The Ledger
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Sturdy: Non-founder CEOs are often best suited to scale growth companies
“So I would like to invest in a non-founder led company. You point out Satya, I know dozens of incredible CEOs that were not founders and have same, but different mix of special sauce that makes them The right person to lead that company, and often to lead the …”
Lawee: Venture diversification yields diminishing returns beyond six investments
“I think people overvalue perceived diversification. I think you get a diminishing return in our business once you get past five or six investments.”
Sturdy: VCs passed on Stripe citing high valuation and commodity market
“When I did that deal, I remember talking to lots of other investors and the pushback would be it's in a commodity market. It's valued too high. There's not real differentiation.”
Sturdy: $100M revenue companies with execution discipline are viable IPO candidates
“But I don't actually think it's necessarily a scale thing. I've seen a hundred million dollar revenue companies that are operating with that level of precision have their story tight, have their execution plan really tight, and would be a good candidate to go …”
Daniel Dines Rejected Sequoia Capital's Investment Offer for UiPath's Series B
“So I said basically no to Sequoia to our Series B, and we, Series B was led by Excel US, and Capital G, Kleiner Perkins, and some other people participated in, but I said no to Sequoia.”
Zanutto: Hedge funds use early checks as loss leaders for pre-IPO allocation
“Frankly, a lot of these hedge funds manage such enormous pools of capital relative to the size of the traditional VC fund. That for them, you know, writing a 25 or fifty million dollar check into an A or a B round is a rounding error, right? So for them, they …”
Zanutto: Every enterprise will need Armis for unagentable devices alongside CrowdStrike
“As IoT devices continue to proliferate, you know, every enterprise will need a CrowdStrike for their agentable devices and an Armus for all unagentable devices.”
Zanutto: High valuations and easy money create severe downstream financing risks
“One learning that I've come away with from those conversations and experiences is if you take the money and it's at a very high price and it's easy money, there is a risk to that because you, if you take it at too high of a price, you get over your skis and th…”
CapitalG operates as an investment club where partners make individual decisions
“At the core of it is kind of the decision process, and for us, which is extremely unusual for a growth equity fund, we make the investments individually. The group can and does hopefully help inform that, but it's more of an investment club than kind of an inv…”
Laela Sturdy Makes Six to Eight Major Decisions per Year at CapitalG
“Six to eight. And then a lot of small ones along the way, but probably six to eight.”
Sturdy: CapitalG only underwrites existing products in base-case scenarios
“Now when I look at an investment, almost always my base case is I'm only going to underwrite what exists today. I can get excited about the possibility of the future, and that's built into the upside case, but if there's not evidence of the launch of that prod…”
Sturdy: UiPath faced investor skepticism over its 10-year history in Romania
“UiPath when, you know, made that investment in the series B, the numbers were extraordinary, but the pushback was this company's been around for 10 years based in Romania. Like, why is it all of a sudden exploding now?”
Sturdy: Growth investment volume remains high when factoring in AI
“If you add in AI deals, the number, the volume and dollar amount actually looks quite high.”
Sturdy: CapitalG shifted to earlier-stage AI investments over past 18 months
“So we believe that over the last 18 months, the best opportunities have been going earlier in these AI companies, and that is what we've done.”
Sturdy: Public companies can still make major investments if accountable for results
“I think there's a bit of a myth that once you go public, you can't make the investments that you want. I don't believe that's true. I think you can make the investments you want, but you are accountable to delivering those results.”
Sturdy: CapitalG never underwrites deals dependent on M&A exits
“We would never underwrite something dependent on M&A.”
CapitalG's average investment entry multiples more than doubled from 2015 to 2021
“We look at the entry multiples we're paying on average, and they're, you know, more than double what we did five, six years ago.”
Derek Zanutto: Pursuing market breadth over depth in expensive markets fails
“What I worry most about, and I think what's most challenging is if in markets like this where prices are incredibly high, going for breadth and trying to chase everything, I think is a losing strategy because then you're going to, you know, not have enough, en…”
Derek Zanutto: Enterprise Data Stack Will Consolidate as CIOs Rationalize Vendors
“And I think there's a case to be made that you're likely to see a bit more consolidation down the road as CIOs and CDOs look to rationalize all the vendors are using to solve, you know, common pain points throughout the enterprise.”
Lawee: Conservative venture investing will ultimately prove correct despite missed gains
“Ultimately, being a little more conservative is going to prove out, but it's not after kind of years of money-making.”
CapitalG Underwrites Deals to 3X Base Market Growth and 10X Upside
“We'll make three X with a reasonable expectation of market growth. If things go as we hope, then this could be a 10 X. And that's independent of multiple. We're just talking about market expansion.”
Lawee: Experience with market cycles causes risk aversion disadvantage in bull markets
“I do feel that there's a little bit of a disadvantage in protracted bull markets of having lived through these cycles, because your experience has taught you to be more risk-averse, and as you're kind of living through a bull market, that's kind of a negative.”
Frantz: Stripe is a revolutionary payments company with extraordinary traction
“I think our most recent public investment, most recent investment in a private company that, that, that's been publicly disclosed is Stripe, which is a revolutionary company in the payment space with an extraordinary team and traction that's quite unlike what …”
Odoo completed a €500M secondary deal at a €5B valuation
“So it was five hundred millions of euros at a five billion valuation. It was Summit Partners, one of our earlier investors who sold to Sequoia Capital, BlackRock, Mubadala, and Capital G.”
