20 VC 049: VC is Getting Younger with Spencer Lazar @ General Catalyst Partners

Spencer Lazar is a Principal at General Catalyst Partners, based in New York City. He focuses on early stage software & internet investments, with a particular interest in online marketplaces, mobile applications, web services, and enterprise IT. Spencer was previously the cofounder of Spontaneously, Inc - an iOS development studio. Prior to that he was an early stage software & internet investor at Accel in London, where he sourced and worked with companies including Hailo, Birchbox, Bonobos, ForgeRock, and Qriously. In Today's Episode You Will Learn: How is the roads into the venture industry changing? What young people can do to make themselves more attractive to VCs? What would make Spencer's perfect founder? How important is geography when investing in startups? How does Spencer feel the education technology space is developing? What metrics Spencer examines when investing in a startup? What sectors is Spencer most interested in? Items Mentioned in Today's Show: Spencer's Favourite Book: The Everything Store on Jeff Bezos Spencer's Latest Investment: CampusJob Insight Venture Partners How Lightspeed's Jeremy Liew invested in Snapchat? Hot EdTech Startups: Lynda.com, PluralSight, General Assembly, Grovo, ClimbCredit Oscar, Sensio As always you can follow Harry, Spencer and The Twenty Minute VC on Twitter here!

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

• 0:00Harry Stebbings?

  Hello and welcome to episode 49 of the 20 Minute VC with your host Harry Stebbings. And in today's episode, I am thrilled to welcome our second member of the General Catalyst team. Previously, we had Nico Bonatos on episode 10, and today we welcome Nico's colleague, Spencer Lazar. Spencer is a principal at General Catalyst Partners, focusing on early-stage internet and software investments with a particular interest in marketplaces, mobile apps, web services and enterprise IT. Previously Spencer was co-founder of Spontaneously Inc. and an investor at Axel in London, where he sourced and worked with Halo and Birchbox, just to name a few. It's a tremendous interview where we really deep dive into some serious sectors.

• 0:45Harry Stebbings?

  But before we jump into today's interview with Spencer, have you ever advertised a job and then changed your mind about what you need? Don't worry, HiringScreen's Blink algorithm is no one-hit wonder. No matter how many times you might change your mind, you can then recalculate candidate relevance scores whenever you need against your new requirements. HiringScreen continues to deliver the smartest and fastest way to identify the most relevant candidates for your job. But enough from me, it's time to dive into our interview with Spencer.

• 1:23Harry Stebbings?

  Spencer, welcome to the 20 Minute VC. It's an absolute pleasure to have you on the show.

• 1:29Speaker 01

  Great to be here, thanks for having me.

• 1:31Harry Stebbings?

  Can we start at the beginning now? And can you give us a little background about you and tell us how you made your entry into the VC world?

• 1:39Speaker 01

  Sure, happy to.

• 1:42Speaker 01

  The VC world is a funny place and I'm sure you know, having talked to many, there historically haven't been sort of obvious channels into the industry.

• 1:53Speaker 01

  I went about it in a pretty kind of lucky way in a lot of ways. When I was in college, I forever had sort of dreamed of being a VC, even since I was a little kid, about ten years old. And when I was in college, I had studied economics and always been in technology, kind of grew up in the same dorm room as the same dorm as the guys that started Facebook while they were there. So there was a tremendous amount of energy around the startup world at the time. And there weren't really opportunities to join venture firms at the early stages, but there was a later-stage venture firm.

