EP 92: Mike Volpi (Partner, Index Ventures) Top AI Investor Predicts How The AI Wave Will Play Out

Mike Volpi is a top AI investor and GP at Index Ventures, where he’s invested in companies such as Confluent, Scale AI, Sonos, and many others. In our discussion, Mike reveals the frameworks he uses for making investment decisions and his predictions on the trajectory of the AI wave. He also shares stories from his early career at Cisco, what made him lean in early into machine learning, how he views his role as a board member, and much more. (00:00) Intro (02:49) The Genesis of AI Investments and Understanding Human Logic (03:46) The Journey of Learning and Investing in AI (05:34) The Evolution of Technology and its Impact on Investments (09:17) The Role of Optimism and Pragmatism in Venture Capital (15:43) The Influence of AI on Equity Value (21:53) The Role of Government and Private Sector in AI Regulation (25:56) Investment Strategies and Decision Making (31:50) The Art of Investing in Young Entrepreneurs (35:58) Reflections on Career and Lessons Learned (38:55) Mentorship and Nurturing Young Venture Capitalists (40:12) The Art of Mentoring in Venture Capital (41:00) Empowering Partners: A Case Study (41:35) The Power of Frameworks in Decision Making (43:19) Understanding Your Weaknesses as an Investor (44:24) The Painful Misses in Investment (46:18) Redefining Yourself for Growth (49:26) Embracing Mistakes in Venture Capital (51:46) Learning from the Titans of Venture Capital (55:18) The Value of Market Leaders in M&A (59:17) The Journey from Italy to Silicon Valley (01:11:18) Lessons from Being a CEO (01:14:28) Reflections on Personal Growth and Learning (01:15:29) Transitioning from Operator to Venture Capitalist (01:17:30) The Philosophy and Strategy of Index Ventures (01:20:20) The Role of a Board Member and Building Personal Brand (01:32:20) Lessons from Serving on the Board of Ferrari (01:38:08) Advice for Young Professionals in the Tech Industry (01:41:30) State of the Venture Capital Industry Today Executive Producer: Rashad Assir Producer: Leah Clapper Mixing and editing: Justin Hrabovsky Check out Unsupervised Learning, Redpoint's AI Podcast: https://www.youtube.com/@UCUl-s_Vp-Kkk_XVyDylNwLA 🎥 Subscribe on YouTube: https://www.youtube.com/channel/UCugS0jD5IAdoqzjaNYzns7w?sub_confirmation=1 Follow on Socials 📸 Instagram - https://www.instagram.com/theloganbartlettshow 📱 X - https://twitter.com/loganbartshow 🎬 Clips on TikTok - https://www.tiktok.com/@theloganbartlettshow About the Show Logan Bartlett is a Software Investor at Redpoint Ventures - a Silicon Valley-based VC with $6B AUM and investments in Snowflake, DraftKings, Twilio, and Netflix. In each episode of The Logan Bartlett Show, we sit down with the people behind today’s most important startups and extract the tactics, lessons, and frameworks they’ve learned the hard way. Conversations span hiring to GTM, product, growth, fundraising and everything in between - collectively forming the ultimate playbook to make you a better CEO, investor or board member. Tap follow and enable notifications to stay ahead of the game.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:04Logan Bartlett?

  Welcome to the Logan Bartlett Show. On this episode, what you're going to hear is a conversation I have with Mike Bulpe. Mike is a general partner at Index Ventures, where he has invested in companies like Confluent, Scale AI, Hortonworks, Sonos, among a bunch of other very successful businesses. Mike and I talk about a number of different things, including his early career at Cisco, what made him lean in early into artificial intelligence, as well as how he views his role as a board member, and the types of investments that he looks to make as a VC. Really fun conversation with one of the legends in the venture capital industry that you'll hear now. Mike, thanks for doing this.

• 0:43Speaker 01

  Great.

• 0:43Logan Bartlett?

  Great to be here. So you were early in investing in artificial intelligence. I assume it was an outgrowth of a lot of the data investments you were doing, but I think your first one was Aurora, self-driving company, and then maybe a derivative of that was Scale AI. Now you've invested in things like Cohere. And what did you see in AI in the early days that kind of, you said, hey, this is going to be the next frontier. This is something I want to lean into?

• 1:08Speaker 01

  Truth be told, the story is a little more serendipitous than that. And I went to TED. In fact, Satish, I think, was there with me, like back in, I want to say 13, 14. And this guy called Chris Urmson, who is now the CEO of Aurora. Back then, he was the CTO of the self-driving venture at Google. It was called Shofur, now it's Waymo. He gave a talk about self-driving. And I, you know, I was mesmerized by this idea. I was like, this is incredibly cool. And I didn't really comprehend AI particularly well at that point. But I thought, well, you know, how is it that a vehicle can drive itself? So, you know, dug into that a little bit and found out that underneath it was this deep learning AI

• 1:52Speaker 01

  kind of concept. And, you know, I sort of just got curious about it. And started to educate myself more on it. And I also basically started stalking Chris Nemson for the next two years until in 16, when he left Google and ended up starting Aurora. And we did the series A there. But that was really the genesis of it. And I think what kind of sparked my interest, and I think that's still genuinely true today, which is if you look at software programming in general, it's a representation of of human logic, right? It's sort of how we codify in some thread of logic that we want to follow. But

• 2:34Speaker 01

  that's not exactly how the human brain actually works. And what actually fascinated me was that AI was the closest thing that we could manufacture that looked and smelled like it was not. And it's even today, it's not really, I think, a lot of people that draw the analogies don't quite understand how different they actually are. But it was the closest thing to comprehending how human minds were. And that's why I got fascinated by it. And then obviously, that I like to align what I'm interested in and what I invest in. And so then the investments sort of followed that thread of interest that I had.

• 3:11Logan Bartlett?

  How do you go about going down and figure, besides stalking Chris, and I'm sure following them around to different conferences and stuff, how do you go about unpeeling that? Like, you're curious about something. And then what do you do next to figure out if they're there?

• 3:25Speaker 01

  Well, in that particular field, it was it's very academically influenced. And so there was really about following the academic threads. So if you kind of go through the history of AI, right, there was a there's a lot of work that happened at CMU originally and Carnegie Mellon University in robotics and deep learning, etc. Jeff Hinton, who is largely credited today for being kind of the father of some of the modern AI concepts, was at CMU. He left and went to University of Toronto. A bunch of his students ended up permeating through Berkeley, some through MIT, some through Stanford, etc., etc. So it was about kind of following that map of the

• 4:09Speaker 01

  Leading academic thinkers in the area that sort of gave me a little bit of a roadmap. And oftentimes I actually used Chris Ermson, who was highly respected because he was actually an associate professor at CMU before he went to Google. And his co-founder Drew Bagnell, who is still a professor at CMU, they sort of led me down the path because they had the credibility to kind of introduce me to some of these folks. And I think that really was able to kind of broaden my view around it. Generally, I think that's always a healthy approach to say like, who are the domain experts in this field? And let's get to know them, right? If you're a database person, you want to know Stonebreaker because he is the guy in databases.

• 4:51Speaker 01

  And you sort of follow that thread of like, who are the knowledgeable people? And that gives you a map of the market.

• 4:58Logan Bartlett?

  You are one of the few investors, I think, still active today, who lived through the internet, lived through the mobile shift, lived through artificial intelligence. I read a quote.

• 5:10Speaker 01

  I was in middle school, to be clear.

• 5:12Logan Bartlett?

  Yeah, exactly. When you were 12 and you were paying attention to their Cisco, I employed a lot of young people there. Child labor laws were a little different. But I think something you said in 2015 and 16, comparing artificial intelligence to the internet, which I think today people draw that analogy all the time, but at the time, that was a little field from what people were talking about. What did you see in AI that reminded you of some of the shifts that happened in the internet?

• 5:42Speaker 01

  I think the core concept of these important shifts that happen, whether it's mobility, like with the iPhone, or AI today, or the internet of early years, social media when it started, first came out, is that they end up kind of being these enablers, or I don't love the word platforms, but they end up being platforms where people can take them and

• 6:10Speaker 01

  Realize new ideas off that base, right? So if you think about the early internet, you know, in the early days, it was mostly about emails or message boards or something like that, then really the breakthrough was the web, the browser and the web server. That allowed people to start thinking about commerce and films and marketing and advertising and and and and and. And I think it's that ability to take something that basically opens up a horizon of activities that then a subsequent group of people can pursue. And in that context, I think the internet and AI have a lot of interesting similarities for good and for bad.

• 6:55Speaker 01

  Because if you think about, you know, I joined Cisco back in 94 and really the rise of Cisco coincided with the building of the internet, right? They were the infrastructure for the internet. Cisco became an important company. It was, it was and is worth a lot of money. You know, you could argue similar things about OpenAI. But a lot of the interesting stuff happens on top of that. And it's very hard to estimate in the moment exactly when those exciting things happen and which ones are actually good and which ones are bad. Because, you know, if you think about some of the things in the late 90s that we imagined the internet would offer us, they were correct.

• 7:39Speaker 01

  They just didn't happen in the timeframe that we thought they would. And therefore, you have a little bit of a financial bubble that happens around it. Because we all think like Webvan is going to happen next year and it doesn't. Instacart happens 15 years later. The idea has happened. When they happen is a little harder to judge, which brings about these sort of like bubble like behaviors. Because, you know, essentially venture capitalists and investors in the technology business, we're all optimists. Like that, that's why we do the job that we do. We think stuff is going to happen. And that optimism leads us to sometimes Uh, correctly incorrectly predicting when they will happen and we lose money on that. But in some cases, we're right and we make a lot of money doing it.

• 8:22Speaker 01

  And that's, I think, some of the similarities that you're seeing in the AI world today. We're, we're envisioning the incredible things that will happen on top of AI. But we're not really sure about the timing. We're making the bets anyway. And for right on the timing, well, you know, we'll be very successful investors. And if not, we'll lose some money.

• 8:40Logan Bartlett?

  Is, is your belief then if something feels like an inevitability, like artificial intelligence in some ways, then our job as venture capitalists is to actually lean into the hype cycle and not worry too much about valuations within reason, because if it works, it could be the Siskos or the Amazons or the Googles or OpenAI today. And if it doesn't, you just lose your money? Or do you need to be pragmatic about the valuation and the price still, knowing that there's something of a mania going on?

• 9:15Speaker 01

  Yeah, I mean, in this sense, I, I, I think you have to be optimistic, but I think you have to be careful when the valuations get very large. I mean, look, um, I, I think AI is super cool. I am not in the camp that says this is the coolest thing we've ever done. And if you kind of reflect that back on market caps of companies, there are a small number of companies that are worth more than a trillion dollars. There is a slightly larger number of companies that are worth hundreds of millions, Cisco, et cetera. There are more companies worth 50 and more companies worth five or 10 billion. But if you're going in and investing as a venture capitalist with a reasonable probability

• 9:57Speaker 01

  of failure into something that's worth 20 billion, what are my chances of making 10x on that bet? Especially with downstream dilution and option pools, not super high, you know? There's one company every five years or one company. And what are the chances this is it? It's pretty low. And so my view is at the lower valuation ranges, 50, 100, 200, even 500, you know, 10x is a $5 billion company. There's a reasonable number of those. And so you're like, you know, statistically speaking, I have decent odds at, at making this one work. But you know, you go to the roulette table and you just bet on one number, the chances are you're not gonna get it.

• 10:41Speaker 01

  And I think that while I think it's smart for venture capitalists to lean in, it's smart for us to have a portfolio in AI because we don't know which one's right. And it's smart to be moderated on the investment, the entry point of that investment in order to sort of accommodate a reasonable failure rate.

