The Exchanges

Q with you in terms of like the selection and the importance of it. Can I ask one final thing on Ben before we move to a pre and a post-mortem, which is like, obviously people and leaders transition and change over time a lot. When you look at the evolution of Ben as a leader, What were the biggest changes in Banner as a leader over time, do you think?

A He was a really young guy when we invested in the company. I don't even think he's 40 now, so he wasn't 30 then, and so it's been amazing. He's not the first person I've seen grow from a twenty-something to the CEO of a multi-billion dollar company. I saw Jeremy Stoppeman do it at Yelp, and I saw Toby Lutke do it at Shopify. It's perhaps the coolest thing to watch, and that I think people's true personalities come through more and more As they grow in stature and confidence, and Ben continues to be himself. He's such a pleasure to work with and interact with. He remains super humble, super focused on building Pinterest to be the business that he wants it to be, and so I actually think he's sort of stayed the same more than anything else. Now, he's had to learn to do a whole bunch of things that he didn't need to do when he was leading a six-person company in a crappy Palo Alto apartment, but I think the business wouldn't obviously be what it is without him, and I think his super strengths are His ability to innovate and come up with product that consumers love to interact with. And I hope, and I believe he'll continue to do that for many years to come. As the business gets larger, there's a thousand other things to worry about. And so obviously one of the critical things is then being able to recruit, attract, and retain really talented people to cover those things too. And he'…

AI assessment note: “I actually think he's sort of stayed the same more than anything else.”

Q Yeah, no, I totally agree in terms of, especially kind of the market and just appreciating how large it is. When you were also making the investment, you know, the landscape itself is important to address. How did you think about the competitive landscape at the time, and how did that factor into your thinking?

A Yeah, so we'll touch on the competitive landscape, and then there's one other really important topic I want to come to, which is just sort of the team and their backgrounds relative to what was happening back in On the competitive landscape, there were two other companies that we spent a lot of time looking at. One was called Supply, and it was spelled S-V-P-P-L-Y, and the other one was called The Fancy. And they had similar concepts, the idea that you could catalog a bunch of stuff that you saw online by saving it to a board of some sort or another. And when we first invested, we and the founders tracked Pinterest progress against those two other companies. But I think within eight or nine months, they just stopped tracking those companies. Pinterest had grown so much more quickly and had far surpassed those other offerings, and when you ask why, I think so much of it is super subtle. The difference is, if you look at the three companies from 50,000 feet, aren't that significant. The concepts were really similar, but it goes to show the importance of extraordinary attention to detail on all the subtleties to make what could be just a good user experience into a phenomenal user experience. And hats off to the Pinterest team. They just got that right with obsessive focus on making sure those details really worked for consumers.

AI assessment note: “there were two other companies that we spent a lot of time looking at”

Q Got you. Ok, so that's on the upside. On the flip side, you know, it's always important to see like a pre-mortem. What were your thoughts around the core reasons why it might not work?

A So one, it was tiny, and so with a media business, it's a little bit like a birthing process to get to the stage of monetization, and it's sort of like a venture capital cliche, which is grow, grow, grow, don't worry about making any money. And while that sounds good or scary, depending on your perspective, For a media business, it's completely out of necessity, because if you go to an advertiser, even with a silver platter asking to take their ad dollars to advertise against your audience of a 100,000 users, you'll get laughed out of the room. No advertiser in his right mind is going to spend the time to understand your media platform to reach a 100,000 users. And critical mass in the U.S. is probably around between five and ten million users. You need to get there before you can get the first dollar of advertising revenue. So the first big question mark is, can you get to Five or ten million users. Well, when you're at a 100,000, that means you have to grow your business 50 to a hundred times before you can make the first penny of revenue. In hindsight, after you get there, it doesn't seem so bad, but looking ahead at that challenge, it's incredibly daunting. And so the first thing you have to assume is you're just not going to get there, and therefore you can't monetize, and therefore you'll have no revenue, and therefore you have no business. And the chance of that for any …

AI assessment note: “So one, it was tiny... first big question mark is, can you get to Five”

Q especially on kind of the .one and .two is again compounding, You know, if we think about kind of that usage growth as one element, the other element is, as we both know, kind of the dangers that come with leaky funnels. On the retention side, what gave you the confidence that we had an incredibly retentive, sticky audience in the earlier days when you made the investment in Pinterest?

