20VC: Raising A $1.35Bn Fund I, The Emerging Secondary Opportunity For Early Stage Managers and Founders & What It Takes To Win The Best Growth Deals Today with Ravi Viswanathan, Founder & Managing Partner @ NewView Capital

Ravi Viswanathan is the Founder and Managing Partner @ NewView Capital, launched in 2018 with their $1.35Bn Fund I, they have already set themselves as leaders in the world of growth funding with 3 massive exits in less than 2 years in the form of Plaid, sold to Visa for $5.3Bn, Acquia, sold to Vista Equity for $1Bn and then Scout, sold to WorkDay for $540M. Prior to founding NewView Ravis spent 14 years at one of the largest venture firms in the business, NEA where he co-led their venture growth equity practice and in 2016, became COO @ Nea. Before the world of venture, Ravi spent 4 years as a VP @ Goldman Sachs and before that was at McKinsey & Co. In Today’s Episode You Will Learn: 1.) How Ravi made his way into the world of venture from investment banking and how that led to his founding the monster $1.35Bn Fund I for NewView Capital? 2.) Given the first fund being $1.35Bn, how did Ravi find the fundraising process for NewView? On reflection, what did he and the team do well that they would do again? What did they not do well that they would alter? What advice would Ravi give to first-time fund managers raising today? 3.) Would Ravi agree with Bill Gurley, "the biggest challenge today is the sheer quantum of capital flowing into the industry"? What does Ravi make of the rise of private equity (PE) houses entering the venture landscape? How does it change the exit landscape? 4.) How does Ravi think about the right way for funds to navigate and approach the secondary market? What advice would he give to emerging managers? How does Ravi feel about founder secondaries? What framework does he use to determine whether the amount is reasonable? 5.) How does Ravi think about what it take to truly win the best deals in competition today? If one does not have the budget of a16z, how does one build a venture platform? Where do the majority of investors make mistakes when it comes to VC value add? Items Mentioned In Today’s Show: Ravi's Fave Book: Shoe Dog: A Memoir by the Creator of NIKE, Born A Crime: Stories from a South African Childhood Ravi’s Most Recent Investment: Plaid As always you can follow Harry, Ravi and The Twenty Minute VC on Twitter here! Likewise, you can follow Harry on Instagram here for mojito madness and all things 20VC. Businesses are always looking for ways to shorten their sales cycles. HelloSign provides secure, effortless eSignatures proven to speed up contract signing by 80%. Most clients go from a multi-week turnaround to a multi-hour one. They’re an industry leader and have been voted #1 for Ease of Use two years in a row on G2 Crowd. Don’t let pen and paper processes slow you down. Click Here to join the millions of users already using HelloSign to close more deals faster!

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

• 0:00Harry Stebbings?

  Welcome back to the 20 minute VC with me, Harry Stebbings, and you can see more from us behind the scenes here on Instagram at H Stebbings 1996 with two Bs. I always love to hear your thoughts and feedback on the show there. But to our episode today, and I was first alerted of this guest's incredible last 12 months by Chathen at Benchmark, who also made the intro, so huge thanks to Chathen for that. But I'm very, very excited to welcome Ravi Viswanathan, founder and managing partner at New View Capital. Launched in 2018 with their $1.35 billion debut fund, they've already set themselves as leaders in the world of growth funding with three massive exits in less than two years in the form of, check this out, Plaid sold to Visa for $5.3 billion, Acquire sold to Vista Equity for $1 billion, and then Scout sold to Workday for $540 million. Pretty good first few years there.

• 0:44Harry Stebbings?

  And prior to founding New View, Ravi spent 14 years at one of the largest venture firms in the business, NEA, where he co-led their venture growth equity practice, and in 2016 became COO at NEA. Before the world of venture, Ravi spent four years as a VP at Goldman Sachs, and before that was at McKinsey and Company. But before we move into the show today, I want to take a moment to mention HelloSign, a great example of a company that found success in building a product focused on user experience. HelloSign is an effortless e-signature solution used by millions to securely send and request legally valid digital signatures and agreements. They raised a total of $16 million in funding and recently got acquired by Dropbox for an impressive $230 million.

• 1:25Harry Stebbings?

  Check out hellosign.com/20vc to join the thousands of companies and founders who value fast, secure, and simple e-signatures. And speaking of signatures and getting deals done there, you really need to build that relationship and there's nothing like meeting face to face, and there's nothing like Zoom to make that happen. Zoom lets you connect and do business across town or around the world. Zoom ties together all of your communication needs into one easy platform for video conferencing, phone calls, group chat, webinars, and your conference rooms, and connect easily from anywhere, your mobile phone, your laptop, or conference room. Zoom is how business gets done. Get your free account at zoom.com today. Meet happy with Zoom. And finally, I've always been a big history man, and so I want to talk about Cooley, the global law firm.

• 2:10Harry Stebbings?

  Around startups and venture capital. Since forming the first venture fund in Silicon Valley, Cooley has formed more venture capital funds than any other law firm in the world, with fifty plus years working with VCs. They help VCs form and manage funds, make investments and handle the myriad of issues that arise through a fund's lifetime. So to learn more about the number one most active law firm representing VC-backed companies going public, head over to Cooley.com and also check out Cooleygo.com. But that's enough from me, so time to dive into this incredible episode with Ravi Viswanathan, founder and managing partner at Newview Capital.

