The Exchanges

Q to mention them for you. So first, we've got Beck, Fair. Um, obviously immensely successful and heavily VC backed in comparison to the second, which was eHow, obviously bootstrapped. So, so now I've name dropped those. Uh, now that's out of the way. Uh, how did these two experiences differ with one being heavily VC backed and the other being bootstrapped and what learnings from these two very different approaches?

A Totally. Yeah, absolutely. I think the first, uh, business I started in 1999 was a couple of co-founders. We were here in San Francisco, and we had this idea for a business, Betfair. As you say, the name dropping doesn't work so well in the United States, and a lot of people haven't heard of it, but, you know, it's now a fairly large business, and it has been for a while, and so, but, you know, initially, we founded a company called Flutter, and what's currently Betfair is a result of the merger of our company and one of our competitors, Betfair, and we combined and took their name. So, Anyway, we had come up with this idea to create a kind of a marketplace for sports betting and exchange or an eBay type thing for a business that had always, it had never been done that way. And we raised on the back of just that idea, we raised five million bucks and we raised another thirty nine million bucks six months later, eight months later to continue building that business. So we built it in a very, uh, venture backed fashion. We hired, uh, Quite a number of people. I think as was customary back at that time, it took a long time to get your first product out to customers. So we probably had a hundred employees or close to it before we actually launched to the public. That story goes on. We merged our biggest competitor. I went on the board and didn't have an executive role and started s…

AI assessment note: “We bought it with just our own money. We got profitable very quickly.”

Q to mention them for you. So first, we've got Beck, Fair. Um, obviously immensely successful and heavily VC backed in comparison to the second, which was eHow, obviously bootstrapped. So, so now I've name dropped those. Uh, now that's out of the way. Uh, how did these two experiences differ with one being heavily VC backed and the other being bootstrapped and what learnings from these two very different approaches?

A Totally. Yeah, absolutely. I think the first, uh, business I started in 1999 was a couple of co-founders. We were here in San Francisco, and we had this idea for a business, Betfair. As you say, the name dropping doesn't work so well in the United States, and a lot of people haven't heard of it, but, you know, it's now a fairly large business, and it has been for a while, and so, but, you know, initially, we founded a company called Flutter, and what's currently Betfair is a result of the merger of our company and one of our competitors, Betfair, and we combined and took their name. So, Anyway, we had come up with this idea to create a kind of a marketplace for sports betting and exchange or an eBay type thing for a business that had always, it had never been done that way. And we raised on the back of just that idea, we raised five million bucks and we raised another thirty nine million bucks six months later, eight months later to continue building that business. So we built it in a very, uh, venture backed fashion. We hired, uh, Quite a number of people. I think as was customary back at that time, it took a long time to get your first product out to customers. So we probably had a hundred employees or close to it before we actually launched to the public. That story goes on. We merged our biggest competitor. I went on the board and didn't have an executive role and started s…

AI assessment note: “We bought it with just our own money. We got profitable very quickly.”

Q Do you think the increasing youth of founders today has led to a worse handle over the capital allocation segment of the CEO role compared to 20 years ago when they were former business execs with 20 years experience?

A I don't think so, actually. I would, I would not support that statement. I think, because I don't think those experienced business people necessarily We're better at it. I think startups have become massively more capital efficient, which is great for the ecosystem is in some ways good for VCs in some ways bad for VCs, I guess. So younger people may not have as much experience, but the stakes for most of the things they undertake are lower because the businesses are so much more capital efficient. So I think it's generally kind of fine. And then you also look at some spectacular CEOs. Like I think Zuckerberg is an example of a spectacular CEO. And he doesn't have, he didn't have decades of business experience or in my own portfolio. I have a company in LA called JustFab, and there's co-CEOs there. And Adam Goldenberg, who is one of the co-CEOs, is, I think, just a tremendous capital allocator. And he, that's his kind of role as partner, Don, is more on the creative side. And his understanding of how to invest in projects and when to be aggressive, you know, in a highly capital, consumptive business is one of the key things that's made him successful. So I think, I think that's great, and it's an issue way, we weigh in on board members all the time. I was, I had a board meeting yesterday with one of my companies that's, that, you know, has fortuitously gotten very well funded, a…

AI assessment note: “I don't think so, actually. I would, I would not support that statement.”

