Jan 2, 2019 · 42m · a16z
a16z Podcast | M&A and Innovation, Inside Out
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In this episode of the a16z podcast, Goldman Sachs Chief Strategy Officer Stephanie Cohen discusses how large enterprises manage corporate innovation through strategic M&A, internal incubators, and balanced build-versus-buy decision-making. She provides actionable insights on post-merger integration, risk management, and fostering intrapreneurship while maintaining operational alignment.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. The host holds 1% of the talking time here. How this is scored →
The host as informed peer 2.6 Guest teaching 2.3 Guest disagreement 1.1 The host pushing back 1.5
speaking balance: gold is the host, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 22:16 Defending Internal Market Fit
Cohen reframes Casado's premise that single-customer internal startups lack market validation, arguing that internal builds only need to be custom-tailored for Goldman's specific DNA.
Hardest push from the host ▶ 23:46 Challenging Goldman's Custom Tech CultureCasado directly challenges Goldman's historical tendency to build custom internal replacements for standard tech stack items, bringing up their legacy custom Word editor and custom virtualization setups.
Biggest teaching moment ▶ 6:36 Reframing Acquisition DCF AnalysisCohen corrects standard corporate valuation thinking by explaining that discounted cash flow models should test what growth assumptions one must believe rather than produce a single rigid valuation figure.
The host holds their own ▶ 23:46 Demonstrating Deep Technical Knowledge of GS StackCasado demonstrates deep technical domain familiarity by specifically mentioning Goldman's historically unique infrastructure decisions around white box switches and non-vSphere ESX deployments.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The host as informed peer | Guest teaching | Guest disagreement | The host pushing back | Why |
|---|---|---|---|---|---|---|
| Stephanie Cohen's Career and Background | 1 | 1 | 1 | 0 | Casado introduces Cohen and asks for her career bio to set up the discussion on organic versus inorganic growth. Cohen outlines her two-decade tenure at Goldman Sachs across M&A, industrials, and strategy, emphasizing that strategy and M&A belong in the same room. | |
| Preconditions for Successful M&A Integration | 2 | 2 | 1 | 1 | Casado contrasts academic studies showing high M&A failure rates with his own positive acquisition experience. Cohen explains that successful integrations require both dealmakers and operations teams at the table early, along with humility toward acquired leadership. | |
| Valuing Pre-Revenue and Early-Stage Acquisitions | 2 | 3 | 1 | 1 | Casado asks how to assign monetary value to pre-revenue or highly strategic acquisitions. Cohen reframes the question, explaining that valuation models should test key growth assumptions rather than produce a single rigid dollar figure. | |
| Valuation Impact on Post-Merger Commitment | 3 | 3 | 1 | 2 | Casado argues based on his Nicira experience that a high price tag actually forces post-acquisition commitment. Cohen acknowledges that high stakes increase focus, sharing sell-side tactics like leveraging buyers' fear of losing to competitors. | |
| Acquiring Premier Properties vs. Secondary Players | 3 | 3 | 1 | 1 | Casado probes the Silicon Valley debate between acquiring market-leading premier properties versus discounted number-two players. Cohen breaks down when distribution advantages justify buying secondary players versus paying up for category-defining tech. | |
| Goldman Sachs' Strategy and Transaction History | 2 | 2 | 1 | 1 | Casado jokingly asks if Goldman Sachs is on an M&A buying spree now that an M&A veteran is Chief Strategy Officer. Cohen clarifies that her focus is primarily on overarching strategy and highlights recent selective tuck-in acquisitions like Clarity Money and Bond Street. | |
