The Exchanges

Q What would you most like to see change in the venture ecosystem?

A Getting back to truly long-term thinking. I, one of the things that I've seen transform over the industry is from starting 15 years ago, is we used to, everyone kind of took for granted that it was going, you were company building, and that it would take A long time for these companies to be successful, and that you recognized you were starting a longer-term relationship, and I think that some of the, the trajectory of some of these amazing companies, which are truly outliers, that have had this, you know, up and to the right success, has forced all companies to be, you know, judged by that same curve, and that's not the way that, that all companies are built, and I think that it forces entrepreneurs to do, uh, and capital to do unnecessary things, like putting too much capital to risk too early on, Trying to expand too quickly until you figure out the fundamentals of your business. I really want people to start to think about things in terms of we're building a, you know, build businesses over 1015 plus years, and thinking about, you know, when to bring in capital once you de-risk key elements of the business versus just trying to look bigger and go faster.

AI assessment note: “Getting back to truly long-term thinking.”

Q In terms of the entrepreneurial drive there, as you, as you said about kind of the progression of your career through DFJ, you've seen thousands of entrepreneurs. Are there any kind of signs of a truly driven and ambitious entrepreneur and how motivated they are potentially in the, in the forthcoming business?

A Yeah, it's, it's hard because I think that they're all entrepreneurs. They have different backgrounds, they have different styles, and that's where I think some people make mistakes is You know, saying that they have to look a certain way or act a certain way or talk a certain way, and I think that, you know, as we discussed earlier, that's where you get to do some of that kind of lazy pattern matching that I think really misses the outsized opportunities. I kind of have two approaches to this, and one of the things that I've always said is I'm not just interested in the what, I'm interested in the why. I think that's really important to understand is why an entrepreneur is doing this. What you have to recognize is building a company, an early-stage company, is insanely risky. It is It's extremely challenging. You know, statistically, this is not something that a rational person wants to do. You, there are a lot of easier ways to go and make money or to have an impact without taking on the enormous personal and physical and toll on your relationships, on your mental wellbeing, everything. So people who are building a company, people who are really building opportunities for the longterm have something that is driving them that is beyond just A financial return. It's beyond just wanting to be famous. There has to be some core. You know, for Elon, that's getting to Mars. That's a…

AI assessment note: “I'm not just interested in the what, I'm interested in the why.”

Q In terms of the entrepreneurial drive there, as you, as you said about kind of the progression of your career through DFJ, you've seen thousands of entrepreneurs. Are there any kind of signs of a truly driven and ambitious entrepreneur and how motivated they are potentially in the, in the forthcoming business?

A Yeah, it's, it's hard because I think that they're all entrepreneurs. They have different backgrounds, they have different styles, and that's where I think some people make mistakes is You know, saying that they have to look a certain way or act a certain way or talk a certain way, and I think that, you know, as we discussed earlier, that's where you get to do some of that kind of lazy pattern matching that I think really misses the outsized opportunities. I kind of have two approaches to this, and one of the things that I've always said is I'm not just interested in the what, I'm interested in the why. I think that's really important to understand is why an entrepreneur is doing this. What you have to recognize is building a company, an early-stage company, is insanely risky. It is It's extremely challenging. You know, statistically, this is not something that a rational person wants to do. You, there are a lot of easier ways to go and make money or to have an impact without taking on the enormous personal and physical and toll on your relationships, on your mental wellbeing, everything. So people who are building a company, people who are really building opportunities for the longterm have something that is driving them that is beyond just A financial return. It's beyond just wanting to be famous. There has to be some core. You know, for Elon, that's getting to Mars. That's a…

AI assessment note: “I'm not just interested in the what, I'm interested in the why.”

Q What would you most like to see change in the venture ecosystem?

A Getting back to truly long-term thinking. I, one of the things that I've seen transform over the industry is from starting 15 years ago, is we used to, everyone kind of took for granted that it was going, you were company building, and that it would take A long time for these companies to be successful, and that you recognized you were starting a longer-term relationship, and I think that some of the, the trajectory of some of these amazing companies, which are truly outliers, that have had this, you know, up and to the right success, has forced all companies to be, you know, judged by that same curve, and that's not the way that, that all companies are built, and I think that it forces entrepreneurs to do, uh, and capital to do unnecessary things, like putting too much capital to risk too early on, Trying to expand too quickly until you figure out the fundamentals of your business. I really want people to start to think about things in terms of we're building a, you know, build businesses over 1015 plus years, and thinking about, you know, when to bring in capital once you de-risk key elements of the business versus just trying to look bigger and go faster.

