The Exchanges

Q you. It goes back to what you and Mike have said before about insight developments. I guess, you know, you said there about kind of building on top of the new software layer and the social network. That idea then obviously changed, and it was actually Navin at Mayfield who asked in particular, when was it clear that that change was made and needed to be made in the idea?

A Okay, so I think this is the secret to seed investing, which is, it wasn't clear for a number of years. We made our investment in 2010, and the actual change didn't happen until 2012. And so, if you think, like, a pivot in many people's minds is just like a moment. It's like the singular decision, and it's like a lightning strikes you, and you know. In reality, what happened with Lyft was that Zimride went through hundreds of iterations. It starts off as this platform that's sold to universities, then it becomes a platform that's sold to universities and corporations, and then this realization of we don't have enough density of activity, right? If you stay within Stanford campus, it's fine within Stanford campus, but you need to stitch together Palo Alto. Can you do that by stitching together Facebook that was in Palo Alto at the time and Stanford kind of, but you're never going to get to the density that you need. And then how do you make people more comfortable with paying for transportation? Well, we looked at Craigslist and people are trying out different longer routes. They're paying for being in a car with someone to go to Lake Tahoe or to LA. So what does Logan do? Well, the next week he's rented a van and And he's posted to Craigslist that he's gonna drive down to LA, and here's the CEO of a company who's driving a van down to LA with a bunch of people who've paid for s…

AI assessment note: “it wasn't clear for a number of years. We made our investment in 2010”

Q I do want to go back to Lyft though, because when we think about those iterations, and then kind of to where it is more in the model today, when was it clear the newer Lyft model was very much working?

A Yeah, so this is sometimes where people will say even product market fit is not a moment, but I think this is probably the counter to that. When Lyft launched in 2012, I remember one of our associates Literally running into my office, and this guy, Tommy Leap, he says, you would not believe how amazing this product is. Like, Lyft is going to be huge, and it wasn't that he'd used the product, you know, a hundred times at this point. He had literally used it for two days, and he thought it was life-changing, and so I remember contacting the Lyft guys and saying, I think we have something. I've never seen a reaction like this, It wasn't just Tommy. It ended up being all of these young people who I'd asked about Lyft, and they said, this is just totally different. And so in my mind, it just became like a very, very clear moment where for a long time, we've been selling this platform, looking for density of activity, and it's just kind of fallen into our lap. And so that was like, 2012, I think in the summer, we were just experimenting. And like when I say we were experimenting, I think John and Logan emailed a bunch of Zimride users in the San Francisco area, and they built Lyft in like three weeks because they felt like this was an experiment that they wanted to run. At the time, like Uber was this black car service. The whole tagline was be a baller. And so having your friend com…

AI assessment note: “When Lyft launched in 2012, I remember one of our associates Literally running into my office”

Q Who is one unsung hero behind the scenes in the Lyft team that moves the needle?

A I love this Question, because it has to be Kristin Svercek, who joined Lyft in November of 2012, but I knew her from her time as an associate at Gunderson in 2008, where she was involved in our fund formation side. Then she represented me through Silicon Legal every time we invested into a company, which is how Logan and John met her. They then hired her firm to represent them because they liked her so much. And ultimately in November of 2012, it was totally obvious that she was this great attorney, very young. It wasn't totally obvious that everything was going to be as wildly successful as it was, but they decided they needed her because there was a strong legal component to this business. And I remember one critical board meeting is we're talking about like all of the competition, what's happening in this market. And some of the questions around ethics and how you behave in business, there was this moment where she said, you know, why is it important for us to always do the right thing? And she paused and she said, because it's good business practice. And I remember at one point I came back to her and I said, did you ever think that people would realize that you were right? And she said, like, no, I didn't think that it would Ever be the case that I was proven right, that it's really good business practice to do what's right. But I think, you know, I'm really excited that sh…

AI assessment note: “it has to be Kristin Svercek, who joined Lyft in November of 2012”

Q What did you learn about them in that process? As you said there, it's a two-year process with multiple iterations. As you said there, the driving to LA, As CEO, it's doing pretty unusual things. What did you learn about them as a team in that process?

A There's an absolute commitment to customer, fanatical desire for customer development. So a lot of people think customer development is like intellectual process. And in fact, it's hand to hand combat, right? You're trying to uncover secrets that other people may not know. And for them, it was real life Experimentation, right? The fact that John Zimmer, when he was selling the platform to universities, would go to a university campus dressed in a beaver suit to try to convince people to just engage with this platform gives you a sense for, like, it wasn't that they felt like someone else should do that work. They were always so committed to knowing what the customer desire was and how that translated into product. For themselves, and for each person who was in that organization, really came alive all the time.