• 2:37Speaker 01

  Now, I guess, probably wouldn't be called a venture firm at all, called Insight Venture Partners, who had a very particular model for how they built their sourcing team or their sort of deal origination team, if you will, which is that they basically recruited kids exclusively out of college from, you know, somewhat notable schools in the US. They had about, at the time, about ten or twelve of them at any given time. And you're basically an inside sales team. You know, it was a glorified sales job, but the, you know, the industry you were inside salesperson was venture capital. You were reaching out to companies, you know,

• 3:20Speaker 01

  that basically you thought were interesting, working for one of their partners and, you know, trying to drum up, you know, interesting deals and opportunities. And, you know, it was a very much a kind of eat what you kill culture. You didn't really get to work on deals unless you found a deal. So there was, you know, very competitive, but also very collaborative, incredible group of people and gave me the opportunity to learn a lot about the venture business. And, you know, now, fast forward, a

• 3:53Speaker 01

  Or nine years since I joined Insight at the time, the firm is, you know, has gone on to, at the time it was already a good growth equity firm and now has gone on to really set the bar for, you know, what great growth equity, great early state, sorry, great growth stage sourcing

• 4:13Speaker 01

  is and they do it with young people. So for, for me, it was a great opportunity to, again, to learn the business and, you know, to do it from some of the best in the, in the industry. So that's kind of how I got started.

• 4:25Harry Stebbings?

  Did you source deals then when you were at Harvard?

• 4:29Speaker 01

  No, no, no, no, I'm sorry if I wasn't clear. No, I was, I was recruited or went through the recruiting process when I was in school, but, but that was for a full-time job when I graduated.

• 4:40Harry Stebbings?

  Okay.

• 4:40Speaker 01

  So at 22 was my first day at Insight, age 22. And no, I was not sourcing deals there.

• 4:48Harry Stebbings?

  Absolutely. And, and then what would you say about the traditional ways of getting into VC then? Cause you essentially got into VC straight away, which is quite a, um, a strategy in the industry.

• 5:01Speaker 01

  I got into VC straight away, but remember this is not early-stage VC. This is, and this is not, you know, I wasn't doing VC in the way that I do VC now. You know, in the early-stage business, for example, you know, there's a meaningful amount of deal flow that comes to the venture capital firm for a variety of reasons, from a variety of sources, but the, the, the most significant of which is you are investing in companies that actually need cash. The Insight model was going after companies that don't need cash, that were profitable, had never raised money before and were somewhat large. So it was a very different model. The, the

• 5:45Speaker 01

  way that we found companies was different. You know, it was ultimately the early-stage venture business typically only has, you know, one, two or three junior people on a team, partners on a team.

• 5:59Speaker 01

  These guys, you know, today, Insight has thirty people on their junior team.

• 6:02Harry Stebbings?

  Wow.

• 6:02Speaker 01

  So it was a very, very different model. Um, so it sort of got me into the industry. But it wasn't, it didn't get me into doing early-stage venture, which is largely what I do today.

• 6:12Harry Stebbings?

  And do you think the roots into venture then are changing with time? Or do you think it is still very much the investment banking?

• 6:20Speaker 01

  Absolutely. I mean, in a lot of ways, venture is a young person's business in terms of, um, kind of knowing, uh, what, uh, phenomenon are emerging, um, you know, in, we look at a lot of, for example, a lot of consumer products, um, wind up becoming, uh, sort of, uh, becoming into vogue via teenagers and college students anyway.

• 6:44Harry Stebbings?

  Absolutely.

• 6:44Speaker 01

  And so having a, some degree of connection, uh, connection, connected tissue, um, either, you know, in some cases, you have partners at, at venture firms who have kids who are teenagers, and that's how they learn about these things. But having young.

• 6:58Harry Stebbings?

  I think it was at light, it was at light speed, I think, where, um, one of the partner's daughters was on Snapchat permanently and he was asking her what it was, and that stemmed their investment.

• 7:10Speaker 01

  Yeah, that kind of thing is very common. Uh, you know, it's also, um, yeah, that, that kind of thing is very common.

• 7:17Harry Stebbings?

  And then.

• 7:18Speaker 01

  So young people, young people, I do believe, are increasingly present in the venture business in a way that they, they were not ten years ago.

• 7:26Harry Stebbings?