A I mean, the numbers were small, but you could see it in the numbers. The consumers just loved the service and kept coming back. I think there was a chart in the initial pitch deck they shared, which was, it was a distribution. So this is before the days of people being obsessively smart about cohorts and how to think about cohorts. But they showed a chart that showed the number of users who've visited once in a month, the number of users who visited twice in a month, three times a month, and so forth. And it was a series of bars. And then there was one on the far right, which was like 20 plus times a month. And the 20 plus times a month bar, I think, was as high as any of the others. Would show that, like, some people just love this product and kept coming back to it. And I think the other mistake I think people make in evaluating internet products is that everyone thinks of Facebook these days as the gold standard. And Facebook or Instagram, from its pretty early on in its inception, would start broadcasting a particular metric, which was DAU divided by MAUs. And so the number of users in a month who were active on a daily basis. And Facebook had this incredibly impressive metric, which was, it was like, And if you think about the core of what Facebook is, it's fundamentally about keeping in touch with your friends, and like, humans are inherently social, and we like to talk t…

AI assessment note: “there was a chart in the initial pitch deck they shared”

Q Speaking of the innovative product mentality, how do you advise founders in a world where Facebook can spin up a team, copy your product, and then have it out in a week? How do you advise founders on that today?

A There's no one answer, but I think there are a whole lot of techniques and tactics. One is, I probably wouldn't do something that's like square in the middle of Facebook's roadmap. Because they almost certainly will do what you just described. Two is, I think a lot of people, particularly around their early financings, like to go tell the world about it. It's validation. If nothing else, it's nice to have your mom read about you in TechCrunch. But the truth is, that does almost no value. It adds no value to your company. In fact, I'd argue it detracts substantially. Because you don't get tons of consumers from an article in Facebook. But what you do get is lots of investors interested in what's going on. Lots of entrepreneurs saying, oh, maybe I can do something like that. And the large company saying, huh, I need to check that out. And so, if you can grow your company quietly, without tons of press and attention, it may not be as fun for your ego, but it may be much better for your long-term prospects. And in fact, we don't talk about this often, but I think our initial investment in Pinterest was maybe in March or April of 2011. You can't find anything on the internet about our involvement with the company for at least six or nine months. In fact, it was the subsequent financing That somehow got leaked to the press. That's the first time anyone found out about our financing, …

AI assessment note: “grow your company quietly, without tons of press and attention”

Q Yeah, no, I totally agree in terms of, especially kind of the market and just appreciating how large it is. When you were also making the investment, you know, the landscape itself is important to address. How did you think about the competitive landscape at the time, and how did that factor into your thinking?

A Yeah, so we'll touch on the competitive landscape, and then there's one other really important topic I want to come to, which is just sort of the team and their backgrounds relative to what was happening back in On the competitive landscape, there were two other companies that we spent a lot of time looking at. One was called Supply, and it was spelled S-V-P-P-L-Y, and the other one was called The Fancy. And they had similar concepts, the idea that you could catalog a bunch of stuff that you saw online by saving it to a board of some sort or another. And when we first invested, we and the founders tracked Pinterest progress against those two other companies. But I think within eight or nine months, they just stopped tracking those companies. Pinterest had grown so much more quickly and had far surpassed those other offerings, and when you ask why, I think so much of it is super subtle. The difference is, if you look at the three companies from 50,000 feet, aren't that significant. The concepts were really similar, but it goes to show the importance of extraordinary attention to detail on all the subtleties to make what could be just a good user experience into a phenomenal user experience. And hats off to the Pinterest team. They just got that right with obsessive focus on making sure those details really worked for consumers.

AI assessment note: “On the competitive landscape, there were two other companies that we spent a lot of time looking at.”

Q The challenge that I often hear back from founders is, I get you, Harry, but I show the VCs and they look at my cohorts and they're going, oh, it's growing 12%, not Or 25%, which is what benchmark and market standards say. For founders who have that mindset of like, oh, I need to get that number for the VCs to be excited, what do you say to them?

A They're talking to the wrong VCs. Tell them to come talk to me. Now, that said, if you're growing at seven percent per month, particularly off a very small base, it is hard to get a lot of excitement for what you're doing, unless you can articulate how and why you can sustain it. And so you have to be able to understand what exactly is causing that growth. And why is it such a deep well, or why is there such a deep well of future users that you should be able to continue to grow at that rate for a very long time to come? By the way, even Pinterest, which obviously has grown to be massive and has hundreds of millions of monthly active users today, it hit a few speed bumps along the way. Like while the first year or so after we invested, it did grow really, really fast. There were moments where it hit air pockets and the growth paused. And I'd say the other thing that's really remarkable about the team was that that didn't cause them to throw their hands up in the air and say, oh, well, it was a good run. We got this far. Too bad. They went and solved the problem, and in many cases, it wasn't one silver bullet that suddenly unlocked another horizon of growth. It was dozens of little things that each improved the numbers by .one percent or .two percent, but when you have this culture of constant iteration and experimentation, those little .one and .two percent, they add up, and ne…

AI assessment note: “They're talking to the wrong VCs. Tell them to come talk to me.”

