20VC: The Lyft Memo: Floodgate's Ann Miura Ko on Why Successful Seed Investing Is Not Investing In a Company But The Development of a Set of Secrets, Whether Capital Is a Defensible Moat Today &How Startups Should Approach Competition

Ann Miura Ko is the Co-Founding Partner @ Floodgate, one of the leading early-stage firms of the last decade with a portfolio including the likes of Twitter, Twitch, Lyft, Okta, Outreach and more. As for Ann, not only did she lead the round for Lyft but in the last 12 months has led rounds for 2 of the hottest companies in the valley; Popparazzi and Popshop Live. Due to her immense investing success, Ann is a multiple Forbes Midas Lister and is also a lecturer in entrepreneurship at Stanford, a co-director of the Mayfield Fellows Program at Stanford, and a member of the Board of Trustees for Yale University. In Today’s Episode with Ann Miura Ko You Will Learn: 1.) How Ann made her way from a PhD in Quantitative Modelling at Stanford to co-founding one of the leading early-stage firms in the valley? 2.) What does Ann believe is the secret to successful seed investing? What insight development did Ann believe Lyft had? How had they approached customer development in such a unique way? What are the leading signals to Ann today that founders really understand the customer development process? What questions does she ask to discover this? 3.) Why does Ann not engage in the compression of fundraising timelines today? How does she build relationships of trust and honesty with founders so early? Does Ann worry that founders have such large capital injections too early today? Why should employees examine capital efficiency, not capital raised? How does Ann advise founders on pre-emptive rounds? 4.) How did Ann and the Lyft team approach prioritization in the early days? In what ways did Lyft decide to "play their own game" when it came to the competition? How did Uber and its growth impact the financing strategy for Lyft? In what deliberate ways did John and Logan set the culture for Lyft? What have been Ann's biggest lessons from them on culture building? 5.) Does Ann believe that capital in itself is a competitive moat today? What does Ann believe needs to be proven before capital can be used as a weapon to win? In the case of Lyft, what signals or measurements did Ann define as guiding metrics for success? How did they change over time? How can founders determine their own in their businesses?

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

• 0:00Harry Stebbings?

  Welcome back. This is 20 VC and my favourite episode of any month with the memo. The show where we deep dive on an investment into a breakout company with the partner that led the round. Today's guest I had on the show five years ago, if you can believe it. And I've wanted to do this episode for a long time. And so I'm thrilled to welcome back into the hot seat Anne Murrow Co, co-founding partner at Floodgate, one of the leading early-stage firms of the last decade, with a portfolio including the likes of Twitter, Twitch, Lyft, Okta, Outreach and many more. As for Anne, not only did she lead the round for Lyft, but in the last 12 months alone, she's led rounds for two of the hottest companies in the valley, Paparazzi and Pop Shop Live, due to her immense investing success. Anne is a multiple Forbes Midas Lister and is also a lecturer in entrepreneurship at Stanford, a co-director of the Mayfield Fellows Programme at Stanford,

• 0:44Harry Stebbings?

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• 1:27Harry Stebbings?

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• 2:10Harry Stebbings?

  And so head over to nordvpn.com to check out the best VPN in action today. And lastly, but by no means least, you have to check out Diligent, the only modern governance solution that recognizes good governance. It's not just one thing, but the coming together of many different elements. So why buy siloed software solutions for each when you can work with Diligent? The only modern governance solution to lead your organisation forward. But don't trust me, trust 50% of the Fortune 1000, trust users in 90 countries and trust 24/7 customer service. Find out more today at Diligent.com. That's quite enough from me though. So now I'm thrilled to hand over to co-founding partner at Floodgate, Anne Muraco.

• 2:53Speaker 01

  You have now arrived at your destination.

• 2:56Harry Stebbings?

  And this is such a joy to do, just checking in, as we said, five years since our last episode. So I wanted to do this one for a long time, but thank you so much for joining me again today.

• 3:06Speaker 02

  Absolutely, I'm excited.

• 3:07Harry Stebbings?

  Now, I do want to start, I love a good story. And so we're obviously focusing on, you know, Lyft and the early Zimri journey. And so when we go back, paint the picture for me, how did you meet the team? Where was the meeting? Who was it with? Provide that context.