  And then what can college graduates and recent, um, university students do to make themselves more attract, attractive to VC firms? Is there any type of thing they should be pursuing?

• 7:39Speaker 01

  Sure. Um, so I think that, um, you know, venture firms typically are attracted to people with points of view. Um, and, uh, you know, some degree of, uh, domain expertise.

• 7:56Harry Stebbings?

  Okay.

• 7:56Speaker 01

  It's possible, um, to get that as a, a young person. Um, it's possible to, you know, be a, you know, computer scientist specialized in, you know, a certain type of, um, uh, storage or a certain type of, uh, security. That's possible, um, but it's also possible, um, and I'll just highlight one of my colleagues who's absolutely amazing to be, um, a college student who stands out based on their sort of leadership within the community and degree of sort of connective tissue across the country. Um, and that's what my colleague Peter Boyce did, um, who now works at GC, um, was really an organizer of, um, young talent, young entrepreneurial energy and, um, you know,

• 8:40Speaker 01

  has, has really been a huge driving force of value for our firm, um, because he's brought a lot of that with him and introduced us to a lot of opportunities. So I would say either, either be a domain expert, have, where you have strong points of view about a particular space, or have, uh, differentiated levels of connectivity and leadership within that community.

• 9:01Harry Stebbings?

  And you said about opinions as well. How, how is it, um, suitable to present your opinion? Is it good to do it in a blog? Is it good to interact via social media? What would you suggest in that aspect?

• 9:15Speaker 01

  I would say, um, you know, the first thing is probably to put your opinions out in the world, uh, you know, you, to be somebody who sits in a library and reads books, you know, proverbially, um, and has strong views is, um, it's certainly one way to develop views. It's not necessarily a great way to be found or to develop a reputation for having those views. And social media is a kind of democratic, uh, in some ways democratic, uh, playing field where anybody can, you know. Blog or tweet or, you know, or otherwise do a video and distribute it and engage with other people. So I would say, you know, first and foremost, kind of get out there.

• 9:59Speaker 01

  Don't be afraid to engage with people. Most of the smartest people in the world do, you know, that do venture capital, enjoy interacting and engaging with young people with strong views. So, you know, I would, I would do that by all means. I think, you know, the one caveat being, you know, your schedule may not be the same schedule as other people. So I would not be, you know, as the, as the working folk. And so, you know, if it takes a couple of follow-ups or, you know, it takes a couple of times to engage someone, don't worry about it. Don't take it personally. You know, if you have strong views and you're smart, I'm sure that the people will appreciate whatever you have to share.

• 10:40Harry Stebbings?

  Absolutely. And then shifting slightly on to the founder's perspective.

• 10:47Speaker 01

  Yeah.

• 10:48Harry Stebbings?

  What do you look for in founders? What's your kind of perfect founder, if you could mold one? Or do you like founding teams more than founders?

• 10:56Speaker 01

  What is my perfect founder? Well, I mean, I definitely am not interested in solo founders. I found that to be a unfulfilling journey for most and, and very much a lonely one. But there can only, in almost all cases, there can only be one CEO. And so, you know, I tend to gravitate towards CEO founders who are very clear thinkers, who have strong views about the world, but still can be persuaded otherwise. So they're good listeners.

• 11:39Speaker 01

  People who are great storytellers. I think that in some ways, you know, storytelling is sales, storytelling is fundraising, storytelling is recruiting. Those are the things, the key things that a, a great CEO does. And you really have to do that well. So those are some of the things that I broadly look for across all industries. And, yeah.

• 12:03Harry Stebbings?

  And are you very geographical specific in terms of do you only invest in New York startups or American startups? Or are you very diverse?

• 12:12Speaker 01

  Me as in Spencer or me as in John Pauls?

• 12:15Harry Stebbings?

  Uh, you as in Spencer.

• 12:18Speaker 01

  So, um, I think about my role at, at our firm as being what I call a goalie and a sniper.

• 12:24Harry Stebbings?

  Okay.