Q Before we move into a quick fire and just while we're staying on pricing that I'm intrigued price sensitive or not, how much of a role does that play for you?

A Absolutely. I'm very price sensitive for a great business. I will stretch really hard and high. I think when we invest Invested in LinkedIn, the, uh, the two existing VCs thought the price we were paying was so crazy that they invested nothing in the round. I think that round ended up at something like a hundred X return. So when you see something that you think is really special, you stretch, but ultimately price matters. And this idea that, you know, in early stage venture price doesn't really matter because if the company works and you paid 10 pre or 15 pre or 30 pre, if it's a billion dollar company, who cares? You still did really well. And I think that's true. But the way I think about it is I think about making each investment as an investment I'm going to make a hundred times. And in some of those hundred instances of the future, it works out really well. And in some of them, it doesn't work out well at all. And as an investor, I have to think about what does that portfolio look like? How much risk am I taking that portfolio? And what's the, the sort of the aggregate return? And, you know, you can't focus on the couple of times that you might've made a hundred times your money. You have to think about the aggregate, how it works altogether. If the 10 pre-deal that goes to a billion was a hundred extra turn, then, uh, or the 10 post and the 30 post deal that goes to a bi…

AI assessment note: “I'm very price sensitive for a great business. I will stretch really hard”

Q The challenge that I often hear back from founders is, I get you, Harry, but I show the VCs and they look at my cohorts and they're going, oh, it's growing 12%, not Or 25%, which is what benchmark and market standards say. For founders who have that mindset of like, oh, I need to get that number for the VCs to be excited, what do you say to them?

A They're talking to the wrong VCs. Tell them to come talk to me. Now, that said, if you're growing at seven percent per month, particularly off a very small base, it is hard to get a lot of excitement for what you're doing, unless you can articulate how and why you can sustain it. And so you have to be able to understand what exactly is causing that growth. And why is it such a deep well, or why is there such a deep well of future users that you should be able to continue to grow at that rate for a very long time to come? By the way, even Pinterest, which obviously has grown to be massive and has hundreds of millions of monthly active users today, it hit a few speed bumps along the way. Like while the first year or so after we invested, it did grow really, really fast. There were moments where it hit air pockets and the growth paused. And I'd say the other thing that's really remarkable about the team was that that didn't cause them to throw their hands up in the air and say, oh, well, it was a good run. We got this far. Too bad. They went and solved the problem, and in many cases, it wasn't one silver bullet that suddenly unlocked another horizon of growth. It was dozens of little things that each improved the numbers by .one percent or .two percent, but when you have this culture of constant iteration and experimentation, those little .one and .two percent, they add up, and ne…

AI assessment note: “They're talking to the wrong VCs. Tell them to come talk to me.”

Q I love your style in terms of really going deep on the business and the analysis and really spending the time there. My concern is with the proliferation of capital that we have today, the timelines are just so much more compressed. How do you feel your style translates to today when the proliferation of capital is just at a level that we haven't seen before?

A Yeah, it makes the beauty contest even harder, because it used to be they could be multi-week beauty contests, and you at least had an opportunity to let your real personality, your real strengths, and weaknesses shine through to determine compatibility with an entrepreneur. When the beauty contests are compressed to literally two days, it's more like a shotgun wedding, and no one really knows what they're getting into, and so it's a little scarier, I think, for all parties, and so it's a fact of life. Many of the best companies have many options for where to get capital, so we compete, and I think we do pretty well, but it's so much more fun when you think you've sort of found an undiscovered gem that other people are just not interested in, and so when you're willing to go off the beaten path, and historically that's been both in terms of areas, but also in terms of geographies, it's just easier. It's a more pleasant process. You can actually date someone for a while before you have to get married, and I think that suits both parties really well, and those are the circumstances I really enjoy. They're hard to find, and they're increasingly hard to find, because to have an idea that other people don't share when there's 25 other venture capital firms out there isn't that hard, but when there's 250 other venture capital firms out there, chances are someone else is thinking abou…

AI assessment note: “When the beauty contests are compressed to literally two days, it's more like a shotgun wedding”

Q director and kind of board director elements and board member elements there, because I was going to ask you later on in the show, but let's ask Now, in terms of, you said, 1617 years in the business, how have you seen your role and your thesis towards being a good board member change over the time? Have you seen any big developments in how you act personally on boards?

