The Exchanges

Q That's very, very kind of you. I would love to start with a little bit of scene setting though. Uh, you joined Venture, um, a while ago in July, 96. Um, how did you get the job at Excel? Can you just take me to that and how you got into Venture there?

A It was kind of an accident. I was trying to get a job in a startup and I inadvertently became a venture capitalist. Um, but I, I was a product manager at a company called Silicon Graphics, which was a high flyer in the early nineties. We were doing three D graphics and digital media. And, uh, I've been there about four years and it, you know, the reason I'd gone there was to try and get the base of experience that could make me, you know, somewhat valuable in a startup. So I was starting to talk to some startup opportunities and, you Got to know a few of the venture backers in the course of that, and it turned out that none of those startups were quite right for me, but, uh, some of the venture people said, you know, hey, maybe you might want to come in and work with us for a while, and I, I thought that might be a decent, uh, position to, you know, identify a better startup opportunity, so, uh, so I ended up joining Excel, um, I took a pay cut to do it, uh, and I thought of it as, like, And, and I wasn't making a lot of money at SGI. So that, that kind of tells you how, how the industry worked then. But, um, I thought I might be there for like, 18 months and, you know, it's been a little longer than that.

AI assessment note: “It was kind of an accident. I was trying to get a job in a startup”

Q No, resize the check. You know, I, you said it went from like six to 12. I'm saying, why not invest just three or six? Why do nothing?

A Well, we didn't really have that opportunity, you know, because they always have to do 12. Yeah, no, there was, there was an opportunity for a lead investor, and then the existing investors, you know, were not backing off their pro rata, so you're either going to do 12 or just play your pro rata. I mean, you know, with that switch is what we ended up doing, um, but, you know, obviously in retrospect, Respect. I wish we'd invested the 12. And you know, the firm that did invest the 12, I think it's like the best investment in their history. You know, the series B at Snowflake. And so, and so that's, that was a big lesson learned.

AI assessment note: “we didn't really have that opportunity... you're either going to do 12 or just play your pro rata”

Q over the outsider mindset. Can I ask we, we on the product side and on the market side, we have market creation or like new category creation, or we have optimization innovating, but in a well-known product category in an existing market, making something better, not new necessarily. Um, How do you think about a preference when it comes to market creation versus kind of product innovation and product improvement?

A Yeah. Well, I mean, I've done both, uh, you know, and I've had both work pretty well. I think, I think there's, there's a sweet spot in there, Harry, you know, um, you know, cause certainly category creation is difficult. It can take a long time and you can time it wrong. You know, there's, you know, many times people have attempted to create a categories and they were right, but early, you know, which amounted to being wrong. Um, and, and so, you know, finding, um, that opportunity, which is close enough to something that people understand, so it isn't just a complete lobotomy for the customer, right? You know, so that, so they have some grounding, but different enough so that it isn't just kind of an obvious next move by all the incumbents. You know, that's, that's kind of a sweet spot. Um, again, maybe Snowflake's an example of that, right? People knew data warehousing, but You know, the whole idea of doing this, uh, leveraging the power of the cloud was a really important transformational thing. So, you know, so we had these twenty million people that were trained on SQL and the whole tool ecosystem that we could take advantage of. Uh, but, uh, we also had, you know, an architecture and a set of capabilities that were going to unlock value that was going to be really hard for a Teradata or an Oracle, uh, to do. So, you know, so that's a good example of it's like, well, is t…

AI assessment note: “I think there's, there's a sweet spot in there, Harry”

Q You mentioned Gong, you mentioned Pinecone, you mentioned Snowflake. I think we also learn from mistakes that we make investing wise. I'm just intrigued on like your biggest size wise. What was your biggest size wise and how did that change your mindset?