• 11:03Logan Bartlett?

  Do you think having lived through those platform shifts, internet and mobile, and I guess now AI, do you think that makes you better equipped to have the prepared mindedness and some of the historical precedents of how some of these things have played out? Or does that lend itself to some level of cynicism? And there's going to be more optimists out there that will see things differently and say, no, this time's different?

• 11:35Speaker 01

  Well, I think the first thing it helps you is to identify the real waves and the not so real waves. Like, you know, I've been a skeptic and I was quite skeptical about the whole crypto wave. So didn't really do any investing in that area.

• 11:48Logan Bartlett?

  Were there specific things that you saw? I mean, I was as well, but I'm curious.

• 11:53Speaker 01

  I mean, it's because when we call it a platform, what we're saying is it enables you to do a lot of things that you couldn't do before. Right? That's kind of the point of it. I never figured out, other than speculating on rising crypto prices, I didn't understand what it is that you could do that you couldn't do before. Arguably with Bitcoin, you know, maybe if you live in Argentina, it's a good deal to have some of those, but it's not enabling, right? It is a currency in and of itself. So the identification is helpful. So you see these waves and you go like, okay, this is going to be important. So just a recognition, when you recognize this, trying to get in early before the prices go sky high, that's super relevant.

• 12:35Speaker 01

  And then sort of trying to understand how to capture value around that platform shift that's happening.

• 12:45Speaker 01

  I think right now, when you hear a lot of venture capitalists talk, they're talking about, you know, is this a just a wrapper on OpenAI or on Cohere or on Claude or something like that? Or is there a real company here? Being able to identify the difference between just a wrapper and an actual app, those are the sorts of things that I think help you that I can take lessons from the internet. Email never really was a great business, but a website that does commerce was, even though technically you're saying, well, how hard is this? You're just moving bits from one place to another, but there was value there. So being able to identify where there is more than just a wrapper is, I think, one of the skill sets that carries over from generation to generation of waves.

• 13:29Logan Bartlett?

  Is there a distinction or a question Joel ask that are between a wrapper on one side and a net new application that could create equity value on the other?

• 13:40Speaker 01

  Well, specific to the AI world, a lot of times I try to comprehend how much does this particular app embrace details of the use case of what the user is doing with the app, right? And how much of it requires knowledge of a specific domain? That domain could be human resources, it could be marketing or sales, it could be the automotive industry. There's a lot of domains, but most oftentimes, SaaS applications have to capture the essence of that user's workflow. And ideally, in many cases, it occupies the workflow of

• 14:24Speaker 01

  more than just one person. It's not like just a single player productivity tool. But things that make things more than wrapper are many people use it and they benefit from the network effects of using it together. There's specific embedded knowledge of the workflow of the user in that sector. There is a intelligent usage of multiple types of underlying capabilities of the model. So maybe there is a vision thing or this kind of language model for this, a small model for that, a big model for that, that type of thing seems to me the key to finding what is not a wrapper and an actual application.

• 15:08Logan Bartlett?

  As I think about maybe the internet versus mobile, and I'm going to make these numbers up and maybe you'll disagree, but internet, I think 90%, maybe 80% of the value that got created by the internet were net new companies that got created, be it Amazon, Google, or whatever. We can go down the laundry list of names. There's still Microsofts and, you know, things that ported over some of that value. Mobile, it felt like the vast majority of the equity value that was ultimately created was captured by Apple and Google in large part. And then there was Instagram and Uber and, you know, a bunch of others as well.

• 15:46Logan Bartlett?

  Do you think that the equity value within AI is going to be captured by a lot of the incumbents with the existing data? And there'll be a handful of those that create new value? Like, how much do you think it's closer to the internet, where maybe it'll be a ton of net new equity value created by startups versus mobile, that a lot of it gets captured by existing vendors?

• 16:10Speaker 01

  Yeah, well, I think in that sense, if you compare the internet generation to the current AI theme, my suspicion is it'll be a little bit different. And that the current competitors in AI are quite competent. You know, Google, Microsoft, Amazon, Apple are companies that are still on it. They haven't sort of lost the plot, as was the case maybe at the beginning of the internet. So A, it's likely that they're going to capture a big chunk of the value. Second is the point you mentioned, which is they have a very interesting data advantage. And, you know, whether it's good or bad data is a good question, but

• 16:53Speaker 01

  they certainly have the wherewithal to capture that advantage. And the third is the capital intensity that AI requires. And that's also a slightly different theme than the internet didn't require. It required capital for telcos to build out infrastructure, but nowhere near dimensionally what we're seeing here. So there's a capital mode, there's a data mode, and there's just a competence mode that incumbents have. So my guess is, in the end game, if you just added up the dollars, dollars will flow to incumbents in the AI world more so than elsewhere. However,

• 17:30Speaker 01

  You know, as a venture capitalist, you know, we benefit the zero to 100 billion journey more than we benefit from the 100 billion to trillion journey. And so I believe that there will be enough interesting companies that look like, you know, Uber or Insta or, you know, whatever the case may be, that benefit from the existence of that mobile platform and will create ample opportunity for upside for venture capitalists. So there's a lot, there's, in other words, even if they're not the biggest allocation of dollars, there's so many dollars that I think our industry will do well out of it.

• 18:07Logan Bartlett?

  I heard you say at some point, large language models will be commoditized and so it's all going to be about the data that you train it on. I guess, one, do you remember saying that or the context around it?

• 18:19Speaker 01

  I was probably wrong, but yeah.

• 18:20Logan Bartlett?

  Yeah, okay. Can you elaborate on that point or how you sort of think about the value that might go to large language models and the data and all of that?

• 18:29Speaker 01

  Yeah, well, I think it's a nuanced thing, actually, and, you know, none of us have a crystal ball, we're learning every day, but broadly, I would segment in two ways. Models, if you really distill it out from 100,000 feet, perform better based on two things. One is how large they are and two is how much good data they have to train on. Those are the two big axes.

• 18:54Speaker 01

  Large models cost a lot of money, having lots of good data costs a lot of money.

• 19:00Speaker 01

  And so at least if I were to give you my snapshot of my crystal ball today, I would say is you're likely to have two or three sustained leaders in the large language model space, particularly as applied to consumer applications. It's likely to be OpenAI, it's likely to be Google. You know, there might be a third in there, who knows? But that's and that will largely serve the more consumer universe. And even if you look at OPI's revenue, the vast majority of us is all of us paying $20 a month to them. There's that part.

• 19:36Speaker 01

  I think that there are a lot of functions that will go basically use AI to enable sort of enterprise applications. And that's going to be a bit of a different dynamic because those enterprise applications, if I go back to the point I was making earlier, will have a lot of domain-specific knowledge and data that will allow even a smaller model, which is cheaper to serve, cheaper to train, et cetera, et cetera, to actually perform important functions in the enterprise. So I think you're going to see a divergence in the market between the consumer side of the market and the enterprise side of the market. Now, on the enterprise side of the market, the interesting risk is like, is there some commoditization going to happen? Because you have a lot of open source models that are out there.

• 20:20Speaker 01

  And that's a maybe. There's that possibility that the open source models will tend to drive the price points down and commoditize the enterprise side of this. I think there's still some, it's not all self-evident because there are some rough edges to the open source models that don't make them incredibly enterprise-friendly at this point in time. So we'll have to see how that plays out. But broadly, I see kind of that segmentation. I think, given the capital required, it's hard to imagine that, I mean, I think there's going to be significant price wars between OpenAI, Google, and whoever else. Because, you know, if you're Google, this is truly existential, right? It's absolutely existential to win this market. They will throw everything at this.

• 21:05Speaker 01

  And so I think what you're going to see is some amount of price war, i.e. commoditization, but around a small number of players, not a complete disappearance of value because everything is free.

• 21:16Logan Bartlett?

  Makes sense. I guess one of the things that's a topic du jour, it seems like these days is AI regulation, the existential threats around AI. Do you have any thoughts on what role should the government play? What role should private sector play? Any opinions about that stuff that seems to be playing out daily right now?

• 21:40Speaker 01

  Yeah, I mean, it's a complicated subject. I have not historically seen our government, and these days as functional as our government is, be able to create regulation that keeps up with the velocity of technology. I agree with some of the first principles that are being laid out right now, that it shouldn't be discriminatory and it shouldn't do these bad things. In general, what I actually believe more is that when you look at the people that are providing the leading-edge models and capital and so forth, they are ultimately pretty responsible companies. Microsoft is a responsible company. I don't like everything that they do, but broadly, the responsible company, so is Google.

• 22:23Speaker 01

  And I am more inspired by the fact that the cutting edge is being done by responsible companies versus there's some wonderful regulation that created that safety harness around it. I will say that there is risk in the open source universe, because if I'm a bad guy and I want to build a nuclear weapon and I have a really good open source model, I can probably sort that out. There isn't an obvious regulation that I can think of that would be effective to say, let's stop that. Right? And I just think that we're going to have to move along the journey and hope that the right actors

• 23:06Speaker 01

  do the right things to make sure that technology is used in the right way.

• 23:12Speaker 01

  Eventual regulation, no issues with it all. I just don't think it's going to happen in the timeframe that the technology is moving at.

• 23:19Logan Bartlett?

  Over the course of your career, you've made investments in everything from hardcore infrastructure. We talked about Aurora, Scale. You've also done some consumer investing, Blue Bottle. You were an investor in Sonos as well, is that right?

• 23:31Speaker 01

  Yeah.

• 23:32Logan Bartlett?

  What's the through line across these investments? What's a Mike Volpe investment in an entrepreneur that gets you excited?

• 23:40Speaker 01

  It's really just completely random.

• 23:41Logan Bartlett?

  Right? Just cherry picking randomness as it comes across.

• 23:45Speaker 01

  No, I mean, I've always thought like, as a professional, you kind of look at your balance sheet, like what are my assets? What are my liabilities? And for me at least, I think I have two assets. One is I'm very curious about technology. And so figuring out Investments that tickle my curiosity, whether it's data infrastructure or it's AI or whatever, I pursue it. So that's one thread. And then, you know, the other one is I have a network of people that I love working with and I have over the years. And I lean in on that asset when I know I have a special person that I'm working with. So if you take like

• 24:29Speaker 01

  a Sonos, the founder of Sonos who led us to making that investment was a guy named John McFarlane, who I'd gotten to meet back in my Cisco days. He founded a company called Software.com, went public, very successful. And he called me up and said, you know, you should look at this and was completely off the roadmap. We weren't going to do music stuff and hardware. But it was John. Or, you know, Blue Bottle Coffee, which is this entrepreneur named Brian Meehan, brilliant entrepreneur. I met him, he was my neighbor in London. I met him, I thought this guy's super smart. He called me up one day and said, you want to put money in Blue Bottle Coffee? And I was like, well, anything Brian does, we'll do. So it's sort of like the two threads are amazing people that I've gotten a chance to meet in life. Another one would be Wealthfront and Andy Rackliff, who I've gotten meet. And

• 25:14Speaker 01

  then the other one is stuff that tickles my technological curiosity. Those are the two threads.

• 25:20Logan Bartlett?

  What's your mental underwriting framework or decisioning process for getting to the point of saying yes? Are you instinctive in the way that you sort of know when you first meet it? Or are you peeling back the layers over and over again and really yearning and agonizing about getting to a yes?

• 25:38Speaker 01

  Yeah, listen, I like to use an analogy when I talk about this one. You know, I'm not much of a surfer, but it's a surfing analogy. I think there's three things that you have to convince yourself that you have, right? A surfer needs a wave, a board, and he or she who surfs. So there's the person, the board, and the wave. The wave is you kind of want to look at a landscape and see something that's actually changing in your favor at the right time, right? You know, if you look at quantum computing, interesting, interesting theme, not happening right now, there's no wave, right? AI clearly big wave. So first identify that there's a wave coming. Usually the wave is an externality, meaning you don't control it.