AI assessment note: “There's an absolute commitment to customer, fanatical desire for customer development.”

Q I do want to go back to Lyft though, because when we think about those iterations, and then kind of to where it is more in the model today, when was it clear the newer Lyft model was very much working?

A Yeah, so this is sometimes where people will say even product market fit is not a moment, but I think this is probably the counter to that. When Lyft launched in 2012, I remember one of our associates Literally running into my office, and this guy, Tommy Leap, he says, you would not believe how amazing this product is. Like, Lyft is going to be huge, and it wasn't that he'd used the product, you know, a hundred times at this point. He had literally used it for two days, and he thought it was life-changing, and so I remember contacting the Lyft guys and saying, I think we have something. I've never seen a reaction like this, It wasn't just Tommy. It ended up being all of these young people who I'd asked about Lyft, and they said, this is just totally different. And so in my mind, it just became like a very, very clear moment where for a long time, we've been selling this platform, looking for density of activity, and it's just kind of fallen into our lap. And so that was like, 2012, I think in the summer, we were just experimenting. And like when I say we were experimenting, I think John and Logan emailed a bunch of Zimride users in the San Francisco area, and they built Lyft in like three weeks because they felt like this was an experiment that they wanted to run. At the time, like Uber was this black car service. The whole tagline was be a baller. And so having your friend com…

AI assessment note: “When Lyft launched in 2012, I remember one of our associates Literally running into”

Q Who is one unsung hero behind the scenes in the Lyft team that moves the needle?

A I love this Question, because it has to be Kristin Svercek, who joined Lyft in November of 2012, but I knew her from her time as an associate at Gunderson in 2008, where she was involved in our fund formation side. Then she represented me through Silicon Legal every time we invested into a company, which is how Logan and John met her. They then hired her firm to represent them because they liked her so much. And ultimately in November of 2012, it was totally obvious that she was this great attorney, very young. It wasn't totally obvious that everything was going to be as wildly successful as it was, but they decided they needed her because there was a strong legal component to this business. And I remember one critical board meeting is we're talking about like all of the competition, what's happening in this market. And some of the questions around ethics and how you behave in business, there was this moment where she said, you know, why is it important for us to always do the right thing? And she paused and she said, because it's good business practice. And I remember at one point I came back to her and I said, did you ever think that people would realize that you were right? And she said, like, no, I didn't think that it would Ever be the case that I was proven right, that it's really good business practice to do what's right. But I think, you know, I'm really excited that sh…

AI assessment note: “it has to be Kristin Svercek, who joined Lyft in November of 2012”

Q Okay, so you were introduced. Where did you have the first meeting, and was that like an unlock in it? I find often with meeting companies, there's like a moment when you're like, oh wow, this is special. Where was the meeting? Did you have that unlock?

A Yeah, so John and Logan came into our office Mike and I, at the time, we were subleasing space from another venture capital firm, and just to paint the picture, I'm just getting started in my venture capital career, and I think I hadn't even finished my PhD at the time, and I was largely pregnant, so I was due in, I think, in April of that year, and in our first meeting, I'm, like, pregnant, I have, like, This meeting that I'm having, and Mike is there. What was great about it was we were all sort of just starting up in our career. I think probably John and Logan had gone up and down Sand Hill Road and been rejected by a bunch of firms at that time, and I also hungry to make investments, but I don't have a name. I don't have a brand on which I'm sitting on, and so I'm trying to hustle to find great Folks to work with. And so at this moment, we sort of come together, and I've been teaching all these classes with Steve Blank on customer development, and here are two guys who walk into our office. There's a couple of things that we are really drawn to. One was, they have this incredible story of why they're working on this. So John had joined Logan on this journey on Zimride, and Logan says, you know, I was in Zimbabwe, I was really passionate about transportation, and in Zimbabwe, all these people can't afford to own a car, so they share the ride, and I had been in Zimbabwe back …

AI assessment note: “John and Logan came into our office Mike and I, at the time”

Q What did you learn about them in that process? As you said there, it's a two-year process with multiple iterations. As you said there, the driving to LA, As CEO, it's doing pretty unusual things. What did you learn about them as a team in that process?

