: I decided to write a proposal to work at a
Speaker 3: baklava bakery because food is the perfect intersection between Armenian
Speaker 3: and Turkish culture. And so yeah, when I got it,
Speaker 3: call my parents they were like, are you serious? And
Speaker 3: I worked at a baklava bakery per year in Turkey.
Speaker 1: That's amazing. Okay, So here's my other question. What is
Speaker 1: the ven diagram overlap between baklava baking and venture capital?
Speaker 3: Okay, I thought you were gonna ask me about trading
Speaker 3: and venture capital the.
Speaker 1: Harder one, which I think is baking.
Speaker 3: Yeah, I mean, I think the analogy is probably number one,
Speaker 3: like you're serving customers at the end of the day,
Speaker 3: and for us, we're serving our LPs and entrepreneurs. Number two,
Speaker 3: you actually have to be like quite collaborative because one
Speaker 3: person is like making the layers and the dough, like
Speaker 3: super thin. Someone else is perfecting like the pistachio like
Speaker 3: mixture that's like perfect, somebody else is doing like the
Speaker 3: sugar syrup, and you know, to bring it all together,
Speaker 3: it really does take a village. And I think the
Speaker 3: analogy is to build an amazing company, it takes a village.
Speaker 3: And then third, you just got to like roll with
Speaker 3: the punches, like you know, the oven goes down, or
Speaker 3: somebody it doesn't you know, show up to work or
Speaker 3: whatever it is. You just got to roll up your
Speaker 3: sleeves and help. Those things I think have been good
Speaker 3: training ground for being a VC.
Speaker 2: To use a line that we may say over and
Speaker 2: over on the podcast, I imagine that baking back lava
Speaker 2: is kind of like investing in bonds in the sense
Speaker 2: that you want to repeat the exact same process over
Speaker 2: and over again and avoid the screw ups more than
Speaker 2: you're trying to at any given moment, make you know,
Speaker 2: the one out of ten batches that's transcendent, right, Like,
Speaker 2: you just want to keep that consistent process.
Speaker 1: That was a stretch, Joe, I think, I think I think.
Speaker 2: I got there in the end. Let's talk a little
Speaker 2: bit about investing right now. Ai, Yeah, no, it's probably
Speaker 2: going to be a big deal. I'm curious though, Within
Speaker 2: AI there are various views on what it's going to
Speaker 2: do and how it's going to change the world, and
Speaker 2: who will be the winners, and who will accrue and
Speaker 2: let a crew to legacy companies or startups or the
Speaker 2: models of the chip company whatever to be successful right now?
Speaker 2: Do you have to have a view on some of
Speaker 2: these questions, because there's obviously the point about, yeah, you
Speaker 2: want to find people who have for some reason likely
Speaker 2: to be good founders, good operators, et cetera. Do you
Speaker 2: also have to have a view on tech debates that
Speaker 2: are happening right now?
Speaker 3: I mean yes and no. For example, I think you
Speaker 3: do need to have a view on foundation models right
Speaker 3: These are the models that power chat Ept and Claude
Speaker 3: and Gemini and some of these others, because there's still
Speaker 3: many many entrepreneurs that are coming out and saying, hey,
Speaker 3: I want to build like a better, faster model and
Speaker 3: I'm going to raise hundreds of millions of dollars, And
Speaker 3: I think having a view on okay, has it already consolidated?
Speaker 3: Have we kind of already reached like the horizontal model
Speaker 3: penetration with these four or five players, Like, that's definitely
Speaker 3: a market view that you need to take.
Speaker 2: What is your view on this question?
Speaker 3: Yeah? My view is kind of does this settling on
Speaker 3: and consolidating with these players, and I think it's really
Speaker 3: hard to catch up. I think what's been really interesting, however,
Speaker 3: is these smaller models that are very domain specific, so
Speaker 3: they're really good at one particular industry or one problem
Speaker 3: they solve, and their value proposition is not we're going
Speaker 3: to be better than the underlying models. It's actually, hey,
Speaker 3: as the underlying models get better and AI generally gets better,
Speaker 3: our technology also improves. It's like rising tide lifts all boats,
Speaker 3: and they've figured out how to incorporate AI not to
Speaker 3: just be this feature but actually something that solves a
Speaker 3: real workflow problem for their end customers and has a
Speaker 3: real ROI. And so I think that's the areas that
Speaker 3: we're really excited about.
