The Exchanges

Q terms of that willingness to help, but I do want to move on and discuss your thesis today with Drive in the very exciting times ahead and discuss maybe three specific elements, because first maybe where you invest, the geography itself, then dive into how you invest, kind of discussing that investor psychology, and then finish on maybe some themes and verticals you're excited by. How does that sound, Chris?

A Yeah, sure. So to tie back one last story on Sequoia was in that exact same first partner meeting where I was incredibly intimidated. There was also something that remarkable that happened in that meeting, and that was that there was a company on the agenda that was based in Petaluma, and the partnership decided not to invest in that company because it was too far away from Silicon Valley. Now, Petaluma is about 10 miles north of San Francisco. It's, it's not like it's a far away place at all, but the theory of the firm and the investment practice of the firm was rooted in investing in a bicycle ride of the office because when you're investing in technology technology, Through these companies that were in the nineties, early 2000, what you were really investing in was groups of people that were highly specialized and really only located in one corner of the world in large quantities to build these next generation technology companies. Well, fast forward a few years and the advent of cloud computing really led us down a path where suddenly these infrastructure level engineering, a lot of those tasks were suddenly being commoditized. And the value flipped from being invested in where those few engineers were. It really flipped from being in technology to the enablement of technology as it kind of sneaked into every single business on planet earth. And you see it today where, you …

AI assessment note: “Yeah, sure. So to tie back one last story on Sequoia”

Q Now, I absolutely love that as a story. It resembles mine in many ways. The question I always get, and not in the schedule, so I'm sorry for this, But it's what made you so intrinsically excited about VC from the start, kind of pre-entering the workforce?

A When I was in high school, I had a disagreement with my father. My father wanted me to be a doctor. I didn't want to be a doctor. And so I decided I had to teach myself about business. And the best way I could do that was starting to read the newspaper. The very first newspaper I got was an edition of the Wall Street Journal. It was in print still at the time. And the very first article I read in that newspaper that day was Was about this firm in California that was sending back a hundred million dollars to the University of Michigan because they needed to disclose who it was they were investors in. And this was, if you know your VC history, this was the story of Sequoia sending back a hundred million dollars to the state of Michigan because through the University of Michigan, because they ended up having to disclose things through FOIA requests. And Sequoia at the time made the decision to no longer accept public funds. And because of this disclosure, they wanted to protect the stealthiness of their businesses. And I didn't know anything about VC. I certainly didn't know anything about FOIA. Um, but I knew that if you could send back a hundred million dollars and not miss it, that had to be a good business. Even I could figure it out. And that kind of tipped me for this whole world. And then from that tip, I just got my hands on everything. I met with everyone I possibly could…

AI assessment note: “if you could send back a hundred million dollars and not miss it, that had to be a good business”

Q What did they see that made them convert, do you think?

A Well, I think what we would do in the beginning is, you know, we didn't have an office. We just had a, uh, we had a suburban and a laptop, and that was really it. What we would do is we would drive the LPs around to what we thought were some of the most interesting startup companies that were here. And, you know, we would take them to go see guys like, uh, there's a guy here called Sean Lane. And Sean is the founder of a company in Columbus called Crosschecks that he moved here from Baltimore. And, you know, Sean would talk to them about This is a guy who came from the NSA, learned all about technology, and then started a healthcare technology company, artificial intelligence company, and said, where in the world can I put this that would give me the best advantage? And he picked Columbus because it had a great density of healthcare. It had a access to an engineering pool that he could afford, and that it simultaneously put him in a place where he felt like he could get those early customer wins, that early customer adoption. So when we would take LPs around, and they would meet folks like Sean or Or some of the other entrepreneurs, what they would see is this is no different than having a lineup of meetings in California. So if the founders are here and these raw ingredients are here, then this should be a great place to invest. And the raw ingredients of talent and engineers,…

AI assessment note: “what they would see is this is no different than having a lineup of meetings”

Q What did they see that made them convert, do you think?