A There's an absolute commitment to customer, fanatical desire for customer development. So a lot of people think customer development is like intellectual process. And in fact, it's hand to hand combat, right? You're trying to uncover secrets that other people may not know. And for them, it was real life Experimentation, right? The fact that John Zimmer, when he was selling the platform to universities, would go to a university campus dressed in a beaver suit to try to convince people to just engage with this platform gives you a sense for, like, it wasn't that they felt like someone else should do that work. They were always so committed to knowing what the customer desire was and how that translated into product. For themselves, and for each person who was in that organization, really came alive all the time.

AI assessment note: “There's an absolute commitment to customer, fanatical desire for customer development.”

Q I totally agree with you in terms of that process. Can I ask in terms of like the relationship build that you have with them, the uncovering of that process, how do you think about doing that today when fundraising timelines are just so compressed?

A Yeah, it's funny. I was just talking to one of our investors about the fact That I really seek not to have my investing timeline be compressed. If a founder wants to find just a check, I say to my team, and Mike says this as well, like, we have to force a choice. If someone's just looking for a checkbook, we're probably not your gal or guy, because we don't make that many seed investments. We're not an index fund. We don't seek to make a hundred investments in a year. I only make Somewhere between three and six investments every year. So we're in July. I've only made two investments at the seed stage. Why? Because I spend actually a lot of time with these companies. And when I make an investment, I commit to doing that. I commit that my investment will make a difference in our fund. So it's not an option bet. It's the only time in which I can make that investment. And so I won't have a future chance to do it. And I'm not going to make an investment in a competitive company Because I'm all in with you, and so if I'm going to make that commitment, I can't make a decision in 24 hours, and so I need the chance to get to know that, that founder. The last two investments that I've done, I had a month-long process through which we got to know each other, and it was a commitment to one another, and I recognize that that's just not the usual at the seed stage, and there are probably com…

AI assessment note: “I really seek not to have my investing timeline be compressed.”

Q I'm really intrigued in terms of the difficulty, though, of building out a portfolio with very little brand, and how you manage that effectively. As you said, great investments. So was it a case that those were less hot rounds to get into, and the competition wasn't as high? And how do you think that's changed today with the importance of VC brand?

A Well, I think I tried to use every single talent and asset that I had, and so at the time, I was actually teaching a class with Steve Blank. His whole blog was just starting to take off like crazy, and so I remember the very first term sheet that I put out was Talia Busquiet, TaskRabbit, and I had a feeling that there were other people who were just going to love her to pieces, And so in my infinite paranoia, I had her meet with Steve Blank, and I had him tell her how great I was, and then, you know, I would call Eric Reese, and if he would tell her the same thing, and I think Tim Ferriss was meeting with her, and Tim Ferriss was the one who introduced us, so I made him tell her how great I was, so every single person who I knew who might be able to vouch for me, I got them to vouch for me, and so that sort of built on itself, Uh, when I first got into that company with TaskRabbit, it was the only company that I was working with, and so I spent a hundred percent of my time thinking about Leah and thinking about TaskRabbit and how it was going to become amazing, and then eventually, you know, I found ModCloth, and eventually after that, I think Leah was the one who introduced me to Logan and John. Now, with ModCloth, again, it was e-commerce. It was not something that was terribly popular at the time, so We actually did have a lot of time and not a lot of competition, and then s…

AI assessment note: “We actually did have a lot of time and not a lot of competition”

Q Okay, so you were introduced. Where did you have the first meeting, and was that like an unlock in it? I find often with meeting companies, there's like a moment when you're like, oh wow, this is special. Where was the meeting? Did you have that unlock?

A Yeah, so John and Logan came into our office Mike and I, at the time, we were subleasing space from another venture capital firm, and just to paint the picture, I'm just getting started in my venture capital career, and I think I hadn't even finished my PhD at the time, and I was largely pregnant, so I was due in, I think, in April of that year, and in our first meeting, I'm, like, pregnant, I have, like, This meeting that I'm having, and Mike is there. What was great about it was we were all sort of just starting up in our career. I think probably John and Logan had gone up and down Sand Hill Road and been rejected by a bunch of firms at that time, and I also hungry to make investments, but I don't have a name. I don't have a brand on which I'm sitting on, and so I'm trying to hustle to find great Folks to work with. And so at this moment, we sort of come together, and I've been teaching all these classes with Steve Blank on customer development, and here are two guys who walk into our office. There's a couple of things that we are really drawn to. One was, they have this incredible story of why they're working on this. So John had joined Logan on this journey on Zimride, and Logan says, you know, I was in Zimbabwe, I was really passionate about transportation, and in Zimbabwe, all these people can't afford to own a car, so they share the ride, and I had been in Zimbabwe back …

AI assessment note: “John and Logan came into our office Mike and I, at the time”

Q you. It goes back to what you and Mike have said before about insight developments. I guess, you know, you said there about kind of building on top of the new software layer and the social network. That idea then obviously changed, and it was actually Navin at Mayfield who asked in particular, when was it clear that that change was made and needed to be made in the idea?