• 26:19Speaker 01

  You can only thing you can do as a company is to time getting on the wave at the right time, but you're not making the wave. That's one. The second thing is the board, which I think of it as the product or the technology of the company. And do you have the correct instrument for that wave at that point in time? Right? And, and again, this is like, the correct instrument means you need to have good technology, but it has, technology is defined as good to the extent that it solves the problem it's trying to solve. And so that's the instrument. And the last one, which is ultimately probably the most important is, is the surfer themselves, who has to be able to figure out that I need to take this board and put it on this wave at this time, and then navigate the weirdness of that wave.

• 27:03Speaker 01

  Cause that wave has competitors in it, it has early adopter customers, late adopter customers, it has macro climates, people don't want to spend money, do want to spend money. What you try to look for is a great entrepreneur who knows how to use technology to take advantage of a wave that's coming their way. Right? And if you have all those three, then you have a winning investment. If you have only two, you need to think hard about it.

• 27:30Speaker 01

  In general, of the three, my biggest bias is almost always the founder, the entrepreneur. Cause I think entrepreneurs are good at identifying waves, they're good at identifying which technology you need to use to tackle it.

• 27:42Speaker 01

  And so they find their, their moment in time. But you see a lot of fantastic entrepreneurs who like are just, you know, sitting out there on board with no way. Yeah, yeah. So, so, you know, you gotta, you gotta think through that. That's probably the most important element, but ideally you want all three.

• 27:59Logan Bartlett?

  When you're actually going about like diligencing a deal, how does Index do it? Do you guys pair up and have two people prosecuted? Are you sort of on your own hunting? Do you have a junior person helping you? Like, how does that kind of work?

• 28:12Speaker 01

  Yeah, generally, we have a team effort. Usually have a partner and a secondary partner that are working on it together. And we have a team of younger folks on the team that help us out. So it's usually a, you know, team of three or four folks that are working on any particular transaction.

• 28:32Logan Bartlett?

  I heard you say that 80% of your investments are ones you, with good confidence, you'll make money, which allows you to do 20%, which are the moonshots and who knows? And how do you sort of think about like what the 80% is versus the 20%? Is that something you actually articulate internally? Like, hey, this is one of my 20%?

• 28:50Speaker 01

  It's not, yeah, no, I think my partners know about it.

• 28:54Logan Bartlett?

  Yeah.

• 28:55Speaker 01

  But, you know, for example, I've had good success in my career investing in a lot of open source state infrastructure companies, you know, Hortonworks, Cloudera, Confluent, Elastic, Confluent, ClickHouse now, Cockroach Labs, Kong, et cetera. So I sort of, you know, I'm a student of how the mechanics of how that works, how you turn it into a business. And I feel like, okay, that's middle of the fairway for me. I know how this business works. I know what to look for. I know how they monetize. And, you know, for me, they've produced, you know, $5 to $15 billion outcomes as market cap companies.

• 29:37Speaker 01

  And sort of that's kind of what I think of as my 80%, like stay in the lane. If I produce that output for my partners, which, you know, generates returns for them, generates return for the LPs, occasionally, they're going to let me do some crazy shit, which is like, you know, self-driving cars or robotics or early investments in AI. And so I think as an investor, I like to have a little bit of that balance.

• 30:04Speaker 01

  And that, I think, gives me a platform to do crazy things. And sometimes those crazy things, they work out or even derivatives of those work out, right? Because Aurora has been a good investment for us. As a public company, we've, you know, we've made some money on it. But I made that the scale investment because of Aurora and scale is going to turn out to be a fantastic return for us. So, you know, the crazy things sometimes lead to good stuff later.

• 30:29Logan Bartlett?

  Yeah.

• 30:30Speaker 02

  Hey, guys. I'm Jacob Efron, a partner of Logan's at Redpoint. Wanted to take a quick break from the episode to let you know that Redpoint's AI podcast, Unsupervised Learning, now has its own YouTube channel. We have an incredible set of guests really at the forefront of the AI revolution. So if you're interested in what's happening in AI, what it means for businesses in the world, definitely subscribe. Now, back to the show.

• 30:50Logan Bartlett?

  I'm curious, actually, because you bring it up in scale, I was going to ask this later. But what did you, Alex was 19? I think he was 20. 20 when you invested in him? What did you uniquely see in him? I've sat down and done a podcast with him and he's obviously a fantastically intelligent, sort of cerebral individual, but investing in a 20-year-old is a risk in and of itself, I guess. What did you see in him at that time?

• 31:17Speaker 01

  I mean, first of all, as far as Alex, you know, I can wax poetically about what an amazing entrepreneur he is. You know, everything you want out of an entrepreneur. He's twitchy, restless, he's incredibly smart, he's super commercial, he works his ass off, he's a great networker, he sees technology before it arrives, you know, he adjusts and shifts. I mean, so many good qualities.

• 31:40Logan Bartlett?

  Were those things that you intuitively knew at 20 years old? Or are those now that he's 26 or 27 or whatever?

• 31:46Speaker 01

  No. And actually, I think that's the interesting part of your question, which is that when you invest in a 45-year-old, you more or less have the final product. That is what that person is going to be. When you invest in a 20-year-old, it's not a finished product. It's got rough edges, you're not sure about this, you're not. And I think what you have to do as a VC is to sort of squint and ask yourself, this person looks like this at 20. What will they look like at 25 or 30? Can you extrapolate the trajectory of this individual? And it's really hard because humans change enormously between age 20 and age 30.

• 32:31Speaker 01

  Like, you know, it's a life-defining decade for us. We find our motivation, our ambitions, our aspirations. We face our first challenges as an adult. And so the extrapolation is inaccurate at best, but you try your best to see what this person is going to turn into. And I think honestly, being a parent of somewhat older children is helpful in that assessment because, you know, I've seen my own kids like evolve and change and become different kinds of people. So I think that's an art form. I don't always get it right, but I think oftentimes when I read briefing memos from VCs, it always says, this is what the entrepreneur is.

• 33:12Speaker 01

  And it never talks about what is the entrepreneur going to be in five years? And I think that that's a bit of an art form. And if you look at the greatest returns in our business, you know, whether it's an Amazon or a Facebook or whatever, oftentimes you see the leader evolving a lot as a leader in time. And it's funny how we don't actually pay attention to it. We just look at it very static.

• 33:36Logan Bartlett?

  Yeah, I guess it's hard to, it's much easier to take that snapshot than it is to try to project the person in some ways, I guess. I think the projection can lead to maybe some level of false precision. I've always found that the in-between when you write a check and then you sort of go quiet for four weeks or whatever after, and then you go to your first board meeting and the entrepreneur's been through a bunch of fundraise conversations and how much they've changed by the time your last conversation with them to your first board meeting or whatever with them is usually a pretty good sign of like the slope of the line and how quickly they're going to grow.

• 34:12Speaker 01

  Yeah.

• 34:12Logan Bartlett?

  So, yeah, I guess that's one of the things of getting to know entrepreneurs over long periods of time and getting them to see them evolve as they, as you have those conversations.

• 34:20Speaker 01

  Yeah. And you know, there's also, you know, there's always this kind of question about where is the value that an entrepreneur, that a VC brings to the table, right? And it is true that, you know, a lot of what we do is just invest. Like, that's our primary act. But I think When you're investing in a 45 year old, leading or a group of established founders, you are more along for the ride. When you're investing in a 20 year old, and I've experienced this firsthand with Alex or George Sevilka at Hebe and so forth, is you are shaping who they become also. And I find that absolutely fascinating.

• 35:01Speaker 01

  It's a, it's just, it's an absolute privileged position to take these incredible people who have so much talent and to be able to sort of unlock aspects of them. Mostly, they're growing on their own.

• 35:13Logan Bartlett?

  Yeah.

• 35:13Speaker 01

  Make no mistake. But you can clearly feel your influence much more than what you can do. You know, you give a nice piece of advice to a 45 year old, but they are who they are.

• 35:22Logan Bartlett?

  Yeah. You started full-time investing in 2009. You went over to Index, but then you were investing in the 90s at Cisco when you were 12 years old, going through that, that, that stretch. If you could go back in time, maybe to when you started at Index, what's something you know now that you wished you could have told yourself then about investing, about working with entrepreneurs?

• 35:48Speaker 01

  I mean, so much. First of all, I think, you know, it, it takes a while to become a decent venture capitalist. It's, it's not a profession that you can write down and explain. I mean, I'm sure you know this, but there's, it's very experiential. I think it's very, uh, it's artisanal in its nature. You've got to understand a lot of different details and how things come together. Probably most of my professional career prior to going to work for Index was operational in nature. I had done some investing. And I think the, probably the first thing I would tell myself back then is

• 36:33Speaker 01

  actually let go of some of those operational first principles. Cause I think operators tend to think too much in the first person when they look at a company. They, you know, you psychologically are like, if I had this product and this market, I could lead this company to win. Big problem is it's not you. It's it's another person that's doing it. And so you have to kind of let go a little bit of your sense of analytical structure of how does this market structured? What is the competitive nature of it? Can I do due diligence on the technology? And embrace more the the understanding of the person, of the founders, and and their ability to execute against that idea and that technology.

• 37:18Speaker 01

  So that was probably, I was more focused on markets, on competitive dynamics, on technology, and less focused on the people. And over the last 15 years that I've done this, I've learned that it's more about the people and a lot less about the technology. Well, I mean, the technology is important and so on and so forth. So that's probably the the the biggest shift, I would say,

• 37:42Speaker 01

  that that I I've tried to internalize. And then, you know, the other thing is this is a pattern recognition job. And so it it is about seeing an opportunity and saying, can I, do I have any other situations where this pattern has repeated? And I can perform, you know, I can sort of follow that trend. And that's true, both in terms of the business opportunity, but also the individual founder. And the founders are hugely diverse. There's all sorts, but there are patterns, right? And so can I see a pattern in this person? And those are probably things that I didn't really understand super well when I got to the job day one.

• 38:20Logan Bartlett?

  In talking to a few folks at Index, more than one said that you were the best mentor they've they've ever had in their careers.

• 38:31Speaker 01

  You must not have had very good careers.

• 38:32Logan Bartlett?

  Yeah, yeah, yeah. Well, it's a limited number of people, I guess, they're working with and.

• 38:35Speaker 01

  Yeah, we do pay their salaries.

• 38:37Logan Bartlett?

  Yeah, exactly, exactly. Yeah, yeah, yeah. I don't have to, I'll tell you the names after. They're maybe looking for a pay bump. So when you think about developing young venture capitalists or helping them learn this artisanal craft that comes with experience and all the sort of, some of the things that you've learned over the course of the last 15 or 25 years, or however you want to. Score it. How do you think about nurturing those people and helping them find their own lane? Because what's true of Mike Volpe, what's true of Doug Leonie and Peter Fenton and Mike Moritz and all these people that are iconic names in the industry is going to be slightly different. Right? We're all sort of throwing different pitches. We're doing things slightly differently.

• 39:19Logan Bartlett?

  But how do you help pull out the best of the people that you're working with?

• 39:24Speaker 01

  Yeah. I mean, there's a lot of things, but I'd highlight two, which is first, in the venture capital business, you have a lot of very hardworking, very intelligent, talented people. This is, this is a very high density of that type of profile.

