Jun 17, 2024 · 1h 24m · news
Danny Rimer: The Biggest Lessons from Missing Snap, Airbnb, Spotify and Facebook | E1166 · 20VC with Harry Stebbings
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In this masterclass episode of 20VC, host Harry Stebbings interviews Index Ventures Partner Danny Rimer about the core strategic philosophies, cultural priorities, and operational mechanisms that define the firm. Across their discussion, Danny candidly explores the valuable lessons learned from high-profile missed investments, the necessity of strict exit discipline, and the art of backing extraordinary founders.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 20.9% of the talking time here. How this is scored →
Harry as informed peer 3.3 Guest teaching 3.6 Guest disagreement 1.8 Harry pushing back 2.6
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 1:08:03 Danny rejects European tech pessimism
Danny flatly rejects Harry's quote from a top European competitor claiming no great companies have come out of Europe recently, calling the sentiment 'bullshit' and 'absurd'.
Hardest push from Harry ▶ 22:00 Harry challenges valuation growth optimismHarry refuses Danny's optimistic framing on rising valuations by pointing out how traditional public SaaS leaders like Box and Dropbox have languished.
Biggest teaching moment ▶ 1:02:32 Danny redefines empathy vs compassionDanny corrects Harry's terminology on founder feedback, re-educating him via Jeff Weiner's framework on why compassion is superior to empathy in high-stakes leadership.
Harry holds his own ▶ 17:54 Harry cites Bessemer TAM memosHarry displays sharp domain knowledge by bringing up published Bessemer investment memos to prove that top VC firms consistently drastically underestimate the TAM of mega-winners like Twilio and Snap.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Growing Up: Art, James Bond, and Brothers | 1 | 1 | 1 | 2 | Harry opens with light biographical questions about Danny's childhood and James Bond. He offers a mild pushback asking if success makes someone care less about what others think. | |
| The Netscape Era: Keep the Main Thing the Main Thing | 2 | 4 | 1 | 2 | Danny educates Harry on Jim Barksdale's operational principles at Netscape, specifically the 'snake rules' for decision-making. Harry guides the conversation with standard probing questions. | |
| Voting Dynamics & Consensus at Index | 4 | 3 | 2 | 3 | Harry demonstrates industry knowledge by bringing up Brian Singerman's non-consensus model at Founders Fund as a counterpoint to Index's voting system. Danny explains how Index tests sponsor conviction. | |
| The Great Misses: Spotify, Snap, Airbnb, and LinkedIn | 3 | 4 | 2 | 3 | Harry challenges the cons of thesis-based investing, noting venture is a game of anomalies. Danny explains their past fashion/music thesis and admits how deal fatigue led them to miss Spotify. | |
| Backing the Founder over the Market | 5 | 3 | 1 | 3 | Harry demonstrates strong domain expertise by citing Bessemer's memo data regarding underestimating TAM for massive hits like Twilio and Snap. Danny agrees that TAM calculation is mostly noise. | |
| Learning from Mistakes & Avoiding Bad Valuation Patterns | 4 | 3 | 3 | 4 | Harry pushes back on high-valuation optimism by pointing to the languishing valuations of traditional SaaS platforms like Box and Dropbox. Danny counters that the elite tier of trillion-dollar tech leaders is expanding. | |
| Market Timing, IPO Windows, and Figma | 3 | 4 | 2 | 2 | Danny educates Harry on market timing, explaining why truly great companies can go public in any market and framing Figma's multi-year incubation as product risk rather than market risk. | |
| Was Figma a Clear Winner? | 4 | 4 | 3 | 3 | Harry presses on signaling risk and capital oversupply in venture. Danny takes a strong stance against sector, impact, and geographic funds, calling them compromises on deal quality. | |
| Future of Venture: "Scaled Artisans" vs. Asset Aggregators | 4 | 4 | 2 | 2 | Harry frames the future VC landscape between asset aggregators and boutiques. Danny outlines Index's positioning as 'scaled artisans', using the Swiss luxury watch industry as an analogy. | |
| Index's Ultimate Strength: DPI & Exiting | 5 | 4 | 2 | 3 | Harry cites Keith Raboy's framework and LP praise regarding Index's DPI record. Danny articulates their disciplined exit philosophy driven by institutional LP fiduciary duties. | |