A Okay, so I think this is the secret to seed investing, which is, it wasn't clear for a number of years. We made our investment in 2010, and the actual change didn't happen until 2012. And so, if you think, like, a pivot in many people's minds is just like a moment. It's like the singular decision, and it's like a lightning strikes you, and you know. In reality, what happened with Lyft was that Zimride went through hundreds of iterations. It starts off as this platform that's sold to universities, then it becomes a platform that's sold to universities and corporations, and then this realization of we don't have enough density of activity, right? If you stay within Stanford campus, it's fine within Stanford campus, but you need to stitch together Palo Alto. Can you do that by stitching together Facebook that was in Palo Alto at the time and Stanford kind of, but you're never going to get to the density that you need. And then how do you make people more comfortable with paying for transportation? Well, we looked at Craigslist and people are trying out different longer routes. They're paying for being in a car with someone to go to Lake Tahoe or to LA. So what does Logan do? Well, the next week he's rented a van and And he's posted to Craigslist that he's gonna drive down to LA, and here's the CEO of a company who's driving a van down to LA with a bunch of people who've paid for s…

AI assessment note: “it wasn't clear for a number of years. We made our investment in 2010”

Q I totally agree with you in terms of that process. Can I ask in terms of like the relationship build that you have with them, the uncovering of that process, how do you think about doing that today when fundraising timelines are just so compressed?

A Yeah, it's funny. I was just talking to one of our investors about the fact That I really seek not to have my investing timeline be compressed. If a founder wants to find just a check, I say to my team, and Mike says this as well, like, we have to force a choice. If someone's just looking for a checkbook, we're probably not your gal or guy, because we don't make that many seed investments. We're not an index fund. We don't seek to make a hundred investments in a year. I only make Somewhere between three and six investments every year. So we're in July. I've only made two investments at the seed stage. Why? Because I spend actually a lot of time with these companies. And when I make an investment, I commit to doing that. I commit that my investment will make a difference in our fund. So it's not an option bet. It's the only time in which I can make that investment. And so I won't have a future chance to do it. And I'm not going to make an investment in a competitive company Because I'm all in with you, and so if I'm going to make that commitment, I can't make a decision in 24 hours, and so I need the chance to get to know that, that founder. The last two investments that I've done, I had a month-long process through which we got to know each other, and it was a commitment to one another, and I recognize that that's just not the usual at the seed stage, and there are probably com…

AI assessment note: “I really seek not to have my investing timeline be compressed.”

Q And so is this, is this the leaky bucket syndrome?

A It's not only the leaky bucket syndrome. It's, it's the, it's the companies that you find are a massive flash in the pan or the They might even go public, and you realize that there are all sorts of things wrong with the company, and so what I believe is that, and we call these things TNAX, so traction, not a company, and we believe that if you actually start to have the conversation really early on at the, at the moment of getting seed financing, what's the basis for your culture? How do you hire and fire? What is your compensation philosophy? How do you create career paths for people within your organization? How do you make technical decisions within your organization? All of these questions, if you are just posing them and discussing them with your CEOs, then you can at least have the basis for understanding what is required to build a scalable company, and that discussion in and of itself can be quite valuable. But as you start to act upon it, then you're building the true foundation for a scalable business as your company takes off, takes off with product market fit.

AI assessment note: “It's not only the leaky bucket syndrome.”

Q I'm really intrigued. Where do you stand on market creation? Say Snapchat created probably, I think I could argue, a truly new market and ephemeral messaging. So where do you stand on market creation for product market fit?