A Well, I think what we would do in the beginning is, you know, we didn't have an office. We just had a, uh, we had a suburban and a laptop, and that was really it. What we would do is we would drive the LPs around to what we thought were some of the most interesting startup companies that were here. And, you know, we would take them to go see guys like, uh, there's a guy here called Sean Lane. And Sean is the founder of a company in Columbus called Crosschecks that he moved here from Baltimore. And, you know, Sean would talk to them about This is a guy who came from the NSA, learned all about technology, and then started a healthcare technology company, artificial intelligence company, and said, where in the world can I put this that would give me the best advantage? And he picked Columbus because it had a great density of healthcare. It had a access to an engineering pool that he could afford, and that it simultaneously put him in a place where he felt like he could get those early customer wins, that early customer adoption. So when we would take LPs around, and they would meet folks like Sean or Or some of the other entrepreneurs, what they would see is this is no different than having a lineup of meetings in California. So if the founders are here and these raw ingredients are here, then this should be a great place to invest. And the raw ingredients of talent and engineers,…

AI assessment note: “what they would see is this is no different than having a lineup of meetings”

Q Now, I absolutely love that as a story. It resembles mine in many ways. The question I always get, and not in the schedule, so I'm sorry for this, But it's what made you so intrinsically excited about VC from the start, kind of pre-entering the workforce?

A When I was in high school, I had a disagreement with my father. My father wanted me to be a doctor. I didn't want to be a doctor. And so I decided I had to teach myself about business. And the best way I could do that was starting to read the newspaper. The very first newspaper I got was an edition of the Wall Street Journal. It was in print still at the time. And the very first article I read in that newspaper that day was Was about this firm in California that was sending back a hundred million dollars to the University of Michigan because they needed to disclose who it was they were investors in. And this was, if you know your VC history, this was the story of Sequoia sending back a hundred million dollars to the state of Michigan because through the University of Michigan, because they ended up having to disclose things through FOIA requests. And Sequoia at the time made the decision to no longer accept public funds. And because of this disclosure, they wanted to protect the stealthiness of their businesses. And I didn't know anything about VC. I certainly didn't know anything about FOIA. Um, but I knew that if you could send back a hundred million dollars and not miss it, that had to be a good business. Even I could figure it out. And that kind of tipped me for this whole world. And then from that tip, I just got my hands on everything. I met with everyone I possibly could…

AI assessment note: “if you could send back a hundred million dollars and not miss it, that had to be a good business”

Q I ask, if you look there and you kind of go back to kind of one-on-one economics, you've got this excess supply of startups and this drought of capital, so to speak, going into them. What does that do in terms of valuations, and how do you think about price sensitivity being in this kind of inherently less competitive market to the 10 term sheets per deal of Silicon Valley?

A So when we first got here, there was a, another VC who turned to me and said, you guys are going to love it. It's great. I love investing here. You get to invest in B plus companies at half off prices. And I was kind of like, that's not what I'm going to invest in. And you know, my attitude and our attitude here at drive is I'm going to pay the market price for A plus companies because the B plus companies, they hardly ever get acquired and they certainly never go public. It's the A plus companies that the valuations you pay should look on a relative basis, like They were incredibly cheap, no matter where they're based. So, you know, it's interesting. Even though there are fewer VCs here, the very best companies are getting priced at a very similar level to those in Silicon Valley. You know, it's harder to get those rounds closed, but when those rounds are closing, you know, they're closing at very attractive valuations for the businesses.

AI assessment note: “the very best companies are getting priced at a very similar level”

Q My word, Chris. We do have similarities in our approaches. You mentioned Sequoia there, a firm that you later ended up working with. I'd love to hear maybe the big lessons for you and takeaways from that experience working with truly one of the world-renowned leading firms. Maybe what were those takeaways for you?

A Well, I'll never forget my first partner meeting at Sequoia. My very first reaction was, oh my gosh, I've made a huge mistake. I should have gone to business school. I'm completely out of time. These guys are some of the smartest people I've ever run across, and now there's a whole room of them, and I'm afraid to even talk, but what I learned very quickly was that the partnership at Sequoia is unique because almost everybody there is the story of an entrepreneur and many times an immigrant founder who came to America to start their company, and they are a bizarrely approachable group of people who really value young people who are willing to work Incredibly hard. And I was a beneficiary of that part of it was being the right place in the right time, but the lessons from having the experiences of working with some of the very best companies that Sequoia has been able to work with was one of those once in a lifetime experiences that went on for six years for me and learned very much about all the fundamentals of what it takes to be a great founder of what it takes to be a great board member, what it takes to actually generate returns for, for limited partners. And I don't think there's any place you could learn that other than in the workforce itself that you really, they believe you have to learn by doing it's, it's an apprenticeship model. And so that meant that there's no book…

AI assessment note: “learned very much about all the fundamentals of what it takes to be a great founder”

Q My word, Chris. We do have similarities in our approaches. You mentioned Sequoia there, a firm that you later ended up working with. I'd love to hear maybe the big lessons for you and takeaways from that experience working with truly one of the world-renowned leading firms. Maybe what were those takeaways for you?