| Convincing Founders to Shut Down | 3 | 3 | 1 | 2 | Danny explains how Index removes bias from exit timing by stripping primary origin partners of their exclusive vote. Harry probes on founder shutdown dynamics. | |
| Selling Private vs. Public: Regrets of the Etsy Miss | 4 | 4 | 1 | 3 | Harry shares his own regret about not selling his seed stake in BeReal to prompt reflection. Danny acknowledges that holding public stock too long, like Etsy, has been Index's bigger flaw. | |
| Pivot Dynamics: King's Journey to Success | 3 | 4 | 2 | 3 | Harry forces Danny to name specific winners. Danny recounts King's pivot history and explains an exception where Index stretched on price to maintain participation. | |
| Partner Advice: Take Your Time and Limit Distribution | 3 | 3 | 2 | 3 | Harry pushes back on Danny's advice to new partners, arguing that meeting high volumes of founders is necessary to build judgment. Danny clarifies the importance of limiting time distribution. | |
| Missing Snap: Lessons in Conviction and Fund Concentration | 3 | 4 | 1 | 2 | Danny openly details missing Snap's growth round due to arbitrary fund concentration limits and outdated market cap assumptions. Harry offers sympathetic context on risk management. | |
| Missing Facebook: The Value of Secondary Deals | 4 | 4 | 1 | 2 | Harry brings up specific research details regarding Index's missed Facebook investment. Danny shares the story of passing on a $10B valuation term sheet and subsequently learning secondary strategy from Yuri Milner. | |
| VC Decision-Making: Navigating the Forks in the Road | 2 | 4 | 2 | 2 | Danny educates Harry on founder evaluation, contrasting the overt confidence and polish of US founders with the understated self-awareness of European founders. | |
| The Painful Zero: Lessons from Nasty Gal and Emotional Detachment | 3 | 4 | 1 | 3 | Harry presses Danny on emotionally driven follow-on investments. Danny candidly discusses Nasty Gal, admitting he let emotional attachment overwrite rational financial discipline on follow-on checks. | |
| Multiplying Success: Why Spend Time on Winning Investments | 3 | 4 | 2 | 3 | Danny corrects Harry's framing on empathy versus compassion, citing Jeff Weiner's distinction between taking on emotional pain and maintaining objective distance to help effectively. | |
| Scaling Internationally: Maintaining Partnership Culture Across Geographies | 3 | 4 | 2 | 3 | Harry asserts that VC partnerships must be co-located in a single office. Danny refutes this dogma by explaining how Index successfully expanded to SF and NY by physically relocating existing partners. | |
| Pessimism vs. Reality: The Dynamism of European Entrepreneurship | 4 | 4 | 4 | 4 | Harry quotes a top rival European partner claiming no great European companies have emerged in recent years. Danny forcefully rejects the premise, labeling it absurd and citing London's post-Brexit strength. | |
| Work-Life Priorities: Maintaining a Great Marriage in Venture Capital | 3 | 3 | 1 | 2 | Harry asks personal questions about maintaining family balance during rapid global expansion. Danny shares his strict personal priority hierarchy and regrets prioritizing work trips over family. | |
| Quick Fire: Pitching Discord Amid a Portfolio Crisis | 4 | 4 | 2 | 2 | Harry conducts a quickfire round. Danny recounts Jason Citron grilling him about the Nasty Gal bankruptcy before accepting Index's Discord investment, and shares early lessons from Kevin Harvey. | |
| Quick Fire: Firm-Building Advice and the Power of Humility | 3 | 3 | 1 | 1 | Harry asks for direct firm-building advice. Danny emphasizes the necessity of hiring true peers and remaining perpetually humble in an unpredictable venture market. |
Statements from this episode (57)
Danny Rimer: Investors should abandon theses to back extraordinary founders
“If the person's extraordinary, throw all theses out the window and just back the founder.”
Danny Rimer: TAM and market size are noise in startup investing
“One of our tenants is definitely that market size TAM is noise.”
Danny Rimer: Great companies can go public in any market environment
“I do believe that the best companies at that stage when they are ready to go public can go public in any market.”