• 39:42Speaker 01

  That type of profile is best managed or best mentored by giving them a lot of free space and allowing them to take risk. Right? The core thing is jump into the deep end of the pool. And, and I think that the best people shine the most in that circumstance. And, you know, the venture capital is populated by a lot of smart people. The, the, the ones that have performed very, very well are few and far between. But all of those, you just wanted to throw them into the deep end of the pool. What does that translate to? It's like, pick a sector and you go invest in that sector

• 40:22Speaker 01

  and let me know how I can help. So take like, you know, one of my amazing partners at, at Index, Shardul Shah, he came, he, he joined us and the US team is the first person we hired on the US team back in like 2011. And we didn't really have a person covering security. And I was like, okay, Shardul, take security, it's yours. Go build a network, figure out what to do. Do your investments. I'm here to help. I'm here to open doors if I need to. But really it's about giving them the freedom and the flexibility and most importantly, the self-confidence that they can tackle whatever problem is faced in front of them. That's one dimension. The other thing that I try to do is not give people answers, but give people frameworks to figure out their own answer.

• 41:06Speaker 01

  So you asked, I have this problem. Should I invest in this company? I'm not going to tell you whether you should invest in the company. I will give you a way to think about whether you should invest in this company. And then you sort, you're, you are in the details. You know, the people better, you've studied the market better, whatever. You have all the data. I'm going to give you a framework like the one I just gave you about the surfboard.

• 41:28Speaker 01

  And hand you that framework and saying, you figure it out and I'm going to back you up. And by the way, look, as a VC, maybe you're better than I am, but I don't think I get half the time right.

• 41:41Speaker 01

  And so you better, you better get used to like letting people make mistakes. I mean, everybody, I made, I've made so many. And as a venture capitalist, it's sort of like, uh, it, it completely comes with the territory. So letting people feel like they should not fear making a mistake. If you went through a rational process, using the right frameworks, you came up with the answer, you invested, the company didn't work out. It's fine. It's totally fine. Just go back at it, right? As long as you're using those frameworks. So, you know, don't quibble with the decision of whether you did or did not do a right thing. Just focus on the fact that you use the right mental frameworks to make the decision that you did.

• 42:21Logan Bartlett?

  The mistakes you've made, are there, there are commonalities or through lines between them that you've, you've now learned a course correct? Maybe, maybe it was you invested too much in the board and not the wave or anything along those lines that you've looked back and you're like, I wouldn't have done that again. Cause we're always going to be wrong, right? Just statistically.

• 42:43Speaker 01

  Yeah, no, for sure. I, I think, look, um, one of the most important things we understand, we have to do as people is to understand our own weaknesses, right? What are my pitfalls? And in some ways, those are often the flip side of the coin of your greatest strength. So I said earlier, I love tech. My weakness as an investor is I fall in love with tech. And so, you know, what I have to do oftentimes in the moment of like, should we do this? Should we not do this is pause and say, am I doing this because I love the tech? Or am I doing this because we think we're going to make money out of this? And the most frequent problem I've, mistake I've made in my career is just falling in love with the technology more than falling in love with the business and the people and all that good stuff.

• 43:27Speaker 01

  So that's what I have to guard band myself against, although that, that's just me. Every, every one of us has blind spots. And so the most important thing is just recognizing what's yours. And then, you know, surrounding yourself with people or surrounding yourself with frameworks that, you know, prevent you from going off the rails, given that blind spot.

• 43:48Logan Bartlett?

  Is there an investment that stands out that you didn't make that's particularly, particularly painful? And what was, I'm sure there is, we all have them. I can think of a list of five of them or something, but that you, you tweaked your mental model going forward, saying, hey, I was off on this and it's something I need to think about going forward?

• 44:08Speaker 01

  Yeah, I mean, I'll cite one that, you know, gives kudos to Redpoint, which is Snowflake.

• 44:13Logan Bartlett?

  Yep.

• 44:14Speaker 01

  I, you know, I, the first investor in Snowflake was Mike Spicer at Sutter Hill. Credit to him, he was kind enough to show us and me the Series B and then probably a number of subsequent rounds. And, you know, I sort of used market logic to convince myself it wasn't a good idea because it was like, well, you know, Amazon has Redshift, it's their fastest growing, most competitive product in the market. This is a, this is just an analytical database. There's lots of those, there's Netezza and Vertica and like, you know, Teradata and all these and, you know, technically speaking, it was more scalable on a cloud basis.

• 44:57Speaker 01

  But I sort of essentially used market logic to talk myself out of it. And what I didn't appreciate, for one, Benoit, the founders there, which were, who were amazing, and then the ability that Mike had to bring in first Bogmuglia, who was a great leader, and then Mike, and Frank Slutman, who was also another great leader, to evolve the company, who just didn't enter my framework well. And

• 45:25Speaker 01

  So, you know, but those ones hurt.

• 45:28Logan Bartlett?

  Yeah, no. When you're wrong on things that you invest in, it goes to zero. When you're wrong on things that work out, they go very far.

• 45:39Speaker 01

  You can only lose your money once.

• 45:40Logan Bartlett?

  You can lose it once.

• 45:41Speaker 01

  You can make it 50 times over.

• 45:43Logan Bartlett?

  You said something that I found pretty profound and I'd like to read back to you and get you to elaborate on. But most companies and people define themselves and who they are in too narrow of a way. When you're getting started, it's important to focus, but then over time you need to redefine yourself more expansively. Can you elaborate on that sentiment, either for companies or people?

• 46:04Speaker 01

  Yeah, I mean, that was sort of my big lesson in my first adventure in a professional life at Cisco. You know, I joined the company when we were about 1,000 employees, I think, like something like that. And, you know, seven years later, we had 50,000 employees. And I think the company succeeded in many ways because it kept reinventing itself with additional chapters to. You know, first it was a router company, then it was a router and switch company, then it was an internet working company, then it was like, you know, it kept reinventing its existence. And in some ways, the phrase I often try to use is like, you know, we sort of define the sandbox of what it is that we are.

• 46:48Speaker 01

  And we try to excel within that sandbox, but then we ultimately just live in that sandbox. And we forget that the whole point is to make the sandbox bigger. That lesson applied to Cisco, I think it really applies to people a lot. Especially capable people, many of them in our business and venture capital, but also in other professional walks of life. They define themselves as this is who I am. I am a programmer. I am a salesperson. I am a marketer. I'm really good at Java. And you sort of, you kind of in the moment feel good because you excel at this thing, which ultimately actually doesn't fully expose who you are as a person.

• 47:32Speaker 01

  And so being able to sort of assess where you are and say, you know what? I'm going to make that sandbox bigger. I'm going to try something different. I'm going to try to expand my competence.

• 47:45Speaker 01

  That allows us to really fulfill our full potential. You know, I was not a software engineer, right? I liked, I programmed, but I was a mechanical engineer. And if someone says like, well, how does a mechanical engineer understand anything about AI? Probably right. But then, you know, if you just sit there and, you know, you read papers and you try it and you download the software and so on and so forth. And you redefine, you say, well, no, turns out I'm not a mechanical engineer. I can understand this other stuff and I can understand this other stuff over here. You gradually expand the sandbox. And I think that, you know, it's not such a blind process because if your sandbox is two by four

• 48:25Speaker 01

  and you sort of say, I'm going to go to 30 by 50 feet. Not so much, but you know, there's a gradual process associated, but it's really important for people to continue to grow. I mean, another way to put it is this whole growth mindset mentality, but I kind of think of it as expand the domain in which you can act to allow yourself to learn new things and excel at more things.

• 48:50Logan Bartlett?

  Similarly, you said evolution has taught us that mistakes are bad, but that's not true, which is a weird thing, especially as a venture capitalist. You, you, you need to be willing to make mistakes so that you can hit the ball far out of the park. But how do you think about that?

• 49:08Speaker 01

  Look, I, I, I think of it as, I actually think the VC job is very statistically oriented job. Right? At the end of the day, uh, much as a baseball player goes up to, to the plate and tries to hit, you're only going to, if you're really good, you're going to hit it there about 33% of the time. But if you don't swing, you're never going to hit it. And so I, I, I do think that it is absolutely critical to embrace the idea that mistakes are part of what you do. Like it's just, it's fine. And Before even saying like, I learned from my mistakes, that's kind of obvious. It's just forgiving yourself for your mistakes. Like saying, it's, it's fine. It's totally okay to make a mistake. And if, if you're not, it's probably worse, right?

• 49:53Speaker 01

  If you make no mistakes at all, you're sitting in that small sandbox and just bunting every time the ball comes at you, right? Yeah. So, you know, making mistakes is about, is, comes with the territory when you expand it. And then obviously you try to learn from your mistakes, but some of your mistakes, the, the lessons you learn are pretty obvious. They, they just show up and you're like, oh God, I'm not doing that again. Yeah. Um, uh, but I think the most important part, and I, I think particularly for very competent people, uh, you hate making mistakes. We hate making, making errors. And it, and it's a very human, it's interesting because it's a human thing, right?

• 50:31Speaker 01

  Like, um, uh, 10,000 years ago, when I came out of my cave and I made, I did it at the wrong time, the lion ate me. Yeah, you died. It, it was really bad to make that, to make a mistake. The mistakes translated into tragic endings. Today, professional mistakes, like, you know, people give us 3,000 shots. Yeah. And so I think we overweight the, the idea of making a mistake in our, in our own mind.

• 51:03Speaker 01

  It's a sort of psychological factor. And I think the most important thing is just to let it go. Like, all right, fine, screwed it up. Let's move on, try again.

• 51:11Logan Bartlett?

  So there's a book called Done Deals, those were written in 1999, that I read when I got into the venture industry and I actually still had sitting on my bookshelf. Uh, and I went back and I, I remembered there was a chapter that you wrote, uh, about when you were at Cisco and Cisco's investing strategy. In there, there was a comment that you made about, uh, getting credibility with entrepreneurs. And there was two people you referenced, you said, you can call them and ask about me and ask about Cisco. And the two people were Don Valentine and John Doerr, two of the, uh, most prominent people in I think our industry's history. What do you remember about both of those people, their style? Were there things that you internalized about, uh, interacting with them that you carry with you today?

• 51:56Speaker 01

  Yeah, I mean, the interesting thing about those people is they, in some ways, interestingly represent the venture capital business. You know, both are not active VCs now, but in their era, they were the titans of our industry. And they were completely different human beings. You know, Don unfortunately has passed. John is still active, doing a lot of really amazing philanthropic things. But Don was a guy that, you know, he would show up at the board meeting. He had a, he had his little Sequoia notepad with a green pen, only green pen. And oftentimes, he wouldn't talk. He would just like write notes and hand them to you. And he commanded extraordinary presence. And he was the guy that you were completely afraid of, you know,

• 52:41Speaker 01

  saying something stupid. Now, he also had this uncanny ability to see a situation, a person, a thread of logic or whatever, and see flaws, chinks in their armor, and use that to go drill in and figure, and figure out what's really going on here. John was enthusiasm, drive, contagious sort of ability. In some sense, he was an entrepreneur himself, that he sold you the vision, right? Both turned out to be very, very successful at, at what they do. And the lesson you take away from it is that there really isn't a mold for a succession, successful venture capitalist. You know, there's those two, there's, you know, Mike Moritz, who was a journalist. There's Peter, who was, I think,

• 53:24Speaker 01

  fourth generation VC or something, like he's sort of born and bred. At birth, he started writing checks to people. So you have this huge variance of how you undertake the task of being a venture capitalist. And the big lesson from, from those two was how, how you have to actually design your own approach as an investor. In doing it in your own way, you can also inspire others. And both of them were very inspirational. Both of them, also, I think for me at least, were extraordinarily generous with their time. And when you think about it in reverse, I was some kid. That's 26, 27 years old or something, going up to Don Valentine, one of the greats,

• 54:07Speaker 01

  or Dora, one of the greats, and be like, "Hey, can I grab lunch with you?" "Sure. Come on in, talk. Anytime you want to come by for advice, come on in." And so, you know, you've got to pass that down to the next generation. And the way I think of it is like, you know, I've had some reasonable success being a venture capitalist. When some kid calls you up and say, "Hey, can I grab lunch?" "Yes. Yes, absolutely." And then you can make your assessment as to whether that person is worthy of more time or less. But keep that door open, as they did for me, and hopefully I've done for others, and hopefully many people will continue.