• 3:21Speaker 02

  Yeah, so interestingly enough, our best founders come through recommendations from our existing founders. The way we met John and Logan was that Lea Buskey, who's the founder of TaskRabbit, had been in the Facebook incubator or accelerator at the same time as John and Logan. And in fact, we have a picture where I think John and Logan were helping Lea put up her signage in this office. And as a result of that, they were friends and Lea told me, hey, there's a couple of guys that you really ought to meet. I had funded Lea's my first check the year before in 2009.

• 4:03Harry Stebbings?

  Okay, so you were introduced. Where did you have the first meeting? And was that like an unlock in it? I find often with meeting companies, that's like a moment when you're like, oh wow, this is special. Where was the meeting? Did you have that unlock?

• 4:14Speaker 02

  Yeah, so John and Logan came into our office, Mike and I, at the time we were sub-leased. Seeing space from another venture capital firm. And just to paint the picture, I'm just getting started in my venture capital career. And I think I hadn't even finished my PhD at the time. And I was largely pregnant. So I was due in, I think, in April of that year. And in our first meeting, I'm like pregnant, I have like this meeting that I'm having. And Mike is there. What was great about it was we were all sort of just starting up on our career. I think probably John and Logan had gone up and down Sand Hill Road and been rejected by a bunch of firms at that time.

• 4:58Speaker 02

  And I also hungry to make investments, but I don't have a name. I don't have a brand on which I'm sitting on. And so I'm trying to hustle to find great folks to work with. And so at this moment, we sort of come together. And I've been teaching all these classes with Steve Blank on customer development. And here are two guys who walk into our office. There's a couple of things that we were really drawn to. One was, they have this incredible story of why they're working on this. So John had joined Logan on this journey on Zimride. And Logan says, you know, I was in Zimbabwe. I was really passionate about transportation.

• 5:40Speaker 02

  And in Zimbabwe, all these people can't afford to own a car, so they share the ride. And I had been in Zimbabwe back in 2006. And I remember seeing this, you'd see people like piled into cars and driving to different locations. And so he was inspired by this, but he'd been working in transportation since his days in college. He was actually on the board of Transportation Authority in Santa Barbara, where he had gone to college. And then John, at the same time, had joined this journey. Because in college in Cornell, he had seen this class where this professor had talked about how transportation changes the fabric of society in the United States.

• 6:21Speaker 02

  And you can go from canals to, you know, railways to highways. And actually how the physical infrastructure with Within a society changes because of the way transportation evolves. And we're at this moment where transportation is about to change because we have a new software infrastructure, starting with social networks, that might enable something new. And, you know, it's crazy to think at the time, but like, we haven't seen a transportation startup. And in fact, when we were looking at this business, we had to go and talk to the founder of Zipcar to see what else was out there. And literally, there was nothing really, no innovation had really happened

• 7:03Speaker 02

  since that period of Zipcar in the transportation space. So really, what we were interested in was this insight around a market.

• 7:12Harry Stebbings?

  I totally get you. It goes back to what you and Mike have said before about insight developments. I guess, you know, you said there about kind of building on top of the new software layer and the social network. That idea then obviously changed. And it was actually Navin at Mayfield, who asked in particular, when was it clear that that change was made and needed to be made in the idea?

• 7:31Speaker 02

  Okay, so I think this is the secret to seed investing, which is, it wasn't clear for a number of years. We made our investment in 2010, and the actual change didn't happen until 2012. And so if you think like, a pivot in many people's minds is just like a moment. It's like the singular decision, and it's like a lightning strikes you and you know. In reality, what happened with Lyft was that Zimride went through hundreds of iterations. It starts off as this platform that's sold to universities. Then it becomes a platform that's sold to universities and corporations.

• 8:13Speaker 02

  And then this realization of we don't have enough density of activity, right? If you stay within Stanford campus, it's fine within Stanford campus, but you need to stitch together Palo Alto. Can you do that by stitching together Facebook, that was in Palo Alto at the time, and Stanford? Kind of, but you're never going to get to the density that you need. And then, how do you make people more comfortable with paying for transportation? Well, we looked at Craigslist and people are trying out different longer routes. They're paying for being in a car with someone to go to Lake Tahoe or to LA. So what does Logan do? Well, the next week, he's rented a van. And he's posted to Craigslist that he's gonna drive down to LA.