Speaker 1: And this is actually something I wanted to ask you
Speaker 1: about because in all our conversations with VC people in
Speaker 1: San Francisco or VC adjacent people, this kind of comes up.
Speaker 1: There's enthusiasm about building more specific applications on top of
Speaker 1: those large language foundational models and I'm kind of curious,
Speaker 1: like how much of a moat is there for those businesses,
Speaker 1: because it feels like, you know, if the essential technology
Speaker 1: is the thing that you're borrowing from Microsoft or Google
Speaker 1: or whatever, it feels like the customization is almost the
Speaker 1: easy part there.
Speaker 3: So I guess, like, how.
Speaker 1: Easy is it to replicate a specific use case for
Speaker 1: AI if you're not you know, developing the foundational model yourself.
Speaker 3: Yeah, so I think actually history teaches us a lot
Speaker 3: about this. If you think about sas software as a service,
Speaker 3: there's no technical mode to SaaS. If somebody wanted to rebuild,
Speaker 3: you know, there was always this question that a lot
Speaker 3: of vcs would ask. It's like if Google through ten
Speaker 3: engineers at this, would they build it? And like an
Speaker 3: honest founder would be like, yeah, you know, if they
Speaker 3: threw one hundred you know, engineers, they'd build it in
Speaker 3: this amount of time. But I think finding one white
Speaker 3: spaces that have been ignored, which I like to invest
Speaker 3: in a lot of what I call like the forgotten
Speaker 3: functions and forgotten industries which we can talk about. Yeah,
Speaker 3: and then second, you really have to take a view
Speaker 3: of where's your user spending time. You have to really
Speaker 3: understand their day to day and just throwing an AI
Speaker 3: feature that reads, for example, like legal contracts is not enough.
Speaker 3: You either got to be like, okay, this is the
Speaker 3: version control, or you're going to get like so much
Speaker 3: more information, or it's just such a more delightful tool
Speaker 3: that you, as a lawyer spend your entire day in.
Speaker 3: That's the companies that we're excited about, because otherwise it's
Speaker 3: really a race to the bottom of how much you
Speaker 3: can charge on top of these foundation models, what.
Speaker 2: Are some of those white spaces? I mean, law is
Speaker 2: intuitively a big area because we know how much time
Speaker 2: lawyer spend reading and yeah, documents of tech. But what
Speaker 2: some white spaces that exciting?
Speaker 3: Okay, so let's think about the physical world. So this table,
Speaker 3: these chairs we're sitting on, the sneakers you're wearing, all
Speaker 3: of the items that you see in the physical world
Speaker 3: have been designed by an industrial designer. So an industrial
Speaker 3: designer usually starts with a sketch like zero to one.
Speaker 3: They draw the next air Jordan's Ferrari, whatever it is,
Speaker 3: and then they have to do this painful of taking
Speaker 3: this sketch and turning it into something that can actually
Speaker 3: be manufactured. The textures, the color library, the specific way
Speaker 3: that the shoe shows up, or the materials that they
Speaker 3: can use, and that is a very manual process. So
Speaker 3: almost a year ago I invested in this company called Viscom.
Speaker 3: The founder, Jordan, worked as a car designer for Honda
Speaker 3: and then he worked at Nvidia for a couple of years,
Speaker 3: and he saw the power of AI, and instead of
Speaker 3: replacing the human creativity of drawing that next incredible ikea
Speaker 3: chair or H and M dress or whatever it was,
Speaker 3: he was like, let's preserve the human creativity and then
Speaker 3: just use AI to automate all the painful tasks of
Speaker 3: taking that sketch into something that can be totally manufactured.
Speaker 1: The other big topic in San Francisco seems to be
Speaker 1: valuations and the inevitable Gartman style hype cycle that we
Speaker 1: will probably encounter in this space. Where are we in
Speaker 1: terms of enthusiasm and inevitable disappointment with AI?
Speaker 3: Yeah? So could not be a bigger difference between AI
Speaker 3: company valuations and non AI company evaluations. Like, for example,
Speaker 3: if you are just a regular SaaS company and you're
Speaker 3: making a million dollars of revenue, it's really hard to
Speaker 3: raise over one hundred million dollar valuation, which would be
Speaker 3: one hundred x multiple.