• 54:43Logan Bartlett?

  There is a comment you made in that book about recommending buying the market leader instead of the lesser players despite paying a higher price. I think the quote you had was, "The right way to frame the question is not how much you're paying for an equivalent asset, but rather how much better can the market leader perform when combined with the asset of the larger company?" Is that something you think about today in investing? Paying a premium for the market leader rather than going in for the number two at a lesser price?

• 55:13Speaker 01

  Absolutely. I think that that is, you know, we live in an industry where the leader gets 70, 80% of the value.

• 55:21Logan Bartlett?

  Yeah.

• 55:22Speaker 01

  I think the concept of the cheerful, cheap and cheerful number two doesn't work in our business. And, you know, we've, at Index, we've seen the same thing where we invested in a number two player and it just, you know, occasionally you get a decent return. But by and large, you know, investing in the number one player, I think in that context, I was speaking more about M and A. And I still think that is absolutely true. Where like, if you're gonna, if you're gonna buy somebody to integrate them into your company, as today, it's much more difficult because there's a lot of regulatory issues and so forth. 100% pay more. What people forget is that...

• 56:02Speaker 01

  You know, you're, you're sitting there saying, uh, company A, market leader, uh, $200 million valuation. Company B, second place in the market, $50 million valuation. In one case, I own, uh, 15% of the company, in that case, I own 20% of the company for a little less money. Five years later, they go public. You will make or lose more of that in intraday trading in the stock price. Yeah. So you're, you're fixated on completely, if you really believe that the thing is going to be public, or if you really believe that this particular acquisition will transform your business in some way, you're completely crazy to think that plus or minus 20 or 30% of the price makes any difference when you invest or when you buy in the company. Yeah.

• 56:45Speaker 01

  It's you're focusing on super micro instead of like the big picture of what's going to happen over a time or longer time horizon. Yeah.

• 56:52Logan Bartlett?

  And, and that's even, uh, from a M and A or, or a return standpoint. And then there's the benefits of the reference ability, uh, of being in the market leader as well, which is very beneficial to at least our job, right?

• 57:09Speaker 01

  For sure.

• 57:10Logan Bartlett?

  Being in the number one versus the number two.

• 57:12Speaker 01

  For sure. I mean, I'll give you a concrete example. Like, you know, I, I was fortunate enough to enter this business with a, a little bit of a brand and a reputation when I entered it. But that wasn't to say that I was going to be any good at investing. One of my first investments that I did with Satish, with Pure Storage, right? Pure Storage. And, uh, we, I, I want to say we did the series, maybe C or D in the company, at a pretty high valuation, uh, like $500 million valuation. I forget what, how much money we put into it. So I wouldn't say this was like a premium, whatever. But, uh, you know, fast forward, I think Pure Storage today is worth, I don't know, 15 billion, something in, in, in that neighborhood.

• 57:54Speaker 01

  So clearly a, a perfectly, a perfectly good investment. And then you start to build a brand with, you know, Frank Slutman's on the board, Anil Bostri's on the board, Satish, Spicer. You know, you've got this really great group of people that are like, hey, that guy Volpe, he's all right. He knows, he knows what he's doing. He invested in this. And then people are like, ah, Pure Storage, this, that. And then that opens the door for the next thing, which I think was Hortonworks with Fenton. And that opens the door to the next thing and the next thing. And so. You know, playing with the win as you're getting started, uh, somehow being associated with the winner. And of course, it's not just making the investment. You got to work hard after that for the company.

• 58:36Speaker 01

  But that sort of, you know, gives you the platform to do a little bit better and a little bit better.

• 58:41Logan Bartlett?

  So shifting gears a little bit, you were born in Italy.

• 58:45Speaker 01

  Yeah.

• 58:45Logan Bartlett?

  And then grew up in Japan.

• 58:47Speaker 01

  Yeah.

• 58:48Logan Bartlett?

  How does someone born in Italy, growing up in Japan, end up in California in the middle of the internet bubble?

• 58:55Speaker 01

  Well, uh, it's kind of serendipity. Um, my, I was born in Milan, Italy. My dad worked for a local bank.

• 59:05Speaker 01

  When I was six, uh, my dad was, my mom and dad were kind of the adventurous type. And so, uh, the bank offered them a, uh, expat job transfer to Tokyo. They took it. I started first grade in Tokyo. And I had this kind of an collective life of going to an American school in a, in a society that was totally different. Made some really interesting friends along the way because a lot of the other kids that I went to school with were sort of like me. You know, kids of executives at IBM, kids and diplomats, kids, whatnot. And then, you know, I, I liked science and math.

• 59:42Speaker 01

  And so, you know, because the education was in English, when I, when I got to, uh, apply, applying to college, sort of going to America was sort of the obvious thing. And then, um, I, I applied to a variety of American universities. Several of them were in Boston and one was in California and I visited in February. And so, uh, truth be told, the weather, you know, I drove down Palm Drive and I was like, wow, this is nice.

• 1:00:09Logan Bartlett?

  This is different.

• 1:00:09Speaker 01

  Yeah, yeah, that's good. So, so, you know, that led me to, to, to, to the Bay Area. And, uh, I think after a few years even as an undergrad, I started to recognize, wow, there's like something very, very special happening in the field that I love in this area. And, you know, obviously it's, it became infectious after that.

• 1:00:28Logan Bartlett?

  Did, did, uh, going from, from Italy first grade to Japan, is that right? Do you think that has helped you in being able to resonate with different people and get along in different environments?

• 1:00:42Speaker 01

  Yeah, a hundred percent. I mean, the probably the biggest takeaway lesson is, uh, adaptability, which is being able to. Change yourself a little bit to adjust to the environment. But I think the less obvious one is being able to see things from another person's perspective. You know, where I find it's most useful is in negotiations. You know, when you're oftentimes you're negotiating, it's a term sheet, it's an M and A transaction, whatever. The thing that I find most useful is I look at the problem from the other person's perspective. And I try to orient where we're going to fulfill what's important to them, which is oftentimes

• 1:01:26Speaker 01

  not exactly what's important to you. Or in some cases, I want them to get to get them to see the world a little more the way I see it. So how do I change their prism a little? But the ability to see things from another person's perspective, obviously being thrown from, and by the way, Japan and Italy, there are no two countries with more diametrically different cultures. Like, it's crazy how different they are. But you sort of have to adjust to that and see things from the other person's perspective. And that's been, you know, a good lifelong lesson for me.

• 1:01:59Logan Bartlett?

  Would you walk into an Italian home and then walk out to a Japanese culture? Is that sort of the, you're flipping context.

• 1:02:06Speaker 01

  It was pretty, it was a three-way context flip because my school largely, I'd say my high school experience was comparable to any American kids. But I had friends in the neighborhood, I spoke Japanese, I still speak Japanese, I had Japanese friends that were local neighborhood kids. And, and then at home, it was, you know, pasta and osobuko, right?

• 1:02:24Logan Bartlett?

  Yeah. Probably a little louder at home, too.

• 1:02:27Speaker 01

  Yeah, yeah. But, you know, honestly, it's one of those strange things, I think is the beauty of youth. Like, didn't really think much of it. It was only when I got to America that people were like, wow, that's really unusual. I was like, I guess.

• 1:02:38Logan Bartlett?

  Yeah, you're fish and water the whole time. I, you know, it's like, you don't really appreciate it.

• 1:02:43Speaker 01

  Exactly.

• 1:02:44Logan Bartlett?

  So you graduated Stanford in 94?

• 1:02:46Speaker 01

  Uh, no, I'd finished my undergrad in 88. I stayed an extra year, got a master's degree in 89. And then I went back for my MBA and I finished that in 94.

• 1:02:55Logan Bartlett?

  Okay, got it. So that was your business school.

• 1:02:57Speaker 01

  Yeah.

• 1:02:58Logan Bartlett?

  Fortuitous timing to be graduating in 94. I assume that was, internet was starting to take off. Had Netscape been started then?

• 1:03:10Speaker 01

  Netscape had started, they released the Netscape Navigator, which was the browser in, I want to say, February of 94.

• 1:03:20Logan Bartlett?

  Okay, so right around then.

• 1:03:22Speaker 01

  Right around the time, yeah.

• 1:03:22Logan Bartlett?

  And you think this is the big thing? This is what you want to be a part of? And you applied to Netscape and Mark and Ben say, "No, thank you."

• 1:03:32Speaker 01

  Ben was not that senior yet.

• 1:03:35Logan Bartlett?

  Okay, so Mark, yeah.

• 1:03:37Speaker 01

  No, what actually happened was, I was an engineer. I was a mechanical engineer at Hewlett Packard before business school. When I got into business school, I had all these smart bankers and consultants. So like, oh, that's the way to go. So I got a job in management consulting over the summer. Didn't like it at all. I was like, no, I'm going back to tech. And I was organizing a conference and we, a friend of mine, Greg Sands, who's actually got his own venture firm now, was like, "Hey, rather than doing all these posters, I think we should make this thing called a website." And I was like, "Hmm, a website?" And he goes like, "Yeah, there's this thing called a web browser

• 1:04:20Speaker 01

  and you can go check out the Louvre and all these things and we should make one of those. And we'll advertise the conference there." And we had emails, so we'd like, we'll just get people's emails and that'll be, we'll make a little Excel spreadsheet. I'm like, "Okay, well, how hard is this making a website thing?" And so, little HTML and whipped up a website. And then we got, the conference was completely oversubscribed and people from all over the world showed up for this conference. And I was like, "Hallelujah, wow, this thing is like, this web thing is super cool." And so, my friend Sands had a job offer to go to Netscape. He was like ahead of me in terms of figuring it out. So I called Sands and I'm like, "Yeah, you think there might be one more job there?" And he actually talked to the guys like, "Now, look, MBA

• 1:05:05Speaker 01

  with a mechanical engineering degree, you're utterly useless."

• 1:05:08Logan Bartlett?

  Yeah, yeah.

• 1:05:08Speaker 01

  "No, thank you." So then, that's when I sort of took a step back and said, "Okay, well, how is an internet made? And what are the pieces in there?" And I figured out that the internet's made out of routers and there's one company that makes all the routers. And so I cold called the CEO of Cisco, who happened to be a Stanford grad also. And he was, again, kind enough to open his door to me and that led to a job.

• 1:05:33Logan Bartlett?

  Who was the CEO of Cisco?

• 1:05:34Speaker 01

  It's a guy named John Mortgage.

• 1:05:35Logan Bartlett?

  Okay.

• 1:05:36Speaker 01

  He's the predecessor to John Chambers, who was largely my boss during during my tenure at Cisco. But Mortgage was the CEO. He's sort of this man from Wisconsin who now lives in New Hampshire, who's kind of a grumpy, you know, a simple man, but amazing mentor for me when I was young. And yeah, he found my, he found me interesting enough to give me a job.

• 1:05:59Logan Bartlett?

  So, so you were there for a while and basically ran M and A, bought, I think, over a hundred companies, invested in 250 plus.

• 1:06:11Logan Bartlett?