• 8:58Speaker 02

  And here's the CEO of a company who's driving a van down to LA with a bunch of people who've paid for spots in it. Just to see if that's going to be the secret to unlock more activity. And so Zimride to Lyft was a process, not a moment.

• 9:14Harry Stebbings?

  What did you learn about them in that process? As you said there, it's a two-year process with multiple iterations. As you said that, the driving to LA as CEO, it's doing pretty unusual things. What did you learn about them as a team in that process?

• 9:28Speaker 02

  There's an absolute commitment to customer, fanatical desire for customer development. So a lot of people think customer development is like intellectual process. And in fact, it's hand-to-hand combat, right? You're trying to uncover secrets that other people may not know. And for them, it was real-life experimentation, right? The fact that John Zimmer, when he was selling the platform to universities, would go to a university campus dressed in a beaver suit to try to convince people to just engage with this platform. Gives you a sense for like, it wasn't that they felt like someone else should do that work.

• 10:09Speaker 02

  They were always so committed to knowing what the customer desire was and how that translated into product for themselves. And for each person who was in that organization, really came alive all the time.

• 10:23Harry Stebbings?

  I mean, I love that. I didn't know about the beaver suit element. But I do have to ask, because I always get worried today though, Anne, because you know, founders have so much money so early that they almost don't need to do the customer development process for a while. They hire extensively beforehand just because of the proliferation of capital. And like, you know, driving down to LA in vans and dressing up in beaver suits. We don't see that commitment as much anymore in my eyes. Do you share the same concern in that review in terms of the early money that's now? A lot.

• 10:50Speaker 02

  Yeah, but I think that's what you look for now. Again, you're not always looking for the best idea. Because at the seed stage, we often say we're not investing in a company because a startup isn't a company. It's a set of insights, it's a development of a set of secrets that you have. If you believe that whatever you're investing in at the seed stage is stagnant, then great. We should always just invest in that best idea. But in my mind, I'm always investing in a set of people who are committed to a process of uncovering secrets. And if you believe that, then you wouldn't invest in the person who wasn't willing to own that.

• 11:31Harry Stebbings?

  Can I ask, and sorry, this is completely off schedule, but what questions do you ask to uncover the process that they got to those insights? What are the biggest questions that reveal the most in terms of that process?

• 11:42Speaker 02

  Yeah, I mean, like in the very first stages, I love to have them even write up some of what they believe, right? So I love looking at the things that they would let go of, the beliefs that even if the data came in unclear, they wouldn't let go of. I like to look at what they believe in terms of their competition, who is their competition, why? I like to understand what has happened historically that they believe it wasn't true in the past and is true now. And so it's this navigation of the IDMAs that I think we concentrate so much on building, right? And I think building processes and speed of development is really important.

• 12:22Speaker 02

  But a second element that we also look for is the speed at which people develop their own insights. Sometimes if they've had angel investors, you can see what's happened within their own investor write-ups. And you know, everyone will set, send updates on a monthly or every other month basis. And you can even see, when you look at the past two or three, how much they're learning in that process. And often ask for that if they have that.

• 12:49Harry Stebbings?

  I totally agree with you in terms of that process. Can I ask, in terms of like the relationship build there that you have with them, the uncovering of their process? How do you think about doing that today when fundraising? Time lines are just so compressed.

• 13:01Speaker 02

  Yeah, it's funny. I was just talking to one of our investors about the fact that I really seek not to have my investing timeline be compressed. If a founder wants to find just a check, I say to my team and Mike says this as well, like, we have to force a choice. If someone's just looking for a checkbook, we're probably not your gal or guy because we don't make that many seed investments. We're not an index fund. We don't seek to make a hundred investments in a year. I only make somewhere between three and six investments every year. So we're in July. I've only made two investments at the seed stage. Why? Because I spend actually a lot of time with these companies. And when I make an investment, I commit to doing that.

• 13:45Speaker 02

  I commit that my investment will make a difference in our fund, so it's not an option bet. It's the only time in which I can make that investment. And so I won't have a future chance to do it. And I'm not going to make an investment in a competitive company because I'm all in with you. And so if I'm going to make that commitment, I can't make a decision in 24 hours. And so I need the chance to get to know that that founder. The last two investments that I've done, I had a month-long process through which we got to know each other and it was a commitment to one another. And I recognize that that's just not the usual at the seed stage. And there are probably companies that I don't get to invest in as a result of that. But I also think that it forces a choice.