Speaker 1: But even if I put out a press release saying
Speaker 1: that I am now using AI in my SaaS business,
Speaker 1: which seems to be the new strategy.
Speaker 3: That does seem to be a strategy. But I mean,
Speaker 3: if your core function is not you know, AI native,
Speaker 3: and then within AI, valuations range from you know, even
Speaker 3: half a billion dollars for some new seed companies because
Speaker 3: they're run by incredible technologists. So I think there's a
Speaker 3: broad sense that this is real. The market is huge,
Speaker 3: and people want to have the right ships on the table.
Speaker 3: There's also a lot of demand for these limited amount
Speaker 3: of individuals that have very specific AI talents and experience.
Speaker 3: There's not that many of them in the world, and
Speaker 3: most of them are in San Francisco, where all the
Speaker 3: vcs are. So basically, I think it's a combination of
Speaker 3: limited talent, supply for people going out to solve really
Speaker 3: really hard problems within AI, and then also capital that's
Speaker 3: kind of flocking to those types of individuals, and supply
Speaker 3: drives demand, and supplies is what drives valuations, and so
Speaker 3: that's why we're seeing.
Speaker 2: That Tracey mentioned the whole phenomenon of we're an AI company.
Speaker 2: Now we're doing something with AI. Are there good companies
Speaker 2: out there that are not AI adjacent, but good SaaS
Speaker 2: businesses whose valuations are too low just because they're not
Speaker 2: sexy right now?
Speaker 3: Oh yeah, there's so many of them. I mean, I've
Speaker 3: focused a lot on vertical software, which is software for
Speaker 3: one particular industry, so software for architects, software for car
Speaker 3: mechanic shops to run their business, software for HVAC, electrical
Speaker 3: and plumbing to run their business. And these are incredibly important,
Speaker 3: mission critical industries that you know, I think AI will
Speaker 3: certainly be a feature for. But fundamentally there are things
Speaker 3: that people need software to run their everyday business, like
Speaker 3: dispatch or customer CRM, or figuring out procurement and supply
Speaker 3: you know, supply chain type of problems, and so I
Speaker 3: think that there is a huge opportunity. The challenge is,
Speaker 3: though a lot of those companies raise at very high prices,
Speaker 3: then they cut burn They laid off a bunch of
Speaker 3: people in twenty twenty two to twenty twenty three, and
Speaker 3: as a result, their growth rate has stalled. And so
Speaker 3: I think there's like fourteen hundred SaaS companies that were
Speaker 3: unicorns in twenty twenty one and twenty twenty that haven't
Speaker 3: fundraised in the last like eighteen to twenty four months,
Speaker 3: and that's because they have extended their cash runway. I
Speaker 3: expect those to come to market. I also expect a
Speaker 3: lot of consolidation to happen amongst startups. There are so
Speaker 3: many companies going after the same space and just kind
Speaker 3: of like race to the bottom in terms of unit
Speaker 3: economics to like undercut one another. I think if they're
Speaker 3: not success, if one of them is not successful in
Speaker 3: breaking out as the clear winner, I could see startups
Speaker 3: starting to join forces and go after the space together.
Speaker 1: So at the beginning of this conversation, you mentioned that
Speaker 1: Index had roots in Europe, or at least it looked
Speaker 1: in Europe for potential opportunities, and I think there is
Speaker 1: a sense nowadays that Europe is lagging behind when it comes.
Speaker 3: To stuff like AI.
Speaker 1: I guess I have multiple questions on this topic, but
Speaker 1: a why is that or why does that sense exist?
Speaker 1: And then secondly, have you seen good opportunities in Europe lately?
Speaker 1: Are people doing interesting things there potentially beginning to catch up?
Speaker 3: Yeah? Well, I think again it all comes back to
Speaker 3: the density of talent, which I know everybody was talking
Speaker 3: about like the doom loop in San Francisco and all
Speaker 3: of that. But I have to tell you I was
Speaker 3: at a conference a block away from here yesterday, Eric
Speaker 3: Newcomers Cerebral Value Conference, and literally it was like probably
Speaker 3: the top fifteen minds in AI that all o their
Speaker 3: offices are within a five to ten minute you know,
Speaker 3: drive of where this conference was. Everyone you know, from
Speaker 3: Dario at Anthropic to you know, Ali from Data Bricks,
Speaker 3: and the list goes on and on and on like fantastic.