Q Now, I'd love to get started with a little background on you and how you made your way into the venture scene. In 2009, I think it was. So kind of, what's your story?

A Well, so I, I started as an entrepreneur, you know, I guess to just to go way back in history. I came out of University and, and was working in management consulting, and I didn't really have a vision for what I wanted to do with my life. I just, you know, it was kind of, I had a good job and, you know, I was enjoying it and doing well. And then, and I'd never been exposed to the entrepreneurial side. It just didn't even occur to me that you could start a business. That sounds laughable today if you're a young person today, but I graduated from university in It just wasn't obvious. I mean, it wasn't obvious to me anyway, that being an entrepreneur was even a legitimate career path or something I could consider. And when that did get on my radar, I was really inspired about the notion of working for myself. And I, I founded a business and then I bought and built another business. And having done those two things and sold the second business, I thought I would start another business, but I ended up one of my really good friends, a fellow entrepreneur that I'd kind of been in the trenches with. Join Matrix Partners as a general partner, and he recruited me, and I really got excited about this opportunity to kind of be an entrepreneur, but within a venture fund, and to get to work with a whole bunch of young entrepreneurs.

AI assessment note: “he recruited me, and I really got excited about this opportunity”

Q Now, I'd love to get started with a little background on you and how you made your way into the venture scene. In 2009, I think it was. So kind of, what's your story?

A Well, so I, I started as an entrepreneur, you know, I guess to just to go way back in history. I came out of University and, and was working in management consulting, and I didn't really have a vision for what I wanted to do with my life. I just, you know, it was kind of, I had a good job and, you know, I was enjoying it and doing well. And then, and I'd never been exposed to the entrepreneurial side. It just didn't even occur to me that you could start a business. That sounds laughable today if you're a young person today, but I graduated from university in It just wasn't obvious. I mean, it wasn't obvious to me anyway, that being an entrepreneur was even a legitimate career path or something I could consider. And when that did get on my radar, I was really inspired about the notion of working for myself. And I, I founded a business and then I bought and built another business. And having done those two things and sold the second business, I thought I would start another business, but I ended up one of my really good friends, a fellow entrepreneur that I'd kind of been in the trenches with. Join Matrix Partners as a general partner, and he recruited me, and I really got excited about this opportunity to kind of be an entrepreneur, but within a venture fund, and to get to work with a whole bunch of young entrepreneurs.

AI assessment note: “Join Matrix Partners as a general partner, and he recruited me”

Q Um, but, so, with regards to this, yeah, The question was, like, what do you believe that others do not? Uh, you answered the conventional wisdom is that ideas without execution are worthless. So how contrarian are you in your thinking towards this, and what are some elements you believe are integral to successful idea generation?

A Well, I think, you know, I think idea generation is quite challenging, or I've never been particularly good at it. I guess the reason I have so much energy around this particular topic is I don't feel like I have a Talent that I'm, is the ability to really evaluate an opportunity like this, evaluate, to see even contrarian ideas that have a lot of merit. I think I'm sometimes able to perceive the opportunity there where others can't. And so that's been a powerful force for me. And if I look at the experience in Flutter Betfair, my first business, it was a really tremendous idea, which was not created by me. It was my co-founder Vince's idea, a full credit to him. Uh, but he had sort of parked it. He'd had the idea nine months before and then kind of parked it as infeasible. And then as soon as I heard it, I said, that is it, that we need to be doing that. And I created some energy around making it happen and we went and did it. And then I can't tell you how mediocre our execution was as founders. I mean, it's embarrassing compared to a lot of the people in my portfolio. How terrible we were now in defense a little bit, the sign, you know, founding companies has become more and more of a science and less of an art than it was even 15 years ago. Um, so hopefully, and if, if I was a founder today, I would, um, the first time founder today, I would perform a little better, but, but…

AI assessment note: “we did a really poor job of executing on it, but the core idea was so powerful”

Q We can do a second interview in a couple of years' time and see. And then, and then talk to me about the biggest challenge for you in your role at Matrix. What's been difficult about the transition?