• 14:30Harry Stebbings?

  I do want to go back to Lyft though, because when we think about those iterations and then kind of to where it is more in the model today, when was it clear the newer Lyft model was very much working?

• 14:41Speaker 02

  Yeah, so this is sometimes where people will say even product market fit is not a moment, but I think this is probably the counter to that. When Lyft launched in 2012, I remember one of our associates literally running into my office and this guy Tommy Leap, he says, "You would not believe how amazing this product is. Like Lyft is going to be huge." And it wasn't the He'd used the product, you know, a hundred times at this point. He'd literally used it for two days and he thought it was life changing. And so I remember contacting the Lyft guys and saying, I think we have something. I've never seen a reaction like this. It wasn't just Tommy.

• 15:25Speaker 02

  It ended up being all of these young people who I'd asked about Lyft. And they said, this is just totally different. And so in my mind, it just became like a very, very clear moment where for a long time, we've been selling this platform, looking for density of activity. And it's just kind of fallen into our lap. And so that was like 2012, I think in the summer, we were just experimenting. And like, when I say we were experimenting, I think John and Logan emailed a bunch of Zimride users in the San Francisco area. And they built Lyft in like three weeks because they felt like this was an experiment that they wanted to run. At the time, like Uber was this black car service.

• 16:08Speaker 02

  It, the whole tagline was be a baller. And so having your friend come and pick you up. You have this gigantic furry pink mustache in the front of the car. And then you're supposed to sit up in the front seat was just like, it was the opposite of be a baller. We also, there was no payment mechanism because there was sort of this regulatory gray area. And so there was a suggested donation. And so you could technically ride for free. Most people actually paid the suggested donation. And so it was like this series of like pretty hacky experiments that then became pretty clear that this was something that people really desired. But for a year after that, we were still running Zimride as a platform.

• 16:50Harry Stebbings?

  How did you determine when was the right time to turn that off? Cause it's a tough thing, Steve. You've got revenue, you've got customers, you've got enterprises. What was the decision making around that?

• 16:58Speaker 02

  And I think like this is where, you know, hindsight is 2020. It's like totally clear they should have gone all in. But again, you put yourself in the shoes of the founder. When you're a founder, you're all in on your idea. Like the whole thing is that you've created this narrative, not only for yourself, but for your employees, that this product, this vision, this.

• 17:20Speaker 02

  Mission is meaningful and you've given up birthday celebrations with friends, nights out to make this vision come true. And so you're bought into this. And then comes along like this three week experiment that seems really successful. Like when you look at it now, it's like, obviously they should head in this direction. But that's not the way it necessarily works. I think that's why it took a year. But I remember within a few months, we had to make a decision. Do we divert basically 90% of the resources to Lyft? And I took a walk with Logan all around like the ballpark area. I remember just sort of walking and walking and he's saying like, I think I need to do this.

• 18:03Speaker 02

  Is this what we do? And I'm like, I think we do. I think we have to go on this. And then at this, this board meeting, I don't remember who it was, but someone said like, do you really think that this is going to work? And like Logan and John like slammed their fists on the table and they're like, this is for sure going to work and we need to head in this direction. And to just like see that conviction, when you have like a few million dollars of revenues coming here and like that's what investors invested into, that was really powerful. Because you don't have a ton of data points and then you're saying, let's go.

• 18:37Harry Stebbings?

  I love that pounding the fist on the table. I do want to unpack a couple of elements you said there. You mentioned like the moustaches on the front and I remember when it was like high fiving friends. The culture was always like, we're nice people. How did they build that culture? How did you analyze that? And what did that look like in those days?

• 18:53Speaker 02

  Yeah, it was really interesting. So even for their series A, which is before they made the pivot and actually beyond in several other conversations with investors. This was a question I used to get all the time. Are they too nice? Are they too nice? Are they too nice? Are they not competitive enough? And that used to grate on me because I used to think like, why are those two things so counter to one another? Like, can you not have both? Can you be a nice person but fiercely competitive? And what I found with Lyft and John and Logan in particular. Is you can be, you can be an ethical person, you can be a nice person, and you can be fiercely, fiercely competitive.