Index Ventures avoided expanding to China and India to maintain focus
“I think that reflecting back, not going to, not jumping on the bandwagon and going to China or India was actually a really important lesson for us in maintaining maintaining our focus.”
Danny Rimer: Netscape was the OpenAI of the early internet era
“At the beginning of the internet, literally the first company of import was Netscape. I mean, in some ways it was probably the open AI of its day.”
Danny Rimer: Decisions must never be revisited or debated once made
“Your job is to make a decision. That's the concept of seeing a snake and killing it. You make a decision. The most important one is don't revisit that decision. Once you've made that decision, once you have commit, you're all in. You're not gonna, it's not up …”
Index Ventures uses a 1–4 and 7–10 voting scale
“Every investor has a vote, and we have a voting system that goes from one to four, and from seven to 10, so you can't do a five or six, and you need a certain threshold of positive votes north of six, so it's more like 6.5, to get an investment, ah, passed thr…”
Index Ventures' best investments have always been unanimous
“Our best decisions, our best investments have always been unanimous, which has a lot to do with the dynamic of the partnership being so varied and diverse in terms of who we are and how we approach things.”
Index Ventures missed investing in Spotify, Snap, Airbnb, and LinkedIn
“One is Spotify, another one is Snap, another one's Airbnb, another one's LinkedIn. Those are the four that we had real opportunity in some fashion or another to manufacture the opportunity for Index to be in the round, and we failed for different reasons.”
Brian Chesky calls Index the best partner that never invested in Airbnb
“Brian, Brian Chesky from Airbnb repeatedly loves to say, you know, Index is, is the team that they wish they, they're, it, Sorry. He says Index is the best partner that never invested in the company.”
Daniel Ek built a startup backend in weeks as a high schooler
“In his spare time when he was still a high school student, he built the back end in, in a matter of weeks.”
Danny Rimer: Index Ventures portfolio company Joost was a 'shit show'
“Being an investor in Juiced, which was a shit show”
Index misjudged Airbnb by focusing on hotel cannibalization over market creation
“When one of the big lessons on Airbnb was when we were evaluating it, we were thinking, how many hotel rooms is Airbnb going to cannibalize? Rather than thinking, actually, Airbnb is going to create an entirely new market, an entirely, entirely new amount of i…”
Danny Rimer: VCs flawlessly price deals on current comps instead of growth
“So that's the other one, which is we always evaluate the multiple that we're paying based on the current snapshot of comps, rather than thinking out what is it going to be worth if every company continues to grow, and if this specific sector grows, what are th…”
Danny Rimer: Apple hitting $1T re-calibrated his ceiling for scale
“I mean, you know, honestly, I hadn't really thought about companies being worth multiple trillions until, until Apple hit that trillion number.”
Danny Rimer: Languishing SaaS companies suffer from poor execution, not markets
“And the ones that are languishing Probably is more a reflection of execution and product market fit at this point rather than rather than the fact that they're languishing for other reasons.”
Danny Rimer: Not doubling down on Nvidia was a big mistake
“Clearly, I mean, I invested in NVIDIA. I should have doubled down a lot more when I did a couple of years ago. That, that was a big mistake.”
Danny Rimer: Avoid investing in second-derivative market creation plays
“Probably more patient on the technology and the amount of time that it takes to come to fruition rather than a question of whether the market is going to be Excited, you know, that I have to, I would call that a second derivative play. Not only does the produc…”
Figma took over three years to build its initial alpha
“So, so, so an example is in the case of Figma, clearly it was going to take three years plus To come up with an alpha. But that was more a question of, were they going to be able to deliver the product of significance enough to be relevant and to dominate the …”
Danny Rimer: VC signaling risk is largely a thing of the past
“I think there's so much money sloshing around and so many folks have so many different funds that signal risk is, is more of the past. I mean, if you look at the continuum of entrepreneurial power versus investor power over the last couple of decades, It's onl…”
Danny Rimer: Sector, impact, and geographic funds compromise on investment quality
“I'm not a huge fan of sector funds because I think that with sectors, you're not looking for the best companies. You're looking for the best company in that sector. I'm not a fan of impact funds because you're rationalizing A mediocre investment because you're…”
Danny Rimer: Larger VC funds delay carry and shift focus to fees
“We've always been focused on getting to carry as soon as possible. And the larger the funds, the longer it will take and the more attractive the management fee is.”