AI assessment note: “Getting back to truly long-term thinking.”

Q Do you approach it with the mindset of the worst that can happen is it can go to zero, but the best is it can go to SpaceX, which is now eleven billion?

A Where I think people make mistakes is thinking that the worst you can go is always zero. That's always zero. Um, one of the things I get very frustrated with, particularly in early stage, the kinds of companies that we typically invest in, when someone says, oh, worst case, worse, so-and-so will buy this, or worst case, worse, this team is amazing, and someone will want to buy them. Uh, that's, that I think gets to be lazy thinking, right? Um, because you don't worry about, as you know, you know, you're just trying to cap your downside. What you really want to think through, it's not the downside scenarios, because we're investing early, and we're not writing large, large What we really need to understand and what we're evaluating new opportunities is how much could this be worth if everything goes right? Um, how do you really think about that true upside potential? How could you really gut and transform huge industries? And if that's where I think it allows you to do some of the exponential thinking and some of these really outsized kind of entrepreneurs and companies, and it's not obvious. Sometimes you start with small things. You know, you're not necessarily the SpaceX is a different one. You actually built the rocket because you had to build the rocket. Right. But there are other companies where you think of like box, just in terms of file sharing, there were some simple e…

AI assessment note: “what we're evaluating new opportunities is how much could this be worth if everything goes right”

Q And we hear a lot today about diversity in the industry and the lack of diversity in the industry. Is, is then kind of investing with pattern recognition at the forefront not a complete paradox, really, to diversity? Because if you are ingrained in, in pattern recognition, you would be much more inclined to young males who graduated from Stanford with CS degrees. Would you agree with that?

A Yeah, no, I think it's funny. When I, When I first started in 2000, it was, so the patterns always, the patterns have changed. So I want to take away what the pattern recognition is versus what is popular at that moment. There are fads. And where you get into a lot of trouble is where you conflate a fad with pattern recognition. So in 2000, what was extremely popular was like the eBay model. You take a young, thoughtful entrepreneur who's building some really interesting company, and then you go and get someone out of interesty. You go and get someone like a Meg Whitman, or someone who's run a big business, and you bring them in a CEO, and that's how you do success, right? And we saw a number of companies that tried that model. Some succeeded. A number of them failed. And then there was a period, which was, it was what I call the, the Google, you know, copycats, which is, you really want PhD students. You really want people who are dropouts out of top PhD programs in CS. Those are the ones that are going to build great companies. And now you're doing the, the Facebook You want the dropout who has to be even younger cause they're, or Snapchat even younger cause they're going to see it. What I know for sure is that whatever the next big business is that is going to be built, it doesn't necessarily mean that it's going to look like the last, you know, big company that's these five…

AI assessment note: “where you get into a lot of trouble is where you conflate a fad with pattern recognition”

Q Do you approach it with the mindset of the worst that can happen is it can go to zero, but the best is it can go to SpaceX, which is now eleven billion?

A Where I think people make mistakes is thinking that the worst you can go is always zero. That's always zero. Um, one of the things I get very frustrated with, particularly in early stage, the kinds of companies that we typically invest in, when someone says, oh, worst case, worse, so-and-so will buy this, or worst case, worse, this team is amazing, and someone will want to buy them. Uh, that's, that I think gets to be lazy thinking, right? Um, because you don't worry about, as you know, you know, you're just trying to cap your downside. What you really want to think through, it's not the downside scenarios, because we're investing early, and we're not writing large, large What we really need to understand and what we're evaluating new opportunities is how much could this be worth if everything goes right? Um, how do you really think about that true upside potential? How could you really gut and transform huge industries? And if that's where I think it allows you to do some of the exponential thinking and some of these really outsized kind of entrepreneurs and companies, and it's not obvious. Sometimes you start with small things. You know, you're not necessarily the SpaceX is a different one. You actually built the rocket because you had to build the rocket. Right. But there are other companies where you think of like box, just in terms of file sharing, there were some simple e…

AI assessment note: “What we really need to understand and what we're evaluating new opportunities is how much”

Q So if we switch sides of the table now as to why they're doing it, I'm intrigued because we've seen over the past few years, the kind of celebritization of VCs and the building of these massive personal VC brands. So in terms of the motivations behind that, why do you think we've seen this rise and how do you view it yourself as an industry insider?