A Absolutely. I mean, for starters, when you're early in your career, you have a lot less experience and a bit more time, and as you build a portfolio in venture, you find yourself having a bit less time And a lot more experience. And so my sales pitch, if you will, to entrepreneurs early in my career was that I had the capacity and the ambition to work much harder than anybody else. And where I lacked in experience, I'd find a way to pull someone else from Bessemer or outside of Bessemer into the situation to provide the incremental judgment that I didn't necessarily offer. And I think that's what most young VCs do, where I think that's a winning approach. As you get more experience with You don't need to be pulling on other people to help or access their judgment as regularly, because you've seen so many things. And, you know, sadly, across my portfolio in 17 years, I've seen everything from all forms of sexual harassment, male on male, male on female, female on male, to even, you know, accidental death, to theft. You know, every, every sort of human horror that exists, exists in companies. And when you start to get to companies of certain sizes, you sort of see it all. And the first time you see it, it's incredibly jarring and disturbing. Some of these things are always jarring and disturbing, but you, you sort of build tools and access extra piece to help deal with these prob…

AI assessment note: “when you're early in your career, you have a lot less experience and a bit more time”

Q What's the advice to a junior starting out in the industry?

A Two pieces of advice. One is, think totally independently. The stuff that everyone is working on, sometimes it's interesting, sometimes it's not, but as a junior VC, it's virtually impossible to be successful fishing in a pond that lots of experienced VCs are fishing in, because you've got no way to win those opportunities. But if you can come up with your own ideas that turn out to be right, that other people are somewhat dismissive of, You've got a shot because when you go fishing, there will be no experience if you see fishing next to you. And for me, that, that example was Yelp in 2005, even though, uh, Jeremy Stoppelman and Russ Simmons were well-known characters in Silicon Valley. They both worked at PayPal. I think they went up and down sand hill road and no one was interested to invest in their company. I think they got two term sheets. One was from me. I cold called them from, from New York and flew out to visit them. And the other was from, I think another VC from that might not, may not even be in business anymore. But everyone dismissed it, and so if I had been fishing in an area that other VCs wanted to invest in, I would have had no shot, because I was a know-nothing, had-done-nothing young venture capitalist, 3000 miles away.

AI assessment note: “Two pieces of advice. One is, think totally independently.”

Q Can I ask, with this hypothesis in place, how does that affect the cadence of investing? You know, often I hear investors say, regardless of down markets or bull markets, I invest three times a year. How does that fallow period affect your investment mentality towards the actual cadence?

A For starters, I've done a lot of consumer internet investing or consumer tech investing, but I've also invested in many business software companies too. And so, I think I will likely end up making fewer Consumer tech investments over the next several years than I have historically, but I don't think that will necessarily slow down an overall investment pace because there are other phenomenally interesting areas of the tech world that create or that generate interesting opportunities, even if they're not consumer related. I think what is a stronger influence on an intelligent pace for new investment is sort of general sentiment and availability of capital. And so I think we're, we're still at near an all time high. I think maybe there was a peak In late 15 or early 16. But, you know, if you look back historically at the amount of venture capital invested per year in America, and we invest outside of America too, but most of our investing is in the U.S., it was sort of in the 15 to thirty billion dollars a year range. And it fluctuated up and down, but it was in a pretty tight range year after year after year. But starting in 2013 or so, that just exploded. And I think it was eighty billion dollars in 2015. And there's just no way there are that many more great companies that the industry could sustain and almost tripling. And so I think what actually happened was that a lot of m…

AI assessment note: “I don't think that will necessarily slow down an overall investment pace”

Q director and kind of board director elements and board member elements there, because I was going to ask you later on in the show, but let's ask Now, in terms of, you said, 1617 years in the business, how have you seen your role and your thesis towards being a good board member change over the time? Have you seen any big developments in how you act personally on boards?