A It's a hard job. So, venture capital, you know, there's a scarce number of opportunities, and there's ever-increasing money chasing it. Venture capital, early-stage tech venture in the U.S. deploys maybe ten billion dollars a year or something like that into early-stage deals. And ten billion dollars is a drop in the bucket in the U.S. economy, right, in financial services. Like, you know, the Two more billion flows in from some sovereign wealth funds, and it totally distorts the market. There's all this money chasing a limited number of good deals, and there's a ton of smart people working in this industry. So I think everything about this job is hard, is the bottom line. I think it's very challenging to find opportunities, to find the right entrepreneurs, to win those deals, because there's really, you know, a lot of smart people chasing, you know, a limited set of really good deals. So I find it challenging every day, and It's rewarding, you know, when you do, but you know, it's, it's a job where I think unlike an entrepreneur's job, you don't get as much a sense of the flywheel working, right? Like you don't sense that you, you don't get the sense that you've got this thing going and you're building strength to strength. Like it's a, you know, every day is a, what have you done for me lately? And, you know, the day after one of your company's IPOs, not that I've had that, b…

AI assessment note: “unlike an entrepreneur's job, you don't get as much a sense of the flywheel”

Q Do you think the increasing youth of founders today has led to a worse handle over the capital allocation segment of the CEO role compared to 20 years ago when they were former business execs with 20 years experience?

A I don't think so, actually. I would, I would not support that statement. I think, because I don't think those experienced business people necessarily We're better at it. I think startups have become massively more capital efficient, which is great for the ecosystem is in some ways good for VCs in some ways bad for VCs, I guess. So younger people may not have as much experience, but the stakes for most of the things they undertake are lower because the businesses are so much more capital efficient. So I think it's generally kind of fine. And then you also look at some spectacular CEOs. Like I think Zuckerberg is an example of a spectacular CEO. And he doesn't have, he didn't have decades of business experience or in my own portfolio. I have a company in LA called JustFab, and there's co-CEOs there. And Adam Goldenberg, who is one of the co-CEOs, is, I think, just a tremendous capital allocator. And he, that's his kind of role as partner, Don, is more on the creative side. And his understanding of how to invest in projects and when to be aggressive, you know, in a highly capital, consumptive business is one of the key things that's made him successful. So I think, I think that's great, and it's an issue way, we weigh in on board members all the time. I was, I had a board meeting yesterday with one of my companies that's, that, you know, has fortuitously gotten very well funded, a…

AI assessment note: “I don't think so, actually. I would, I would not support that statement.”

Q We can do a second interview in a couple of years' time and see. And then, and then talk to me about the biggest challenge for you in your role at Matrix. What's been difficult about the transition?

A It's a hard job. So, venture capital, you know, there's a scarce number of opportunities, and there's ever-increasing money chasing it. Venture capital, early-stage tech venture in the U.S. deploys maybe ten billion dollars a year or something like that into early-stage deals. And ten billion dollars is a drop in the bucket in the U.S. economy, right, in financial services. Like, you know, the Two more billion flows in from some sovereign wealth funds, and it totally distorts the market. There's all this money chasing a limited number of good deals, and there's a ton of smart people working in this industry. So I think everything about this job is hard, is the bottom line. I think it's very challenging to find opportunities, to find the right entrepreneurs, to win those deals, because there's really, you know, a lot of smart people chasing, you know, a limited set of really good deals. So I find it challenging every day, and It's rewarding, you know, when you do, but you know, it's, it's a job where I think unlike an entrepreneur's job, you don't get as much a sense of the flywheel working, right? Like you don't sense that you, you don't get the sense that you've got this thing going and you're building strength to strength. Like it's a, you know, every day is a, what have you done for me lately? And, you know, the day after one of your company's IPOs, not that I've had that, b…

AI assessment note: “very challenging to find opportunities, to find the right entrepreneurs, to win those deals”

Q Have you always found yourself arguing for a slightly more conservative approach, or is it more recently where you've decided to place a little more emphasis on unit economics and conservatism?

A You know, maybe I've always been a little bit more. I think, you know, as my journey as an entrepreneur has led me to believe that, you know, one of the things you, you just, you need to stay alive long enough to win, right? And I think, uh, young entrepreneurs, uh, Are a product of their environment, particularly young people who haven't seen a lot of cycles, uh, can sometimes have a hard time extrapolating how the funding environment might change. And so the right amount of paranoia about the future is important, right? And, um, you'd hate to run out of capital just at the wrong time. So anyway, in my mindset, I think, you know, I, I'm not articulating this well. I think when you figure things out, it is the time to be aggressive and But I think a lot of entrepreneurs in these markets with relatively cheap capital have a tendency to be aggressive and put their foot on the gas, even when they haven't truly got their business figured out. And not only is that highly wasteful of resources, you might argue, well, those resources were cheap because it's been a capital has been freely available, but it actually, I think, sabotages your ability to be successful. If you get too many headcount around You're just going to be, you're going to be distracted from the core mission of figuring out the business. Now, once you've got that product market fit and you figured it out, then the ch…

AI assessment note: “maybe I've always been a little bit more.”