Danny Rimer: Future VC will split into aggregators and artisans
“I mean, of course, we're trying to wedge ourselves in between, right? That's the plan, but I agree with you. I think there will be asset aggregators and artisans, and what we're trying to be, what we talk about internally, is scaled artisans.”
Danny Rimer: Rolex is a much better business than Apple
“Rolex actually sells more from a profit standpoint. Rolex and used Rolexes are a much better business than Apple.”
Danny Rimer: Apple and Airbnb are rare exceptions in product-driven marketing
“Most companies that have been successful, be they enterprise or consumer in the tech space, The marketing has been a byproduct of a great product or service. Really, the exception to the rule would be Apple, and probably Airbnb, and I'm, and I scratch my head …”
Danny Rimer: Almost no Index Ventures portfolio companies have mainstream brands
“Very few of our companies across the portfolio, and we have a pretty significant portfolio, and we thankfully have some great entrepreneurs, very few of them legitimately have brands yet. In fact, I'm not sure that any of them truly have mainstream brands.”
Danny Rimer: Exiting investments is Index Ventures' greatest strength
“I think probably one of the things that Index is best at is the exiting part.”
Index Ventures has no sovereign wealth fund or family office LPs
“Our LPs are, we have no family offices and sovereign wealth funds. So, they're all institutions, and they're mostly non-profits, or Their customers are nonprofits.”
Index limits lead partners to one vote on exit decisions
“I mean, in our winners, it's a question of, first of all, just being disciplined about when to exit, and making sure that we are not sort of falling into the trap of thinking that because they've been successful, they will naturally be more successful over tim…”
Harry Stebbings retained all BeReal pre-seed shares through multiple funding rounds
“I had be real from like the first check or the precede round, and I could have sold consistently in multiple different rounds, and I never sold.”
Index Ventures' biggest mistakes come from holding investments too long
“The biggest mistakes that we've done as a firm is holding on too long rather than selling too early.”
Index Ventures sold Etsy too early before Josh Silverman's turnaround
“Another one where we sold too early was definitely Etsy. We didn't take into consideration the fact that Josh Silverman was going to come in and totally transform the organization, and that obviously we left a lot of money on the table.”
Index Ventures co-invested $5M in King after Apax preempted round
“So we were going to lead with fifteen million, which at the time was a huge Series A, and they came in with twenty-five million, and we had an opportunity To put in an incremental five million at their valuation, and we decided to hold our breath and do it.”
Danny Rimer: Stretch valuation for early rounds, hold discipline later
“Stretch on price in the early rounds. You know, when we have conviction on the early rounds, I think you, there's a lot of room to stretch on price. In the later stage growth rounds, when the multiples Are gonna be more challenging to get. We have much more di…”
Index passed on Snapchat due to fund concentration limits
“What happened there was we, to my recollection, we had the opportunity to invest, but we had a growth fund, and we were unwilling to put the amount necessary to lock in the round, and so as a result of that, we didn't do the deal.”
Index capped social platform valuations at $1B after Instagram sale
“At the time, we thought the peak amount that a social platform would be worth Was a billion dollars because Instagram sold to Facebook for a billion dollars.”
Index Ventures offered Facebook $50M at a $5B valuation
“We offered them what we thought was an incredible term sheet, which was to put in fifty million at five billion.”
Index Ventures acquired significant secondary Facebook stock from Owen Van Natta
“He ended up selling us some pretty significant secondary of, and so it turned out to be a great investment for index.”
Danny Rimer: Accumulating secondary stock in winners beats hunting new investments
“That was a brilliant understanding of where to double down on value and where to spend your time.”
Danny Rimer: Evan Spiegel spiked in key areas but lacked well-roundedness
“By the way, what I would say about Evan is he spiked in certain areas. I mean, he was not Great in other areas, and I'm still not sure that he's great in the other areas.”
Danny Rimer: Great founders need a clear spike rather than well-rounded skills
“So I think it's more about having a really clear spike in a particular part of your personality or vision rather than the full product.”