• 12:26Speaker 01

  So, uh, I'm a sniper in that there are some areas that I am particularly interested in and, um.

• 12:32Harry Stebbings?

  What are those?

• 12:34Speaker 01

  Um, so right now that is, uh, financial services, um, we could double click on that if you're interested.

• 12:41Harry Stebbings?

  Yeah, absolutely.

• 12:43Speaker 01

  Still spend a bunch of time in education, um, spent a bunch of time in labor marketplaces and sort of broadly the future of work. Um, and I'm now spending a lot more time in insurance. Um, so those are some of the things that I've been chewing on, uh, recently.

• 12:58Harry Stebbings?

  And what would you say then to people who say that education's never really produced much in terms of VC returns?

• 13:06Speaker 01

  Um, I would say that, uh, historically that's been true, um, but I think that there are a lot of companies that, uh, are. You know, that, that, that, that was a truism built on old distribution models, um, and a world that hadn't yet fully realized the pain of the skills. Uh, sort of 21st century skills imbalance that our country faces. And in the face of that very, very significant imbalance, the demand for those skills. Um, you know, largely around not just, uh, software engineering literacy, but computer literacy more broadly.

• 13:48Speaker 01

  Um, creates an incredible, uh, appetite to spend on, um, education and, and acquiring those skills. Um, and, um, I think the tide is really shifting and it's going to shift significantly.

• 14:02Harry Stebbings?

  And what companies in particular in the education sector are you interested in then?

• 14:07Speaker 01

  So I'll just kind of give you a full life cycle of stuff from late-stage stuff, which I think demonstrate this point, all the way down to early stuff that excites me. So on the most obvious example of this, over the course of the past few months, folks would look to a company like Lynda.com, right? Which was just acquired by LinkedIn for well north of a billion dollars. I think a billion and a half dollars. Incredible story of a company.

• 14:35Speaker 01

  And, you know, so that would be one example that's already exited. Another one would be a company called Pluralsight, which is a online training company for developers, software developers, not to teach development, but whose audience are people that are already developers to learn new skills.

• 14:56Speaker 01

  And then I would look down to companies like General Assembly, which is sort of this interesting online, offline, sort of next-generation vocational school that teaches everything from software engineering in a variety of settings to digital marketing to design and others. Going down the spectrum, a company that I'm a proud angel investor in is a company called Grovo, which is basically teaching people how to use, regular people, how to use business software.

• 15:28Harry Stebbings?

  How do you spell that, sorry?

• 15:31Speaker 01

  G R O V O. So instead of focusing on, you know, teaching people to be engineers, which is going to be a very, very important pocket of the economy and already is, Grovo basically says, look, not everybody's going to be a software engineer, but everybody should know how to use the leading software today. So they teach people how to use things like Salesforce or LinkedIn for recruiting or HubSpot for content marketing or...

• 16:02Speaker 01

  You know, the list goes on.

• 16:03Harry Stebbings?

  Absolutely.

• 16:04Speaker 01

  Dropbox, Reap the Prize. And these are, this is a category of education that didn't exist fifteen years ago. Certainly, it didn't exist a hundred years ago. And they're basically creating this new category. Companies are doing really well. And then I go as far down as to say, you know, companies like Clime Credit, which is a new, sort of sits at the intersection of a number of my interests. It's a new financial services company which targets, which targets vocational schools and students to help people get access to vocational training that wouldn't be able to pay for it otherwise. There's a very, very significant funding gap in our country around tuition associated with vocational schools.

• 16:48Speaker 01

  And they focus exclusively on those. So anything from a coding boot camp to an aircraft maintenance school to a welding academy, anything where there's a very high ROI associated with attending and completing a course, they help students finance that and make that sort of the future income accessible.

• 17:10Harry Stebbings?

  And then when viewing these companies, what metrics do you focus on in particular in their decks? Is it their revenue stage? Is it their team? What's it for you that you look at?