A You know, I'm Harry, like my, my biggest miss is also one of my biggest wins. Um, so, so, so like, you know, we, we were seed investors in snowflake and then, you know, in series a investors and we were, you know, positioning, uh, ourselves to lead this series B and had, you know, sort of a lot of conversations. And I think, you know, a lot of agreement with Founders, around a ten million dollar Series B. Wing One, that was a good size for Wing One, you know, which is a very, pretty small fund, and then, you know, but we, we underestimated how rapidly the venture market was moving in terms of the size of financings, and that, you know, ten million dollar financing suddenly wanted to be a 20, and, you know, the lead check went from six to 12, and we felt like we couldn't do that, you know, within little Wing One, so we passed. What a dumb move. Biggest You know, in retrospect, right? You know, this is our company that we were already working in, and, and, and because of the size of the financing, we still love the company, right? You know, but because, literally, because of the size of the financing relative to the size of our fund, you know, we, we didn't step forward, uh, you know, into that, and it's, I think, you know, as an opportunity cost, obviously, it's not a, a loss in, in, in sense of lost capital, but it's an opportunity cost, probably the biggest, biggest opportunit…

AI assessment note: “my biggest miss is also one of my biggest wins. Um, so, so, so like, you know, we, we were seed investors in snowflake”

Q and whatever months it was. I'd just love to unpack some lessons from that because it went from a bluntly smaller firm, um, in, you know, singular locations to a global player and an aircraft carrier in many respects. My question to you is, what are one or two of the big lessons that you took from your time in Excel, having been there so early and seeing so much?

A Yeah. So, well, so when I joined Excel, I mean, we were, we were very focused, um, thematically. I was also a pretty small team. I mean, there were the founders, Jim Swartz and Arthur Patterson. Jim Breyer was there. Um, you know, there was a healthcare team that would soon be spun off. It was like one other associate that had gotten there a year ahead of me. And I mean, and that was it. You know, but the team, the, the firm had very big ambitions and, and was not willing to sort of place itself second, second to anyone, and, and so certainly aspired to the, to the top ranks of the industry, and I think that ambition ended up being, uh, you know, a pretty important ingredient. Uh, you know, in terms of the, the things that the firm did really well that, that have allowed it to be as successful as it is today, um, you know, one was, um, developing next generation venture capital investors. The firm for, You know, combination of reasons we can talk about was just exceptional at identifying, um, superb talent and then developing it, uh, within, you know, within the firm. Uh, and if you, if you look back, I mean, there's just a very long list of people, both still in the firm and also people, you know, alumni that have left, uh, that have really made an impact on the industry, have led, you know, really important, uh, high-performing firms or, or, or founded their own. Um, and I th…

AI assessment note: “one was, um, developing next generation venture capital investors”

Q How do you think about market timing risk? It's something that I don't like to take. As you said, being, you know, wrong on timing is crucial and you can be right in your theory and wrong on timing and, you know, doth bother no parsnips as we say in the UK. And so how do you think about market timing risk?

A Well, I mean, I guess you could say, sometimes you have to get lucky. It's one of the risks that we talk about the most, uh, as early stage investors, um, And, you know, again, I think the, the thematic focus and sort of only working in domains that you understand really well is an advantage. Uh, you know, you have, um, I think better, better proximity to judge when, you know, when the architectural transition, uh, is, is, is likely to occur. You have a lot of customer intimacy, so you can sort of sense the, the level of urgency or, or the amount of frustration Uh, with existing approaches, um, and, uh, but it's, it's still easy to get wrong. I mean, I, you know, I get it wrong all the time.

AI assessment note: “thematic focus and sort of only working in domains that you understand really well”

Q No, resize the check. You know, I, you said it went from like six to 12. I'm saying, why not invest just three or six? Why do nothing?

A Well, we didn't really have that opportunity, you know, because they always have to do 12. Yeah, no, there was, there was an opportunity for a lead investor, and then the existing investors, you know, were not backing off their pro rata, so you're either going to do 12 or just play your pro rata. I mean, you know, with that switch is what we ended up doing, um, but, you know, obviously in retrospect, Respect. I wish we'd invested the 12. And you know, the firm that did invest the 12, I think it's like the best investment in their history. You know, the series B at Snowflake. And so, and so that's, that was a big lesson learned.

AI assessment note: “you're either going to do 12 or just play your pro rata”

Q How important do you think it is to have hits early on in your investing career?

A You know, it's a double edged sword, right? So it, it can be very good in terms of building, uh, some credibility and some reputation. And that certainly was the case, you know, for me. And so it, it brought, You know, maybe sort of more relevant and interesting to, to founders. On the other hand, you know, maybe I skipped over some of the important lessons that one needs to learn early in one's career. And, and, uh, of course it, you know, it's not that those lessons weren't there. I just ended up learning them in, you know, the, the post to .com bust, uh, downturn when, you know, all the cracks were revealed. And, uh, it might've been, might've been better to, to have, uh, some experience with some of those things up front, but, You know, you, you play the cards you don't.