Sturdy: CapitalG invests $50M to $200M per growth-stage company
“So again, we're growth stage investors. We're investing 50 to two hundred million dollars in these companies.”
Sturdy: Most tech companies fail to execute second and third product acts
“One of the early lessons I got in pattern recognition in investing was believing more in the second and third act than I think really would transpire for most companies.”
Sturdy: CapitalG writes $100M-$150M checks for private equity buyout partnerships
“So in the context of working with a private equity partner, if they were to do a roll up or invest in more traditional profitable assets that either trade from the public markets to the private or have been private the entire time, then we're very open to part…”
Sturdy: Single-LP Model Frees CapitalG From Artificial Sales Pressures
“And that's a huge advantage for us because it means that we can invest and hold over the long term and why we're so obsessed with finding generational companies that will compound over the long term because that creates incredible Money on money and incredible…”
Sturdy: Growth Companies Wait Too Long to Diversify Before IPO
“I would say in the growth stage, more often they wait too long, particularly as they're ramping up in, in the couple of years prior to IPO, because it's almost always Needed for a strong public company to have some sort of diversification.”
Laela Sturdy: Stripe's 2017 Valuation Proved Fair Through Continuous Compounding
“2017 when we invested in them, nobody, or I would say lots of people didn't believe that they could compound and continue to grow at such a strong rate that actually the valuation multiple that we were paying into was more than fair because they would compound…”
Sturdy: Facing heavy pushback and self-doubt means you are in the right deal
“If you feel nervous and, like, you're advocating for something so hard and others are telling you no and, you know, to the point that it almost makes you doubt it yourself, you're exactly where you should be.”
Sturdy: Outlier founder traits and data drive outsized venture returns
“That's one of my core investment theses is always look for outlier metrics and look for outlier personality traits in a founder. I believe that outlier data is really important to pay attention to, and that will end up having outsized impact and returns.”
Sturdy: $30M-$100M tech companies growing 15%-20% face decay to single digits
“So most of the time, if you're growing 15, 20%, you'll, you'll see that decay to single digits. And I do think that those companies, it's going to be hard to remain independent.”
CapitalG targets a minimum 3x to 5x return on growth investments
“In general, we look For growth stage investing to have a sort of three to five X return as a minimum threshold for, you know, money on money return on investments with an eye toward investments that have a 10 X opportunity.”
Generational companies recruit world-class leaders years earlier than typical startups
“One of the things that I've seen in terms of commonalities of the truly generational transformative companies is that they are able to get world-class leaders to join their companies way earlier than they should.”
CapitalG co-led Stripe's 2016 Series D at a $9B valuation
“So I, you know, co-led Stripe Series D investment in 2016. And at the time that, you know, that was a nine billion dollar valuation back in 2016.”
CapitalG operates independently despite Alphabet being its sole limited partner
“We're an independent growth fund backed by Google and Alphabet. So the GPs, we have investment decisions. We operate entirely separate from Google and Alphabet, but Alphabet is our single LP.”
CapitalG passed on investing early in Nubank due to market unfamiliarity
“I would say one of the big, cause I looked at new bank early. That's a good example. And I think I was, while I was loved the founder and so impressed with the business traction, the risk around a new market and a model I didn't totally understand just made me…”
CapitalG invested $160M total in UiPath across multiple funding rounds
“I first invested in UiPath in the Series B. We co-led the Series C and invested in several other rounds. So in total, we invested a hundred and sixty million in UiPath over the course of several rounds”
Laela Sturdy says top founders spend at least 30% of time hiring
“The very best founders hiring is probably 30% of their time. If not more, they're relentless about it.”
Zanutto: Capital oversupply in venture has persisted for over 10 years
“I think there's been an oversupply Supply of capital for, you know, the better part of 10 years now, at least 10 years, really since the Fed took interest rates down to zero coming out of the GFC in 2008, 2009.”
Derek Zanutto: Investors must form sector theses before companies start fundraising
“And I think what that means in reality is that for investors to make informed judgments On underwriting risks and making investments, you really need to have been doing your research and your work and developing your thesis on a category well in advance of a c…”
David Lawee: CapitalG Targets 25-30% IRR With Low Loss Ratios
“I think our funds are still going to perform in the same IRR neighborhood as venture funds, but the distribution, so we're a three X IRR could be 30% depending on how long it takes you to get the three X. So the IRR for the fund is going to be the same, but th…”
Winning growth rounds requires pre-built theses and pre-set target valuations
“The rounds in growth are extremely competitive, just like any segment. And the way to compete is by being in the ready position, like already having your thesis, already kind of knowing what price you would invest, already kind of being able to activate dilige…”
Frantz: Late-stage private liquidity allows companies to delay going public
“To go public, I would say, you know, it seems like companies need to be a bit larger and a bit more developed than would have been the case 20 years ago. But I think a great deal of the consideration whether they go public Is driven by management teams who may…”
CapitalG operates strictly for financial return, not strategic value for Google
“So our only metric for Google capital is financial return. So we're by no means a strategic investor for Google.”
Scaling customer acquisition channels often substantially inflates CAC
“One of the big challenges a lot of companies face is they'll get Some sort of product market fit. They'll get one or two customer acquisition channels going, but when you really dive into the details, it's quite hard to scale those customer acquisition channel…”