A Okay, so this actually touches on the top level of Of power that we talk about, which is category power. And category power is actually where you think about how you define the market so that the customer buys into your story of what the market is. And so in essence, it's that whether or not it's a existing market, a new market, or resegmented market, you want to People to believe that you have a new market. So great example of that is Netflix. When Netflix came out, they didn't say we are a better version of Blockbuster. Instead, they said we deliver media to your home. And so when the media became switched from DVDs to now streaming, it was still the same message. They delivered media to our home. It was a new model in which consumers were consuming content in a different kind of way, and so Netflix was very successful in creating a new category, not by attacking, attacking the existing market blockbusters had already defined, but rather by creating this new category, and there's a great book called Play Bigger that just came out. That book Itself describes this category creation in a really great way with lots of different examples.

AI assessment note: “this actually touches on the top level of Of power that we talk about”

Q And so is this, is this the leaky bucket syndrome?

A It's not only the leaky bucket syndrome. It's, it's the, it's the companies that you find are a massive flash in the pan or the They might even go public, and you realize that there are all sorts of things wrong with the company, and so what I believe is that, and we call these things TNAX, so traction, not a company, and we believe that if you actually start to have the conversation really early on at the, at the moment of getting seed financing, what's the basis for your culture? How do you hire and fire? What is your compensation philosophy? How do you create career paths for people within your organization? How do you make technical decisions within your organization? All of these questions, if you are just posing them and discussing them with your CEOs, then you can at least have the basis for understanding what is required to build a scalable company, and that discussion in and of itself can be quite valuable. But as you start to act upon it, then you're building the true foundation for a scalable business as your company takes off, takes off with product market fit.

AI assessment note: “It's not only the leaky bucket syndrome. It's, it's the, it's the companies”

Q And then moving from proprietary now, uh, obviously we have to touch on the product itself. So, so again, what's product power? What, what do you look for that's inherent within this type of power, uh, for you?

A And it's funny, product power in some ways is a misnomer because what we're looking at there is product market fit. And ultimately this is, this is what Mark Andreessen described in his original post on product market fit was that it's, it's not product. It's not team. It's ultimately Market that has all of the power. And this is counter to this notion that if you throw out any kind of product into the market and it sticks, then you might actually have product market fit. Whereas we would actually say product market fit is not just about whether or not it sticks with any kind of market. That market has to be incredibly sizable, and that market also has to have such a powerful need that it literally pulls the product out of the hands and Of the company. And so it's a much more visceral experience than we would say is normally the definition of product market fit.

AI assessment note: “product power in some ways is a misnomer because what we're looking at there is product market fit”

Q How did you determine when was the right time to turn that off? Because it's a tough thing to do. You've got revenue, you've got customers, you've got enterprises. What was the decision making around that?

A And I think, like, this is where, you know, hindsight is twenty-twenty. It's like, totally clear they should have gone all in. But again, you put yourself in the shoes of the founder. When you're a founder, you're all in on your idea. Like, the whole thing is that you've created this narrative Not only for yourself, but for your employees that this product, this vision, this mission is meaningful. And you've given up birthday celebrations with friends, nights out to make this vision come true. And so you're bought into this and then comes along like this three week experiment that seems really successful. Like when you look at it now, it's like, obviously they should head in this direction, but that's not the way it necessarily works. I think that's why it took a year, but I remember within a few months, we had to make a decision. Do we divert basically 90% of the resources to lift? And I took a walk with Logan all around like the ballpark area. I remember just sort of walking and walking and he's saying like, I think I need to do this. Is this what we do? And I'm like, I think we do. I think we have to go in on this. And then at this, this board meeting, I don't remember who it was, but someone said, like, do you really think that this is going to work? And, like, Logan and John, like, slammed their fists on the table, and they're like, this is for sure going to work, and we n…

AI assessment note: “I remember within a few months, we had to make a decision.”

Q We mentioned the element of competition earlier, and I mentioned kind of speaking to Naveen at Mayfield, Before the show, and he said about kind of the competition from Uber and its impact on financing strategy. Talk to me, how did competition from Uber make financing challenging?

A Yeah, and some of the competition and what happened really, like, kind of ramped up in that 2014 to 2016 period, where luckily I was not on the board. But I know, like, for a while there, there were moments where I think Lyft had just a few months of cash left. And there are points where the way in which the financings were happening, you're just had limited numbers of folks who could even write the check sizes that you needed. And so the world was just getting smaller and smaller, and people were being asked to pick sides. And so I think in that moment, again, if you're just competing, and you're just working on that, who's better, then that's harder. But again, when you come back to what's your different Are you investing into the different piece? Then all of a sudden there's a new lease. It's critical for us too. It's like a small investing firm. We always say, don't force a choice. Don't force a comparison.