  Is there something that you learned about M and A that would be broadly applicable to an entrepreneur to be thinking about, even if they, everyone's aspirations are to go public and build a $20 billion company. But as, that's the logical landing spot for the vast, vast, vast majority of companies. Is there anything that you experienced or saw that is worth imparting to an entrepreneur listening?

• 1:06:35Speaker 01

  I would say that

• 1:06:40Speaker 01

  M and A is, is something that makes sense at times.

• 1:06:47Speaker 01

  In particular, when you are at a distribution disadvantage to an incumbent

• 1:06:55Speaker 01

  and in roughly the same field, it's something that's worthy of thinking about because the incumbent tends to have a lot of staying power and will fight you for a long, long periods, especially if they're a large company. So in the case of Cisco, if you're making a moderately competitive product, you could sell the company, hopefully get a reasonably good position in, in, in the, in the company and sort of continue to grow with it. And at the same time, not have to fight the fight forever. Now, not every entrepreneur faces that situation. Not everybody's got like a giant incumbent that they have to deal with. So it's a, you know, it's case by case. The other thing would be if you're going to sell your company, sell it to someplace where you're excited to go.

• 1:07:38Speaker 01

  You know, thankfully, at the time Cisco was growing by leaps and bounds, right? Growing 200% year on year. And if you get to join that and, and ride the wave, absolutely. A lot of times I think entrepreneurs just kind of think of it as. Oh, you know, I'm done. I'm just selling out. I'm gonna go there, waste my time for two years and then go away again. And, you know, in truth, I think it's, if I were an entrepreneur, I wouldn't not necessarily try to maximize value of how much money am I getting from M&A, but am I going to the right kind of company where I'll actually not waste two years of my life vesting, but I'll actually do something productive and meaningful. And

• 1:08:16Speaker 01

  you've sort of seen that, you know, when Facebook bought Instagram, Kevin Systrom was there for a long time. He didn't just sort of say like, oh, great, that was a billion dollars. Thank you very much. Goodbye. He became an integral part of the company. And I think he enjoyed his ride at Facebook just much before as afterwards. And I think that that's a, he probably could have sold Instagram to somebody else for more money. But I think in the end, both financially and personally, that became a much more fruitful endeavor.

• 1:08:45Logan Bartlett?

  Yeah. Is there something that companies do to, or should do to set M&A up for success on the acquirer side that you've, you've kind of seen play out or that you would recommend?

• 1:08:58Speaker 01

  I mean, we, you know, when I was at Cisco, just during the period that I managed that part of the organization, I think we bought 75 companies. And as was the case as a VC, made every mistake in the book, like screwed all of them up. But some of them turned out to be meaningful. I think the most important thing that I've often talked about is that companies are not made to be bought and companies are not created to be acquirers. It's a very unnatural process. And when you do unnatural things as an organization or as a person, you tend to make a lot of mistakes when you do those. And so if you, if acquisitions are going to be a core part of your strategy, make sure that you have

• 1:09:40Speaker 01

  processes built around it, you hire people that know what they're doing around it, that you think of the end to end process of both evaluating, acquiring, integrating, and then measuring the success of that. Accept the fact that you're going to make mistakes, just like for us, VCs, you're going to make mistakes. But the good ones really work out and the bad ones turn To zero. So understand that you can't just buy one and hope it's going to work. But you have to avail business processes around it. And in the end, in all candor, I think Cisco probably won't necessarily say this in their public media. But my guess is their success rate on acquisitions was probably comparable to what we would expect as a success rate as VCs. They're sort of doing VC at a slightly larger scale.

• 1:10:25Logan Bartlett?

  Yeah.

• 1:10:25Speaker 01

  But imagine being a VC and only doing one deal a year or one deal every two years. Would you get good at it? Not really.

• 1:10:32Logan Bartlett?

  Yeah.

• 1:10:32Speaker 01

  You just got to do it more and most companies that acquire don't think of it that way. They're just like, oh, we found this very strategic thing. We're doing one off. Well, chances are you're probably not going to get good at it doing that.

• 1:10:44Logan Bartlett?

  You were a CEO for two years.

• 1:10:45Speaker 01

  Yeah.

• 1:10:46Logan Bartlett?

  Juice, was there anything, I'm sure there's things you wish you did differently. But did you, in retrospect, wish you had gone and been a CEO or founder earlier in the journey? Or was that the right time for you to try it out?

• 1:11:02Speaker 01

  Okay, so I should have done it sooner.

• 1:11:05Logan Bartlett?

  Yeah.

• 1:11:07Speaker 01

  It was hard for me to leave Cisco because it was home. You know, I'd grown up as a person in that process.

• 1:11:16Speaker 01

  You know, I still, some of the people that I worked with there, you know, Jay Shri Lal, Tony Bates, Charlie Giancarlo. These are people that are still my close, close friends. You know, that I became a person during that period of time. So it's very hard for me to go like, okay, I'm out of here. Probably means I overstayed my welcome there. And also, I think in the latter years from, from about 2001 until 2007, when I left, the company was relatively static at 50, 60,000 employees. So you don't even notice, but your mindset becomes big company. Like you start to think big company.

• 1:11:57Speaker 01

  And the values of like what makes a big company good and a small company good are very, very different. Right? And so I think when I became a CEO, the first mistake is that my mindset, you know, and things like velocity of decision making was very big company. And I didn't appreciate how much I needed to unwind the last five, six years of experience that I had had to be a better leader of a small company. You know, it's in big companies, there's a heavier cost when you change your mind on things. If I say like, okay, I had like five, six thousand people working for me at Cisco. And I was like, okay, well, we're going to take like 500 of them and have them go do this.

• 1:12:41Speaker 01

  You just like, you know, blew up 500 people's lives. In a startup, it's like, you know, we're gonna take three of you guys and you go do that.

• 1:12:48Logan Bartlett?

  Yeah.

• 1:12:48Speaker 01

  And it's like tomorrow morning, we wake up and it's like, oh, that was a bad decision. Let's come back and do this. And that's like no foul, no harm. It's a total two-way door in decision-making, whereas big company decision-making is more of a one-way door. It's not, it is reversible, but, but it's pretty painful. And so you become cautious, right? You do what I call, you play a little more defense than you play offense. And I think I stepped into the CEO role with too much defense in my mind and not enough offense in my mind. So that was probably a big, and I think had I done it earlier when Cisco was still in its growth mode, I think my mindset would have been in a little different phase that was more aligned with what you needed to do in a small entrepreneurial company.

• 1:13:30Logan Bartlett?

  Did that experience benefit you more as a board member, investor, or neither?

• 1:13:34Speaker 01

  The, my startup at Juiced?

• 1:13:36Logan Bartlett?

  Yeah.

• 1:13:37Speaker 01

  Uh, I probably the best two years of learning I've ever had in my life.

• 1:13:41Logan Bartlett?

  Is that right?

• 1:13:42Speaker 01

  Honestly. Um, it, you know, more than my time at Cisco, I felt personal ownership of the decisions that were made and the, the weight of them. Um, you know, things had gone so well for me, both personally and for the company at Cisco, that I felt a little bit invincible, maybe.

• 1:14:02Logan Bartlett?

  Hmm.

• 1:14:03Speaker 01

  And I got my ass kicked. Uh, so that was good. Um, recognizing what one's good at, what, what bad at. I was, you know, I worked with Ruloff and Danny. Ruloff at Sequoia, Danny at Index were my board members. Both were amazing, learned a lot from them and that the, the. I admired and respected Danny so much that that actually led me to deciding to join him as a partner at that point. So yeah, I learned a lot about board members. I learned a lot about board members when the company is not executing at the way you you you want it to. So yeah, great, really great learning years. I, you know, the company didn't really make much money. We,

• 1:14:44Speaker 01

  I think, was sold for some return to capital to the fountain to the investors, but it wasn't great. But still, for me, probably the two best years of learning.

• 1:14:53Logan Bartlett?

  So, so 2009 ish, you leave and you mentioned Danny Reimer from Index. Was he based in Europe at the time?

• 1:15:02Speaker 01

  He was, yeah.

• 1:15:03Logan Bartlett?

  So he was in Europe and then Roloff was at Sequoia. There was a period of time when you were EIR at Sequoia?

• 1:15:09Speaker 01

  Yeah, I spent time with Sequoia before I joined the startup, though.

• 1:15:12Logan Bartlett?

  Oh, before. Okay, okay. So we're going back in time. So, so Index was a European founded and headquartered firm. What drew you? It sounds like Danny was a part, important part of it. But what drew you to, hey, I want to help set up a West Coast office for these guys?

• 1:15:27Speaker 01

  Well, I think the first big decision, I was 42 at the time, was should I be a venture capitalist or not? Because it wasn't that obvious. My wife said something really thoughtful at the time. She said, like, well, of all the professional years that you had, when did you have most fun? And I was like, oh, in the early days of Cisco, when I was doing M and A and investing. She's like, well, pro tip.

• 1:15:47Logan Bartlett?

  It's good advice.

• 1:15:48Speaker 01

  Yeah, listen to yourself.

• 1:15:50Logan Bartlett?

  Yeah.

• 1:15:50Speaker 01

  So I think that the first decision was to do venture capital. And then, you know, Index provided a fascinating, you know, pseudo entrepreneurial opportunity, which is that it was a very well recognized and good firm in Europe. It had a lot of resources, you know, raising money as a solo GP or a small GP was very hard to imagine at the time. And so having the backing of a very established firm in Europe to go launch what became Index in the US was a very unique, is sort of like, I get all the capital in the world to go exercise an entrepreneurial activity to try to launch a firm in the US. And that was, that was a very exciting opportunity. And on top of which, it was going to be both Danny and I,

• 1:16:35Speaker 01

  we both moved to the US to, or he moved to Silicon Valley to do this. And I was like, get to work with a great guy that I respect a lot, got the backing of a firm that's very serious and committed to this, and I get to do something that's reasonably entrepreneurial, which is to build a firm. And the sort of a trifecta.

• 1:16:53Logan Bartlett?

  How does Index view the world from an investment perspective? Like, are there certain types of deals that you you think about? These are Index deals or the types of things we want to be in?

• 1:17:06Speaker 01

  Yeah, I mean, I think it the philosophy that I was talking about earlier is consistent within Index. We're we are a very entrepreneur centric investor. So we sort of have to fall in love with the entrepreneur to invest. We are less of a market segmentation investor. You know, so market segmentation investors are like, there's four sectors, four stages. We've got to have one in each one of these. That's not really us.

• 1:17:33Speaker 01

  So as a result, our our better success stories are almost always aligning ourselves with founders that have done amazing things. We don't incubate. We don't we don't have a EIR program per se. It's really more about identifying these people and investing in them. And we have a growth fund. The purpose of the growth fund is to follow up on the ones that we missed last time.

• 1:17:59Logan Bartlett?

  Yes.

• 1:18:01Speaker 01

  Or double down on the ones that we like the most. So but it's it is unique in that sense also because we don't. A lot of firms are organized differently, but in our case, there's only one team. There's no growth team and venture team. And so it's the same group of people following the same great entrepreneurs and either investing the first amount of capital or, you know, catching up later.

• 1:18:22Logan Bartlett?

  Because you referenced, I heard you say you don't believe in incubation as a core strategy or it's not a core strategy of yours that you guys pursue. Why is that the case?

• 1:18:34Speaker 01

  Well, I think in order for a great entrepreneur to build a business.