• 2:48Speaker 01

  You have now arrived at your destination.

• 2:52Harry Stebbings?

  Ravi, it is such a pleasure to have you on the show today. I heard so many great things from our mutual friend and the very wonderful Chathin at Benchmark. So thank you so much for joining me today, Ravi.

• 3:00Speaker 02

  Thank you for having me. I'm a huge fan of the show.

• 3:02Harry Stebbings?

  That is very, very kind. I promise to pay you later. But I do want to start with a little on you. So venture is your third hurrah in the professional world. So how did you make your initial entry first? And then how did you come to found Newview most recently?

• 3:14Speaker 02

  For sure, my journey to venture was a pretty circuitous one. So a little bit of background. So I was born in India, grew up on the East Coast and at college, I went to the East Coast, Penn, and I studied bioengineering. And at the end of my time there, I really was fascinated by science and technology and really the research. And there was this burgeoning field of material science that I wanted to explore more. So I went to grad school, went to grad school at UC Santa Barbara and got a PhD in material science, chemical engineering. And I really loved it. And back then, that was the early innings of a field that's now known as nanotechnology. Back then it was called molecular engineering. So I thought it was really interesting. So I finished that in the mid nineties, nineteen ninety-four, came up actually to the Bay Area and got a job at a company called Raycam, which people probably don't know the company. It's been bought a couple of times, I think, bought and sold.

• 3:59Speaker 02

  It's for material scientists, it's a wonderful sandbox, a ton of innovation, ton of science. So I joined Raycam, this is in the mid nineties and I like to play soccer. So I play soccer with friends at Roble Field in Stanford on the weekends. And I got to meet new friends that were working at these crazy companies called Netscape and whatnot. And that really was a trigger for me. I said, wow, science is great. Innovation is great, but I really like maybe the commercialization of innovation versus the research of it, which is kind of a stark realization after going to school for several years. So I thought, you know what, let me go back to business school. I really am thinking about a pivot. So I went to business school, went back east. I'd say as a scientist, my first career, second career was consulting.

• 4:39Speaker 02

  I went, joined McKinsey after business school. Was there for a couple of years. Really for me, it was a wonderful place to really learn strategy. I think of it as almost a postdoc in the business world, which I really needed. And then in early 2000, I joined the investing business. I joined Goldman Sachs and back then, people tolerated consultants coming into ventures. So I was able to squeeze in. I was there four years, loved it, but I really wanted to learn the craft of venture capital and the craft of just company building. And I wanted to go to a pure play firm. And so I knew some folks at NEA and joined them in the east coast. And after a couple of years, moved out in the west coast here in Menlo Park. Was there 15 years, loved it.

• 5:17Speaker 02

  And in that time, which brings me to how we founded NewView, we really looked at the changing venture landscape and changing venture ecosystem. We found is a lot of dynamics going on, one of them being companies staying private longer. Another that these funds are getting raised faster and bigger funds are getting raised. So these portfolios are getting pretty large. What we found is when we were doing this portfolio management exercise, that there was a group of companies that were really high quality. And they were growth stage, but we weren't really paying as much attention as we could have been. Mainly because it was either an older fund or really the lead partner had left. So that's what we did in 2018. We orchestrated a spin out from NEA with 30 odd companies. And that's how NewView was formed, which when we closed the fund in late 2018.

• 6:01Harry Stebbings?

  I mean, I love that as a founding story and what an entry into venture that is, three times lucky. And don't worry, in Europe, we still accept consultants as VCs. So have no fear there. I do want to start on NewView itself because it's a first time fund and it's also a billion dollar one at that. And the question that Chathan asked, and very poignantly, was first, given the extremely large size for a first time fund, or for any fund, but especially for a first time fund, how was the fundraising process for you?

• 6:24Speaker 02

  I would say it was a pretty unique process. It was really helped by the fact that this was a spin off from NEA. And we were also spinning off with a set number of companies. That in these companies, if you talk to the LPs, the limited partners, they believed them to be of very high quality. I also knew a lot of these LPs for many, many years. And so the vast majority of my investors in U V are actually N E A investors. So it was definitely a long process. And I think I probably spoke to every lawyer on planet earth in that process. Or at least it felt that way. But it was a wonderful process and it was a ton of help. By the way, it was just myself and a bunch of folks within N E A and a lot of other folks helping us out.

• 7:04Harry Stebbings?

  Now, when I review kind of our fundraiser for stride, I think there are kind of key areas where I look back and go, yeah, we did really well. And then I look back and think, oh, we could have done better there. And I would definitely change that for fun tos fundraiser. On reflection for you, what do you think you did well on the first fundraiser?

• 7:19Speaker 02

  Not necessarily with a lot of forethought, but I over indexed on two critical constituencies. One is obviously the LPs and the LPs is really a lot of it was myself, my background, but also telling the story of this evolving market and how we thought this could be an emerging product and emerging part of that market. So it was a lot of time from the LPs, but it was also a lot of time spent with these companies. They had never really experienced this where you had someone in their cap table, a pretty prominent investor, get replaced by someone else. Now, it was made easier from the fact that a lot of these companies knew me and they knew that I was within here for a long time. They knew that they've got a lot of support, but we really did over index on the LPs as well as companies that were spinning off with us.

