20VC: a16z's David George on Leading a16z's Growth Fund Today, The Biggest Misconceptions of Growth Investing, How a16z Think Through Portfolio Construction, Investment Decision-Making and Scenario Planning & How The Entrance of New Players Has Changed Th

David George is a General Partner @ Andreessen Horowitz where he leads their growth investing practice. Since joining in 2019 David has invested in the likes of Clubhouse, Coinbase, Databricks, Figma, Instacart, Robinhood and TripActions just to name a few. David also sits on the board of Current, Greenlight, and Workrise. Prior to a16z, David spent 7 years growth investing at General Atlantic where he invested in the likes of Airbnb, Crowdstrike, Opendoor, Slack and Uber. In Today’s Episode with David George You Will Learn: 1.) How David made his way into the world of growth investing with General Atlantic and how that led to his leading the newest iteration of a16z growth funds? What were David's biggest takeaways from his time with General Atlantic? How did it impact his investing? 2.) Misconceptions of Growth Investing: Why does David believe that great business models are table stakes at growth today? What gives the best the edge? Why does David believe that people over-rotate on TAM? Why is it misleading in many ways? What is the right way to assess TAM at growth today? What does David look for when digging into unit economics? When is the right time to focus on unit economics? 3.) Portfolio Construction and Scenario Planning: How does David think about portfolio construction with the new a16z growth fund? What is the right level of diversification? How does David think about loss ratio today? How does David approach outcome scenario planning? What is an attractive level of upside for David to engage at growth? How has that expectation changed over time? 4.) Valuations and Crossover Funds: How does David assess the valuation landscape today? How does David determine whether he will pay up or sit out on an investment? How has the rise of crossover funds, PE funds and hedge funds entering growth impacted the valuations being paid and the investment process itself? What does David make of these new entrants? What challenges do they bring? 5.) Investment Decision-Making: How do a16z approach decision-making at growth? Who is on the core IC? Why does David strongly believe in the single trigger model in venture when it comes to decision-making? What are the biggest reasons for politics in venture firms today? What can be done to mitigate them? Item’s Mentioned In Today’s Episode with David George David’s Favourite Book: Increasing Returns To Scale David’s Most Recent Investment: Loom

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 20 VC with me, Harry Stebbings. And what an episode we have in store for you today. I just love doing this one. It's one where the chat really completely went off piece and we didn't stick to the schedule at all. But always a sign of a great conversation. So I'm thrilled to welcome David George, General Partner at Andreessen Horace, where he leads their growth investing practice. Since joining in 2019, David has invested in the likes of Clubhouse, Coinbase, Databricks, Figma, Instacart, Robinhood and TripActions, to name a few. David also sits on the board of Current, Greenlight and Workrise. And prior to Andreessen, David spent seven years growth investing at General Atlantic, where he invested in the likes of Airbnb, CrowdStrike, Open Door Slack and Uber, again, just naming a few.

• 0:39Harry Stebbings?

  I'd also want to say a huge thank you to Ariel at TripActions and Elliot Databricks in particular. Some amazing questions, suggestions from them, and I so appreciated that. But before we move into the show today, I have to say I just love using AngelList's Fund Admin platform to manage my investments. The team and the platform at AngelList takes care of all my back office needs so that I can focus on working with great founders. Leading fund managers have made over 10,000 investments into 6,000 startups via AngelList, all online and all in one place. And with the recently announced Rolling Funds, you can easily find and invest in these top fund managers on angellist.com/rolling. And let's face it, this new world of remote work is here to stay, and so are all of the new headaches that come with running a remote team, though, which is a nightmare.

• 1:22Harry Stebbings?

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• 2:03Harry Stebbings?

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• 2:10Harry Stebbings?

  With elite global talent and owning end-to-end processes from hiring to onboarding to remote teams integration, Terminal delivers the product building powerhouse your business needs to grow. From workspaces to on-the-ground support, they take the guesswork out of remote management so that you can just thrive. But don't take my word for it, take the word of high-growth businesses like Gusto, Chime, Hims, all trusting Terminal with their remote teams, and you can find out more today at terminal.io. But without further ado, I'm now so excited to hand over to David George, General Partner at Andreessen Horace.

• 2:46Speaker 02

  You have now arrived at your destination.

• 2:49Harry Stebbings?

  David, it's such a joy to have you on the show today, my friend. I do want to start by saying huge thank you to Angela Strange on your team and Elliot Databricks for some brilliant question suggestions, but thank you so much for joining me today, David.