• 19:38Speaker 02

  But the thing that I've learned in this journey is sometimes you need to define your own game. When you're put on the field and someone has a game that they're really good at, if you then try and engage in that battle on their basis, you're never gonna win. If you see that happening, you change the rules. So if you see Coca-Cola on the battlefield, you become like the five hour energy drink. And you take up different shelf space and you change the size of the bottle. And in the same way with Lyft, they didn't try to engage in any direct hand to hand combat. It became like, let's figure out who we are and what we wanna do. And that was the battle that they engaged in.

• 20:19Harry Stebbings?

  I love that in terms of that being the battle they engaged in. I mean, it took a couple of kind of core decisions also in terms of deciding which game they wanted to play, prioritizing a lot on the core business itself. I just want to ask, how did you advise them on prioritization? How did they think through prioritization in the early days? And what did that look like? Cause they didn't make decisions to really focus.

• 20:39Speaker 02

  Yeah, and some of it was just sort of how do they expand on a market by market basis? Some of it was also when will Uber come into what we're doing, right? So part of the, the debate was when will Uber come in? Because as I said, when we first launched, they were black cars. Be a baller, you know, look like you're really rich. That's very different to high fiving the guy who's picking you up and being friends and having a giant pink mustache in the front of your car. But what was interesting was the quick recognition from the market that this peer to peer driving service would be where everything was fought and won. And so it did become very rapidly competitive. The question was like, how big does San Francisco need to get?

• 21:24Speaker 02

  Cause that's where we got started. And then how do you expand market by market? So for a while, it was just this focus on let's get this thing right. Now let's get LA right. And I think every few months, we were launching markets. It wasn't until I think it was 2014. This is when I rolled off the board the first time. They went live with 24 markets just as I was rolling off the board. And I remember being like, 24 markets? That's just insanity. That's huge. And it turns out it's like, it's just a mere drop in the bucket, right? But like that focus on, we're gonna create the best experience for riders and drivers. We're gonna do that by expanding market by market, understanding the dynamics.

• 22:07Speaker 02

  That was a real thing for them. I think that's the bigger question. Where does that focus come from? Well, if you read the initial pitch and you go through the first set of slides on it, and you say, okay, close your eyes now and say, is this for Zimrite or is it for Lyft? It could be for either. That original vision of why are they building this company? What makes it meaningful? Those were all things that stayed true even as they were going public, even if you ask the founders today. I think that's where the focus comes from, is that they weren't just building a business. They were building a vision for the future.

• 22:43Harry Stebbings?

  Can I ask, you mentioned the incredible market expansion there. What did you learn about market expansion from seeing them execute so well in terms of continuously opening up new markets to consumers?

• 22:54Speaker 02

  Well, I think as a seed investor, I love the focus in one market and not just saying, we're gonna go national. I see this tendency actually with a lot of founders today. It's like, just on the seed or in the Series A, we're gonna go national. It's gonna be huge. And it took a long time for these companies to get to that stage. And so the idea of like, how do we make this market work, like really work? And understand what's the dynamics. Then we go to another one. We realize this market has slightly different dynamics. And how do you make that market work? Like LA was an interesting one, because I remember initially it was like, it's nothing like San Francisco, because everyone has a car. And so you get actually a lot of drivers, but maybe not as many riders.

• 23:36Speaker 02

  And that's a different dynamic. We had a lot of starving artists there. And so actually navigating and understanding the dynamics, giving the team the right resources to be really successful. I think that was really interesting.

• 23:50Harry Stebbings?

  In the early days, what were the signals that a market was working? Was it number of drives per driver? Was it how frequent the consumer used it on a weekly basis? What do you think was the kind of core measurement of success for a market working?

• 24:03Speaker 02

  I mean, ultimately, we were always looking at ETA, right? So when was driver going to be able to reach a rider? And you would see that the market really worked for the rider if you had a driver that was just a few minutes away. In that metric, you see sort of the dynamics of a marketplace, that you have liquidity, you have the right supply, you have the right demand. And so I think that ability to see that was important.

• 24:31Harry Stebbings?

  We mentioned the element of competition earlier, and I mentioned speaking to Naveen at Mayfield before the show. And he said about the competition from Uber and its impact on financing strategy. Do you want to meet how the competition from Uber made financing challenging?