AI assessment note: “it's a double edged sword, right? So it, it can be very good”

Q the large firms that we saw deploying such crazy amounts at such crazy prices, and I looked at their partners and I was like, You shouldn't have done this. You've seen this before. Like, you know how this game works. How do you think about actually every situation being fresh or actually learning from the past? I'm just intrigued given the many different exposures from Macro. How it happened again.

A You want to learn from the past, but you don't want to overlearn from the past. I think one of the behaviors in venture, you know, which you just, you know, noted is that, uh, you know, there's this kind of safety in the herd thing, and, and I, a belief, uh, within, you know, firms and, and partners, and not incorrect, that if they're making the same mistake that everyone else in the industry is making, they probably won't be punished for it, because, you know, the capital has to go somewhere. And, uh, you know, so the real dangerous thing is to make the unusual mistake that no one else made. Uh, and so, you know, this is, um, it's one of the things that kind of drags down returns in the industry. It's one of the things that makes it a very cyclical business. Uh, it's, uh, you know, and it's, it's just a behavior that's been there kind of forever, you know, because, you know, the flip side of, um, of sort of, sort of maintaining discipline is sometimes, um, you know, missing out on a, on a huge, um, Sort of acceleration. And I certainly saw that when in the, like back to the late nineties, you know, there were people, uh, good venture capitalists that were like, you know what, you know, these valuations are just too high. I'm not investing in these internet companies, you know, it just doesn't make sense. And, you know, they kind of missed out on a pretty transformative phase. …

AI assessment note: “You want to learn from the past, but you don't want to overlearn from the past.”

Q I, I never liked companies that are a net new line item. For someone. And I think in the case of that, from the sounds of it, it was a net new line item for a buyer. How do you think about companies when it is a net new line item for a buyer and you're not replacing something, but you're really adding an additional cost?

A Yeah. Well, you better have line of sight on where that budget's going to come from and who owns it. You know, net, net new is not usually ever really net new. I mean, it might, it might be a new line item, but you know, hopefully you are, uh, You know, funding is available from things maybe that the customer no longer needs, uh, or sufficient gains that are going to pay for it, and that can take a little, I mean, that's part of the friction, right? You know, when, when you're proposing something new, it takes a little while for that to sort out. Um, you know, my, uh, my, another company I work with, uh, is, uh, Gong, right? Uh, pretty, uh, pretty successful sales technology company, and, You know, what Gong brought to market, that was a net new thing. Uh, and, uh, and, and it did constitute, you know, additional spend, but, you know, the gain from it was so clear and so obvious, and, and, and, uh, and the pull, you know, once, once users got their hands on it was so strong that, you know, with other budget was able to be able to be reallocated, uh, you know, to fund, to fund that investment, and it, and it became kind of a must have. In the sales tool belt. So, I mean, I love projects like that. I mean, I'd rather have been doing that in sales tech than, oh, here's a better CRM, you know, unplug Salesforce and plug in my CRM. You know, like to me, that's a fool's errand. You k…

AI assessment note: “you better have line of sight on where that budget's going to come from”

Q So is there a lesson or takeaway from that then?

A Yeah, there is, which is like some, you know, some businesses are, might be good businesses, but really aren't venture appropriate. Uh, and, uh, and so I, I think that's kind of what I took away from this. There's a lot, you know, there was lots of, um, opportunity to build, you know, big, Um, network operations type companies, and, you know, look at the build out of the cellular industry, for example, or, you know, the, uh, and, but there's also a capital intensity, uh, and a sort of financial engineering, um, elements to that, that make it very, uh, very difficult to think you're going to do that, uh, out of venture capital, which is really built more around a lot of IP, a lot of team tenacity, and unique perception, And, you know, more, more moderate amounts of capital. And so I, you know, I applied that lesson in other sectors later, you know, steering clear of, you know, certain super capital intensive clean tech projects.

AI assessment note: “some businesses are, might be good businesses, but really aren't venture appropriate.”