Danny Rimer: US founders overrate their abilities due to excess polish
“In the US, folks are super confident, and so, you know, they will not only spike in certain areas, but they're actually not that good in certain areas, but they'll still think that they spike in those areas, and so the level of polish and sophistication that y…”
Danny Rimer: European founders routinely underestimate their own extraordinary strengths
“In Europe, of course, it's the antithesis of that, right? Like, they're not even aware at How good they are in particular areas, let alone the fact that they're much better than they think they are in other areas.”
Danny Rimer: Operators do not necessarily make the best investors
“That's part of the reason why I think that operators are not necessarily the best investors.”
Danny Rimer: Rescue attempt for Nasty Gal carried high opportunity cost
“And I did get a positive vote, but it was not the high average that I got on the first one, and so I felt responsible to the partners that I didn't put good money after bad, and not only did I put good money after bad, but the opportunity cost of spending time…”
Danny Rimer: Jeff Weiner is one of tech's best CEOs ever
“I credit Jeff Wiener who is definitely one of the best CEOs that has ever been in this industry.”
Danny Rimer: Compassion is more effective than empathy when delivering feedback
“Empathy, you're taking on an understanding. You're like literally taking on the pain of the other. Which is not really helpful. Compassion means you understand what the person is going through, but there's a distance between you and the other person. So you ca…”
Index Ventures scales new offices by relocating existing partners
“When we open offices, we don't actually hire folks to open the office. We actually take partners from one office and move them.”
Index Ventures avoided crypto because no partner found conviction
“We were trying to squint and figure out who was going to be the champion and was going to lead us to the promised land of being excited about crypto, and none of us could do it.”
Index Ventures' mistakes stemmed from betting against Europe
“Every time we've messed up is when we over rotate a bet against Europe.”
Danny Rimer: London maintained pre-Brexit levels of entrepreneurial dynamism
“London has continued to maintain a real, basically an equivalent dynamism of entrepreneurialism as it did pre-Brexit, which is a total shock to me, but it's absolutely true.”
Danny Rimer: VCs should prioritize gut instinct over analytical decision rationalization
“And I'm sort of saying actually, you know, what is the first impact? What is the first reaction that you have to the founder, to the opportunity? How does it make you feel? Can you build on that? Like, all of that other stuff is actually gonna help you rationa…”
Index Ventures offered Discord a term sheet after a two-slide presentation
“Based on the retention of Discord at the time, we followed up the next day and offered them a term sheet.”
Danny Rimer: Discord is returning to its core focus on gaming audiences
“So what happened was during COVID, Discord became much more of a mainstream platform. So, and now it's going back to what it was when we invested, which is Really a communications platform and vertical social media platform. I wouldn't say social media. I mean…”
Sequoia and Accel are Index's primary consumer Series A competitors
“Clearly, clearly the folks at Sequoia are a big fierce competitor, and the folks at Acceler are fierce and, you know, I would say there are a number of different players, but those come to mind for consumer stuff. Certainly Sequoia comes to mind a lot. Benchma…”
Index Ventures will not significantly expand fund sizes over ten years
“First of all, that the partnership is not much bigger than it is today, that our funds are not much bigger than it is today, but that our returns have only gotten better”
Danny Rimer: Staying at Index in ten years indicates a failed transition
“I shouldn't be there in 10 years. If I'm still there, I'm doing something wrong, or they, or they're doing something wrong. So I'd like to see that the baton has been passed, and that the folks are taking Index to Higher and higher territory, but maintaining w…”
Shorts cut from this episode
▶ US vs EU Founders 🇪🇺🇺🇸 · 20VC with Harry Stebbings (@1:09:57)
▶ My biggest miss: Facebook 👎 · 20VC with Harry Stebbings (@53:04)
▶ How we made $$$BN's on Discord 💰 · 20VC with Harry Stebbing (@1:16:07)
▶ Does a great product = great marketing? 🤩 · 20VC with Harry (@33:50)
▶ Why you shouldn’t bet against Europe 🇪🇺 · 20VC with Harry (@1:08:33)
▶ The Snake Rule of Venture 🐍💰 · 20VC with Harry Stebbings (@5:59)
▶ My biggest hits & misses in venture 🎯 · 20VC with Harry Ste (@0:02)