A We talked about this. I'm, uh, I I'm doing the, I don't do a lot of press, which is, I don't know if that's good or bad, uh, but one of the, the things I have found a little bit disturbing is this rise of kind of the, the celebrity investors or all of this need to do personal branding, particularly for venture capitalists early on in their career, because I think what really demonstrates if we're, we're good is that our companies do well and that our entrepreneurs think highly of us. And, you know, the, the challenges is that can take a really, really, really long time, and most people aren't patient enough or don't want to wait that long. They want to be taken seriously or get all the credit early on in their career. I appreciate and understand that entrepreneurs have more and more options available to them. They're not just in terms of the amount of capital that's in the market, but the different stages of capital that is in the market. You have a lot of people who are becoming angels. Being an angel is suddenly cool. Like, everyone wants to invest in startup companies. You have a lot of Seed investors. Then you have all these different pools of capital, some of them that are more specialized, like the firm that I'm part of is DFJ Venture. We do early stage invest. We're very hands-on investors, but you have a lot of other investors that say they do that kind of investing as …

AI assessment note: “one of the, the things I have found a little bit disturbing is this rise”

Q Do you find, do you find they are fully transparent with you at that point?

A If they aren't, that is probably not a good fit. So that's, that's one of the other kind of things that I do to assess the kinds of people that I want, I want to work with. If people are holding things really close to the vest, If there's been some training with entrepreneurs the last couple of years, it's like VCs are the enemy, and you only want to, it's on a need-to-know basis, and the problem is, is when everything goes well, that may or may not work, right? You may be able to actually just kind of keep them to the sidelines and not give them information, but if things go badly, if you actually need to do, you know, an inside round, if you're going to need help closing key candidates, all of the things where we can be useful, the more information that you give, the better suited we are to actually help you. So I found that that's actually, you know, one of the indications of an entrepreneur that I, that I tend to work with well is where they're transparent and also where they're open to learning from their mistakes and, you know, talking through them and saying, here's, it's, I just don't want to know when you're pitching me everything that's gone well. That's great. Tell me everything that's gone wrong and what you've learned from that and how you changed, because that's going to be, that's, I think, a more important indicator of long-term success than just getting all the…

AI assessment note: “If they aren't, that is probably not a good fit.”

Q Do you have a framework for it now?

A I had tried. I tried, I tried custom letters. I tried like, um, but I really found that every single company is unique and every entrepreneur and the way that they're thinking about it is unique. And some of them, it's just easier nose. Some of them, the most challenging ones are where, you know, it's not going to be a good fit for your firm or your partners aren't enthusiastic. But you really want to see the company be successful, and in those instances where I'm really trying, it's not just saying no, or it's not like I figured out why you're going to fail. It's like, it's everything's on the margin, and here's why I can't quite get there, but let me see if I can be helpful to you. Here are the kinds of investors that I think would be good for you. So it's time-consuming, and I'm not perfect on it by any means, but one of the things that I view as a key success is when I've passed on a company, and that entrepreneur comes back to me for advice. In terms of who they're actually are considering raising around from, or how they're thinking about, you know, the next steps of the business, because that is that, that's that opportunity to, to still be helpful to them, because there are a number of these companies that I want to see succeed. They just don't necessarily fit within the framework of the DFJ portfolio.

AI assessment note: “I really found that every single company is unique and every entrepreneur”

Q So if we switch sides of the table now as to why they're doing it, I'm intrigued because we've seen over the past few years, the kind of celebritization of VCs and the building of these massive personal VC brands. So in terms of the motivations behind that, why do you think we've seen this rise and how do you view it yourself as an industry insider?

A We talked about this. I'm, uh, I I'm doing the, I don't do a lot of press, which is, I don't know if that's good or bad, uh, but one of the, the things I have found a little bit disturbing is this rise of kind of the, the celebrity investors or all of this need to do personal branding, particularly for venture capitalists early on in their career, because I think what really demonstrates if we're, we're good is that our companies do well and that our entrepreneurs think highly of us. And, you know, the, the challenges is that can take a really, really, really long time, and most people aren't patient enough or don't want to wait that long. They want to be taken seriously or get all the credit early on in their career. I appreciate and understand that entrepreneurs have more and more options available to them. They're not just in terms of the amount of capital that's in the market, but the different stages of capital that is in the market. You have a lot of people who are becoming angels. Being an angel is suddenly cool. Like, everyone wants to invest in startup companies. You have a lot of Seed investors. Then you have all these different pools of capital, some of them that are more specialized, like the firm that I'm part of is DFJ Venture. We do early stage invest. We're very hands-on investors, but you have a lot of other investors that say they do that kind of investing as …

AI assessment note: “They want to be taken seriously or get all the credit early on in their career.”