Q over the outsider mindset. Can I ask we, we on the product side and on the market side, we have market creation or like new category creation, or we have optimization innovating, but in a well-known product category in an existing market, making something better, not new necessarily. Um, How do you think about a preference when it comes to market creation versus kind of product innovation and product improvement?

A Yeah. Well, I mean, I've done both, uh, you know, and I've had both work pretty well. I think, I think there's, there's a sweet spot in there, Harry, you know, um, you know, cause certainly category creation is difficult. It can take a long time and you can time it wrong. You know, there's, you know, many times people have attempted to create a categories and they were right, but early, you know, which amounted to being wrong. Um, and, and so, you know, finding, um, that opportunity, which is close enough to something that people understand, so it isn't just a complete lobotomy for the customer, right? You know, so that, so they have some grounding, but different enough so that it isn't just kind of an obvious next move by all the incumbents. You know, that's, that's kind of a sweet spot. Um, again, maybe Snowflake's an example of that, right? People knew data warehousing, but You know, the whole idea of doing this, uh, leveraging the power of the cloud was a really important transformational thing. So, you know, so we had these twenty million people that were trained on SQL and the whole tool ecosystem that we could take advantage of. Uh, but, uh, we also had, you know, an architecture and a set of capabilities that were going to unlock value that was going to be really hard for a Teradata or an Oracle, uh, to do. So, you know, so that's a good example of it's like, well, is t…

AI assessment note: “I think there's a sweet spot in there”

Q No, I, I totally get you there. What's the biggest mistake you see first time founders make?

A I think choosing expedience over, you know, the hard things that, that actually Contribute to long-term value. You know, there's sort of quick fixes and, and sort of feel-good measures that can take the edge off whatever, uh, is bothering you, uh, at a moment in time. But those chickens come home to roost, uh, so that this might manifest itself in, you know, in a hiring decision, you know, where you opt for good enough instead of holding out for great. Uh, this might manifest itself in fundraising, where you sort of take, you know, ready, friendly capital instead of partners that, you know, can really help you. Uh, and you know, eventually those accumulation of, of expediences, um, compromise a company.

AI assessment note: “choosing expedience over, you know, the hard things that, that actually Contribute to long-term value”

Q How important do you think it is to have hits early on in your investing career?

A You know, it's a double edged sword, right? So it, it can be very good in terms of building, uh, some credibility and some reputation. And that certainly was the case, you know, for me. And so it, it brought, You know, maybe sort of more relevant and interesting to, to founders. On the other hand, you know, maybe I skipped over some of the important lessons that one needs to learn early in one's career. And, and, uh, of course it, you know, it's not that those lessons weren't there. I just ended up learning them in, you know, the, the post to .com bust, uh, downturn when, you know, all the cracks were revealed. And, uh, it might've been, might've been better to, to have, uh, some experience with some of those things up front, but, You know, you, you play the cards you don't.

AI assessment note: “You know, it's a double edged sword, right?”

Q What do they do to develop talent so well, do you think? What specifically about Excel makes them good at talent development?

A Yeah. I mean, I think it's this, um, interesting combination of giving, um, well, you bring the right raw material in first. Okay. And then, and then you give that person, um, both enough rope to hang themselves so that they're, you know, feeling tremendous accountability. You know, what, uh, will be called the sleepless night factor. Uh, but also guardrails, uh, that protect them from making, you know, really egregious, uh, you know, blunders, right? And so this combination of guardrails and enough rope to hang yourself is sort of the magic of it, and it, and it, it accelerates learning tremendously, and, and it's done in sort of a non-hierarchical fashion too, so we were aspiring to the flat partnership, which means even, you know, the most junior people, the brand new associate like me, you know, sort of had an equal voice and You know, even though, okay, yeah, there, there, there was people with a lot more experience, but you sort of felt like, you know, you were, uh, you know, you were a peer, even as, even if mainly some of that was optical, and you, and you were forced to behave like that, and, and approach decision-making in that manner, so, you know, so you weren't carrying someone's bag for three years, or, you know, be doing support work, uh, you know, you were sort of on the stage, but you also had a lot of backup, so I think that, Those are some of the key ingredie…

AI assessment note: “this combination of guardrails and enough rope to hang yourself is sort of the magic”

Q How do you think about market timing risk? It's something that I don't like to take. As you said, being, you know, wrong on timing is crucial and you can be right in your theory and wrong on timing and, you know, doth bother no parsnips as we say in the UK. And so how do you think about market timing risk?

