The Exchanges

Q And I'm intrigued with that kind of operational experience. Do you feel it's something that I always debate internally for myself? Do you feel that all VCs need operational experience, or what do you think is the best kind of and quickest onboarding process for institutional investors?

A Yeah. I actually think contrary to a common belief that you, you must be a great operator to be a great investor. I actually believe the opposite, which is that not all great operators are naturally going to be good investors. And in fact, your investment career should be developed and honed by investing through, through that experience. And it's a fairly unique and specialized skill that obviously the more you understand about different parts of the business, the better you're going to be at sifting out the BS from reality. I think the best investors stem from actually being investors. So the earlier in venture that you start investing, the better you're going to be over the long term. So I don't think doing a career, a lifetime career in another field and then switching over as a late stage career change is the common way to go. There are exceptional cases, but I think the best way institutions should think about it and for yourself is the sooner you get investment exposure, the The better you're going to know whether you're, you're good or not, and you'll know what skills to develop. It's like being an entrepreneur, working in a big corporation for 20 years, and then becoming an entrepreneur, you're still going to be learning the same things as if you were in school, and you graduated, and you were 24, and you're doing, starting a company. There's common skills you're going …

AI assessment note: “I think the best investors stem from actually being investors.”

Q And I'm intrigued with that kind of operational experience. Do you feel it's something that I always debate internally for myself? Do you feel that all VCs need operational experience, or what do you think is the best kind of and quickest onboarding process for institutional investors?

A Yeah. I actually think contrary to a common belief that you, you must be a great operator to be a great investor. I actually believe the opposite, which is that not all great operators are naturally going to be good investors. And in fact, your investment career should be developed and honed by investing through, through that experience. And it's a fairly unique and specialized skill that obviously the more you understand about different parts of the business, the better you're going to be at sifting out the BS from reality. I think the best investors stem from actually being investors. So the earlier in venture that you start investing, the better you're going to be over the long term. So I don't think doing a career, a lifetime career in another field and then switching over as a late stage career change is the common way to go. There are exceptional cases, but I think the best way institutions should think about it and for yourself is the sooner you get investment exposure, the The better you're going to know whether you're, you're good or not, and you'll know what skills to develop. It's like being an entrepreneur, working in a big corporation for 20 years, and then becoming an entrepreneur, you're still going to be learning the same things as if you were in school, and you graduated, and you were 24, and you're doing, starting a company. There's common skills you're going …

AI assessment note: “I actually believe the opposite, which is that not all great operators are naturally going to be good investors.”

Q kind of building the team, you said about kind of what founders should look for and how kind of, uh, what do you call it? Introductions and advice should be a core component of that. In terms of your team building internally with Spectrum, how did you look to build the best team you could and what did you see as the core components to building the best venture fund?

A That's a great question because I think there's a, there's a propensity, there's a thought, there's a thought in venture that venture should be done by individuals. It's an individual sport and you work at it alone. So you could be successful. You just be alone and do that because it's about your own star quality. And so really the question we posed ourselves as a team, having been on some teams, uh, myself, I've had the fortunate opportunity of working with some teams that really have exceptional teamwork. The question is, could you build a team that is actually team oriented versus stars? So the two, the two ends of the spectrum are stars versus team players. Can you incentivize and create a structure where you have that, uh, teamwork because that's how you create an institution. Otherwise, if you have stars, once the stars leave, you don't have something that remains as an organization. And our goal, even though first time fund, our goal, um, when Kent and I started was to make something, uh, he, he comes from Goldman. So, uh, The background is to create something long-lasting like that. How could you create something as an institution, or like Benchmark, where you have the leaders of the organization still being able to perform at their peak, but they left at their peak of their career, and, and passed it on to the successors. So, so I think those things we thought about in…

AI assessment note: “could you build a team that is actually team oriented versus stars?”

Q And which way do you think the VC world is going? Often I hear that, you know, Operating experience is becoming more and more important. Do you, do you feel that in 10 years time actually we will have a proliferation of career VCs, or do you think it will mostly be operational?

A The key is having an operational network is critical, but having operational experience. So I have operational experience, but that's now at least six, seven years in the past because I've been doing venture for six, seven years. So I think for every single instance where you have someone who was the great operator, they were. And I think as venture, we'll get more competitive, and I think this is why we started a fund. There's a new shift to delivery. The more real-time your operational relevance is, the more powerful it's going to be. So it's about not having to draw on your own experience from a decade past, but who in your network is going to be able to provide experience right now that is currently operating. I think that's more powerful. So I think having an operational network is key, but not necessarily you have to be the one to have experienced All aspects of operating and you to be imparting the wisdom yourself. I don't think that's the, that in 10 years from now, I don't think that that will be as competitive as having a real-time network of operators.

AI assessment note: “in 10 years from now, I don't think that that will be as competitive”

Q Absolutely. Does, I'm, I'm intrigued as a kind of GP now at spectrum 28 and, you know, although not kind of immediately at the front of mind, you know, at the end of the day for LPs, it's cash on cash. And so I'm intrigued. Does the extended kind of longevity to private, to public companies and to access, does that concern you?