• 8:02Harry Stebbings?

  In terms of the improvement side, what would you look back and go, we could have done better and I would change that for the second fundraiser?

• 8:08Speaker 02

  I would say a couple of things. I probably would have built the team sooner. I was so ensconced in this process that a few months in, that's when we really started. Okay, we need to build the team. And I was really fortunate to get a wonderful founding team. That was one. The second is we got a lot of interest and there was a pause there where I actually took a breath and got really excited, oh, we got this fundraiser. But then I didn't really think about the next mountain we had to cross, which is really transferring all these companies and all of the legal machinations. And I probably could have gotten more prepared for that. I just had no clue what I was getting into. But in the end, the companies were excited to join us. The LPs were excited to fund us and it all worked out. And I was able to also build this wonderful teams I'd mentioned.

• 8:50Harry Stebbings?

  I cannot imagine the legal process that goes with transferring thirty ownership rights stocks across multiple different companies and jurisdictions. And so I'm thrilled that that wasn't me doing that because it would not have been smooth or seamless in any way. But having had this experience, it's a very rare experience raising any first time fund, let alone a first time fund like this. Chathin asked, what would your core advice be to managers contemplating raising their first time fund?

• 9:11Speaker 02

  Yeah, it's a great question. You know, I would say that if you look at the limited partners, they are literally getting inundated with hundreds of firms that are raising capital, many of whom are incredibly established firms that have decades and decades of experience and track records and returns. And then there's tons of new firms also trying to hit the market. And I would probably say to any of these managers, we talk to our companies, our portfolio companies about getting product market fit, I would probably have each of these firms say, what is your product market fit in the VC ecosystem? How will you differentiate? How are you novel, unique? And how can you convince LPs you're going to get best in class returns? Because that's what they're after. And the good news for these new emerging

• 9:52Speaker 02

  managers is LPs are increasingly getting excited about fresh, new ideas as it pertains to venture. So I think that's a big positive. But I'd say the biggest thing is just recognize the sea of other firms that are doing the exact same thing you are and try really hard in figuring out how you're going to win.

• 10:07Harry Stebbings?

  I really like that in terms of the product market fit. And I'm kind of jumping the schedule around here. But in terms of that product market fit, you mentioned the evolving landscape that we're really in today being different than ever. There's more billion dollar funds, there's more hundred billion dollar rounds. When we had Bill Gurley on the show, he said the sheer quantum of capital state is his biggest challenge. So I guess first, how would you assess the state of the ecosystem today? And would you agree with Bill in saying the quantum of capital is the biggest challenge?

• 10:31Speaker 02

  Yeah, as with most things Bill Gurley says, I generally tend to agree and tend to agree. And I think he's dead right. If you look at the history of ventures, at least the modern era, let's say the last twenty, twenty-five years, two thousand, I think a hundred million was either raised or invested. And that movie did not end well, as we all know. So I just think anytime you have an influx of capital into any asset class, just a sheer volume of capital coming in much more by a multiple, usually what you see is Returns degrade. So I do think that that is an issue. Having said that, there are incredible companies getting started. If you look at innovation, I mean, our good friend Chathen talks a lot about the SaaS revolution and the fact that we're still in the early innings.

• 11:13Speaker 02

  There's just, there is a ton of companies to be built and there's a ton of innovation that's happening. And we've only scratched the surface of many areas in the technology landscape. So I do think there is a lot of companies to be built. But I absolutely agree that sheer amount of capital is a concern and you just have to figure out how you win. And I think differentiating yourself and making yourself top of mind with these entrepreneurs is critical.

• 11:37Harry Stebbings?

  I'm really pleased you said that about kind of how you win and being top of mind that, you know, top of mind for a lot of people is often being the most visible, being the most vocal, be it Twitter followers, be it content machines, everyone has different strategies. And the winners today are often easier to spot earlier, given kind of the perfect information we have around data. So I guess my question for you is, how do you think about what it takes to clearly win? And get into the very best deals today at stages where they're more well-known and more pronounced than maybe years gone by?

• 12:05Speaker 02

  I think that you have to have a reason why this entrepreneur wants you in the cap table. For us, a lot of it is relationship building. So much of this profession is sales and relationship building, building relationships with the elite CEOs, elite founders, and also figuring out how do you add value? Because if you add value just with a check and maybe the cheapest check, that's really not going to cut it in terms of getting into the best companies or conversely, having the best returns. So it's really getting out there. I think hustle is such an important part of this business. Relationship building is an important part of this business and really showing that you're top of mind, not just with your following, but specific to that company that you're top of mind, because you can bring something to the table that others can't in terms of value add.

• 12:48Harry Stebbings?

  VC value add is such an interesting one and bluntly, I sound very arrogant saying this, but I don't mean it arrogantly. I think in most cases, it's largely a little bit of hot air. I always say it's better to do one or two things incredibly well and devote yourself to them, be it fundraising and hiring, and the rest, I'm not going to touch and be very upfront about that. How do you think about where your like outsized ROI for companies that take new viewed money is? And how do you convey that to them?