Q Have you always found yourself arguing for a slightly more conservative approach, or is it more recently where you've decided to place a little more emphasis on unit economics and conservatism?

A You know, maybe I've always been a little bit more. I think, you know, as my journey as an entrepreneur has led me to believe that, you know, one of the things you, you just, you need to stay alive long enough to win, right? And I think, uh, young entrepreneurs, uh, Are a product of their environment, particularly young people who haven't seen a lot of cycles, uh, can sometimes have a hard time extrapolating how the funding environment might change. And so the right amount of paranoia about the future is important, right? And, um, you'd hate to run out of capital just at the wrong time. So anyway, in my mindset, I think, you know, I, I'm not articulating this well. I think when you figure things out, it is the time to be aggressive and But I think a lot of entrepreneurs in these markets with relatively cheap capital have a tendency to be aggressive and put their foot on the gas, even when they haven't truly got their business figured out. And not only is that highly wasteful of resources, you might argue, well, those resources were cheap because it's been a capital has been freely available, but it actually, I think, sabotages your ability to be successful. If you get too many headcount around You're just going to be, you're going to be distracted from the core mission of figuring out the business. Now, once you've got that product market fit and you figured it out, then the ch…

AI assessment note: “You know, maybe I've always been a little bit more.”

Q Um, but, so, with regards to this, yeah, The question was, like, what do you believe that others do not? Uh, you answered the conventional wisdom is that ideas without execution are worthless. So how contrarian are you in your thinking towards this, and what are some elements you believe are integral to successful idea generation?

A Well, I think, you know, I think idea generation is quite challenging, or I've never been particularly good at it. I guess the reason I have so much energy around this particular topic is I don't feel like I have a Talent that I'm, is the ability to really evaluate an opportunity like this, evaluate, to see even contrarian ideas that have a lot of merit. I think I'm sometimes able to perceive the opportunity there where others can't. And so that's been a powerful force for me. And if I look at the experience in Flutter Betfair, my first business, it was a really tremendous idea, which was not created by me. It was my co-founder Vince's idea, a full credit to him. Uh, but he had sort of parked it. He'd had the idea nine months before and then kind of parked it as infeasible. And then as soon as I heard it, I said, that is it, that we need to be doing that. And I created some energy around making it happen and we went and did it. And then I can't tell you how mediocre our execution was as founders. I mean, it's embarrassing compared to a lot of the people in my portfolio. How terrible we were now in defense a little bit, the sign, you know, founding companies has become more and more of a science and less of an art than it was even 15 years ago. Um, so hopefully, and if, if I was a founder today, I would, um, the first time founder today, I would perform a little better, but, but…

AI assessment note: “the core idea was so powerful. It survived our mediocre execution”

Q I'm really intrigued. You said about product market fit there. This is a classic business school question. But you had it with two businesses very successfully. So how did you assess product market fit, and how do you look to assess it with your own portfolio companies?

A Yeah, that's a good question. I mean, you know, you can, you know, typically these days, you can see it in the numbers, and you can analyze it, but there's also sort of an intuitive component to it that I think is important in terms of getting a feel that something's working. As a, as an aside, in my first business, the betting business, In that environment, it was before this kind of lean startup movement, this launch and learn and test and just get a minimum product out quickly and see how the market responds. And back in the day, you tried to, you know, build the whole thing before you launched. Uh, and so we were actually, we actually did focus groups of our product because, you know, you wanted to understand customer sentiment. You're spending all this money to build this thing. And this guy in the UK, we're in London, Ran through five or six groups of customers, and then they got to sit behind, you know, a mirrored, a one-way mirrored wall, and you'd ask them lots of questions and show them, show them examples of what they might do, and at the end of it, this guy who'd been a, um, market researcher for 25 years said, you know, in my 25 years, I've probably research tested over 500 products, and this product tested the worst of any product I've ever tested. This is absolutely the worst product I've ever tested. Um, so that would seem to not indicate product market fit, and…

AI assessment note: “you can see it in the numbers, and you can analyze it, but there's also sort of an intuitive component”

Q I'm really intrigued. You said about product market fit there. This is a classic business school question. But you had it with two businesses very successfully. So how did you assess product market fit, and how do you look to assess it with your own portfolio companies?