• 24:44Speaker 02

  Yeah, and some of the competition and what happened really ramped up in that 2014 to 2016 period, where luckily I was not on the board. But I know for a while there, there were moments where I think Lyft had just a few months of cash left. And there are points where the way in which the financings were happening, you just had limited numbers of folks who could even write the check sizes that you needed. And so the world was just getting smaller and smaller, and people were being asked to pick sides. And so I think in that moment, again, if you're just competing

• 25:25Speaker 02

  and you're just working on that who's better, then that's harder. But again, when you come back to what's your difference? Are you investing into the different piece? Then all of a sudden, there's a new lease. It's critical for us, too. It's like a small investing firm. We always say, force a choice, don't force a comparison.

• 25:46Harry Stebbings?

  I mean, it's interesting because a lot of people throw the label that capital is the most in this market, like it is very much probably today in last mile delivery services, people often say now, too. How do you think about that? It was capital the most in this case? And do you think it is?

• 26:02Speaker 02

  Capital has become a really important component, but I just don't think it replaces the fact that if you don't have founders and leadership that's willing to figure things out consistently, you're wasting money, right? Like, you can throw money at the problem only for so long before the market catches up to you. And we've seen, actually, markets, entire markets fail because people threw money at a problem that really shouldn't have money thrown at it. And so I believe that capital's a very powerful weapon, but you actually have to really know, it's like weapons-grade plutonium, right? Like, you have to know which way to direct it.

• 26:45Speaker 02

  Otherwise, you can actually become the victim of that weapon.

• 26:48Harry Stebbings?

  The challenge that I often have is founders come to me and they say, Harry, our competitors raising a hundred from name your large fund or crossover fund, we don't need it, but we kind of have to if they're going to raise a hundred. How do you advise founders in that case, where it is very often like this, it's like, we don't really need it, but if our competitors aren't, they're going to scale everything, we're going to be left behind.

• 27:10Speaker 02

  Yeah, and I think there is some truth to that statement. I think it's not so much the scaling component, but sometimes the hiring component. If you want to attract the best employees, sometimes, these days, they care about that. Like, ten years ago, no one ever did a press release on how much they raised or what their most recent valuation is. That is now a press release. It's a different mindset from the employee's standpoint. And so you do have to cater to that. But then the question becomes, how do you spend it? The truth is, great companies don't necessarily get built on the back of ton of capital. That is not necessarily the ingredient that causes success. You have a lot of different examples where that's just not true, right?

• 27:52Speaker 02

  You have Viva Systems, only raised seven million dollars ever and is now a forty billion dollar company. You have Calltrics that, the first time they raised, they already had fifty million dollars in revenues. And so the capital efficiency turns out, even though employees seem to be attracted to companies where the company's not as Capital efficient for the employees. It's better if the company is wildly capital efficient because you yourself don't get diluted. I think it's a fine balance because what you really want is a founder who's capable of developing an incredibly powerful narrative for why people should join the company, why customers should trust this company without just this blunt instrument of capital.

• 28:37Speaker 02

  And so I do worry about how do you spend it? Why do you spend it? And do you believe that you have product market fit just because you have this incredible round of financing? I have a couple of companies that have raised from great firms recently. And one of Matt Kohler came into one of the companies and I love this story. He said, you guys feel like widely successful because you've had this really hotly contested round and like you got this great check, but in reality, like you're like Charlie and the Chocolate Factory and you just got that golden ticket. We still have the whole book to get through. And I feel like that's so true of you get that huge round of financing, you hit some incredible milestone.

• 29:20Speaker 02

  All you've gone is the golden ticket and you still have the whole book to get through.

• 29:24Harry Stebbings?

  You mentioned the talent traction element there. I do believe something which a lot of people get angry at me for. And it's that the best founders do not need VCs to help them get talent. It could be, hey, can you meet this as a final layer of interviews? But in terms of like filling out candidate pipelines, bloody, that's not my job. It's not your job. And it's also not what the best need. Do you agree with me there?

• 29:47Speaker 02

  Yeah, you know, at the end of the day, I think most of the time where a venture capitalist who has views on a lot of different companies have seen journeys for tens, if not hundreds of companies. What we can offer, maybe some, some element of credibility, we can offer a network. But really like the thing that can be powerful is just another set of eyes from the outside in around, is this true? In my line of work, because I'm pre-product market fit investing, I spend all of my time on Signs of product market fit and what's the journey to get there? Are we two steps closer? Are we two steps further apart? What are the things we measure in order to be able to get there?