| Launching the Accelerate Internal Innovation Program | 2 | 2 | 1 | 1 | Casado asks about Cohen's selection for the Chief Strategy Officer role given her non-traditional background. Cohen details her clean-sheet internal startup experience and describes the Accelerate program, which whittled down 1,000 employee ideas to a funded shortlist. | |
| Buy vs. Build Discipline and Internal Market Fit | 4 | 3 | 2 | 4 | Casado forcefully challenges internal corporate startups, arguing that having only one internal customer lacks market discipline and product-market fit. Cohen defends internal development for core capabilities, emphasizing that solutions only need to be perfect enough for internal needs. | |
| Software Standardization vs. Proprietary Middleware | 5 | 3 | 2 | 3 | Casado cites specific historical tech quirks at Goldman, such as custom Word editors and avoiding vSphere, asking how they manage build versus buy tendencies. Cohen acknowledges the legacy culture and explains new mandates prohibiting custom tweaks on off-the-shelf software to preserve upgrades. | |
| Protecting Internal Innovation from Bureaucracy | 3 | 3 | 1 | 2 | Casado brings up how corporate bureaucracy kills internal innovation, citing banks that resort to creating separate legal entities. Cohen explains that establishing zero daylight between firm strategy and tech leadership helps shield internal projects from budget cuts. | |
| Cultivating Culture: Embracing Failure and ROI Metrics | 2 | 2 | 1 | 1 | Casado asks how to foster a culture of failure without sacrificing executive accountability. Cohen emphasizes CEO leadership driving faster decisions and distinguishes between failed business ideas versus poor team execution. | |
| External Ecosystems and Balance Sheet Investments | 4 | 3 | 1 | 2 | Casado highlights CISO vendor fatigue and asks how Goldman balances strategic partner relationships with startup discovery. Cohen notes that Goldman's balance sheet investment capability allows them to engage startups through multiple non-destructive avenues. | |
| Core Strategic Pillars and Launch with GS | 2 | 2 | 1 | 1 | Casado asks about Cohen's overall strategic vision and team structure. Cohen details her three strategic pillars—client centricity, internal innovation, and diversity—highlighting Launch with GS, a $500M commitment to women-led businesses. | |
| Strategic Prioritization and Operations Balance | 3 | 2 | 1 | 2 | Casado asks how strategy teams prioritize resources without letting innovation become a distraction for core business operators. Cohen explains how her team evaluates structural gaps between baseline growth projections and long-term organizational goals. | |
| Lessons from Competitive Figure Skating | 1 | 1 | 0 | 0 | Casado asks Cohen about her past as a competitive figure skater. Cohen reflects on falling down repeatedly while learning jumps as a foundational lesson in resilience and embracing failure. |
Statements from this episode (23)
Cohen: Strategy and M&A belong within the same team
“I think about it as the way that we think about it is that we want strategy and MNA to be in the same place. So instead of having a group of people that goes off and does strategy and a group of people that goes off and does MNA, and by the way, incentivizing …”
Cohen: M&A succeeds when integration leaders sit with dealmakers from inception
“When companies decide to do something for strategic reasons, when everyone gets together and decides, it's the right thing to do, and by everyone, I mean, it doesn't mean everyone has to agree, because getting to consensus in some of these situations may actua…”
Cohen: Successful tech M&A requires giving acquired talent autonomy to innovate
“A lot of times you're buying the business, not just for the product or the technology, but it's for the people and being humble enough to actually leave those people alone to continue to innovate and succeed.”
Cohen: Financial models should test assumptions, not produce single valuation targets
“And then you get yourself in a lot of trouble when that gets to a single answer. It's like 1.25 billion dollars, right? That inevitably that's wrong. What those, what the math teaches you is what do you need to believe in order for it to succeed?”