A Absolutely. I mean, for starters, when you're early in your career, you have a lot less experience and a bit more time, and as you build a portfolio in venture, you find yourself having a bit less time And a lot more experience. And so my sales pitch, if you will, to entrepreneurs early in my career was that I had the capacity and the ambition to work much harder than anybody else. And where I lacked in experience, I'd find a way to pull someone else from Bessemer or outside of Bessemer into the situation to provide the incremental judgment that I didn't necessarily offer. And I think that's what most young VCs do, where I think that's a winning approach. As you get more experience with You don't need to be pulling on other people to help or access their judgment as regularly, because you've seen so many things. And, you know, sadly, across my portfolio in 17 years, I've seen everything from all forms of sexual harassment, male on male, male on female, female on male, to even, you know, accidental death, to theft. You know, every, every sort of human horror that exists, exists in companies. And when you start to get to companies of certain sizes, you sort of see it all. And the first time you see it, it's incredibly jarring and disturbing. Some of these things are always jarring and disturbing, but you, you sort of build tools and access extra piece to help deal with these prob…

AI assessment note: “when you're early in your career, you have a lot less experience and a bit more time”

Q before we move into the quickfire, you mentioned Sarah Tavel earlier. I spoke to Sarah before the show, and she said you have to touch on the scenario planning exercise that we went through for Pinterest. So if we start on the good in 20 11, if I were to ask you at the time, if all the stars align, what does this look like? What would you have said?

A I mean, at the time, in 2011, LinkedIn was still a private company. And LinkedIn, when it went public, I think in late 2011, if I remember correctly, or maybe it was spring of 2011, It sort of opened the floodgates for the second generation of publicly traded internet companies. The first generation had mostly gone public 10 years before in the internet bubble, and there was a bit of a exit desert for consumer internet in between. And so from the first generation, Amazon was still around in 2010. I think it might have had like a thirty billion dollar market cap. eBay was around and Yahoo was around. And most of the other stuff had already hit the skids. Some of the online travel businesses were still in existence and doing pretty well. But to be worth a billion dollars was extraordinary. Like, it so rarely happened. Literally just a couple months later, LinkedIn went public, and I think its initial market cap was four or six billion dollars when it went public. But I think to dream about anything beyond a billion or maybe two billion dollars was, like, impossible. Whereas these days, you can't go into a coffee shop in San Francisco without running into at least two founders who have companies valued at a billion dollars privately. And so the world has changed basically by an order of magnitude since then. And so the idea that Pinterest would ever have, I don't know what it has …

AI assessment note: “to dream about anything beyond a billion or maybe two billion dollars was, like, impossible.”

Q Pat Grady from Socorro on the show recently, and he said that The rate of decay on operational experience has never been greater than it is now with kind of rapidly evolving product cycles and technology. Do you agree with that moving forward that we will actually see far less operational VCs and actually it is enjoying a much stronger rate of decay in terms of operational experience helping VCs?

A I think about that issue in a totally different way, which is there are a bunch of relatively new VC groups who are comprised of partners who created those firms on the heels of Highly successful entrepreneurial or operating careers. But if you actually look back in the course of history, most VCs don't really, most of the, in the generation before me, most of the great VCs don't actually have operational experience. Some of them do, but like the, the truly great ones, I mean, I take Mike Moritz, someone who I admire from afar. I don't really know him. He was a journalist and I think he sort of started a company, but it wasn't a massively operational intense company. It was sort of a media business, but his whole career has basically been as a VC and Or, or John Doerr, another one of the same generation, sort of the same thing. You know, even in my generation, folks like Peter Fenton at Benchmark or, or Bill Gurley at Benchmark, to name a few people without trying to highlight my colleagues at Bessemer, um, they don't have operational experience. So I think this whole idea of VC being better or adding a lot of value to their operational experience, I think it's bogus. And I think it's sort of a, it's a new idea that's been perpetrated by folks who are competing as VCs who happen to have a lot of operational experience. That's not to say operational experience isn't incredibly v…

AI assessment note: “I think this whole idea of VC being better or adding a lot of value to their operational experience, I think it's bogus.”

Q Who do you think are the unsung heroes, or who's the unsung hero for you from the Pinterest team, and what did they do behind the scenes?