• 13:12Speaker 02

  Yeah, I think you're spot on in terms of most of what's out there is hot air. A couple of ways I'd find that. We do have a pretty heavy operational value add model, several operating partners. And I think where we invest, which is a lot more mid later stage, when you're hyperscaling companies, the operational value add is critical, whether it's product or finance, go to market. So that is critical, but I think you hit it on the head, Harry, when you said that really a lot of it is make sure that the right people are in the right seats and really get out of the way, right? Make sure they're well capitalized.

• 13:38Harry Stebbings?

  Totally.

• 13:39Speaker 02

  The right CEO is in place and really just let them execute. I find that where companies start failing is when boards get overactive and start micromanaging or vice versa. And that's when you see deterioration, but it's really pretty simple, at least in our approach. Now, having said that, you still have to make sure that you can prove that you can add value. Some of that could be I add value by knowing and picking my spots and then staying away and make sure that we support you in other ways.

• 14:05Harry Stebbings?

  Totally, especially kind of in terms of knowing the exact spot where you fit in. Can I ask, I'm always told that I'm not controversial enough on the show than I always just agree with people, which I think is vehemently unfair, but they're probably right as well. My question to you is, I always say to founders, listen, if you're going to do the operational model, hell, it makes sense to do it if you're Andreessen and you have 50 people in recruitment, 20 in marketing, 20 in product, and really, I mean, you can invest at such large scales into really building out that operational team. How do you think about that and ensuring that that operational team is effective if you don't have the resources to deploy and the structure to deploy that Andreessen does?

• 14:40Speaker 02

  Yeah, for sure, we have nowhere near that. I think it's just picking and choosing your spots. One of our operating partners has been a product veteran for 20, 30 years. He gets embedded in the companies and really helps, but helps in a way that's more advisory versus just kind of taking over. You also don't want to do that for two important reasons. Whenever that happens, usually the companies degrade pretty quickly. And the second is you want to make sure you help the companies, not do it for them. So for us, it's like I mentioned, just really picking and choosing where we can be helpful and value add. And a lot of it really is making sure that they have the right folks in terms of recruiting. The danger is you start getting operational in your companies and they see, oh, this is help from our VCs. That's awesome. You're really not helping the company. Where you help the company?

• 15:22Speaker 02

  Is you really help diagnose or where can we be helpful and who's the right person to put in that seat? Again, getting back to what I said, so much of this business is just making sure the right people, starting at the CEO in the right seats and letting them execute.

• 15:34Harry Stebbings?

  I totally agree with you in terms of being in the right seats there. My question to you is to something you said earlier, you said, you know, about winning and sometimes people go for being kind of the cheapest money. In terms of kind of the capital excessive nature that we have today in the ecosystem. I had Peter Fenton on the show and he said, never turn down a deal based on valuation. It's a mental trap. So how do you think about your own price sensitivity stage, you think?

• 15:54Speaker 02

  I think Peter is spot on for early stage. I remember him speaking, this is a decade ago, and he said something really thoughtful. He said, you know, largely in this business, we are price takers for the best companies. And I think that's generally been the case in the last 20 years of venture with maybe one or two extreme examples or exceptions. Dick Crammuck, the founder of NEA would always say that for the best deals, I think you have to be price takers. I think for the later stage, I think it's a little different. A case in point is seeing some of these companies that go public at prices less than their last private round. So price does matter in the later stage because you're not really thinking about, you know, when you're thinking about a hundred X, 500 X, 1000 X, whatever it is, those extreme early stage wins. If you pay 50% off for two, three X off, doesn't really matter.

• 16:39Speaker 02

  The later stage you play in, the more that does matter. So for us, it is making sure that we can still get best in class returns. But what I have learned in my career is don't be afraid to lean in more and more price for the elite CEOs, elite founders and elite companies.

• 16:54Harry Stebbings?

  Well, it's interesting you said that kind of over your career, those lessons. Can I ask, can you pick out one? And you don't have to name names or name companies or even people, but can you tell me a story of maybe a major learning in price sensitivity for you where you've realized that?

• 17:06Speaker 02

  Yeah, I'm happy to, I'm happy to mention them. It was when Workday came into our offices at NEA over 10 years ago. And if you didn't see the company, you would notice a company that's hyper scaling, but burning a lot of capital. And a lot of it was services originally, right? And they also visited us, I believe it was April of 2009. And you know what that climate was back then. So without seeing the company, you would say, wow, hyper scaling, but burning a lot of money, big price. On paper, they would think, wow, you really have to think about that. But when we heard the pitch, it was probably one of the most straightforward pitches I've ever heard in 20 years of venture. Meaning, we just had to fund that company. And the reason for that is, there's the numbers, but you really have to see what is this company doing?

• 17:49Speaker 02

  And they were really reinventing a whole part of the technology ecosystem. And that was a huge learning for me is, yes, you have to look at the numbers and yes, you have to pay attention to price. But there are going to be what I call fundamental companies. And what I mean a fundamental company, companies that really are these iconic companies that completely alter and shift the entire tech ecosystem. And it used to be there would just be one or two every decade. The good news now, there's a few every generation. And for those, you just have to figure out how you put money in.

• 18:20Harry Stebbings?

  Can I ask you a weird question? As you spoke about the kind of 500,000 X's that you can get with the incredible wins at early stage. When you think about kind of the multiple required on every check you write, what does that desired multiple look like? Is it, if it has a chance of being a 10X, is it a 5X? Just help me as an early stage manager, understand the mentality of a later stage manager.