• 17:25Speaker 01

  You know, it's very, very much dependent on the company. So if we're just talking about their deck, literally their deck, so I'm not, you know, in a meeting with them, I haven't, I don't know that much about the company. You know, in my mind, a deck is, you know, a storytelling device. So I'm really trying to understand the story of the company and, you know, why it's going to be very significant. And, you know, there are tons and tons of incredibly smart people out there. The question is, can you take what many times can be very complicated, sophisticated technology and explain it very clearly? And so, you know, the most basic level I look for, you know, is the opportunity significant

• 18:10Speaker 01

  and can they explain it well? And if I dig a layer deeper than that, in the deck, what I'm looking for is... You know, how good of a, a, a good of a business in terms of kind of unit economics and, and, and sort of financial fundamentals is this business? And then how defensible is the business? Are there network effects associated with it? Very significant barriers to entry? How, uh, and then how uniquely suited the team in question is to solve a problem that they've laid out? Um, and unfortunately, that's something that's harder to fully come across on the deck. And that's where, you know, if, if the first few boxes are checked, I will ask for a meeting, um, to try to, to evaluate the team.

• 18:52Harry Stebbings?

  And when talking about markets, how big a market is big enough for you to get interested?

• 18:58Speaker 01

  Um.

• 19:01Speaker 01

  It's a good question. I mean, you know, one of the, the things we talk a lot about, uh, in our industry is kind of, uh, not, not necessarily investing in markets that are big today, but it will be big in the future.

• 19:13Harry Stebbings?

  Absolutely.

• 19:14Speaker 01

  Um. And so, um, you know, you could take, um, something like, uh, VR, uh, you know, VR is not a place where we have made a ton of investments yet as a firm. We have one investment on the West Coast. Um, but you know, it's sort of an emerging ecosystem, creative platform, uh, set of tools and, uh, and sort of a new canvas. And, um, you know, if you believe that that's going to be a big market in five or 10 years, it, it, it may make sense to, to play there. Um, but you know, what, what size markets excite us? Um, you know, I would sort of, uh, put my, uh, pinky to the corner of my lip and say, you know, uh,

• 19:59Speaker 01

  markets in the billions.

• 20:00Harry Stebbings?

  Um, yeah.

• 20:01Speaker 01

  Um, like Dr. Evil, but, uh, you know, something, uh, you know, typically that is several. You know, the way to, a way to think about it is we, in our, in the venture business where you're investing, uh, out of funds of our size, you really need outcomes to be, um, billion plus dollar outcomes, um, which is one of the reasons why people have, um, fascinated, uh, over the, the sort of unicorn idea. And in order for that to be the case, you need to have markets that can support billion-dollar companies.

• 20:34Harry Stebbings?

  And so the question is, how big of a market do you need in order to support a billion-dollar

• 20:39Speaker 01

  company? And if you have a market that is not growing incredibly quickly, that is less than a billion-dollar market, you sort of definitionally should not be able to have a billion-dollar company. So if you hear us or any venture person say, you know, the market's not big enough, part of what we're trying to get our arms around is, can this actually become a company that's worth more than a billion dollars?

• 21:03Harry Stebbings?

  Yeah, because that's what it needs to be to move the needle.

• 21:07Speaker 01

  Right.

• 21:08Harry Stebbings?

  And then talking about those markets, you said, obviously, looking at the future and potential markets, where do you see real potential in a future market? Is it 3D printing? Is it Bitcoin? Is it VR? What are your thoughts?

• 21:21Speaker 01

  Yeah, so I gave you a little bit of a sense of the areas that I'm interested in. Right now, I am focused on insurance, focused on other financial services in kind of what we call non-bank lending, which is where, you know, companies like Lending Club have emerged, but there are a bunch of other categories where you're seeing non-traditional sources of capital, so hedge funds, family offices, folks like that, starting to provide credit to, you know, businesses and consumers in new ways. And so, yeah, insurance is one of the areas we're digging into right now that we find acceptable.