• 1:18:42Speaker 01

  It has to be their idea, right? It has to be, they came up with a concept and they have the skillset and the aspiration to build it into a business. I, you know, incubation as defined often feels more like transplanting. So like, I start something, it's my idea, and I'm going to convince you that it's a great idea to become the CEO of this company. And I'm not saying that never works, but I think more organic growth, if you look at all the great companies that have been built, they've all built that way, right? Amazon, Facebook, Apple, Google, you know, you go on down the list, almost always, it's the people that started it, that had the vision, that carried it forward, it was their baby

• 1:19:27Speaker 01

  and all that. So I think, it's not to say that incubations won't succeed, but I don't view it as a scalable, viable strategy. And I think for venture capital, it's much better to try to find the great entrepreneur who's going to lead you and follow that thread.

• 1:19:43Logan Bartlett?

  How do you think about the role of a, the individual? So, so Mike at, the first part of the email address versus index.com, like, how do you think about the, the relationship between those two and the brand that an individual might carry versus the brand that the institution may, may carry?

• 1:20:05Speaker 01

  Well, in the venture business, it's an intricate and, and complex thing. What we've tried to do at Index over the last 15 years is to build the brand of the firm to give a platform for our younger investors to be successful. I mean, and we always tried to not make it about Mike, or Danny, or Jan, or Neil, or anybody else, and really make it about Index and have a Succession plan that aligns with that philosophy. So the idea is build the institution. The institution serves as a platform for individuals to excel.

• 1:20:47Speaker 01

  You know, the world doesn't love that message. I'd say the world tends to like the superhero, right? The superhero of the moment, the number one on the Midas list and so forth. So you have to contort the world a little bit to make that happen. I think in that context, like Sequoia is a really good role model because they've gone through several generational changes. And I always find that, you know, we obviously in our business, we compete. Any person I compete with Sequoia is tough to compete with. Why? Because they have a Sequoia brand. So in some sense, we admire and respect what they've done. And we've attempted to do the same thing at Index. But inevitably, you do have to think about your personal brand. And in some ways, try to grow it in parallel with the firm brand. Because entrepreneurs know.

• 1:21:31Speaker 01

  And it's a reality that they think about the individual. And I think not everybody thinks about how to build their individual brand and how to evolve it over time. But I think as a venture capitalist, it's important to do that. And you build your brand a lot of different ways, right? Some people blog and some people tweet.

• 1:21:48Logan Bartlett?

  Listen, you're talking to a guy with a podcast named that. So yeah, you're preaching to the choir.

• 1:21:52Speaker 01

  Yeah.

• 1:21:53Logan Bartlett?

  It's an interesting.

• 1:21:54Speaker 01

  How's that brand building going?

• 1:21:55Logan Bartlett?

  Yeah, I don't know. We'll see if anyone listens to this. But no, it's an interesting thing because the two do kind of feed on themselves. It would be much better if you could swap out anyone's name before the at sign of the email address and have that carry the equal weight. But it's hard. It's hard to just get the brand itself to continue to rise absent the players that are on the team.

• 1:22:22Speaker 01

  Yeah, but you know what I'll tell you is that I think you have different responsibilities at a different stage in your career. You know, if you're 27 years old or 30 years old and you're trying to build your brand, forget the company. But like your job is to build your brand.

• 1:22:33Logan Bartlett?

  Yep.

• 1:22:33Speaker 01

  My job, I have a reasonable brand in the industry. It's not my job to enhance that anymore. It's to enhance the Index brand and help all those people around me. Because let's not forget, I'm GP, but I'm also a significant LP in index. And I want them to be very successful going to the future. So I think you change your responsibilities through your career. And once you have that platform, then you use it to elevate others.

• 1:23:02Logan Bartlett?

  Interesting. How do you approach your role as a board member? And what is the impact you hope you make on a board when you join it?

• 1:23:13Speaker 01

  First, I found it to be probably one of the funnest things as a venture capitalist is to do a good job as a board member. Almost to my mind, where like the investing part is a little bit incidental and then the real job starts, right? I think it's important to recognize the balance in the relationship that you have with the leaders of the company. In some models, you are subservient to them, right? They are amazing and I'm here to help. What can I do for you? Like, let me know if I can help. Another modality is I know better than you and I'm gonna tell you what you gotta do. I think both of those are failure modes as a board member.

• 1:23:57Speaker 01

  The board member relationship that I like is a peer and a friend relationship where if you're my CEO and in front of everybody else, I'm always gonna support you. I'm behind you. But it is also my job to put a mirror in front of you and say, hey, Logan, this isn't working. The words you're saying to me don't reflect the reality of the rest of the world. And you know, this is sort of the optimist's pitfall. Every CEO has to be an optimist, otherwise they're not gonna do that job, especially in venture. And they often see the world a little bit through a rose-colored lens.

• 1:24:40Speaker 01

  But it is my job as a board member to hold the mirror and say, this is what it actually looks like, good and bad, right? And

• 1:24:50Speaker 01

  I'm not going to play games with you. It's going to be transparent. I'm going to tell you're doing great when you're doing great. But when I'm telling you it's not working, it's not that. That's not because I don't support you, but I want you to get better. And you're not going to get better if I don't give you that feedback. So it is that it's sort of like what a good friend should do to another good friend. It's sort of the way I think about the relationship. And board membership is, is the board meetings are the least important thing about a board membership. It's, it's, it's about the phone calls and the meetings and the coffees and the text messages and the whatever else that happens in between that creates the foundation. And if you get to a board meeting and you're surprised or you have to have a giant debate, well, you probably weren't doing your job right.

• 1:25:31Logan Bartlett?

  How do you establish that? Do you set up regular one on ones with the CEOs? Is it just something that happens on an ad hoc basis that you're constantly thinking of them and communicating as things come up? Or how does that work?

• 1:25:43Speaker 01

  No, I do. I, I have regular meetings set up. I do a regular meeting every two weeks and then obviously a lot of stuff in between. That's a little more ad hoc.

• 1:25:55Speaker 01

  In the beginning, you might even do it like once a week to just establish the relationship. I try to also not rely just on the calls or the Zooms, but to see the, see them in person, go to dinner with them, have a glass of wine. So well, with Alex, that would have been illegal.

• 1:26:14Speaker 01

  But you know,

• 1:26:15Logan Bartlett?

  You got him a fake ID and that helped.

• 1:26:16Speaker 01

  Yeah. To sort of create the foundation for transparency to occur.

• 1:26:22Logan Bartlett?

  Any surprising experiences from investments that have changed your perspective on how companies should, should be run maybe from 2009, when you first got into this industry to, to today?

• 1:26:37Speaker 01

  I don't know that this was like a revelation, but it became more self evident to me in time is. Just make sure that the main thing is the main thing. Like, at the end of the day, a business is about, you know, making a great product and selling a lot of it, or distributing a lot of it. There's a lot of other stuff that goes around that, but those are the two main things. And, and obviously, you know, having the capital to execute against that. But, you know, simplify it down to the essentials, what matters. And don't, you know, oftentimes I go to board meetings and people talk about all sorts of stuff. And I try to sort of say, no, you know what?

• 1:27:20Speaker 01

  There's only two things, and I often do this, I do my pre-read. And on the board deck that they sent out, I'll, I'll write down, I'm like, there's two things that I'm going to talk about today. All I'm going to do is about, you, you tell a CEO 15 things, they won't remember one of them. But if there's like, you know, today we're going to talk about churn rate and next generation product, those are the only two things that, that matter. Everything else, people might have opinions, they might say good things or bad things, but I'm going to concentrate on just those two main things. Because I want the CEO to walk away, and we're going to meet again in three months as a board, and have thought about like, these two things matter. And then to follow up, like, two weeks later, he's down and say, hey, last time we talked about churn. What do, what do you think? What, what have you done differently in the last couple of weeks about to address that

• 1:28:05Speaker 01

  issue? So, rather than 30, small number, critical things that are fundamental to the business's success, and the rest of the stuff, you know, who you're going to hire for VP of HR, whatever, it doesn't matter, like, pick somebody and hire them, it's okay.

• 1:28:19Logan Bartlett?

  Yeah, interesting. You're on the board of Opsware for how long?

• 1:28:25Speaker 01

  I think it was like, three, four years, until they got bought by HP.

• 1:28:28Logan Bartlett?

  HP. What did you learn from watching, I guess, Ben Horowitz operate and also being on the board with, with Marc Andreessen through that time?

• 1:28:38Speaker 01

  I mean, first of all, It was the most amazing board. Who else was on the board with you? Mike Ovitz. Okay. The legendary Bill Campbell. Wow. Mike Homer, who was VP Marketing at Netscape, he's also sadly passed. Andy Ratcliffe, Mark, Ben, me. Gordy Davidson was the general counsel. So. It's a lot of heavy hitters. Yeah, yeah. Well, let's just say I was careful what I said. Measure it in your words. There's two things you wrote down. Yeah, it was like two things and maybe I'll say one. Yeah. But, I mean, probably the most amazing thing is how much Ben and Mark have matured and evolved over the last, you know, I think it's probably 20 plus years now that we're talking.

• 1:29:24Speaker 01

  Ben was a, you know, first time CEO. Mark was Wunderkind.

• 1:29:33Speaker 01

  They made a lot of interesting decisions. They were, it was a tough competition with the folks at Blade Logic that were also eventually acquired.

• 1:29:44Speaker 01

  I was ultimately struck by their pragmatism. You know, they, they paint the picture of being visionary. But if you think about the story of, of Opsware.

• 1:30:00Speaker 01

  You know, first of all, they sold off their hosting business to EDS. While public. Yeah, while public. So like a complete transformation of the business. And then ultimately, when they got a decent offer from HP, it was like, boom, we're out of here. Why did they do that? Because it was tough going. Right? And so, you know, while you have these, you know, visionary people, which arguably they, they were in fact super visionary because the, the concept of the company is what today is called AWS. Yeah. Right? That's what, that's what the company was supposed to be. That concept didn't work because of the timing. So they basically took the software that was the control system of an AWS and turned that and made it into Opsware.

• 1:30:42Speaker 01

  But when it came down to the key decisions, they were like, oh, you know, it's just black and white. We're, you know, we're not going to be a very successful company. Well, we can sell it. And smartly, they got out. So interesting balance between sort of, you know, the concept we talked about earlier where they had a vision, but they were off on timing. And they pragmatically turned that and, you know, made lemonade out of lemons and sold it to HB.

• 1:31:05Logan Bartlett?

  It's pretty wild. I don't know how many people appreciate this today, but just the fact that you had Opsware with those groups and then you have Blade Logic with David Cherry and Mark Cranny and John McMahon, all those guys. It's just such an accumulation of talent battling it out in a single industry going after one another. It's pretty, uh, pretty wild that there was those many people in that together.

• 1:31:26Speaker 01

  Yeah. And, you know, I think at the time there were just less startups and there was more concentration of talent.

• 1:31:31Logan Bartlett?

  Talent, yeah.

• 1:31:32Speaker 01

  Pretty extraordinary concentration. And by the way, the, you know, the Opsware team, you know, Eric Vischer was a member there. Sharmila Mulligan was a member there. There's some pretty amazing folks on, on that team.

• 1:31:44Logan Bartlett?

  Yeah. Um, you're on the board of Ferrari?

• 1:31:47Speaker 01

  Yes, I am.

• 1:31:48Logan Bartlett?

  What have you learned from being a board member of Ferrari? It's been around for how long? 150 years?

• 1:31:54Speaker 01

  No, I think it's like 75.

• 1:31:57Logan Bartlett?

  So a long time.

• 1:31:57Speaker 01

  Yeah.

• 1:31:59Logan Bartlett?

  What have you learned from being on that board that, uh, either perspective or attitude or something that you think Silicon Valley companies should, should port over?