A I think it concerns me because it concerns the LPs. Now, how we address that is that's why part of the strategy for Spectrum 28 is that we are a hybrid. We're not of the traditional funds that were formed decades ago, horizontal stage investors. So we don't say we only invest in seed. We only invest in A. We are investing across stage, but that would mean you invest in everything, which is also not the case. So you have on the other extreme, you have funds that do invest across stage, but only invest in a certain vertical. We're a hybrid of the two. We invest across stage, but we don't limit ourselves to single vertical. We invest in, we open up and activate a new vertical per quarter. So over time, we invest in multiple verticals, multiple industries, so that way we have the flexibility in case, what if it wasn't the right time to invest in fintech for this whole vintage, and you were mandated to deploy capital, that, that doesn't make sense, or you would have to then not invest at all for a It's not seizing the opportunity. So in our hybrid model allows us to invest in multiple industries across stage and still have focus, but without being constrained on both ends. So that's the experiment we're running. And that's why LP supported us because we're, we have a different playbook.

AI assessment note: “I think it concerns me because it concerns the LPs.”

Q kind of building the team, you said about kind of what founders should look for and how kind of, uh, what do you call it? Introductions and advice should be a core component of that. In terms of your team building internally with Spectrum, how did you look to build the best team you could and what did you see as the core components to building the best venture fund?

A That's a great question because I think there's a, there's a propensity, there's a thought, there's a thought in venture that venture should be done by individuals. It's an individual sport and you work at it alone. So you could be successful. You just be alone and do that because it's about your own star quality. And so really the question we posed ourselves as a team, having been on some teams, uh, myself, I've had the fortunate opportunity of working with some teams that really have exceptional teamwork. The question is, could you build a team that is actually team oriented versus stars? So the two, the two ends of the spectrum are stars versus team players. Can you incentivize and create a structure where you have that, uh, teamwork because that's how you create an institution. Otherwise, if you have stars, once the stars leave, you don't have something that remains as an organization. And our goal, even though first time fund, our goal, um, when Kent and I started was to make something, uh, he, he comes from Goldman. So, uh, The background is to create something long-lasting like that. How could you create something as an institution, or like Benchmark, where you have the leaders of the organization still being able to perform at their peak, but they left at their peak of their career, and, and passed it on to the successors. So, so I think those things we thought about in…

AI assessment note: “Can you incentivize and create a structure where you have that teamwork”

Q In terms of the kind of VC environment itself, and we spoke about kind of the intersection of LPs and GPs, uh, where do you see kind of the clusters in VC environments and where do you think there are crunches? Obviously with the one 75, it suggests that you think there's a crunch at that range, but what's your kind of take on the market overview at this time?

A So starting at the late stage, interestingly, I've had venture experience from seed to early stage to late stage. So I think Of the, of the many people I've actually moved across these, these horizontal stages and experienced, uh, experienced a slice of each of them. So I think I can bring all that together and see that there is an efficiency curve. So there's no definitive optimal stage because if you're on that efficiency curve and you're investing in the late stage, it's as good as investing in the early stage. Even if your multiple isn't as high as So not in the hundred X, but you're really faster to market and your, your IRR can be just as good. So I think anywhere in the efficiency curve, you're going to see superior returns. Now we're on that curve. Is there less capital? I think the later stage, starting with the later stage with companies being private longer, and obviously there was the exception with Nutanix with such a great IPO, but in general with companies remaining private longer, public investors have moved to, Towards investing in these private rounds at valuations that are traditionally meant for companies that were IPO targets already. In that case, you have a lot more capital competing in the late stage, so just in terms of amount of capital, it's high because exits are held longer. Then on the seed stage, because I think you have this trend of operators th…

AI assessment note: “In that case, you have a lot more capital competing in the late stage”

Q In terms of the kind of VC environment itself, and we spoke about kind of the intersection of LPs and GPs, uh, where do you see kind of the clusters in VC environments and where do you think there are crunches? Obviously with the one 75, it suggests that you think there's a crunch at that range, but what's your kind of take on the market overview at this time?

A So starting at the late stage, interestingly, I've had venture experience from seed to early stage to late stage. So I think Of the, of the many people I've actually moved across these, these horizontal stages and experienced, uh, experienced a slice of each of them. So I think I can bring all that together and see that there is an efficiency curve. So there's no definitive optimal stage because if you're on that efficiency curve and you're investing in the late stage, it's as good as investing in the early stage. Even if your multiple isn't as high as So not in the hundred X, but you're really faster to market and your, your IRR can be just as good. So I think anywhere in the efficiency curve, you're going to see superior returns. Now we're on that curve. Is there less capital? I think the later stage, starting with the later stage with companies being private longer, and obviously there was the exception with Nutanix with such a great IPO, but in general with companies remaining private longer, public investors have moved to, Towards investing in these private rounds at valuations that are traditionally meant for companies that were IPO targets already. In that case, you have a lot more capital competing in the late stage, so just in terms of amount of capital, it's high because exits are held longer. Then on the seed stage, because I think you have this trend of operators th…

AI assessment note: “you have a lot more capital competing in the late stage”

Q Is it not difficult then to implement the same level of focus and build the same kind of pattern recognition? If you are specialized in fintech or real estate and you see thousands of companies, you can Kind of measure the data and compare against each other. Is it not difficult with such a broad thesis?