• 2:59Speaker 03

  Hey, thanks for having me, Harry. I've listened to the pod a bunch and love what you've done with it.

• 3:03Harry Stebbings?

  Well, thank you so much. I still can't believe I actually get paid to talk to people like you, so it's a pretty crazy life. But I do want to start with some context. So tell me, how did you make your way into the world of venture and come to be leading Andreessen's Growth Fund today?

• 3:15Speaker 03

  Yeah, so look, I grew up in Kentucky, very far away from the world of finance and technology. I was very fortunate. I had an awesome upbringing, my parents, I had an older brother. Went to college at Notre Dame thinking I was going to be a lawyer. Thankfully, I went into the finance industry out of school instead. Eventually, I moved to San Francisco in 2008, where I started to, you know, first encounter the world of tech. And I joined General Atlantic about 10 years ago. At GA, I had the chance to invest in some amazing companies, spent about seven years there. Companies like CrowdStrike, Uber, Airbnb, Open Door, Slack, and then some others that are a little bit lesser known, but really awesome companies like Benabidi and Seismic. I came over to A16Z to start and run our new growth fund about two and a half years ago.

• 3:56Speaker 03

  Initially got to know some of the folks at the firm just from some overlapping investments that we had. So I think I knew Alex Rampell the best because we had invested together in Open Door. And fast forward to now, we're investing from our second growth fund here. Had the chance to build a great team inside the firm and work with some awesome founders and companies here as well.

• 4:14Harry Stebbings?

  I mean, it's been an incredible time since joining Andreessen. Do you have to touch on the GA time there? Because GA is such a Prominent kind of figure in the industry, but it's also a very different one. So I have to ask, you know, what were your biggest takeaways from your time with GA? And how do you think it impacted your mentality?

• 4:29Speaker 03

  Yeah, look, GA is an amazing place. I'm really grateful to the team there. You know, one of the foundational frameworks that I developed coming out of it was what makes a breakout or successful growth investment, or sort of pattern recognition of what I look for. In almost all cases for me, that has come down to, you know, a great founder and then a theory on busting through consensus view on total addressable market or TAM. The consequence of that is a company that grows faster, you know, faster and or longer than expected. So, you know, take my time here, take Roblox. The prevailing view when we invested was, hey, it's just a kid's game. Well, you know, we felt that they had a shot and still do at being something much bigger, a co-experience platform, something that's much broader than games, much bigger than kids.

• 5:11Speaker 03

  One counterintuitive observation from my time at GA and my pattern recognition coming out of it is, you know, exceptional business models are are just table stakes in growth investing. They're not actually, in my experience, what gives you edge in making great growth investments. So, you know, we don't take risk on investing in anything but high quality business models. But in my opinion, this is not where you generate outsized returns. You can make mistakes here, but it rarely surprises to the upside. So despite that, I feel like it's where 90% of growth investors spend 90% of their time. So, you know, coming back to the TAM point, total addressable market point, I can give you a couple more examples on, you know, forming non-consensus views and things that made successful investments for me. One of the flavors of this is the consensus view of total addressable market

• 5:55Speaker 03

  lags what's actually happening in the market. You know, when I was at GA, I was fortunate to invest in AppDynamics. The consensus defined the market wrong at AppDynamics. There would be way more applications than historically. And, you know, the view of the software to support that just lagged. So you could see it actually by looking at individual forward-thinking companies, but not from looking at market research reports. You know, one of the more recent examples is Figma, which we're investors in from A16Z. The simplistic way to look at their market is software for designers. But the historical definition of design and designers It's actually pretty dated. Our view was that all front-end engineers in the future will engage in design.

• 6:35Speaker 03

  And this is 10x plus bigger in terms of market opportunity than just defining what they do in the design space. So, you know, in both cases, it was a refined view of the addressable market that led to a conclusion that in the future that that will be much bigger than folks recognize today.

• 6:51Harry Stebbings?

  I have to unpack a couple of elements here before we move on. I I just want to dive in and touch base here. It's like you mentioned the element on business model and I do want to touch on that because, you know, when you look at some companies, say a DoorDash of the world, it takes a while for the beauty of the business model to mature into what it is. So how do you think about having the mental plasticity to see what the business model can be versus what it is today when investing in growth?