A Well, I'll never forget my first partner meeting at Sequoia. My very first reaction was, oh my gosh, I've made a huge mistake. I should have gone to business school. I'm completely out of time. These guys are some of the smartest people I've ever run across, and now there's a whole room of them, and I'm afraid to even talk, but what I learned very quickly was that the partnership at Sequoia is unique because almost everybody there is the story of an entrepreneur and many times an immigrant founder who came to America to start their company, and they are a bizarrely approachable group of people who really value young people who are willing to work Incredibly hard. And I was a beneficiary of that part of it was being the right place in the right time, but the lessons from having the experiences of working with some of the very best companies that Sequoia has been able to work with was one of those once in a lifetime experiences that went on for six years for me and learned very much about all the fundamentals of what it takes to be a great founder of what it takes to be a great board member, what it takes to actually generate returns for, for limited partners. And I don't think there's any place you could learn that other than in the workforce itself that you really, they believe you have to learn by doing it's, it's an apprenticeship model. And so that meant that there's no book…

AI assessment note: “learned very much about all the fundamentals of what it takes to be a great founder”

Q I'm super nerdy on, on one element of kind of the picking stage, which is the secondary picking stage, the reserve allocation. How do you think about that? And the thesis around reserves with Drive today, is it a one-to-one? Is it a stack ranked quarterly and kind of allocating according to kind of achievement? How do you think about that?

A Well, there, there is a big difference here from Silicon Valley in that, you know, if you're a founder in Silicon Valley and Sequoia does your A round, you're pretty much guaranteed you're going to get your B round done. There are, there are venture firms that have gone out and built strategies and raised funds that say, look, I'm only going to invest in the B rounds. Of these top five firms, and they put those in their prospectus, and the LPs are excited about that. You know, the difference here is that we don't have that yet. Those follow-on investors don't yet exist who are saying, I'm just going to invest in drives companies. So we're aware of that, and so we do end up reserving more heavily for our early-stage investments than you would typically in California, but that doesn't mean that all of our companies get those Follow on reserves just because we've invested in the A. And so we've had to spend a lot of time making sure that we could keep our, our heads about us and be rational about when companies are working and make sure that we're piling in those reserves versus when we're in a situation where, you know, it hasn't quite worked out and we need to use the reserves for, for other companies.

AI assessment note: “doesn't mean that all of our companies get those Follow on reserves”

Q terms of that willingness to help, but I do want to move on and discuss your thesis today with Drive in the very exciting times ahead and discuss maybe three specific elements, because first maybe where you invest, the geography itself, then dive into how you invest, kind of discussing that investor psychology, and then finish on maybe some themes and verticals you're excited by. How does that sound, Chris?

A Yeah, sure. So to tie back one last story on Sequoia was in that exact same first partner meeting where I was incredibly intimidated. There was also something that remarkable that happened in that meeting, and that was that there was a company on the agenda that was based in Petaluma, and the partnership decided not to invest in that company because it was too far away from Silicon Valley. Now, Petaluma is about 10 miles north of San Francisco. It's, it's not like it's a far away place at all, but the theory of the firm and the investment practice of the firm was rooted in investing in a bicycle ride of the office because when you're investing in technology technology, Through these companies that were in the nineties, early 2000, what you were really investing in was groups of people that were highly specialized and really only located in one corner of the world in large quantities to build these next generation technology companies. Well, fast forward a few years and the advent of cloud computing really led us down a path where suddenly these infrastructure level engineering, a lot of those tasks were suddenly being commoditized. And the value flipped from being invested in where those few engineers were. It really flipped from being in technology to the enablement of technology as it kind of sneaked into every single business on planet earth. And you see it today where, you …

AI assessment note: “the theory of the firm and the investment practice of the firm was rooted”

Q I ask, if you look there and you kind of go back to kind of one-on-one economics, you've got this excess supply of startups and this drought of capital, so to speak, going into them. What does that do in terms of valuations, and how do you think about price sensitivity being in this kind of inherently less competitive market to the 10 term sheets per deal of Silicon Valley?