Speaker 3: So I think the density of talent still in San Francisco.
Speaker 3: But you know, Google had a huge deep Mind presence
Speaker 3: in Europe, for example, and we've been seeing a lot
Speaker 3: of companies spin out of deep Mind and meta there.
Speaker 3: I think Mistral is a great example. They're one of
Speaker 3: the fastest grown you know, open source models. So there's
Speaker 3: definitely talent there because a lot of these big tech
Speaker 3: labs have had presence, you know, in Europe for a
Speaker 3: while in AI.
Speaker 2: You know, when you mentioned the types of industries that
Speaker 2: you're interested in, like Europe may not have a booming
Speaker 2: AI economy the same way San France, it's got it.
Speaker 2: It probably has a lot of companies that would benefit
Speaker 2: from them. So there's sort of like productivity problems. Whether
Speaker 2: we're talking about like industrial chemicals, pharmaceutical areas, areas that
Speaker 2: people are hopeful that AI can be a big solution.
Speaker 2: Do you look at those companies as potential big customers
Speaker 2: if nothing else for the types of technologies that you're
Speaker 2: investing in.
Speaker 3: Absolutely, I'd say like time to Europe as like a
Speaker 3: market for US based companies is getting shorter and shorter.
Speaker 3: And that's also one of the reasons why people Index,
Speaker 3: you know, pick Index, because they want a VC fund
Speaker 3: that kind of has one team across Europe and the
Speaker 3: US that can help these entrepreneurs expand from being only
Speaker 3: US customers to then of course a huge market in Europe.
Speaker 1: Yeah. I've been asking this question a lot while we're
Speaker 1: in San Francisco, But what's the coolest application of AI
Speaker 1: that you've seen? I know you mentioned the product design aspect,
Speaker 1: but is there anything else?
Speaker 3: Well, we have an unannounced seed investment that I'll talk about.
Speaker 3: It's in the agent space. So everyone is talking about agents,
Speaker 3: right like agent for this, agent for that, you know,
Speaker 3: want agent to rule them all.
Speaker 2: This is an agent, is an AI that can actually
Speaker 2: go and do things exactly exactly.
Speaker 3: It's not like a sales AI agent. Let's put that aside.
Speaker 3: It's basically like a command box where you say, okay,
Speaker 3: please book my trip to Italy, and here are some
Speaker 3: broad parameters, and here's my credit card. Go. So a
Speaker 3: lot of companies are building agents, but not a lot
Speaker 3: of people are thinking about the infrastructure or operating system
Speaker 3: for these agents to interact with one another. You know,
Speaker 3: if you think about it, probably an agent will have
Speaker 3: to take your credit card and then interact with another
Speaker 3: agent that is doing the hotel or flight booking, et cetera.
Speaker 3: And being able to share you know, personal data or
Speaker 3: financial transactions is really a complex problem. And so one
Speaker 3: of the investments that we're excited about is building the
Speaker 3: operating system for these agents to be able to interact
Speaker 3: with one another.
Speaker 2: I just have one last question. I think, you know,
Speaker 2: as the time, at the time we're recording this, the
Speaker 2: Nasdaq is a roughly all time highs I think, and
Speaker 2: you know, I more or less think that when the
Speaker 2: stock market is up, that's probably good for exit opportunities.
Speaker 2: Either via IPO or the valuation of companies that would
Speaker 2: buy your portfolio companies eventually, et cetera. I'm not going
Speaker 2: to ask the Lena Khan if you see a question,
Speaker 2: because I think the answer is kind of obvious that
Speaker 2: there will be a more liberal environment for mergers and
Speaker 2: deals in the next administration. That we could be wrong,
Speaker 2: but from a IPO standpoint, stocks are up, but also
Speaker 2: very heavily concentrated in a few gigantic companies. What does
Speaker 2: that window look like to you these days?
Speaker 3: Yeah, well, I think everyone's been holding their breath to
Speaker 3: see what happened with the election, as well as how
Speaker 3: the stock market performs given the question around interest rates
Speaker 3: and inflation and what's the real strength of the underlying economy.