• 30:31Speaker 02

  Are we close? Are we not close? Are we there yet? And being really hard, saying, this isn't it. And in fact, we should throw away this entire product. Or the business model doesn't work anymore. Or the ecosystem doesn't buy it. There's something fundamentally wrong. When you're super close to a company and you're building everything in it, sometimes it's hard to see that. And so that's what I think my job is first and foremost. It's not just the tactical elements.

• 31:00Harry Stebbings?

  Totally. It's a reflective mirror. Completely agree with you there. Final element before the quickfire, I'm just like, you know, when you think to the development of John and Logan, you know, they've gone from, you know, two people with a crazy idea to public market founders now. How have they developed and evolved as leaders in your mind?

• 31:17Speaker 02

  Well, I mean, it's really amazing to see, right? So when I invested, I think there were five of them in a one-room office in Palo Alto. And now we're an organization of a few thousand people. The change has been like, they've had probably, I don't know, 20 different jobs, each of them, from the time they founded to what they are today. The change and the learning curve that they have had to be on and they still are on, it's fantastic to see. It's like once in a lifetime to see like founders have that that degree of change, I think.

• 31:55Harry Stebbings?

  Was there an inflection moment in their change? Was it when they went public? Was it when they raised a big round, when they entered new markets? When you're like, wow.

• 32:02Speaker 02

  So there's several inflection points, right? And there's like the moment that they have to pivot. That I think that was probably a big inflection point. The crazy hand-to-hand combat in competition for like four or five years, that was relentless. And each of those battles, there are so many different types of battles that they had to engage in and so many different choices. I would say there's probably two or three inflection points just in there. And then managing a public company, I think, is total. Totally different animals as well. The fun part is actually continuing to see them evolve. I think also my journey as a seed investor and having kind of grown up in my career with them

• 32:43Speaker 02

  is that you also get to see like the life changes. Like when I met them, they weren't married. And now both of them have kids. Logan was just on paternity leave. And so to see that set of inflection points to alongside the inflection point professionally is the joy.

• 33:02Harry Stebbings?

  I do want to move into my favorite though, which is a quick fire on, as you know, but this one's focused on Lyft. So this one's a little bit different. Are you ready to dive in?

• 33:10Speaker 02

  Yeah.

• 33:10Harry Stebbings?

  Okay. So what was your pre-mortem when you wrote the first check? How could it have gone wrong?

• 33:15Speaker 02

  Yeah. So we believed that transportation was a really interesting space, but we had no idea how it was evolving. The thing that we were betting on was the Facebook connect, to be honest. We thought that that was going to create more trust in this network, even within Zimrun. Now, that was the thing that we thought was the real change element. It turns out that wasn't right. It wasn't the key driver. What we were betting on was this really interesting insight Airbnb of transportation, built upon Facebook connect. It turns out like what was met by Airbnb of transportation was totally fundamentally different. The place where it could have gone wrong is like people totally don't trust each other. It turns out like they don't want to get into anyone else's car.

• 33:59Harry Stebbings?

  Tell me, there's been many strategic decisions made. When you think back to them, what do you think was the most impactful?

• 34:05Speaker 02

  I think the most impactful was the decision to be different. So it was deciding who we are and knowing what we're willing to do to win. And I think it was a single strategic decision, but it was sort of guiding North Star was the most impactful.

• 34:21Harry Stebbings?

  We mentioned them being kind of too nice. What did they do, John and Logan, that is, to create the culture that they did within the company?

• 34:27Speaker 02

  I think in many ways, the founders are the culture. It's the clarity of vision. It's why they do what they do, not having that change. So if you walk into the boardroom for Lyft, on the board is actually, they have it. Framed, they have a beaver costume framed, but they also have the original set of vision and values for Zimride. What's striking is that that North Star has never changed. They want to change the way people relate to transportation and that's always going to be true.

• 34:57Harry Stebbings?

  Who is one unsung hero behind the scenes in the LIFT team that moved the needle?