A I think there are lots of unsung heroes. I mean, Pinterest had so many talented people who contributed meaningfully over years who aren't necessarily at the company anymore. Off the top of my head, I'm thinking about people like Natalie Fair, who was sort of like the first finance person at the company. Or Mike Yang, who was the first general counsel at the company. Or Tim Kendall. He was head of product. He was president at one point. He had so many different hats. And I think, ultimately, either their own personal interests ultimately took them somewhere else, or they were great for the company at a certain size and not another size. And, you know, some people, like Ben, scale all the way up. And he was an incredibly effective founder of a brand new company, and also an incredibly effective CEO and leader of a multi-thousand person company. Most people aren't so versatile. It doesn't mean they're less talented. It just means that, like, they figured out what really works for them, and I think there are many of those people who contributed massively to Pinterest along the way. Sarah, my former colleague, who ultimately left Bessemer and joined Pinterest, is yet another example, and she was at Pinterest, I think, for three or four years, and did all sorts of stuff, including, I think, her first project was to buy the Pinterest domain name in lots of foreign countries, and I rem…

AI assessment note: “Natalie Fair, who was sort of like the first finance person at the company.”

Q I love your style in terms of really going deep on the business and the analysis and really spending the time there. My concern is with the proliferation of capital that we have today, the timelines are just so much more compressed. How do you feel your style translates to today when the proliferation of capital is just at a level that we haven't seen before?

A Yeah, it makes the beauty contest even harder, because it used to be they could be multi-week beauty contests, and you at least had an opportunity to let your real personality, your real strengths, and weaknesses shine through to determine compatibility with an entrepreneur. When the beauty contests are compressed to literally two days, it's more like a shotgun wedding, and no one really knows what they're getting into, and so it's a little scarier, I think, for all parties, and so it's a fact of life. Many of the best companies have many options for where to get capital, so we compete, and I think we do pretty well, but it's so much more fun when you think you've sort of found an undiscovered gem that other people are just not interested in, and so when you're willing to go off the beaten path, and historically that's been both in terms of areas, but also in terms of geographies, it's just easier. It's a more pleasant process. You can actually date someone for a while before you have to get married, and I think that suits both parties really well, and those are the circumstances I really enjoy. They're hard to find, and they're increasingly hard to find, because to have an idea that other people don't share when there's 25 other venture capital firms out there isn't that hard, but when there's 250 other venture capital firms out there, chances are someone else is thinking abou…

AI assessment note: “we compete, and I think we do pretty well, but it's so much more fun”

Q lot of the other surrounding areas, I would love to touch on an element you said there about kind of losing interest when it became much more popular narrative, and then opinions in terms of maybe being the wrong time. I'm always questioning myself around market timing. How do you think about the importance of market timing, and how does that play into your investing mindset, do you think, today?

A So there's lots of styles that can be successful for investors, and you kind of have to know yourself, and so I talk about this with some of my partners at Bessemer all the time, but some of us, especially like the former athletes among us, are super competitive, and when we see a contest, I disparagingly call them beauty contests, but when we see a sort of a scrum around an investment opportunity where there are three or four or 19 firms who all want to make an investment, some of my partners derive energy from that process, and they're like, oh, it's a competition. I want to win the competition. I want to become the investor. And when I see that, I just get deflated. I'm like, ah, what I really love to do is analyze the business and think about the possibilities. I don't like to perform. I don't like to sell. And so the exercise, when it's highly competitive for an investor, becomes a sales exercise, not an analytics exercise. And to me, that's much less rewarding. And so, like I said, I disparagingly call these things beauty contests. Like, I'm not interested in entering beauty contests. I don't find them fun, and they sort of suck my energy away as opposed to produce energy. And so while it can be clearly a Hugely profitable to invest in Uber trends that everyone agrees in, and there's a reason why everyone agrees in these trends, because it's happening, it's clearly happen…

AI assessment note: “What I like to do is I like to try to find trends that people kind of are ignoring”

Q Pat Grady from Socorro on the show recently, and he said that The rate of decay on operational experience has never been greater than it is now with kind of rapidly evolving product cycles and technology. Do you agree with that moving forward that we will actually see far less operational VCs and actually it is enjoying a much stronger rate of decay in terms of operational experience helping VCs?

A I think about that issue in a totally different way, which is there are a bunch of relatively new VC groups who are comprised of partners who created those firms on the heels of Highly successful entrepreneurial or operating careers. But if you actually look back in the course of history, most VCs don't really, most of the, in the generation before me, most of the great VCs don't actually have operational experience. Some of them do, but like the, the truly great ones, I mean, I take Mike Moritz, someone who I admire from afar. I don't really know him. He was a journalist and I think he sort of started a company, but it wasn't a massively operational intense company. It was sort of a media business, but his whole career has basically been as a VC and Or, or John Doerr, another one of the same generation, sort of the same thing. You know, even in my generation, folks like Peter Fenton at Benchmark or, or Bill Gurley at Benchmark, to name a few people without trying to highlight my colleagues at Bessemer, um, they don't have operational experience. So I think this whole idea of VC being better or adding a lot of value to their operational experience, I think it's bogus. And I think it's sort of a, it's a new idea that's been perpetrated by folks who are competing as VCs who happen to have a lot of operational experience. That's not to say operational experience isn't incredibly v…