• 18:39Speaker 02

  The standard that a lot of people throw around is kind of a, let's make sure that the company is in that three to five X range. But every company we invest in, there has to be a thread or something where, you know what? This actually can get outsized returns and it can approximate some of those 10X type returns. Because we do invest largely at the hyper growth stage where there is risk. They're generally unprofitable and they're investing for growth. So you are taking on risk, you want to make sure you get compensated. And the compensation is, you have this base return, but there's something about this company. It's the CEO, their own product market fit, how they're reshaping an entire ecosystem, that it can really be outsized beyond that.

• 19:15Harry Stebbings?

  Yeah, no, I totally agree, Ian. Then you see companies like Plaid and it makes sense. I totally agree. In terms of the capital excessive nature of the ecosystem state that we mentioned, we've also just seen some quite new entrants really in terms of a lot of PE funds also now entering the later stage venture game. How do you think about the approach and incoming of PE funds into more traditional venture growth?

• 19:34Speaker 02

  There's a couple of ways to think about it. On the one hand, you could construe it as a negative point. This is getting back to Bill Gurley's statement because they're coming in with 50 to 250. Million checks wanting to invest in our companies and that obviously is a big bolus of capital. I would say the flip side of that is they're playing in a certain stratosphere that even for us, we may not necessarily play in terms of some of our companies don't necessarily need anywhere near that much capital. The other flip side of that coin is I think it's very healthy because remember, a lot of these firms are coming in not only to invest as minority growth investors, but also to buy our companies, which is a very new vein of exits for a lot of these venture backed startups. It's really emerged, I'd say, in the last decade in much more force. You see a lot of these firms, whether it's Vista or Tomo Bravo or Insight doing that.

• 20:19Speaker 02

  So I actually think that it's a double edged sword. You have to be careful about that amount of capital, but they also can be buyers of your companies. In certain regards, they can also invest. So I can see both ways. We look at it as actually net positive, but you just have to make sure that doesn't happen is the ethos of the company doesn't change, meaning with that much capital, if you were a disciplined company and you were an efficient company that continue to be that way. Because when you have so much capital coming in, that's when bad habits can start creeping in into the minds of the boards and the management teams.

• 20:48Harry Stebbings?

  Can I ask, one thing that I think is really interesting actually is the ultimate of that, or kind of the complete contrast of that, which is when you're lean for so long and then you get given a large sum of money. I often find the mental transition to actually going for growth being a challenge for the founders. How do you think about and advise founders on the transition from extremely lean iterative, fast approaches to really pouring fuel on the fire when they have a model that works? What advice would you give them in terms of that mental transition?

• 21:14Speaker 02

  You see it really in smaller markets where there isn't as much venture. You know, we've done deals in Toronto and Atlanta and Chicago, where they're used to actually operating with a very lean mindset because there just wasn't so much venture out there. Now, when these firms get a lot more capital, I think for us, really it is, they're coming from a good place. That's the first thing. If you're coming from an efficient mindset, that's always a good place to come from. It's really thinking about, all right, where is the stickiness of this? Again, I keep saying product market fit and how do you scale that efficiently? There's two ways to think about it. You get this capital and you just flush it in marketing, right? Whereas the other way to think about it

• 21:52Speaker 02

  Really have metrics saying, okay, this is where the efficiency metrics are such that you can spend more and still grow profitably. And that's what we spend a lot of time with our management teams thinking through. And then the overlay on that is how big a market they're going after and where they are positioned. So if you're going up to a big market and you are a leader, then you actually want to lean in more with capital. Whereas if you get a lot more capital, but it's still very murky in terms of the competitive intensity. What you don't want to do is just flood the market with capital because your competitors will probably do that. And that usually doesn't end well for anyone in that space.

• 22:26Harry Stebbings?

  That's always a worrying thing to see. Speaking of the quantum of capital there and flooding the market with it. You mentioned the fifty to two hundred and fifty million checks that PE firms write. And this is traditionally the amounts that people would raise in IPOs. And when I chatted to Chatham before, he was specific around this. And you mentioned it earlier in terms of companies delaying going public much longer and much further out. So Chatham asked, what are your thoughts on the debate of staying private versus going public earlier?

• 22:49Speaker 02

  I think that if it's for the right reason, I think it's great. So companies staying private longer because they want to get their metrics into best in class. They want to get their corporate governance, their boards in shape to be a public company. That's a great reason. They want to get to scale. Before, ten, fifteen years ago, SaaS companies with a hundred million, you can go public now. It's actually more like two hundred. And so a company that Chatham knows really well, that I was also involved with, MuleSolve. That was the case here. We could have gone public earlier, but chose to really stay private longer, but really for the right reason. I think on the flip side, there's folks that are staying private longer because they see an arbitrage in valuation. So to speak that they think, okay, we can get a higher price staying private versus going public. I think that's the wrong reason. So it really is depends on which reason.