• 35:02Speaker 02

  I love this question because it has to be Kristin Svercek, who joined LIFT in November of 2012. But I knew her from her time as an associate at Gunderson in 2008, where she was involved in our fund formation side. Then she represented me through Silicon Legal. Every time we invested into a company, which is how Logan and John met her, they then hired her firm to represent them because they liked her so much. And ultimately, in November of 2012, it was totally obvious that she was this great attorney, very young. It wasn't totally obvious that everything was going to be as wildly successful as it was,

• 35:46Speaker 02

  but they decided they needed her because there was a strong legal component to this business. And I remember one critical board meeting as we're talking about like all of the competition, what's happening in this market? And some of the questions around ethics and how you behave in business, there was this moment where she said, you know, why is it important for us to always do the right thing? And she paused and she said, because it's good business practice. And I remember at one point I came back to her and I said, did you ever think that people would realize that you were right? And she said, like, no, I didn't think that it would ever be the case that I was proven right, that it's really good business practice to do what's right.

• 36:31Speaker 02

  But I think, you know, I'm really excited that she's always been part of this business. She's been there like almost 10 years, but she's been a force behind the company.

• 36:41Harry Stebbings?

  That is amazing. I did not know that story, but wow, what an impactful hire and what a journey she's been on too. I do want to finish on probably my favorite one, which is like, when you think back to many memories, what's your most Memorable moment from working with Lyft.

• 36:54Speaker 02

  Yeah, you know, this is just one of the early days. Can I give two, actually?

• 36:59Harry Stebbings?

  Sure.

• 36:59Speaker 02

  Okay.

• 36:59Harry Stebbings?

  Two is perfect.

• 37:00Speaker 02

  So the earliest memory is actually, there is a moment in time where, and when I say we're growing up in this industry together, just to give you a picture of where we were, none of us had a boardroom. So I didn't have a boardroom. John and Logan were working in this one room office. I think Manu Kumar at K nine Ventures also like, we're all just being scrappy at the moment. So we need a place where we can meet as a board to go over the business. Logan's on Stanford campus at the time. He's like, let's just sneak into the Stanford Law School dorms. His girlfriend's wife was like going to law school there and maybe we could get one of the common rooms in the Stanford Law dorm. And that was how we held our board meeting was that we had to

• 37:44Speaker 02

  kind of co-op space in a university to be able to even do that because none of us had even like real office space. And like to see that the journey from there to where we are today, it's like mind blowing. The second one is, I think this must have been, I don't know, two thousand sixteen or so. We were having dinner at my house and I had invited John and Logan and their wives over to our house for dinner. And Mike came up to our house and he was coming in a lift and he told the Lyft driver, you won't believe who's eating dinner here at this house. It's the founders of Lyft. And she was like, no way. I don't believe it at all. Like, no way. And Mike was like, you should just come in for a second.

• 38:26Speaker 02

  And I remember opening my door and Mike's there and he walks in and he walks in with his Lyft driver and like her jaw hit the floor. She was so taken with this notion, like the founders are sitting in front of her and to see that moment over dinner at my house, it was this thing where I was like, wow, this is pretty incredible.

• 38:46Harry Stebbings?

  That really is special. I would love to have seen that actually. But listen, Anne, as I said, I wanted to do this one for such a long time. Uh, thank you so much for putting up with my prime questions and I just loved having you back on the show.

• 38:57Speaker 02

  Harry, you're awesome. Thank you so much for the time.

• 39:02Harry Stebbings?

  I mean, simply put, it's episodes like that which make me realise just how much I love what I do. What an incredible discussion, also relationships like mine with Anne. As I said, I had her on the show five years ago, we've been friends ever since. What an incredible person and member of our ecosystem. Huge thanks to Anne for today. If you'd like to see more from us, of course you can, on the 20minutevc.com. However, before we leave you today... Have you ever heard that you need to sleep at 68 degrees Fahrenheit? Well, it's a myth. Science suggests that there's no one universal sleep temperature to give you deep and high-quality sleep. However, the average mattress actually absorbs your body heat, giving you those nasty night sweats and causing restlessness. The Pod Pro though, by Eight Sleep, is the most advanced solution on the market for thermo regulation. It pairs dynamic cooling and heating with biometric tracking. The temperature of the Pod Pro

• 39:46Harry Stebbings?

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• 41:10Harry Stebbings?

  24/7 customer service. Find out more today at diligent.com. As always, I so appreciate all your support, and I can't wait to bring you an incredible set of episodes next week.