Q What questions do you think they should ask then of the VC? Is it a time allowance? Is it a kind of character fit? What should the founders ask for in terms of requirements from their VC, do you think?

A I think the best way for an entrepreneur to assess that is to actually talk to other investments that the VC is working with. Everyone, everyone's in sell mode. It's why you don't want to get married to someone without dating them for a long time. Right. Those first couple of dates can be great. They're, they're, they're happy. They're, you know, showing up with chicken noodle soup when you're sick. Um, what is it two, three, four years down the road? Like, how are you still treating each other? I am trying to think. I don't think I've done a recent investment where my entrepreneurs have not done due diligence. And that's what, if someone doesn't really push you to do due diligence, if someone wants to talk about what they're going to do versus saying, you Instead of hearing it from me, talk to any of my CEOs. I'll make introductions, but honestly, reach out to any of them. You don't have to have it come through me. That's the way that you can tell. You can tell if, you know, if the entrepreneurs aren't responding immediately, you'll get a sense of how that relationship works. One of my, my entrepreneurs calls me or emails me. They're hearing from me as soon as I possibly can. And if someone asks to talk about me from one of my entrepreneurs, you'll get a response very quickly because they appreciate that I give them that turnaround. So I think there's a lot of ways of being ab…

AI assessment note: “the best way for an entrepreneur to assess that is to actually talk to other investments”

Q Do you have a framework for it now?

A I had tried. I tried, I tried custom letters. I tried like, um, but I really found that every single company is unique and every entrepreneur and the way that they're thinking about it is unique. And some of them, it's just easier nose. Some of them, the most challenging ones are where, you know, it's not going to be a good fit for your firm or your partners aren't enthusiastic. But you really want to see the company be successful, and in those instances where I'm really trying, it's not just saying no, or it's not like I figured out why you're going to fail. It's like, it's everything's on the margin, and here's why I can't quite get there, but let me see if I can be helpful to you. Here are the kinds of investors that I think would be good for you. So it's time-consuming, and I'm not perfect on it by any means, but one of the things that I view as a key success is when I've passed on a company, and that entrepreneur comes back to me for advice. In terms of who they're actually are considering raising around from, or how they're thinking about, you know, the next steps of the business, because that is that, that's that opportunity to, to still be helpful to them, because there are a number of these companies that I want to see succeed. They just don't necessarily fit within the framework of the DFJ portfolio.

AI assessment note: “I really found that every single company is unique and every entrepreneur... is unique.”

Q What questions do you think they should ask then of the VC? Is it a time allowance? Is it a kind of character fit? What should the founders ask for in terms of requirements from their VC, do you think?

A I think the best way for an entrepreneur to assess that is to actually talk to other investments that the VC is working with. Everyone, everyone's in sell mode. It's why you don't want to get married to someone without dating them for a long time. Right. Those first couple of dates can be great. They're, they're, they're happy. They're, you know, showing up with chicken noodle soup when you're sick. Um, what is it two, three, four years down the road? Like, how are you still treating each other? I am trying to think. I don't think I've done a recent investment where my entrepreneurs have not done due diligence. And that's what, if someone doesn't really push you to do due diligence, if someone wants to talk about what they're going to do versus saying, you Instead of hearing it from me, talk to any of my CEOs. I'll make introductions, but honestly, reach out to any of them. You don't have to have it come through me. That's the way that you can tell. You can tell if, you know, if the entrepreneurs aren't responding immediately, you'll get a sense of how that relationship works. One of my, my entrepreneurs calls me or emails me. They're hearing from me as soon as I possibly can. And if someone asks to talk about me from one of my entrepreneurs, you'll get a response very quickly because they appreciate that I give them that turnaround. So I think there's a lot of ways of being ab…

AI assessment note: “talk to other investments that the VC is working with”

Q And we hear a lot today about diversity in the industry and the lack of diversity in the industry. Is, is then kind of investing with pattern recognition at the forefront not a complete paradox, really, to diversity? Because if you are ingrained in, in pattern recognition, you would be much more inclined to young males who graduated from Stanford with CS degrees. Would you agree with that?