• 7:17Speaker 03

  Yeah, look, DoorDash is a great example of this. You just led me right into a discussion of mistakes that I've made in the past, which could be like a 90-minute VC episode. But, you know, DoorDash is a great example of this. I missed a lot in DoorDash, not just the unit economics, you know, the power of the market size, the localized network effects, and probably most importantly, the best founder in the space building in that area. But I would say the big piece on the unit economics for DoorDash is you could see early signs of it in performance of really mature markets that they were in, and you could see the localized network effects in action. So specifically in the South Bay suburbs, in the Bay Area, unit economics were very good. And they ran some experiments at the time that we were looking that demonstrated that they could actually get the unit economics much higher.

• 8:01Speaker 03

  The power of their, you know, market position allowed them to maintain strong unit economics on the restaurant side. And then they did some really innovative stuff, you know, which there were ideas around this, but it was early to see it on building consumer stickiness, like loyalty program. And so you put all that together and at the growth stage, you could see this had the potential to have really good unit economics, even though, you know, the trailing data around it didn't show it.

• 8:26Harry Stebbings?

  You mentioned unit economics quite a lot there. My challenge is like, when did they become important? I'm using this session as an advice and a learning moment for me, but at the early stage, sure, your CACs may be super low, but you've got the most aligned customer base that you're marketing towards, and they will generally get a lot more expensive over time as you saturate that audience. But then also, brand and word of mouth can come into play and they can reduce. So I guess my question is like, when do unit economics become central and how central are they to you?

• 8:56Speaker 03

  Yeah, look, at the growth stage, they're very important. The thing that we look for in in unit economics is, you know, where are they now? And then as you scale up much larger, do you have a theory on why they're not going to get worse? And hopefully that they get better. And so they're very important at the growth stage. Again, though I go back to the point of like what's driven, you know, outsized returns for me, the unit economics end up being sort of table stakes, right? Like you could get it wrong to the downside. It's very rare that the company ends up with, you know, unit economics that are much greater than what you expected. It's much more common that, hey, the growth of the company just exceeded all expectations. So, you know, at growth stage, when we invest, we look very closely at them.

• 9:39Harry Stebbings?

  The challenge that I have, and sorry, we did have a schedule, I'm just completely, you know, going off schedule. The challenge is like with the unit econ is like when you have the proliferation of capital that we have into the markets and suddenly founders have these budgets which are just eye watering. Solon has raised a billion dollars, I mean, a billion dollar raise. Like, they need to be worried about CAC optimization or unit economic efficiency. It's just less because they've got a billion dollars in some cases. How do you think about and advise founders on how close they should pay attention to unit econ when they have this proliferation and capital support?

• 10:13Speaker 03

  Yeah, look, I think it's it's a great question and it's it's a function of market conditions, competitive environment. So, you know, there are instances where I'll tell founders that it would make sense to relax their criteria and maybe spend a little bit more in the name of growth if it's a hyper competitive market and it ends up being a super sticky customer base over time. But you mentioned Solon, I know the company a little bit, they're in an incredible market position. I think their business model is fantastic. I would view their future as very elevated levels of high growth with high returns on capital. And, you know, there's not some looming intense competitive threat that makes them think that they should aggressively go burn a bunch of cash just to grow faster.

• 10:52Harry Stebbings?

  I do want to touch on a couple of elements that are really quite VC nerd focused, but I'm just so interested by them. So like when we look at like, bluntly, your old say, four and a half billion in new funds, and then obviously you run growth, how much of that is dedicated to growth? And why is that the optimal number, do you think?

• 11:10Speaker 03

  Yeah, so we have a $3.2 billion current fund in growth and then the first one that we had was was $2.2 billion. And we invest across five major sectors, so B2B, fintech, consumer internet, bio slash healthcare and crypto. And we invest both inside and outside our early-stage portfolio. So we felt like this was the right sizing based on the market opportunity of the best of the best companies in our universe. In each of those sectors, that makes it sort of the right size for us.

• 11:36Harry Stebbings?

  What does that mean when you look at the portfolio construction, diving deeply? How many companies do you want? And also, I guess, for me, you know, I'm at the early stage, so my loss ratio is much higher. I need a much more diversified portfolio. How do you think about the right number of lines on the cap to have in the portfolio? And why do you think that?

• 11:53Speaker 03

  Yeah, look, for our current fund, we'll target about 30 companies. So investment size is average around $100 million. Again, that's a function of the market opportunity and when is the right fit for a company for us to be involved. You know, the range is a little wider than that. It's anywhere from, call it $50 million to $300 million per company at the upper end. Look, you mentioned loss ratio. It's a great question. There's lots of flavors of growth investing. Maybe jump into ours first and I'll tell you about the loss ratio. So our focus is very high-growth companies. They're typically losing money. They're growing very fast. They have aspirations to be market leaders in a big space. So we target three to five X returns over five years in aggregate. But we place a very heavy focus on upside scenarios. So we're constantly asking, how could this investment be worth 10 X plus? And we focus probably more of our effort on that than around the downside.