A So when we first got here, there was a, another VC who turned to me and said, you guys are going to love it. It's great. I love investing here. You get to invest in B plus companies at half off prices. And I was kind of like, that's not what I'm going to invest in. And you know, my attitude and our attitude here at drive is I'm going to pay the market price for A plus companies because the B plus companies, they hardly ever get acquired and they certainly never go public. It's the A plus companies that the valuations you pay should look on a relative basis, like They were incredibly cheap, no matter where they're based. So, you know, it's interesting. Even though there are fewer VCs here, the very best companies are getting priced at a very similar level to those in Silicon Valley. You know, it's harder to get those rounds closed, but when those rounds are closing, you know, they're closing at very attractive valuations for the businesses.

AI assessment note: “the very best companies are getting priced at a very similar level to those in Silicon Valley”

Q I'm super nerdy on, on one element of kind of the picking stage, which is the secondary picking stage, the reserve allocation. How do you think about that? And the thesis around reserves with Drive today, is it a one-to-one? Is it a stack ranked quarterly and kind of allocating according to kind of achievement? How do you think about that?

A Well, there, there is a big difference here from Silicon Valley in that, you know, if you're a founder in Silicon Valley and Sequoia does your A round, you're pretty much guaranteed you're going to get your B round done. There are, there are venture firms that have gone out and built strategies and raised funds that say, look, I'm only going to invest in the B rounds. Of these top five firms, and they put those in their prospectus, and the LPs are excited about that. You know, the difference here is that we don't have that yet. Those follow-on investors don't yet exist who are saying, I'm just going to invest in drives companies. So we're aware of that, and so we do end up reserving more heavily for our early-stage investments than you would typically in California, but that doesn't mean that all of our companies get those Follow on reserves just because we've invested in the A. And so we've had to spend a lot of time making sure that we could keep our, our heads about us and be rational about when companies are working and make sure that we're piling in those reserves versus when we're in a situation where, you know, it hasn't quite worked out and we need to use the reserves for, for other companies.

AI assessment note: “we do end up reserving more heavily... rational about when companies are working”

Q Before we dive into the quickfire, I do want to stay on this theme and go, what do you kind of depict This is the next 10 years for decentralization of VC and entrepreneurship, so to speak. How does that look to you?

A So I think we're in the very beginning. I think we're in the first or second inning here of what is a massive trend across the globe. It's not just in the Midwest. You see this in China and India and other places, too. But I think that what we're seeing here is that fundamentally, harnessing technology with domain knowledge lends itself towards very, very strong products and services that For end customers, and I'll give you an example. So we're investing a lot right now into the robotics space. Well, if you look at who the customers are of those robotics, they're mostly small time manufacturers or mid-scale manufacturers, and a lot of those folks are located outside of the coastal areas and in the middle of America. We've seen companies now that are taking advantage of Moore's Law, dropping the hardware costs, putting software on top of it that makes these Robotic hardware is super, super accessible, and now you can go in and you can start to automate different pieces of production such that humans can spend their time doing the more complicated tasks, but the stuff that people are doing today with next generation robots, it's basic stuff. I mean, it's just put the piece of metal in the machine, have it stamped, have it come out, and then move it to the other side. As you start to look at how much more complicated and how much more sophisticated

AI assessment note: “I think we're in the first or second inning here of what is a massive trend”

Q Before we dive into the quickfire, I do want to stay on this theme and go, what do you kind of depict This is the next 10 years for decentralization of VC and entrepreneurship, so to speak. How does that look to you?

A So I think we're in the very beginning. I think we're in the first or second inning here of what is a massive trend across the globe. It's not just in the Midwest. You see this in China and India and other places, too. But I think that what we're seeing here is that fundamentally, harnessing technology with domain knowledge lends itself towards very, very strong products and services that For end customers, and I'll give you an example. So we're investing a lot right now into the robotics space. Well, if you look at who the customers are of those robotics, they're mostly small time manufacturers or mid-scale manufacturers, and a lot of those folks are located outside of the coastal areas and in the middle of America. We've seen companies now that are taking advantage of Moore's Law, dropping the hardware costs, putting software on top of it that makes these Robotic hardware is super, super accessible, and now you can go in and you can start to automate different pieces of production such that humans can spend their time doing the more complicated tasks, but the stuff that people are doing today with next generation robots, it's basic stuff. I mean, it's just put the piece of metal in the machine, have it stamped, have it come out, and then move it to the other side. As you start to look at how much more complicated and how much more sophisticated

AI assessment note: “we're investing a lot right now into the robotics space.”