A So for each vertical, when we focus on it, we do get to that equal level of depth. The thing is maintaining that requires a lot of effort. I mean, take a play from the startup world. It's not scalable. It's not infinitely scalable the way we're running the fund to keep expanding the areas with this type of, uh, structure because we invest a lot of effort to ramping it up. However, For first fund, we have to, we're providing way more value and going much deeper than we otherwise would because we're trying to build the reputation of delivering on that value. And that's, that's what I think. So you say LPs care about cash on cash return, but what does the, what do the founders care about? They don't care about your cash on cash return and how successful you were in making money as a fund. They care about how impactful were you To them as a company, growing them and adding actual concrete value. And that reputation is what's going to take. Reputation is what we're focused on building in event ahead of the cash on cash return. So the LPs that invest in us have to believe that if we develop that reputation and we're the best at delivering the cash on cash return, we'll catch up if not in this fund in the next one. So it has to, they have to play a longer term game to do that because we are going to spend a lot Of our, so we reinvest a lot of our fund resources into developing those v…

AI assessment note: “The thing is maintaining that requires a lot of effort. I mean, take a play”

Q And which way do you think the VC world is going? Often I hear that, you know, Operating experience is becoming more and more important. Do you, do you feel that in 10 years time actually we will have a proliferation of career VCs, or do you think it will mostly be operational?

A The key is having an operational network is critical, but having operational experience. So I have operational experience, but that's now at least six, seven years in the past because I've been doing venture for six, seven years. So I think for every single instance where you have someone who was the great operator, they were. And I think as venture, we'll get more competitive, and I think this is why we started a fund. There's a new shift to delivery. The more real-time your operational relevance is, the more powerful it's going to be. So it's about not having to draw on your own experience from a decade past, but who in your network is going to be able to provide experience right now that is currently operating. I think that's more powerful. So I think having an operational network is key, but not necessarily you have to be the one to have experienced All aspects of operating and you to be imparting the wisdom yourself. I don't think that's the, that in 10 years from now, I don't think that that will be as competitive as having a real-time network of operators.

AI assessment note: “in 10 years from now, I don't think that that will be as competitive”

Q Is it not difficult then to implement the same level of focus and build the same kind of pattern recognition? If you are specialized in fintech or real estate and you see thousands of companies, you can Kind of measure the data and compare against each other. Is it not difficult with such a broad thesis?

A So for each vertical, when we focus on it, we do get to that equal level of depth. The thing is maintaining that requires a lot of effort. I mean, take a play from the startup world. It's not scalable. It's not infinitely scalable the way we're running the fund to keep expanding the areas with this type of, uh, structure because we invest a lot of effort to ramping it up. However, For first fund, we have to, we're providing way more value and going much deeper than we otherwise would because we're trying to build the reputation of delivering on that value. And that's, that's what I think. So you say LPs care about cash on cash return, but what does the, what do the founders care about? They don't care about your cash on cash return and how successful you were in making money as a fund. They care about how impactful were you To them as a company, growing them and adding actual concrete value. And that reputation is what's going to take. Reputation is what we're focused on building in event ahead of the cash on cash return. So the LPs that invest in us have to believe that if we develop that reputation and we're the best at delivering the cash on cash return, we'll catch up if not in this fund in the next one. So it has to, they have to play a longer term game to do that because we are going to spend a lot Of our, so we reinvest a lot of our fund resources into developing those v…

AI assessment note: “for each vertical, when we focus on it, we do get to that equal level of depth.”

Q Absolutely. Does, I'm, I'm intrigued as a kind of GP now at spectrum 28 and, you know, although not kind of immediately at the front of mind, you know, at the end of the day for LPs, it's cash on cash. And so I'm intrigued. Does the extended kind of longevity to private, to public companies and to access, does that concern you?

A I think it concerns me because it concerns the LPs. Now, how we address that is that's why part of the strategy for Spectrum 28 is that we are a hybrid. We're not of the traditional funds that were formed decades ago, horizontal stage investors. So we don't say we only invest in seed. We only invest in A. We are investing across stage, but that would mean you invest in everything, which is also not the case. So you have on the other extreme, you have funds that do invest across stage, but only invest in a certain vertical. We're a hybrid of the two. We invest across stage, but we don't limit ourselves to single vertical. We invest in, we open up and activate a new vertical per quarter. So over time, we invest in multiple verticals, multiple industries, so that way we have the flexibility in case, what if it wasn't the right time to invest in fintech for this whole vintage, and you were mandated to deploy capital, that, that doesn't make sense, or you would have to then not invest at all for a It's not seizing the opportunity. So in our hybrid model allows us to invest in multiple industries across stage and still have focus, but without being constrained on both ends. So that's the experiment we're running. And that's why LP supported us because we're, we have a different playbook.

AI assessment note: “I think it concerns me because it concerns the LPs. Now, how we address that”