• 1:32:09Speaker 01

  I don't, well, I mean, actually I'll answer the question slightly differently, which is I have observed something which that company and others do incredibly well. I don't know if it ports to Silicon Valley, but it's an interesting concept. You know, Ferrari is a car company. They make 13, 14,000 cars a year. They sell them at 70% gross margin, 65, 70% gross margin, which is absurd in the car business, like completely insane. They have a two-year waitlist if you want to buy a car. Now, if you were to take the nuts and bolts of a Ferrari and say like, let's put that up against a Lamborghini and an Aston Martin. I mean, yeah, the Ferrari is better, but it's maybe 10% better, 5% better, depending on how you measure it.

• 1:32:50Speaker 01

  But the the distance in terms of like Ferrari is a $65 billion market cap company. They sell about the same number of vehicles as their competitors, but way more valuable, way more desirable, like what's going on, right? Like actual technical differentiation, very modest, better, but modest. Value to the consumer, gigantic, right? And what they've been able to construct over the last 50, 60 years is the brand. They have an extraordinary brand, right? That people want to associate with it because owning one or being associated with one defines who you are. It's this hugely desirable, huge, hugely wanted thing to have be associated with that brand.

• 1:33:34Speaker 01

  It means things culturally and societally and so forth. And you see that in other sectors as well. Hermes is another very, very good example of it. That concept of brand building, obviously for those brands took tens of years. And sometimes I wonder like, is there a way to translate that concept of brand into the world that we live in, right? Loosely speaking, big companies generally do because I usually when I use a Google product, even if it sucks, I go, well, it's, you know, it's Google, it's, you know, it's okay. Apple sort of has established that. But I sometimes wonder like, is there a way of sort of turbocharging brand or finding

• 1:34:11Speaker 01

  a way where you, you know, tech capable tech companies can reconstruct that somehow? Of creating sort of that desirability? You know, we've tried at Sonos. Yes and no? I'd say people kind of go like, it's a good technical product, but you know, is it aspirational? Probably got some work to do there. But I think that's probably the concept that I've taken away the the most about that company. I also have, you know, this is sort of learning that I've done as a board member. They are extraordinarily developing their internal talent pool. Like, because in Italy, if you're a smart kid, that's the company you want to go work for, right? There is no better company to work for than that one. But they get this extraordinary talent pool.

• 1:34:56Speaker 01

  Like I I get a chance, I love doing this, but I was like, can I have a lunch with your top 20 engineers? These brilliant kids, like, you know, out of the best universities in Italy, whatever, best grades, super smart mathematics majors, this, that, whatever. And they groom them and largely the company, the CEO was hired from the outside, but largely the company's all people that they've developed over time. And you know, in a world where a lot of what we say is like, oh, you got to hire, hire, hire, hire, their ability to kind of develop that talent is is quite unique and interesting.

• 1:35:28Logan Bartlett?

  Is there a, is there an example or something you can speak to of them being very purposeful in their brand, like a manifestation of it that might not be obvious just from the outside? Like, are they purposely limiting the 13,000 cars a year just to make sure it maintains that exclusivity? Or is there anything that's just particularly interesting?

• 1:35:50Speaker 01

  There's a lot of things that would I would call like brand management, which which they they do quite well. It's like, you can't use our logo here, you can't use our logo there. This person shouldn't be seen. Like, if they if they have some, you know, gangster that's got their photo with a Ferrari on Instagram, they ask them to take it down. Like, they do a lot of policing stuff. But I think the the sort of the more interesting pit bit is the idea of scarcity, which you brought up. They administer scarcity. And any salesperson that's hopefully listening to this podcast will resonate with this. But selling is a process of introducing scarcity of in however way you can to the buyer. The

• 1:36:34Speaker 01

  buyer will pay more, will desire more an object which is scarce. Scarcity can be introduced in a lot of different ways. It could be limiting the number of cars. It could be limiting your time. It could be limiting the amount of emotion that you convey to another person, right? Because when when you and I are negotiating, what you actually kind of want is my positive emotion towards you. And if I restrict that, right, I create scarcity, which you actually desire more. So the the idea of administering scarcity in whatever unit you're counting, whether it's cars, it's emotion, it's time, it's availability of something, that ability

• 1:37:18Speaker 01

  to administer it is the thing that creates that that brand value ultimately. And even as an executive or as a venture capitalist, you know, a mistake a lot of people make is to be too present. Right, to be too available. You actually want to restrict that a little bit because what you want is that trade off that you want something I have. And I'm only going to give you a little bit of it.

• 1:37:40Logan Bartlett?

  I'm sure you get asked by young people in their careers. Can I pick your brain or any career advice you have? Any lesson or insight that you would impart to people that are early in their careers? Either things you did right, things you wish you had done, just, just general advice to people that are trying to climb the ladder or trying to, to be the next Mike Holby.

• 1:38:07Speaker 01

  Well, I don't know. I don't wish that upon anybody.

• 1:38:09Logan Bartlett?

  Yeah.

• 1:38:14Speaker 01

  I, I would say.

• 1:38:17Speaker 01

  In, in a number of dimensions, I would delineate, first of all, the different functions that exist in our industry. Cause this podcast is going to be mostly tech people. So I'd say, first of all, in tech, figure out whether you want to be an investor or whether you're going to be an operator. You can always change your mind later, but stick with that to start with and try to get good at it. Like, don't just give it like, oh, I'm going to be an operator for two years and then I may be a VC. Well, you're not going to be a very good operator for, for two years. Right? So like, you know, dedicate energy and time to being good at it. There isn't one thing that's better than the other. But either way, you've got to love it and not just think that you're checking a box. So pursue it and it's totally fine to be a VC from the get go. Just pursue it with passion.

• 1:38:58Logan Bartlett?

  Yeah.

• 1:38:59Speaker 01

  Because you love it rather than like, oh, I'm going to do it for a while so I can find a job. To stop thinking about something as a interim step, distasteful, but must be done in order for me to do the next thing.

• 1:39:10Logan Bartlett?

  It's impossible to commit to doing that, like as a weighing station to get to the next row. I, I couldn't do it. Some people are maybe able to do it.

• 1:39:17Speaker 01

  A lot of people are.

• 1:39:18Logan Bartlett?

  Yeah.

• 1:39:18Speaker 01

  But it's not, it's not fruitful.

• 1:39:20Logan Bartlett?

  It's hard.

• 1:39:20Speaker 01

  Yeah. It's, it's a, it, it's a hard thing to do.

• 1:39:26Speaker 01

  So that, that would be probably the most important thing. The, the other thing is just be cognizant of what you're good at and what you're bad at. And I actually think the best path to success is to put yourself in a position where your best strengths.

• 1:39:47Speaker 01

  Allowed are most expressed. And your weaknesses are mitigated by other factors. Every one of us has strengths and weaknesses of what we do well, what we do poorly. You know, if you run fast, run for a living. Right? If you're good at math, take a job where math is good. You know, so just like, but you have to be very cold with yourself and saying, what am I good at? And what am I actually not good at? And then position yourself to do the thing that allows you to express your, your greatest strengths. And there's so many ways to succeed in life. And then success oftentimes here, we measure it by money.

• 1:40:31Speaker 01

  But you know, there's a lot of other ways where you can achieve success that generates happiness and so forth. But it's usually for people to align what you're doing with what you're good at. And being thoughtful about knowing what you're good at and what you're bad at. I think that's probably the thing that I would try to impart the most on a younger person that's trying to be successful in business.

• 1:40:54Logan Bartlett?

  The one thing we didn't talk about is state of the industry today. I don't know if you have any thoughts on, on that, but there's a lot of capital out there right now. Which I feel like has been a refrain always, but in particular, it feels like there's a lot of capital out there right now. Do you have any, any opinions on how this stuff's going to play out? You lived through the, the 99, 2000, 2001 cycle. Any thoughts on where we are right now?

• 1:41:23Speaker 01

  I'll tell you what I think I tell our younger folks at Index, right? Which is now is a really tricky time to be a VC.

• 1:41:30Logan Bartlett?

  Yeah.

• 1:41:30Speaker 01

  It's really hard. The first is that we went through this period, 10 very, very plus, very positive years. Could invest in a lot of different sectors, right? Like consumer, fintech, do crypto, you could do AI, you could do data infrastructure, you could do SaaS, like lots of successful areas. So people could like move around and try different things and find areas where they had passion and were well adapted. Today, one sector is hot, just one.

• 1:41:56Logan Bartlett?

  Yeah.

• 1:41:57Speaker 01

  So kind of a pain in the ass because like, you know, everybody's doing the same thing. Second is you've got a portfolio that's sick. Like, everybody's portfolio is struggling right now. It's just a tough time for companies, right? So you're getting no positive reinforcement from your portfolio. You know, you just spent six years of your life figuring out fintech, and there's nothing in fintech to do. So now you've got to pivot over to AI. And then the AI is a bubble, so the valuations are crazy. And your older partners are telling you, like, are you nuts? Why would we pay $500 million for a thing with 1 million in revenue? That's, that's sort of like what you're faced with today. And, and so I think it's really hard.

• 1:42:36Speaker 01

  Oh, and I think there's one more factor, which is by and large, as a venture capitalist, you progress in your career by investing. That's what you do. And so if you don't invest much, which in truth, people's investments outside of like some very big dollars in AI, it's slow, actually, still pretty slow. So people are worried about career progression. And, you know, it's the state of the industry in the transition that we're going through. We're still kind of hung over from the euphoria period where things were better than they normally were. And now things are actually worse than they normally are. And you sort of have to just kind of, as an individual investor, try to power through it and saying like, you know what? I know this is hard. I'm just gonna, I'm gonna put my head down, keep looking at stuff,

• 1:43:21Speaker 01

  keep saying no when it doesn't make sense, trying a few things where they do make sense. But just try to keep doing my job every day. Just keep doing it. And ignore the like, are things moving? Has this person like pivoted over to this? And, you know, have I met the latest AI thing? You know, just do your thing. And then eventually the fog will clear and we'll get back to a reasonable state of being. You know, interest rates will help. I think when things go down in the 2%, 3% range, companies will be valued more and then people will get excited again. And capital will flow in the right direction and so on and so forth. The other thing that I would say is I think there's two skills that are very relevant to a venture capitalist. One is velocity, like move fast, very important.

• 1:44:04Speaker 01

  The other one is good judgment, like you and you sort of balance the two, right? Sometimes there's periods of time where velocity matters more than judgment, like being fast is what matters more than being capable of assessing a situation. I think what we're entering now is a phase where judgment is more important than velocity. And the challenge with young venture capitalists, maybe you feel that way too, is that you've been trained on speed for 10 years. It was like, go find the entrepreneur, get in there first, you know, first term sheet, boom, boom, boom, fast, fast, fast, right? And now you don't get rewarded for fast, you get rewarded for wise. And I think it's a period of time where as an investor, you have to switch your mindset to like, what's the play that makes that is advantageous in this time?

• 1:44:49Speaker 01

  And how do I get good at that play? Right? And I think that that's what the state of the industry resembles. I think in the end game, there's a lot of interesting strategies that are being played out and firms will diverge in their strategy. You've sort of got the everything funds managing 15 billion plus dollars. You've got Middle Eastern money showing up and so forth.

• 1:45:10Logan Bartlett?

  People are buying hospitals.

• 1:45:11Speaker 01

  Yeah, but the craft of what we talked about earlier, of the relationship with the founder, of the ability to develop stuff early on and seeing the development of people, that's not changed. That's still there. And so if that's the game you want to play, which is more what I would characterize as a classical venture game, there is absolutely room and space. You just have to be patient with it because it's a complicated time.

• 1:45:34Logan Bartlett?

  Cool. Mike, thank you for doing this.

• 1:45:37Speaker 01

  Appreciate it.