AI assessment note: “limited numbers of folks who could even write the check sizes that you needed”

Q I'm really intrigued. Where do you stand on market creation? Say Snapchat created probably, I think I could argue, a truly new market and ephemeral messaging. So where do you stand on market creation for product market fit?

A Okay, so this actually touches on the top level of Of power that we talk about, which is category power. And category power is actually where you think about how you define the market so that the customer buys into your story of what the market is. And so in essence, it's that whether or not it's a existing market, a new market, or resegmented market, you want to People to believe that you have a new market. So great example of that is Netflix. When Netflix came out, they didn't say we are a better version of Blockbuster. Instead, they said we deliver media to your home. And so when the media became switched from DVDs to now streaming, it was still the same message. They delivered media to our home. It was a new model in which consumers were consuming content in a different kind of way, and so Netflix was very successful in creating a new category, not by attacking, attacking the existing market blockbusters had already defined, but rather by creating this new category, and there's a great book called Play Bigger that just came out. That book Itself describes this category creation in a really great way with lots of different examples.

AI assessment note: “you want People to believe that you have a new market”

Q engaged in. I mean, it took a couple of kind of core decisions also in terms of deciding which game they wanted to Play prioritizing a lot on the core business itself. I just want to ask like, how did you advise them on prioritization? How did they think through prioritization in the early days? And what did that look like? Because they didn't make decisions to really focus. Yeah.

A And some of it was just sort of how do they expand on a market by market basis? Some of it was also when will Uber come into what we're doing, right? So part of the, the debate was when will Uber come in? Because as I said, when we first launched, They were black cars. Be a baller. You know, look like you're really rich. That's very different to high-fiving the guy who's picking you up and being friends and having a giant pink mustache in the front of your car. But what was interesting was the quick recognition from the market that this peer-to-peer driving service would be where everything was fought and won, and so it did become very rapidly competitive. The question was, like, how big does San Francisco What's going to need to get? Cause that's where we got started. And then how do you expand market by market? So for a while, it was just this focus on let's get this thing right. Now let's get LA right. And I think every few months we were launching markets. It wasn't until I think it was 2014. This is when I rolled off the board the first time they went live with 24 markets, just as I was rolling off the board. And I remember being like 24 markets. That's just insane. Christianity. That's huge. And it turns out it's like, it's just a mere drop in the bucket, right? But like that focus on, we're going to create the best experience for riders and drivers. We're going to do tha…

AI assessment note: “for a while, it was just this focus on let's get this thing right.”

Q How do you play with someone like that? How, you know, when you have such a huge 800 pound gorilla fighting you that's so well funded, how do you do that without ruining your unit economics?

A I think a couple of things that, you know, one of the reasons why there were a lot of companies that tried to attack Lyft in that peer to peer ride sharing space. And what we found was that one of the first things that Lyft did that was really, really important was actually build a sense of community and brand and purpose. So if you remember back in the days, the really early days of Lyft, When you got into a car, it usually had a pink, huge, gigantic, furry, pink mustache on the front of the car, and you'd go and you'd fist bump the driver and you'd sit in the front, and so that was really how they differentiated the service, and there were friends of mine who just absolutely loved that element because it was such a different experience from the Uber experience at the time, which was purely a black car service. You sat in the back, you got into a black car, And it was, you were a baller. And that's how you differentiated those two services. And, and I think the fact that Lyft really played upon this irreverent sense of brand, as well as a tight sense of community, uh, came from the fact that actually the, the founders, John and Logan, really believed in that experience. It came from the Zimride platform of seeing people share the ride and And their belief that actually sharing the ride had actual meaning to it.

AI assessment note: “one of the first things that Lyft did... was actually build a sense of community”

Q We mentioned the element of competition earlier, and I mentioned kind of speaking to Naveen at Mayfield, Before the show, and he said about kind of the competition from Uber and its impact on financing strategy. Talk to me, how did competition from Uber make financing challenging?

A Yeah, and some of the competition and what happened really, like, kind of ramped up in that 2014 to 2016 period, where luckily I was not on the board. But I know, like, for a while there, there were moments where I think Lyft had just a few months of cash left. And there are points where the way in which the financings were happening, you're just had limited numbers of folks who could even write the check sizes that you needed. And so the world was just getting smaller and smaller, and people were being asked to pick sides. And so I think in that moment, again, if you're just competing, and you're just working on that, who's better, then that's harder. But again, when you come back to what's your different Are you investing into the different piece? Then all of a sudden there's a new lease. It's critical for us too. It's like a small investing firm. We always say, don't force a choice. Don't force a comparison.