• 23:31Speaker 02

  The other way to think about it is, at the end of the day, you can stay private longer. But you really do need to figure out a way to give liquidity to your investors, your venture and other investors, and even your employees. Because if you don't do that, venture capital really doesn't work. And when you see when venture has its desert days, it's really when there's a prolonged period when there isn't a lot of liquidity. It could be market driven, generally speaking, or otherwise, but you do have to figure that out. Now, there is a solution, again, with these private equity firms, where you still can stay private, but you still get liquidity. And that's where you effectively exchange your cap table with a control investor in some of these private equity firms.

• 24:08Harry Stebbings?

  Oh, you're teeing me up so well here and I'm just loving this conversation. But the other question that I always have is, how do you think about when to sell? And what I mean by that is, you know, I had Semil Shah on the show and he said the best early stage managers will be able to navigate secondary markets efficiently. And obviously going in much later with your position, but I'm just intrigued how you think about it. How do you think about when to sell, how much of the position to sell and just navigating secondary markets, which are much more fluid and liquid today?

• 24:35Speaker 02

  I think that a lot of times, you know, it really begins and ends with the CEO and the founding team. Let's say selling the whole company and it's really, do they have it in them and having a really dispassionate, intellectually honest conversation that, you know, we can get X now. But can you really translate that to Y by not selling? And I think a lot of times the answer is, you know what, we can, we're not getting the value that we think. We're just hitting the knee of the curve in terms of the inflection point and creating value for ourselves in the market. The flip side of that is we're getting an amazing multiple, whatever that multiple is. In order for us to take the return we would have gotten now and multiply it by three, four or five X by holding it for X number of years. The risk return question really doesn't make sense.

• 25:18Speaker 02

  And that's when you think, okay, maybe it's better, this is a wonderful outcome for everyone, we should think about selling. But a lot of it really is in close consultation with the founding team because you may want to hold. But if the founding team and the management team who really are closest to the field, obviously. If they see a market transition or they are getting tired and they think, you know what, this is a great outcome, then obviously we let them drive it.

• 25:39Harry Stebbings?

  For me, this is where there's this big misalignment between venture and founders because, you know, I see often a lot of times, actually, well, not a lot of times, but I've seen multiple times over the last few years. Where maybe VCs push towards an exit where a founder would rather actually stay and go the distance. And there's the murky mechanics of actually, I'm raising a second fund, I need to return liquidity to my LPs. I haven't delivered any cash on cash, whatever that kind of factor may be that's murky in the mechanics of actual funds and fundraising. Would you agree that that's a misalignment? And how do you think about that potential misalignment between founder and VC, given that liquidity point?

• 26:12Speaker 02

  It's a great question. Also, you just articulated a slide in our in our deck, which is one of the areas where we have played a role. And you're dead right. If you think about the gestation period of a venture-backed startup, it's about a decade. If you think about the length of a fund, it's generally a decade. You can extend that by a year or two, but let's just say a decade. And how many years do you have to invest in a fund or commit capital? It's about four or five years. So you could invest in the second half of your commitment period in a fund, an early-stage deal, and when it's really starting to take form, take shape, you're already getting to the end of your fund life. So I think that there is a misalignment, but I think that's where you could have a secondary sale at scale, where some of these investors need to show liquidity. The founding team, they feel like they really want to keep this going.

• 26:53Speaker 02

  And I think it's very, very healthy to effectively switch out some of these earlier investors, give them a return, a really high-quality return, and then in their shoes, other investors can step in. By the way, the private equity folks have been doing this for many, many years. They just call it sponsor-to-sponsor deals, where they buy a company, they build it, and then they take it public, or many, many times, they just sell it to another firm, and that cycle repeats itself. So I totally agree that there is a misalignment, but I think that there are solutions and opportunities. And we really believe in that. That's one of the areas that we plan to add value. We've already shown that. I think that absolutely is an opportunity there.

• 27:30Harry Stebbings?

  I hope it's not too personal, but do you and you view engaging kind of secondary buying from preceding seed funds, looking for those early liquidity opportunities?

• 27:37Speaker 02

  We do, because if you think about seed funds, a lot of them, they have amazing returns, but a lot of that is more TVPI, total value, and they may not have gotten a lot of liquidity, because they're in these great companies and they continue to accrete in value, but they just haven't had distributions or liquidity. And a lot of these seed funds started maybe seven, eight, 10 years ago, and they're on their third or fourth fund. And we've seen more and more where their first fund, they have great companies, and they want to take some chips off the table, and this absolutely is an opportunity for us.

• 28:04Harry Stebbings?

  Yeah, no, I do totally agree. How do you think about founder secondaries as well? We're seeing more and more founder secondaries. I've, you know, angel invested, and the founders have got large amounts of secondaries. How do you feel about that? And gradually also seeing an industry being built around the financing of founder secondaries and early team secondaries. How do you think about it?

• 28:20Speaker 02

  The way I think about it, I think it's very Very reasonable for a founder who's been incredibly hard at work for five, 10, whatever number of years to take some liquidity. What we think about is what's a prudent amount where this person's behavior doesn't change. On the one hand, if they want to sell a small percentage of their stock to get some liquidity and it's more of a pressure release mechanism for them personally. We actually encourage it and we've done that in the past, both at New View as well as at NEA. The flip side is when you see some founders take massive amounts of capital off the table. The one there is, okay, that fire in the belly, has that been extinguished with money? Such that they actually change how they think about building their business.