A Well, I mean, I guess you could say, sometimes you have to get lucky. It's one of the risks that we talk about the most, uh, as early stage investors, um, And, you know, again, I think the, the thematic focus and sort of only working in domains that you understand really well is an advantage. Uh, you know, you have, um, I think better, better proximity to judge when, you know, when the architectural transition, uh, is, is, is likely to occur. You have a lot of customer intimacy, so you can sort of sense the, the level of urgency or, or the amount of frustration Uh, with existing approaches, um, and, uh, but it's, it's still easy to get wrong. I mean, I, you know, I get it wrong all the time.

AI assessment note: “thematic focus and sort of only working in domains that you understand really well”

Q Um, what was some other time? I'm just intrigued. I want to learn from you. What were some other times when they said that and why were they unjust then? I'm just trying to learn so we don't make the same mistakes.

A Yeah. Post-two thousand. Um, so post-two thousand that, you know, this, You know, we, we went through a large, um, reset, and there was a lot of people doing math, saying, like, oh, you know, for, you know, all this capital's been raised, and, you know, to earn a decent, you know, venture-style return on this capital, then, you know, this amount of, uh, you know, value needs to be created, which means this many IPOs of this size, and that's just not possible, right? So we're, so we're, you know, so buckle up for, Permanently reduced returns. And those guys were so wrong because it ended up actually that the outcome sizes did increase. The number of them did increase. And like what's going on is you just have technology becoming a more and more, uh, important, um, component in the global economy, right? You know, you can look at this just by measuring tech sector, narrowly defined tech sector as a percentage of global GDP. And that doesn't even count You know, the sort of, the technology-enabled componentry that's in other sectors, you know, like financial services or whatever. And so, I think just the relative importance of, of technology and its benefit, um, in everything we do, uh, it has increased so rapidly, uh, that it's, it's kind of kept pace, uh, with, you know, the sort of, the depressing factors. Now, it's cyclical, right? So, there are times when you're overshooting,…

AI assessment note: “Post-two thousand. Um, so post-two thousand that, you know, this, You know, we”

Q And so I think you had, what, what is not, not, I'm not asking you to name names. Don't mind, but like, what is the wrong hands? Like people who are inexperienced, ill-equipped, not knowledgeable. What, what denotes wrong hands?

A I think all the above, you know, I mean, I just sort of don't understand, you know, what it, what it means to, You know, build, build a company and be a steward of other people's capital. I mean, I'll give you a name. So, you know, like SoftBank, you know, like Why did that ever make any sense? And, and who was that? You know, who was that good for? Uh, you know, I didn't, you know, there was a fair amount of damage being done, um, you know, by large amounts of capital being thrown around indiscriminately, you know, sort of damaging the very properties it was investing in, uh, and, um, distorting industry behavior. And again, not, and not just from that one entity, but, you know, others, Others that we, that we can mention, so I think, I think the distortions.

AI assessment note: “don't understand what it means to be a steward of other people's capital”

Q the large firms that we saw deploying such crazy amounts at such crazy prices, and I looked at their partners and I was like, You shouldn't have done this. You've seen this before. Like, you know how this game works. How do you think about actually every situation being fresh or actually learning from the past? I'm just intrigued given the many different exposures from Macro. How it happened again.

A You want to learn from the past, but you don't want to overlearn from the past. I think one of the behaviors in venture, you know, which you just, you know, noted is that, uh, you know, there's this kind of safety in the herd thing, and, and I, a belief, uh, within, you know, firms and, and partners, and not incorrect, that if they're making the same mistake that everyone else in the industry is making, they probably won't be punished for it, because, you know, the capital has to go somewhere. And, uh, you know, so the real dangerous thing is to make the unusual mistake that no one else made. Uh, and so, you know, this is, um, it's one of the things that kind of drags down returns in the industry. It's one of the things that makes it a very cyclical business. Uh, it's, uh, you know, and it's, it's just a behavior that's been there kind of forever, you know, because, you know, the flip side of, um, of sort of, sort of maintaining discipline is sometimes, um, you know, missing out on a, on a huge, um, Sort of acceleration. And I certainly saw that when in the, like back to the late nineties, you know, there were people, uh, good venture capitalists that were like, you know what, you know, these valuations are just too high. I'm not investing in these internet companies, you know, it just doesn't make sense. And, you know, they kind of missed out on a pretty transformative phase. …

AI assessment note: “You want to learn from the past, but you don't want to overlearn”

Q How do you think of the founders fund? Ah, fuck it. We can't predict. Let's just plow into open AI.