AI assessment note: “limited numbers of folks who could even write the check sizes that you needed”

Q engaged in. I mean, it took a couple of kind of core decisions also in terms of deciding which game they wanted to Play prioritizing a lot on the core business itself. I just want to ask like, how did you advise them on prioritization? How did they think through prioritization in the early days? And what did that look like? Because they didn't make decisions to really focus. Yeah.

A And some of it was just sort of how do they expand on a market by market basis? Some of it was also when will Uber come into what we're doing, right? So part of the, the debate was when will Uber come in? Because as I said, when we first launched, They were black cars. Be a baller. You know, look like you're really rich. That's very different to high-fiving the guy who's picking you up and being friends and having a giant pink mustache in the front of your car. But what was interesting was the quick recognition from the market that this peer-to-peer driving service would be where everything was fought and won, and so it did become very rapidly competitive. The question was, like, how big does San Francisco What's going to need to get? Cause that's where we got started. And then how do you expand market by market? So for a while, it was just this focus on let's get this thing right. Now let's get LA right. And I think every few months we were launching markets. It wasn't until I think it was 2014. This is when I rolled off the board the first time they went live with 24 markets, just as I was rolling off the board. And I remember being like 24 markets. That's just insane. Christianity. That's huge. And it turns out it's like, it's just a mere drop in the bucket, right? But like that focus on, we're going to create the best experience for riders and drivers. We're going to do tha…

AI assessment note: “expanding market by market, understanding the dynamics. That was a real thing for them.”

Q How did you determine when was the right time to turn that off? Because it's a tough thing to do. You've got revenue, you've got customers, you've got enterprises. What was the decision making around that?

A And I think, like, this is where, you know, hindsight is twenty-twenty. It's like, totally clear they should have gone all in. But again, you put yourself in the shoes of the founder. When you're a founder, you're all in on your idea. Like, the whole thing is that you've created this narrative Not only for yourself, but for your employees that this product, this vision, this mission is meaningful. And you've given up birthday celebrations with friends, nights out to make this vision come true. And so you're bought into this and then comes along like this three week experiment that seems really successful. Like when you look at it now, it's like, obviously they should head in this direction, but that's not the way it necessarily works. I think that's why it took a year, but I remember within a few months, we had to make a decision. Do we divert basically 90% of the resources to lift? And I took a walk with Logan all around like the ballpark area. I remember just sort of walking and walking and he's saying like, I think I need to do this. Is this what we do? And I'm like, I think we do. I think we have to go in on this. And then at this, this board meeting, I don't remember who it was, but someone said, like, do you really think that this is going to work? And, like, Logan and John, like, slammed their fists on the table, and they're like, this is for sure going to work, and we n…

AI assessment note: “I remember within a few months, we had to make a decision.”

Q lot of people get angry at me for, and it's that the best founders do not need VCs to help them get talent. It could be, hey, can you meet this as a final layer of intervention? Interviews. But in terms of, like, filling out candidate pipelines, bluntly, that's not my job, it's not your job, and it's also not what the best need. Do you agree with me there?

A Yeah, you know, at the end of the day, I think most of the time, where a venture capitalist who has views on a lot of different companies have seen journeys for tens, if not hundreds of companies, what we can offer, maybe some, some element of credibility, we can offer a A network. But really, like, the thing that can be powerful is just another set of eyes from the outside in around, is this true? In my line of work, because I'm pre-product market fit investing, I spend all of my time on signs of product market fit, and what's the journey to get there? Are we two steps closer? Are we two steps further apart? What are the things we measure in order to be able to get there? Are we close? Are we not close? Are we there yet? And being really hard. Saying, this isn't it, and in fact, we should throw away this entire product, or the business model doesn't work anymore, or the ecosystem doesn't buy it. There's something fundamentally wrong. When you're super close to a company, and you're building everything in it, sometimes it's hard to see that, and so that's what I think my job is, first and foremost. It's not just the tactical elements.

AI assessment note: “that's what I think my job is, first and foremost. It's not just the tactical elements.”

Q the characteristics that are inherent within thunder lizards. So, so I want to talk about that, and you very much place emphasis on, on kind of four powers of defensibility that thunder lizards potentially all have. So I'd love to chat about those and how you see them. So let's start with proprietary power. Uh, what do you think this is, and, and what are the characteristics of proprietary power?