AI assessment note: “this whole idea of VC being better or adding a lot of value... I think it's bogus”

Q I know, it's been a long time since our first one, but we're going to unpack the original Pinterest memo that you wrote back in 2011, and I want to start with some history, with some context, so tell me, what was the first meeting? Paint that picture in context for me around those first meetings with the team.

A Yeah, so it was in early 2011, and it was a day where I made one great decision and one terrible And so, as I often do, I live in New York, but I do a lot of investing in California, and I probably, 15 or 20 times a year, take a six a.m. flight out of Newark or JFK, land in San Francisco around nine 30, do a set of meetings, and then go home on the four o'clock flight, because I really like sleeping in my own bed. And I was working with my then colleague at the time, Sarah Tavel, who's based in our California office, and I emailed her a call the day before. I said, hey, I'm coming tomorrow morning for a 10 a.m. meeting with Mariam Nafisi at Minted, which was a small startup, and why don't you come and join me? And so Sarah joined me, and we met with Miriam and a good chunk of her team, and we were evaluating what would have been, I guess, the Series A investment in Minted, and we spent half the day with Miriam. We had lunch with her, and then afterwards, we discussed it, and we decided we were not going to pursue an investment in Minted. We were just too nervous about how back-end loaded their revenues were in the fourth quarter of every year, and it was just so hard to assess the business, having been through, you know, all of one real holiday season, and I was a little bit depressed because I'd Spent basically a whole day traveling to California, and we decided not to move fo…

AI assessment note: “a day where I made one great decision and one terrible”

Q I mean, that's fantastic to hear about Sarah, and I spoke to her before the show, actually, and she gave me many questions, which we will get to, but, um, that's great to hear. Can I ask, on the technical farmer side, like, bluntly, it's something that I would have definitely tripped up on, like, having none in a hodgepodge building. How did you get comfortable with that?

A I mean, ultimately, the proof is in the pudding, and so, while none of the early Pinterest team was I was obsessively experienced in building a tech product. They just had really interesting insight into product and design. And Evan, who I think was largely responsible for collaborating with Ben on the whole, what now is like a very common sort of grid ever flowing format that you see on products all over the place. Like he's an architect by training. I think he was studying to be an architect at Columbia before moving out to the Bay area. And he worked at Facebook before Pinterest. And so, in my mind, it was like the product vision was there, and that, yes, they were going to encounter tons of technical challenges, particularly on the scaling side. The world had watched Twitter go through so many fails and keeping its product up all the time, and I expected they might run into some of the same problems, but the product itself, like, it worked. It wasn't completely flawless by any stretch of the imagination, but it was compelling, and so the fact is, like, they managed to get it built, and so the bet was, wow, they got this far, Um, the strength of the idea and the product, they'll find a way to recruit other talented engineers and technical people to complement the team they have. And sure enough, they did. And of course, as the company grew and became more well-known, it just…

AI assessment note: “the bet was, wow, they got this far... they'll find a way to recruit”

Q Yeah, no, I'm totally with you. In terms of that kind of product experience and the focus there, you obviously mentioned kind of the team obviously being the enablers of it. So I do want to kind of hand over to you on that, and I guess what drove the excitement around Ben and the team and gave you the conviction that you had?

A Yeah, so when we invested, it was controversial for a few reasons. One is the sort of, uh, the flavor du jour for Instagram. Young internet founding teams included a highly technical founder, and Pinterest had no technical founder. And so I think when a lot of VCs met them, they're like, wait a minute, like, who's building the product here? And the answer was, it was like a hodgepodge, outsourced group of people. There was a part-time engineer. Like, there literally was no technical leadership in the company. Obviously, they managed to build something really compelling, but it wasn't because they had a young Mark Zuckerberg as a founder coding away. They had to sort of beg and scratch the And find talent wherever they could to actually build the product that was in their heads. So that was a hugely unusual and somewhat controversial move. And I think the other element of the story that's really important to share is that the product was used at that time, probably by women in 90% of all cases. The male user base was tiny. Even to this day, I think Pinterest is still more often used by women than men, but it's much more balanced. At the time, it was extraordinarily imbalanced. And so, In 2011, if you looked up and down Sand Hill Road, it would be very difficult to find a woman, and yet I had been working at Bessemer for about five years at that point every day with Sarah Tavill.…

AI assessment note: “I don't think I would have met the Pinterest team had it not been for Sarah”

Q Yeah, no, I'm totally with you. In terms of that kind of product experience and the focus there, you obviously mentioned kind of the team obviously being the enablers of it. So I do want to kind of hand over to you on that, and I guess what drove the excitement around Ben and the team and gave you the conviction that you had?