A You know, so the sort of back up the truck on, on, on your winners thing is, um, I think that's a strategy that works. I think for an asset gatherer, you know, there's sort of two business models in venture, you know, you can be in the assets under management game, or you can be in the generate best possible returns game. Uh, and you know, if I'm an asset gatherer, I need places to put assets that deliver, quote, good enough returns. You know, if I'm a return generator, you know, then I'm, I'm actually looking to really maximize multiple uninvested capital, and I'm not, um, just sort of deploying at scale. Anytime you meet an investor that talks about the amount of capital they deploy per year, right, you know you're talking to, you know, an asset gatherer, and so, you know, we, this comes up for us a lot. I mean, you know, when, you know, our, you know, our best companies, You know, they're, they may be doing large high price later stage rounds. How do we participate as, you know, one of the initiating investors, one of the really early investors? Is it, you know, are these things on model or off models for us? And, you know, generally we, we don't attempt to, um, drag down, uh, the returns or, or, or get too far off strategy by playing super heavy in those types of financings and, and would prefer to, you know, preserve the capital for, you know, that next early stage company…

AI assessment note: “the sort of back up the truck on, on, on your winners thing”

Q You mentioned there about, you know, multi-stage players appreciating that the craftsmanship of seed may be in the value that one brings at seed. Putting it out there. I don't think the best founders need help from VCs. Um, founders fund would agree with me, or I agree with them, whichever one we want to take. Um, do the best founders need their VCs?

A Absolutely. Yeah. I mean, but you know, they might not, you know, the, the, it doesn't mean that they can't accomplish great things on their own, but they can accomplish more greater things with, with a good business partner. I think it depends on the investor to, you know, to, frankly, to, to a large degree. Um, it also depends on the founder. The very best founders that I work with, uh, the most talented, most capable, most sought after are also the ones where, you know, we have the highest bandwidth engagement, um, sort of, I think, get to the, the root of issues and come up with better answers together, you know, most frequently. And so, you know, I think there is a high correlation. You know, between the caliber of the founder and also their ability to get the most out of, uh, out of the relationships they have with their investors and their board members.

AI assessment note: “they can accomplish more greater things with, with a good business partner.”

Q What's the sleepless night factor? Sorry. I haven't heard this before.

A Yeah. Well, the sleep, well, this is where you're sweating some investment, either a decision you're about to make about a new investment or, uh, you know, some problem at an existing portfolio company. And you feel such intense personal accountability that you're literally losing sleep over it. And, and to this day, I lose sleep over this stuff. Um, and that, you know, in many ways brings out You know, the essence of the business, uh, you know, like, like we, we live, especially in early stage, we live in a world filled with uncertainty, um, and, you know, trying to, trying to peer through it and make consequential decisions about capital and people and stuff that matters, but doing this, you know, in, uh, in this zone of uncertainty is a really, really difficult thing to do, and so you kind of, you have to sweat it, you know, in order to, in order to, uh, in order to get good at it. Now that, so that kind of individual accountability is super important, but group responsibility and support is also, you know, very important too. So, uh, and so kind of the tension between, you know, individual accountability and group responsibility, getting that right, uh, I think is, um, is part of the magic.

AI assessment note: “this is where you're sweating some investment... losing sleep over it”

Q Well, with that, how do you think about, like, market sizing? Because you have so many investors that say, you know, we just need massive markets. You have others that say, hey, we like niche insertion points that can expand. Uh, do you think we can accurately predict market sizing? How do you approach it when you evaluate new opportunities today?

A We always want the very tightly defined entry value proposition, right? So it's, you know, the ICP is clear, the pain that you're addressing is clear, the value proposition is clear, um, but that needs to lead to a very large market, right? Uh, and so how do I have the tightly defined wedge, but also the large addressable market? It's incredibly difficult for a startup to do a second thing, you know, so, so any, any sort of notion about Oh, well, I'll do this first thing, and it's not that big an opportunity, but I'll be, then I'll be able to do this second thing. It's like, oh boy, you know, like, it's hard enough to do one thing.