A Yeah, no, I think it's funny. When I, When I first started in 2000, it was, so the patterns always, the patterns have changed. So I want to take away what the pattern recognition is versus what is popular at that moment. There are fads. And where you get into a lot of trouble is where you conflate a fad with pattern recognition. So in 2000, what was extremely popular was like the eBay model. You take a young, thoughtful entrepreneur who's building some really interesting company, and then you go and get someone out of interesty. You go and get someone like a Meg Whitman, or someone who's run a big business, and you bring them in a CEO, and that's how you do success, right? And we saw a number of companies that tried that model. Some succeeded. A number of them failed. And then there was a period, which was, it was what I call the, the Google, you know, copycats, which is, you really want PhD students. You really want people who are dropouts out of top PhD programs in CS. Those are the ones that are going to build great companies. And now you're doing the, the Facebook You want the dropout who has to be even younger cause they're, or Snapchat even younger cause they're going to see it. What I know for sure is that whatever the next big business is that is going to be built, it doesn't necessarily mean that it's going to look like the last, you know, big company that's these five…

AI assessment note: “I would love nothing more than for one of these seismic shift companies to be built”

Q Do you find, do you find they are fully transparent with you at that point?

A If they aren't, that is probably not a good fit. So that's, that's one of the other kind of things that I do to assess the kinds of people that I want, I want to work with. If people are holding things really close to the vest, If there's been some training with entrepreneurs the last couple of years, it's like VCs are the enemy, and you only want to, it's on a need-to-know basis, and the problem is, is when everything goes well, that may or may not work, right? You may be able to actually just kind of keep them to the sidelines and not give them information, but if things go badly, if you actually need to do, you know, an inside round, if you're going to need help closing key candidates, all of the things where we can be useful, the more information that you give, the better suited we are to actually help you. So I found that that's actually, you know, one of the indications of an entrepreneur that I, that I tend to work with well is where they're transparent and also where they're open to learning from their mistakes and, you know, talking through them and saying, here's, it's, I just don't want to know when you're pitching me everything that's gone well. That's great. Tell me everything that's gone wrong and what you've learned from that and how you changed, because that's going to be, that's, I think, a more important indicator of long-term success than just getting all the…

AI assessment note: “If they aren't, that is probably not a good fit.”

Q Absolutely. Talking about kind of pattern matching there, and we always hear it's pattern recognition that makes the great VCs. Was there, how long do you think that took For you to really establish that kind of foundational pattern recognition element from seeing so many founders. Was there a point where you clearly saw the patterns?

A I, I'm actually mixed on this one. Cause I think there are, there's some things that are useful in the pattern. And then there's some things that you don't necessarily want to be making investment decisions based purely off of patterns. And my partners will tell you, and I get very frustrated when people use analogies. Um, it's simplistic thinking, right? It's the Uber for X. We, we got to hear that for two years, right? Um, no wonderful business, no substantial business was built because it was an analogy off of something else. And so one of the things that are, we, I really believe in, you can hear Elon Musk talks about this pretty frequently is always going back to first principles, right? What, like rethinking of an industry, what, why now, why is this particular opportunity with this particular team at this particular time going to be interesting, right? And Google is one of the clearest ones. We, DFJ had already made three investments in search companies prior to Google even being funded. One of those was GoTo, which ended up was Overture, which was acquired by Yahoo, which was, at the time, viewed as an amazing success. It was a couple billion dollar outcome, and yet search had just begun, and we didn't see that, and I think a lot of firms didn't see that, and it was what specifically about this team going after this particular opportunity is going to be different. So I,…

AI assessment note: “you don't necessarily want to be making investment decisions based purely off of patterns.”

Q Absolutely. Talking about kind of pattern matching there, and we always hear it's pattern recognition that makes the great VCs. Was there, how long do you think that took For you to really establish that kind of foundational pattern recognition element from seeing so many founders. Was there a point where you clearly saw the patterns?

A I, I'm actually mixed on this one. Cause I think there are, there's some things that are useful in the pattern. And then there's some things that you don't necessarily want to be making investment decisions based purely off of patterns. And my partners will tell you, and I get very frustrated when people use analogies. Um, it's simplistic thinking, right? It's the Uber for X. We, we got to hear that for two years, right? Um, no wonderful business, no substantial business was built because it was an analogy off of something else. And so one of the things that are, we, I really believe in, you can hear Elon Musk talks about this pretty frequently is always going back to first principles, right? What, like rethinking of an industry, what, why now, why is this particular opportunity with this particular team at this particular time going to be interesting, right? And Google is one of the clearest ones. We, DFJ had already made three investments in search companies prior to Google even being funded. One of those was GoTo, which ended up was Overture, which was acquired by Yahoo, which was, at the time, viewed as an amazing success. It was a couple billion dollar outcome, and yet search had just begun, and we didn't see that, and I think a lot of firms didn't see that, and it was what specifically about this team going after this particular opportunity is going to be different. So I,…

AI assessment note: “I'm actually mixed on this one. Cause I think there are, there's some things”