• 29:00Speaker 02

  That's when you could get into some misalignment, but we actually think it's very, very healthy that founders, not just founders, early employees, management team members. And I think you're going to see that increasingly over the next five to 10 years as companies choose to stay private longer. We've talked a lot about institutions getting liquidity. I think employees and founders and execs absolutely will take part in that as well, as they should.

• 29:20Harry Stebbings?

  And I think that's only a great thing for the ecosystem with the diversification of angels and a wider variety of people are suddenly having access to liquidity and actually kind of returning that into the ecosystem again and recycling that. So I think that's super exciting. I do want to ask one more thing for the quick fire app, but it's a question for me that I think about a lot in being new to the institutional investing game and it's boards. And you sat on many fantastic boards. Where do many make mistakes when it comes to scaling their board?

• 29:46Speaker 02

  I think that a huge mistake is not bringing in operators and independents soon enough. What happens is you have the normal progression where there are more and more rounds getting raised and yet another VC, I think against us, but yet another VC joins the board. And then you want to go public and you literally have a board of seven to 10 people and two thirds of them are VC. So not bringing in independents, not bringing in diversity early enough, I think is something that I've seen and it's a mistake. And I think you should endeavor to not get to that point.

• 30:16Harry Stebbings?

  Can I ask also, my business partner Fred says it's the duty of the board member to build this kind of relationship of intimacy with the founder, whether they can really tell you anything about their business or their life and just having that true, honest and direct relationship. How do you think about creating such close knit relationships with those founders? At the board level.

• 30:33Speaker 02

  That's kind of a great lesson is kind of the younger me fifteen, twenty years ago serving on boards and the older me now is what I tell people is build really close personal relationships with the CEOs and the founders. The reason you do that is they're going to share more, you're going to develop this trust, you're going to cross that chasm where you actually become a trusted partner. And so when you go through tough times and most every company does, not all, and you need to make tough decisions, they view you as a partner, not just as an investor. And the tough calls and you'll actually, which you should never be is the first call, something happens, they call you, whether it's a funding issue or a strategic issue or a team issue. And you're able to add a lot more value. So I think that would be something that I totally agree.

• 31:15Speaker 02

  And every time I get on a board, first I try to build a strong relationship even before we invest, just to make sure that we're all simpatico in terms of how we think our value systems are aligned. And next, after getting on the board, make sure that you're able to build a great relationship with the CEO and the exec team.

• 31:29Harry Stebbings?

  I always think actually everyone also forgets the relationship with your fellow board members. It's such an interesting one because you compete day in, day out, and then you sit on a board with them on the same team. But having a really close knit collaborative aligned relationship with fellow board members, I've also found to be like transformative. I don't know about you.

• 31:44Speaker 02

  That's a great point. Yeah, I've been on boards where there wasn't that close knit collegiality and now I try to do the opposite. So I tell CEOs, curate your investors, but curate your board. And when I'm coming into a company, I pay special and close attention to the board and I make sure I want to talk to all of them and make sure that, again, that we're all, our value systems are aligned. I think that's a great point.

• 32:06Harry Stebbings?

  As I said, I've just joined my first now three boards in the last year. What advice would you have for me, having joined my first three boards this year?

• 32:14Speaker 02

  I think I'd mentioned it before, but build a close relationship with the CEO. But I'd also say focus on adding value in your own way, could be something very specific, finance product, CEO coach, et cetera. And so if you build a close relationship, you're able to view that in a different lens. And I would try to just focus on where you can add value. Early on, I remember years and years ago, I would try to add value in too many different ways. And then you realize, you know what, your job is really not to do that. Your job is to pick your spots where you can actually be accretive to. The company and the CEO and I'd really focus in on that.

• 32:45Harry Stebbings?

  Does it matter if it's at very significant points, but they're not throughout the life cycle of the company? So like there are clear advantages to having the on board in terms of ability to reach and attain the best fundraising options on the West Coast and the East Coast. And having that network, especially in Europe, but honestly, it's not throughout the life cycle of the company. And it happens maybe once every 12 to 18 months, sure, but in the interim, that's where imposter syndrome and self doubt creeps in. Because you're not adding value really in that interim.

• 33:11Speaker 02

  Well, I would resist the temptation to try to add value. And that's where a lot of mistakes are made, where you add value at these discrete moments. And then you really want to add value throughout, but you realize you're actually not, you're diluting yourself. So I actually think that's spot on, just because in the whole life cycle of the company, what you're doing is you're playing the long game. And I'd encourage everyone to play the long game, add value where you can. For example, even the folks that say, for example, that are product veterans, it's not like they necessarily need to add value at every stage. There may be a product rollout or how to think about building the team. And then you let others jump in and add value. And so what the CEO will get is a board that actually has role players that can come in and really deeply add value at the right times.

• 33:52Speaker 02

  And if Pierce has built the right board, then it's because someone's always coming in at a certain point and stepping up. And that's okay as well.

• 33:58Harry Stebbings?

  That's hugely reassuring here. So thank you for that one. I do want to finish with the quick fire round, Ravi. So you know the drill. I say a short statement and you hit me with your immediate thoughts. Are you ready to rock and roll?

• 34:08Speaker 02

  Yes, I am.

• 34:09Harry Stebbings?

  Okay, so 2020 is the year of books for me. I mean, I'm sure it won't be, but I'm trying my best. What's your favorite book and why?