AI assessment note: “We always want the very tightly defined entry value proposition, right?”

Q I, I never liked companies that are a net new line item. For someone. And I think in the case of that, from the sounds of it, it was a net new line item for a buyer. How do you think about companies when it is a net new line item for a buyer and you're not replacing something, but you're really adding an additional cost?

A Yeah. Well, you better have line of sight on where that budget's going to come from and who owns it. You know, net, net new is not usually ever really net new. I mean, it might, it might be a new line item, but you know, hopefully you are, uh, You know, funding is available from things maybe that the customer no longer needs, uh, or sufficient gains that are going to pay for it, and that can take a little, I mean, that's part of the friction, right? You know, when, when you're proposing something new, it takes a little while for that to sort out. Um, you know, my, uh, my, another company I work with, uh, is, uh, Gong, right? Uh, pretty, uh, pretty successful sales technology company, and, You know, what Gong brought to market, that was a net new thing. Uh, and, uh, and, and it did constitute, you know, additional spend, but, you know, the gain from it was so clear and so obvious, and, and, and, uh, and the pull, you know, once, once users got their hands on it was so strong that, you know, with other budget was able to be able to be reallocated, uh, you know, to fund, to fund that investment, and it, and it became kind of a must have. In the sales tool belt. So, I mean, I love projects like that. I mean, I'd rather have been doing that in sales tech than, oh, here's a better CRM, you know, unplug Salesforce and plug in my CRM. You know, like to me, that's a fool's errand. You k…

AI assessment note: “you better have line of sight on where that budget's going to come from”

Q This is my question though, which is now you have defense and military, you've got climate, you've got battery and energy. You've got a lot of like very real physical heavy capital intensive categories. That venture investors are plowing into, like never before, or maybe you'll say, you know, history rhymes, but are they making the same mistake, do you think?

A Yes. And, uh, you know, and you can get away with it sometimes, just like I got away with it, with that early deal. If you can find, you know, other people's money, uh, on advantageous terms to sort of fund you through, uh, you know, the valley of death there, uh, you know, like, I mean, there's, Famous, you know, big important companies like Tesla, you know, that wouldn't be what they are today if there were, if, you know, if there wasn't sort of certain miracle financings that occurred at just, at just the right time, you know, and, uh, and so then people, you know, see those, um, sort of hero experiments, and they think, well, let's do another one of those, um, maybe not appreciating the singularity of, you know, the, the, the unique circumstances that, that actually allowed some of those situations to prosper.

AI assessment note: “Yes. And, uh, you know, and you can get away with it sometimes”

Q Yeah. Uh, I think he's just exceptional, but he, he said on the show, price is a mental trap. I'm intrigued from your many years investing. How do you reflect on your own sensitivity in relationship to price and when to pay up versus when not to?

A I think Peter's talking about that, you know, through the lens of, of, of an early stage investing. Um, cause certainly if, if you were talking to a growth investor, they would not say that, you know, like price matters a lot when you're doing growth stage investing and ask any of the people that were piling, you know, large sums into, into companies in, in, in, And early 22, how they, how they feel about price right now, and, and, you know, so price really matters in, but, but in, in those stages, but it's, in early stage, right, is, is, uh, there are some ways you can be over, overly obsessed with price, and it's not to say that it doesn't matter, but, I mean, I'll give you two examples, or two ways that I think about it. Like, one, and this is kind of obvious, like a low price is never a reason to do, to make an investment, um, right, so there's no, no, No, no price, you know, that, that will, that is sufficient justification for, for something that is, you know, otherwise flawed. Uh, so that, I mean, I think some people call that a value trap. Then what about the flip side though? And, and what I, what I found, um, is when I'm getting really nervous about a price getting too high, um, often actually what, what that also is, it's an indication that maybe my conviction is lacking. I don't, I don't have sufficient conviction around this investment, and so queasiness about pric…

AI assessment note: “queasiness about price is actually a symptom that my conviction is, is thin”

Q Was it tough doing wing because like at Excel you have a fundraising machine. I mean, at best you rock up and say hi and thank you. Uh, and then with wing, it's like you actually have to fundraise because it's your fund and you're founding a firm. Was that tough just to make the transition?