• 22:05Speaker 01

  And so there, the question is, you know, insurance is one of the broad sectors where there is very, very low consumer satisfaction. In many cases, you know, particularly with the transition of millennials into real heads of households in the economy, there's still relatively low brand awareness of some of the old brand that our parents grew up with. And there's a real opportunity to use technology in new ways to kind of delight the consumer and to bring, to create new brand value. So Oscar, for example, is one of our investments, Oscar Health and the health insurance space, that we're exploring

• 22:46Speaker 01

  other verticals where potentially a new brand could be created. And similarly, looking at new distribution models that take advantage of, you know, a little bit of the work, for example, that Lending Club has done to think about how potentially people could endure one another as opposed to getting insurance from a big company. And then, you know, we're also looking quite a bit at new sources of data that contribute to potentially better underwriting of risk in insurance. And we have an investment in this space already in a company called Sensio in the auto space that uses data from your smartphone to try

• 23:27Speaker 01

  to understand your driving behavior better and use that to help insurance companies a better price risk for their policies. So we're thinking about how you could apply that type of thinking to other verticals as well, whether it's in the home or otherwise.

• 23:43Harry Stebbings?

  If it's okay with you, we're going to move into a lightning round now.

• 23:47Speaker 01

  Okay.

• 23:48Harry Stebbings?

  Okay. So your favorite book and why?

• 23:53Speaker 01

  You know, the one that I've enjoyed reading over the course of the past year was the book, The Everything Store, which is sort of a, I believe, an unlicensed biography and story of Jeff Bezos. And, you know, in the venture business, there aren't many more legendary founders than Bezos himself. And, you know, I've just been fascinated with his incredible focus, ambition, you know, and ability to kind of reinvent the business time and time again. It's just been fascinating.

• 24:32Harry Stebbings?

  Then Apple Watch, Fly or Die?

• 24:36Speaker 01

  So current version, um, not gonna fly, but very confident about future versions, including a front-facing camera, glucometer, you know, some form of mobile connectivity, uh, data connectivity, local processing, all those things. Um, I think if they're in place, it has a lot of potential.

• 24:55Harry Stebbings?

  And then finally, your most recent investment and why you said yes?

• 25:00Speaker 01

  Sure. Um, so my most recent investment is a company called Campus Job, which is a new, um, which is the largest hiring marketplace where students find work. Um, so it sort of brings together a lot of my interests, uh, in labor marketplaces and, uh, education and, um, you know, and more. And, um, we said yes because, um, we absolutely love the team, the founding team, um, Liz Wessel, uh, in particular, the CEO, is an absolute uh, dynamic force. Um, and the company has really created a brand, uh, at, uh, a place in the hiring market where LinkedIn doesn't have a huge brand yet. Um, and we believe

• 25:41Speaker 01

  that the, uh, first job that, the first jobs even, that a, um, student or, or a, a kid gets, um, are really emotional and a powerful place to build a brand in the, um, online recruiting space. And we're just excited to be partners with, uh, with Campus Job. We think they've got a really bright future.

• 25:59Harry Stebbings?

  Well, fantastic. And thank you, Spencer, so much for coming on the show. It's been an absolute pleasure having you.

• 26:04Speaker 01

  Great. Good to be here.

• 26:07Harry Stebbings?

  As always, all the amazing resources and tips mentioned in today's show by Spencer can be found on the blog at www dot twenty minute VC dot com. And I would love to say a special thanks to HiringScreen, whose blink algorithm means you can spend less time looking at irrelevant CVs and more time meeting with the most relevant candidates for the job, deciding who is the right personality and cultural fit for your team. To see how you can balance smart recruitment technology with the human touch, visit www dot hiringscreen.com or contact Richard Hanson on Twitter at HiringScreenRH. Thank you so much for listening to today's episode and we can't wait to hear your thoughts.