• 34:16Speaker 02

  Well, I'm going to start off by cheating and give you two books. One is Shoe Dog. I think that's a classic for me. It's the tale of how Phil Knight built Nike. It's just fascinating to see the journey he went through to build that company. And the second, so that's more professional, the second was Trevor Noah's Born a Crime. So this is about his life growing up in South Africa, an apartheid in South Africa. It was just staggering what he went through and it wasn't even that many years ago. And I'd say the thread between the two is just how each of these individuals in totally different ways kind of overcame hardship. One massively on the personal side, the other on the professional side. So those two are my favorites.

• 34:51Harry Stebbings?

  We just spoke about boards there. Who's the best board member you've sat on a board with and why?

• 34:55Speaker 02

  I would say Tom Bogan. Tom is a senior exec at Workday now. He was CEO of Adapted Insights. I was on a board with him, I was on the OQ board with him. And I would say just the best board member I've ever worked with, just had incredible credibility. He was a seasoned operator, he was also a seasoned venture capitalist. He had a tremendous UI user interface and approach. He was able to deliver tough messages. He was able to really get all the board members and management teams on the same page. And I learned a ton from him. He's really exceptional.

• 35:24Harry Stebbings?

  I actually had him on the show before, so I'm thrilled to hear that that's the answer there. Tell me, what motto or saying do you most frequently revert back to and why?

• 35:32Speaker 02

  It's a pretty boring motto, and that is focus and execute. I find that there's so many distractions these days when it comes to companies or just in general. I just tell my entrepreneurs, my friends, my kids, whoever listens, just focus on what you need to do, the job at hand, and just really execute. You find the elite leaders, that's what they're really good at.

• 35:48Harry Stebbings?

  What is the single biggest challenge of your role with NewView today?

• 35:52Speaker 02

  I think it definitely is time management, which is obviously a broad umbrella term. It's just, you know, spending time sourcing, but also giving enough time to the portfolio. And also building a firm and building a team, which is obviously very new compared to my life at NEA.

• 36:05Harry Stebbings?

  Oh, it is a different game. I'm totally with you. Fund management versus being an investor, totally different game. Tell me, what do you know now that you wish you'd known at the start of your career in venture?

• 36:14Speaker 02

  I would say the single biggest thing that I would tell myself is just focus much more on the quality of the founders and actually the quality of the CEO. I think early on, you know, you can get seduced by product or a technology or the hype of a certain market or company. But really, you could be spending a decade with this CEO or founder. Really focus on the quality of that. I've been really fortunate to have a couple or several that I just found to be just fundamentally amazing. So that would be my biggest lesson learned.

• 36:42Harry Stebbings?

  And then final one, what's the most recent publicly announced investment for you? And why did you say yes and get so excited?

• 36:48Speaker 02

  Yeah, this is an easy one. It's Plaid, which I was part of the team that led the seed in Series A NEA many, many years ago. So I know Zach has been on your show and I think the world of him. So one of my top priority after founding Uview is figuring out a way to invest. So I was very fortunate and lucky to be able to invest in Plaid.

• 37:03Harry Stebbings?

  I mean, such an incredible outcome there. And yeah, Zach was incredible on the show. But Ravi, as I said, I've wanted to do this ever since I saw Chathen's tweet. Huge thanks to Chathen for setting this up and huge thanks to you for being so willing to go totally off schedule with my questions and for advising me on so many different things. Honestly, I've absolutely loved it.

• 37:19Speaker 02

  Thank you so much, Harry. I really enjoyed it myself.

• 37:23Harry Stebbings?

  Such a natural and free flowing discussion there. And I'd like to say that pretty much none of those questions were on the schedule. So thanks so much to Ravi for being so accommodating there. And if you'd like to see more from us, you can find us on Instagram at H Stebbings 1996 with two Bs. However, before we leave you today, I want to take a moment to mention HelloSign, a great example of a company that found success in building a product focused on user experience. HelloSign is an effortless e-signature solution used by millions to securely send and request legally valid digital signatures and agreements. They raised a total of $16 million in funding and recently got acquired by Dropbox for an impressive $230 million. Check out hellosign.com/20vc to join the thousands of companies and founders who value fast, secure and simple e-signatures.

• 38:08Harry Stebbings?

  And speaking of signatures and getting deals done there, you really need to build that relationship. And there's nothing like meeting face to face and there's nothing like Zoom to make that happen. Zoom lets you connect and do business across town or around the world. Zoom ties together all of your communication needs into one easy platform for video conferencing, phone calls, group chat, webinars and your conference rooms. And connect easily from anywhere, your mobile phone, your laptop or conference room. Zoom is how business gets done. Get your free account at zoom.com today. Meet happy with Zoom. And finally, I've always been a big history man. And so I want to talk about Cooley, the global law firm built around startups and venture capital. Since forming the first venture fund in Silicon Valley,

• 38:49Harry Stebbings?

  Cooley has formed more venture capital funds than any other law firm in the world with 50 plus years working with VCs. They help VCs form and manage funds, make investments and handle the myriad of issues that arise through a fund's lifetime. So to learn more about the number one most active law firm representing VC backed companies going public, head over to Cooley.com and also check out Cooleygo.com. As always, I so appreciate all your support and stay safe and stay home.