Cassato: High acquisition prices force corporate buyers to commit to integration
“Having a high price tag on it actually really helped with the commitment to do that, just because it was so material. So I don't know if this is a totally self-serving world way to think about it, but I'd like to argue that, like, high valuations are actually …”
Cohen: Fear of losing targets to rivals drives maximum acquisition prices
“When I was on the sell side, my favorite thing was to find the buyer who not only wanted to win, but was afraid to lose. When you had the guy or the gal who thought that their arch, their biggest rival was going to buy something, that was how you actually got …”
Cohen: Enterprise acquisition synergies fail when buyer personas differ
“The second thing is, you know what you bought, and what I mean by know what you bought, that's particularly important in the enterprise space, where it's more confusing, right? So, you're a company, you sell a lot to a certain sector, and then you buy another …”
Cohen: Acquired companies need internal 'bat phone' contacts during integration
“Taking a group of people internally who have experience with M&A, who know the internal business, who know how to get things done from your internal engineering team, from compliance, Having an internal team and pairing them with the company, I think is really…”
Cohen: Companies with strong distribution should acquire secondary market players
“But if you're a big company, and you have access to, for example, clients and distribution, maybe the party that's a number two is a number two, because they don't have access to that. And so then they have the same product, but they don't have access. So then…”
Cohen: Acquiring for product and tech justifies paying for market leaders
“But when you're going after product and technology, my hunch is that the paying for the number one makes sense.”
Cassato: M&A decisions are among the few irreversible business choices
“Buying a company when you're running a large business is, like, one of the few decisions you really have to live with. Like, a lot of the other ones, like, you kind of work your way out of in some way or another.”
Cohen: Red team exercises prevent large companies from making M&A mistakes
“And if you stop and actually have a group of really smart people internally and maybe with your external advisor say, we're going to show up for one day, for two hours, and we're going to make the case on the other side, and in the process of making that case,…”
Cohen: Regulated corporations fail when building non-core technology internally
“I think companies get in trouble when they try to do things That should happen externally, internally. And what I mean by that is I think there are certain types of talent that have no desire to work inside an organization that has 40,000 people, that's highly…”
Cohen: Competing internal builds against external software prevents insular development
“If you're competing the own, your own internal projects with either buy and by buy, I mean, just buy the product from a software or other perspective, or buy meaning by the company. If you're doing that in a relatively systematic way, I think you're avoiding s…”
Cohen: Goldman Sachs bans customization of off-the-shelf software
“So we have a rule now against doing that. So, so I hope for that makes people feel better. We're going to stop the tweaking of the, of stuff that's generally available off the shelf.”
Cohen: Protecting core-business internal startups is harder than isolated ventures
“But another thing that we're focused on that we've talked about is cash management and payments. Well, this gets to the very core of what we do every day. It's the, it's our core investment banking clients. It's core to our internal payment functions. And so, …”
Cohen: Treat internal corporate organizations as customers to protect innovation
“So the way that we like to think about it is we like, in places where we're worried about that, we try them to treat the internal organization like a customer.”
Cohen: Combining build and buy strategies forces enterprises to engage specialized startups
“The second thing is if you have a perspective around it's not buy versus buyer build, it's both, then you are going to force yourself to deal with individual vendors in a lot of cases because you are looking for very specific solutions. Of course, like every b…”
Cohen: Underfunded female founders represent a prime commercial investment opportunity
“We felt that women were not getting the capital that they needed or deserved, and that it really meant that they were a good investment. So there's a lot of capital out there, which many people know, but in a place that's being under invested, we thought there…”
Cohen: Operating divisions should be responsible for their own strategy
“The other thing we decided, and this was advice I got, I think I still agree with it, is that divisions Should be responsible for their own strategy.”
Cohen: Strategy teams should embed junior members into business units for free
“I'll send actually generally a more junior member of my team down into the division and basically offer their services for free.”
Cohen: Corporate strategy is for business transformation, not minor tweaks
“And the idea was don't call us when your revenues are off by three percent, and you're just trying to tweak your business model. Call us when you're trying to fundamentally change how you're serving your customer, when you're, when you feel like you have a new…”
Cohen: Isolating innovation projects risks alienating employees driving core daily operations
“You could get to a place where you actually distract the whole organization because in an organization of tens of thousands of people, there's a lot of people every day who just have to be with their clients, execute, and they need to have fun doing that and n…”