Speaker 3: You know, I think that there are a ton of
Speaker 3: companies that are having these conversations in boardrooms saying, okay,
Speaker 3: you know, when the IPO market opens, are we ready?
Speaker 3: And they're getting their systems, their CFO, their IR person
Speaker 3: all ramped up.
Speaker 2: Why isn't it open with stocks of all time high?
Speaker 3: Well, again, I think that there were some big things
Speaker 3: that folks were waiting for, potentially, you know, the election,
Speaker 3: and again like what's going on with rates. I think
Speaker 3: those are really important and so hopefully we'll see the
Speaker 3: IPO market open up very soon.
Speaker 2: Nina Sha Yam, thank you so much for coming on
Speaker 2: to our lives. It was fantastic.
Speaker 3: Thank you so much.
Speaker 1: That was really fun, really.
Speaker 2: Fun, Tracy, I really enjoyed that. First of all, I
Speaker 2: really enjoyed how much of the conversation we got to
Speaker 2: spend about what the job of VC actually is, because
Speaker 2: I mean, I understand the broad perimeters. You talk to
Speaker 2: a lot of entrepreneurs and most of them are going
Speaker 2: to fail, and then hopefully you get a one hundred
Speaker 2: x return in one of them. But hearing some of
Speaker 2: the things like, Okay, it's not enough to meet them,
Speaker 2: you also have to win, and what it takes to win,
Speaker 2: I thought that was really interesting.
Speaker 1: We probably should have asked, now that I'm thinking about it,
Speaker 1: we should ask what happens to the failed founders because
Speaker 1: there is there's a huge survivorship bias same VC, right,
Speaker 1: and we're talking about identifying the winners and what it's
Speaker 1: like when you actually find one. But I wonder what
Speaker 1: happens to people who don't succeed on their first try.
Speaker 2: I've always wondered about that too, and you know the
Speaker 2: degree to which a good VC can I'm totally speculating
Speaker 2: here find a good home for that entrepreneur. Yeah, is
Speaker 2: that one of the services that's like, okay, we have
Speaker 2: a network. I don't know. Actually, I'm just totally spitballing here,
Speaker 2: but I've always wondered if one of the pitches from
Speaker 2: VC is like, you're probably gonna fail because most of our.
Speaker 1: Investments we have a place to put here.
Speaker 2: Yeah, you know, residents.
Speaker 1: The other thing I was thinking about, just in the
Speaker 1: context of Europe US competition and AI. To your point,
Speaker 1: it is kind of interesting to think of Europe like
Speaker 1: not necessarily as a hotbed of AI activity, although as
Speaker 1: Nina pointed out, there are some companies, but maybe as
Speaker 1: a prime beneficiary of some of the product boosts.
Speaker 2: Right, this is a story of our time, productivity boost
Speaker 2: This is a story of our time that there is
Speaker 2: the still important industrial giants of Europe and the fear
Speaker 2: is that they're unproductive. Yeah, and there's huge pharmaceutical and
Speaker 2: there's huge chemical companies in Germany and so forth. And
Speaker 2: so if you actually think AI is going to lead
Speaker 2: to some breakthrough, perhaps these are the big winners. Because
Speaker 2: of the buyers of the technology, not the sellers of
Speaker 2: the technologyrarian.
Speaker 1: Approach to Europe's future.
Speaker 2: I think I'm going to invest in Basf as an
Speaker 2: AI player whatever. I'm not actually suggesting that, but that
Speaker 2: would be.
Speaker 1: A good I think this is actually an interesting investment.
Speaker 2: Theaters good enough take for Twitter.
Speaker 1: Yeah, okay, shall.
Speaker 3: We leave it there.
Speaker 2: Let's leave it there.
Speaker 1: This has been another episode of the All Thoughts podcast.
Speaker 1: I'm Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 2: And I'm Joe Wisenthal. You can follow me at the Stalwart.
Speaker 2: Follow our guest Nina Asha John She's at Nina A Shadyan.
Speaker 2: Follow our producers Kerman Rodriguez at Kerman Arman, dash Ol
Speaker 2: Bennett at Dashbout and kel Brooks at kel Brooks. Thank
Speaker 2: you to our producer Moses Ondam. From our odd Laws content.
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