A There's a lot of demand for unadulterated early stage venture capital, you know, being practiced by experienced people with a track record. Um, and a lot of the very best people with those track records, you know, are, are within aircraft carriers now, and the LPs are somewhat frustrated by, you know, ok, maybe I, I get to put a dollar in the early stage strategy, and I got nine other dollars, you know, going across all these other strategies, and so, so when you show up with a pure play early stage strategy with, you know, people that know what they're doing, like, there's, there's a fair amount of investor interest in that, and that was certainly our experience in, in raising, Wing one and, and all the, all the subsequent wing funds. So I, I think we've had a very, a very positive experience and, and we're very fortunate, um, in, in that regard, but it is, I think it has to do with the, you said the nature of the product, if you will, and, and product market fit.

AI assessment note: “we've had a very, a very positive experience and, and we're very fortunate”

Q What's the sleepless night factor? Sorry. I haven't heard this before.

A Yeah. Well, the sleep, well, this is where you're sweating some investment, either a decision you're about to make about a new investment or, uh, you know, some problem at an existing portfolio company. And you feel such intense personal accountability that you're literally losing sleep over it. And, and to this day, I lose sleep over this stuff. Um, and that, you know, in many ways brings out You know, the essence of the business, uh, you know, like, like we, we live, especially in early stage, we live in a world filled with uncertainty, um, and, you know, trying to, trying to peer through it and make consequential decisions about capital and people and stuff that matters, but doing this, you know, in, uh, in this zone of uncertainty is a really, really difficult thing to do, and so you kind of, you have to sweat it, you know, in order to, in order to, uh, in order to get good at it. Now that, so that kind of individual accountability is super important, but group responsibility and support is also, you know, very important too. So, uh, and so kind of the tension between, you know, individual accountability and group responsibility, getting that right, uh, I think is, um, is part of the magic.

AI assessment note: “this is where you're sweating some investment... literally losing sleep over it”

Q Yeah. Uh, I think he's just exceptional, but he, he said on the show, price is a mental trap. I'm intrigued from your many years investing. How do you reflect on your own sensitivity in relationship to price and when to pay up versus when not to?

A I think Peter's talking about that, you know, through the lens of, of, of an early stage investing. Um, cause certainly if, if you were talking to a growth investor, they would not say that, you know, like price matters a lot when you're doing growth stage investing and ask any of the people that were piling, you know, large sums into, into companies in, in, in, And early 22, how they, how they feel about price right now, and, and, you know, so price really matters in, but, but in, in those stages, but it's, in early stage, right, is, is, uh, there are some ways you can be over, overly obsessed with price, and it's not to say that it doesn't matter, but, I mean, I'll give you two examples, or two ways that I think about it. Like, one, and this is kind of obvious, like a low price is never a reason to do, to make an investment, um, right, so there's no, no, No, no price, you know, that, that will, that is sufficient justification for, for something that is, you know, otherwise flawed. Uh, so that, I mean, I think some people call that a value trap. Then what about the flip side though? And, and what I, what I found, um, is when I'm getting really nervous about a price getting too high, um, often actually what, what that also is, it's an indication that maybe my conviction is lacking. I don't, I don't have sufficient conviction around this investment, and so queasiness about pric…

AI assessment note: “queasiness about price is actually a symptom that my conviction is thin”

Q And so I think you had, what, what is not, not, I'm not asking you to name names. Don't mind, but like, what is the wrong hands? Like people who are inexperienced, ill-equipped, not knowledgeable. What, what denotes wrong hands?

A I think all the above, you know, I mean, I just sort of don't understand, you know, what it, what it means to, You know, build, build a company and be a steward of other people's capital. I mean, I'll give you a name. So, you know, like SoftBank, you know, like Why did that ever make any sense? And, and who was that? You know, who was that good for? Uh, you know, I didn't, you know, there was a fair amount of damage being done, um, you know, by large amounts of capital being thrown around indiscriminately, you know, sort of damaging the very properties it was investing in, uh, and, um, distorting industry behavior. And again, not, and not just from that one entity, but, you know, others, Others that we, that we can mention, so I think, I think the distortions.

AI assessment note: “I think all the above, you know, I mean, I just sort of don't understand”