A Yeah, so when we invested, it was controversial for a few reasons. One is the sort of, uh, the flavor du jour for Instagram. Young internet founding teams included a highly technical founder, and Pinterest had no technical founder. And so I think when a lot of VCs met them, they're like, wait a minute, like, who's building the product here? And the answer was, it was like a hodgepodge, outsourced group of people. There was a part-time engineer. Like, there literally was no technical leadership in the company. Obviously, they managed to build something really compelling, but it wasn't because they had a young Mark Zuckerberg as a founder coding away. They had to sort of beg and scratch the And find talent wherever they could to actually build the product that was in their heads. So that was a hugely unusual and somewhat controversial move. And I think the other element of the story that's really important to share is that the product was used at that time, probably by women in 90% of all cases. The male user base was tiny. Even to this day, I think Pinterest is still more often used by women than men, but it's much more balanced. At the time, it was extraordinarily imbalanced. And so, In 2011, if you looked up and down Sand Hill Road, it would be very difficult to find a woman, and yet I had been working at Bessemer for about five years at that point every day with Sarah Tavill.…

AI assessment note: “I don't think I would have met the Pinterest team had it not been for Sarah”

Q Can I ask, with this hypothesis in place, how does that affect the cadence of investing? You know, often I hear investors say, regardless of down markets or bull markets, I invest three times a year. How does that fallow period affect your investment mentality towards the actual cadence?

A For starters, I've done a lot of consumer internet investing or consumer tech investing, but I've also invested in many business software companies too. And so, I think I will likely end up making fewer Consumer tech investments over the next several years than I have historically, but I don't think that will necessarily slow down an overall investment pace because there are other phenomenally interesting areas of the tech world that create or that generate interesting opportunities, even if they're not consumer related. I think what is a stronger influence on an intelligent pace for new investment is sort of general sentiment and availability of capital. And so I think we're, we're still at near an all time high. I think maybe there was a peak In late 15 or early 16. But, you know, if you look back historically at the amount of venture capital invested per year in America, and we invest outside of America too, but most of our investing is in the U.S., it was sort of in the 15 to thirty billion dollars a year range. And it fluctuated up and down, but it was in a pretty tight range year after year after year. But starting in 2013 or so, that just exploded. And I think it was eighty billion dollars in 2015. And there's just no way there are that many more great companies that the industry could sustain and almost tripling. And so I think what actually happened was that a lot of m…

AI assessment note: “I don't think that will necessarily slow down an overall investment pace”

Q lot of the other surrounding areas, I would love to touch on an element you said there about kind of losing interest when it became much more popular narrative, and then opinions in terms of maybe being the wrong time. I'm always questioning myself around market timing. How do you think about the importance of market timing, and how does that play into your investing mindset, do you think, today?

A So there's lots of styles that can be successful for investors, and you kind of have to know yourself, and so I talk about this with some of my partners at Bessemer all the time, but some of us, especially like the former athletes among us, are super competitive, and when we see a contest, I disparagingly call them beauty contests, but when we see a sort of a scrum around an investment opportunity where there are three or four or 19 firms who all want to make an investment, some of my partners derive energy from that process, and they're like, oh, it's a competition. I want to win the competition. I want to become the investor. And when I see that, I just get deflated. I'm like, ah, what I really love to do is analyze the business and think about the possibilities. I don't like to perform. I don't like to sell. And so the exercise, when it's highly competitive for an investor, becomes a sales exercise, not an analytics exercise. And to me, that's much less rewarding. And so, like I said, I disparagingly call these things beauty contests. Like, I'm not interested in entering beauty contests. I don't find them fun, and they sort of suck my energy away as opposed to produce energy. And so while it can be clearly a Hugely profitable to invest in Uber trends that everyone agrees in, and there's a reason why everyone agrees in these trends, because it's happening, it's clearly happen…

AI assessment note: “What I like to do is I like to try to find trends that people”