A Actually, let's take one step back before we get into this as to why I think all of this is important. So the reason why we think about the different levels of power and why, why a startup needs to have these levels of power is that we believe that not all startups are meant for venture investing. So the numbers actually speak for themselves. When we initially got started with Floodgate, We looked at all of the exits that happened that were over fifty million dollars, and we segmented them from fifty million dollars to a hundred, a hundred to two 52 50 to 505 hundred to 757 50 to a billion, and then a billion plus. And what we found was with each of these categories, it got an order of magnitude harder to get to that next level. And in fact, If you looked at all of the exits that happened at greater than fifty million dollars, in the pure IT sector at the time, there was roughly about a hundred companies that would exit every year around that, that valuation or greater. What we found is that at five hundred million dollars and greater, there is roughly somewhere around 25 companies Plus or minus five to 10 that exit every single year, and those are the companies that really actually move the needle for venture capital. For most funds, what we find is that there is one company that more than returns the fund if you have a very successful fund, and mind you, most venture capital …

AI assessment note: “Actually, let's take one step back before we get into this”

Q I love that, pounding the fist on the table. I do want to unpack a couple of elements you said there. You mentioned, like, the moustaches on the front, and I remember when it was, like, high-fiving friends. The culture was always like, we're nice people. How did they build that culture? How did you analyze that? And what did that look like in those days?

A Yeah, it was really interesting. So, even for their Series A, which is before they made the pivot, and actually beyond in several other conversations with investors, This is a question I used to get all the time. Are they too nice? Are they too nice? Are they too nice? Are they not competitive enough? And that used to grate on me, because I used to think, like, why are those two things so counter to one another? Like, can you not have both? Can you be a nice person, but fiercely competitive? And what I found with Lyft, and John and Logan in particular, is you can be You can be an ethical person, you can be a nice person, and you can be fiercely, fiercely competitive. But the thing that I've learned in this journey is sometimes you need to define your own game. When you're put on the field and someone has a game that they're really good at, if you then try to engage in that battle on their basis, you're never gonna win. If you see that happening, You change the rules. So if you see Coca-Cola on the battlefield, you become like the five-hour energy drink, and you take up different shelf space, and you change the size of the bottle. And in the same way, with Lyft, they didn't try to engage in any direct hand-to-hand combat. It became like, let's figure out who we are and what we want to do, and that was the battle that they engaged in.

AI assessment note: “with Lyft, they didn't try to engage in any direct hand-to-hand combat”

Q So how do you think about investing in downturns, and how do you kind of strategize your investing cadence based on the wider macro effects?

A So I really have this incredibly, I guess, romantic view of 2008 to 2010, which Probably other people remember as a fairly dire period in the economy. It was a great period because I just had the luxury of time, and I had this opportunity to sit down and think, and not just to react. And what was wonderful about that period was I was this no-name, PhD candidate, wannabe investor, and as desperate as I was to find entrepreneurs who would take my check, There were entrepreneurs out there who really needed to get a check from someone, and so it was this great opportunity to allow me to take a bet on, uh, an entrepreneur and have them also equally take a bet on me, and, and so that period of time, I think, was a really great period because all the investors who were in it, they were, they were sort of inventing things along the way, But also, they had the chance to really make sure that this was the relationship that they wanted to be in with the entrepreneur at that time.

AI assessment note: “I really have this incredibly, I guess, romantic view of 2008 to 2010”

Q So how do you think about investing in downturns, and how do you kind of strategize your investing cadence based on the wider macro effects?

A So I really have this incredibly, I guess, romantic view of 2008 to 2010, which Probably other people remember as a fairly dire period in the economy. It was a great period because I just had the luxury of time, and I had this opportunity to sit down and think, and not just to react. And what was wonderful about that period was I was this no-name, PhD candidate, wannabe investor, and as desperate as I was to find entrepreneurs who would take my check, There were entrepreneurs out there who really needed to get a check from someone, and so it was this great opportunity to allow me to take a bet on, uh, an entrepreneur and have them also equally take a bet on me, and, and so that period of time, I think, was a really great period because all the investors who were in it, they were, they were sort of inventing things along the way, But also, they had the chance to really make sure that this was the relationship that they wanted to be in with the entrepreneur at that time.

AI assessment note: “opportunity to sit down and think, and not just to react”