A Yeah, that's a good question. I mean, you know, you can, you know, typically these days, you can see it in the numbers, and you can analyze it, but there's also sort of an intuitive component to it that I think is important in terms of getting a feel that something's working. As a, as an aside, in my first business, the betting business, In that environment, it was before this kind of lean startup movement, this launch and learn and test and just get a minimum product out quickly and see how the market responds. And back in the day, you tried to, you know, build the whole thing before you launched. Uh, and so we were actually, we actually did focus groups of our product because, you know, you wanted to understand customer sentiment. You're spending all this money to build this thing. And this guy in the UK, we're in London, Ran through five or six groups of customers, and then they got to sit behind, you know, a mirrored, a one-way mirrored wall, and you'd ask them lots of questions and show them, show them examples of what they might do, and at the end of it, this guy who'd been a, um, market researcher for 25 years said, you know, in my 25 years, I've probably research tested over 500 products, and this product tested the worst of any product I've ever tested. This is absolutely the worst product I've ever tested. Um, so that would seem to not indicate product market fit, and…

AI assessment note: “you can see it in the numbers, and you can analyze it, but there's also sort of an intuitive component”

Q I'm intrigued. You obviously said about the spending there, and VentureBat allows for a lot more freedom on the burn rate side, and you've said before that the best CEOs are great capital allocators. Why has capital allocation then gotten worse in the ecosystem over time? I've heard you suggest this also, and how does that affect the role of a board member? Now you're a VC.

A Yeah, well, I mean, this is what I think a lot of board members, a lot of venture capitalist board members, Do not have the right idea, in my opinion, of what their role as a board member is, but I think weighing in on, you know, senior leadership, who are the senior leaders of the organization, particularly who is the CEO, generally the founder, and now these days that's pretty hard and unwise to change, and then how they allocate capital, which projects they allocate it to, are really appropriate ways in which the board can help the management team make the right decisions to And then there's a whole host of decisions that boards weigh in on, you know, on specific initiatives or products or pricing or management, you know, all these things that I think they should probably, the board should largely stay out of and just put great people in who are in it every day and make those decisions. But on this issue of capital allocation, the best CEOs understand where to put the resources, where to invest, and I think the average CEO, which is a good person, a venture-backed CEO, the kind of people we invest in, and we, you know, we try and be choosy about who those are, still often is not a master of this issue of capital allocation, and so they will, you know, they will just not be thoughtful about which new projects they invest in. They will often do what they said they were going t…

AI assessment note: “how they allocate capital, which projects they allocate it to, are really appropriate ways”

Q I'm intrigued. You obviously said about the spending there, and VentureBat allows for a lot more freedom on the burn rate side, and you've said before that the best CEOs are great capital allocators. Why has capital allocation then gotten worse in the ecosystem over time? I've heard you suggest this also, and how does that affect the role of a board member? Now you're a VC.

A Yeah, well, I mean, this is what I think a lot of board members, a lot of venture capitalist board members, Do not have the right idea, in my opinion, of what their role as a board member is, but I think weighing in on, you know, senior leadership, who are the senior leaders of the organization, particularly who is the CEO, generally the founder, and now these days that's pretty hard and unwise to change, and then how they allocate capital, which projects they allocate it to, are really appropriate ways in which the board can help the management team make the right decisions to And then there's a whole host of decisions that boards weigh in on, you know, on specific initiatives or products or pricing or management, you know, all these things that I think they should probably, the board should largely stay out of and just put great people in who are in it every day and make those decisions. But on this issue of capital allocation, the best CEOs understand where to put the resources, where to invest, and I think the average CEO, which is a good person, a venture-backed CEO, the kind of people we invest in, and we, you know, we try and be choosy about who those are, still often is not a master of this issue of capital allocation, and so they will, you know, they will just not be thoughtful about which new projects they invest in. They will often do what they said they were going t…

AI assessment note: “what their role as a board member is, but I think weighing in on”