• 12:38Speaker 03

  You know, I always ask my team when we're discussing investment, what's the case for this to return half our fund? And we spend a bunch more time talking about that than downside or downside structure or protection or anything like that. So what that yields is an expected loss rate for us in the 10% range. You know, it's early days, but it looks like that'll be about right for us. And if you invest, you know, with that upside target in mind and the 10% or so loss rate that you're willing to bear, you should also get some fund-returning investments. And, you know, we've been fortunate to have some recent public companies like Roblox and Coinbase, a bunch of others coming down the pipe.

• 13:11Harry Stebbings?

  I think one for me that I always find striking is that capital concentration on a per-company basis. How do you think about bluntly how to get as much cash into the This is possible. And what does that reinvestment decision making look like for like, do we really fucking double down? Or do we let the capital markets support it and we play a nice role?

• 13:31Speaker 03

  Yeah, look, for us, every investment decision that we make is a new, fresh decision. In the venture world, like, you probably think a lot about reserves, like, we don't explicitly reserve per deal. But we do keep a pool of capital in reserve for the best performing companies when we want to double or triple down. And so, you know, we've invested multiple times in many of our companies. So Coinbase, we invested three times, Roblox twice, Databricks three times, Stripe four times, Tripactions four times. Every time we assess one of those new investments, we do it with fresh eyes. And so we call it re-underwriting, we re-underwrite, and we think about, you know, what are the scenarios where we make our returns and target 5X or so? And what is the scenario where we can still see that upside?

• 14:09Harry Stebbings?

  We mentioned the upside there and the multiple expectation or multiple desire. You know, the bunny, the challenge is there's so much cash, the prices are so high. It's just much harder to do those multiples with the entry prices that we're paying. I had Leila from Capital G on the show. She said that prices are 2X what they were a couple of years ago on average entry price for her. I'm interested, like, how do you think about your own price sensitivity today, given where we are today?

• 14:35Speaker 03

  Yeah, look, this is a fantastic question. I wrote a piece about this called "When Entry Multiples Don't Matter", talking a little bit, it touched on this and other things. I'll just talk to you about our process and then I can address the valuation point. So we first start, we assess the company, we assess the market, we assess, you know, founder, all independent evaluation. And so if those check out, then we spend a lot of time on valuation and scenarios and making sure that we see our way to target returns. So the best thing that we can do is invest in great companies that are growing very fast. Because those afford you more degrees of freedom on valuation. And, you know, I talked about the upside scenarios, like, they're the ones that are more likely to deliver upside scenarios. So one of the frameworks that we use and talk about a lot, and it's, you know, this is relevant for valuation,

• 15:18Speaker 03

  because it speaks to the flavor of companies that we tend to matchmake with, is, you know, we look for what we call Glengarry Glen Ross market structures. So, you know, the famous movie, you know, we can't get this wrong. This is like independent evaluation. We just absolutely cannot get this this piece wrong. So what that means is there's a scenario. Have you seen the movie?

• 15:38Harry Stebbings?

  I haven't, so explain it for me.

• 15:40Speaker 03

  Okay, all right. It's sort of like a boiler room sales old school movie. So there's a scene where Alec Baldwin is presenting to his team their monthly sales competition. It's this famous line where he says, okay, here's the prizes. First place gets a Cadillac, second place gets a set of steak knives, and third place gets fired. And so we actually think most many or most tech markets play out in market cap in a similar way. Where the leader captures the vast majority of the market cap creation. You know, if you're not the leader, it's going to be a challenge situation. So we look for those kinds of market structures. You know, this is very well known and well covered in, you know, consumer land. Companies like Google and Facebook that have clear network effects. But surprisingly, you can see it actually in a lot of industries that don't have network effects,

• 16:24Speaker 03

  but play out in similar ways. So in B two B, you know, Salesforce, Workday, ServiceNow, they command almost all the market cap in their respective markets. So the way we approach the valuation question is, you know, if we can get that point right and the company wants to work with us, you know, more often than not, we can reach an agreement on valuation. Now, you know, the biggest point is, you know, in a market where valuations are higher than they used to be, you have to think long term. So we think in five to seven year terms. And try not to worry if we're off by a year or two on the valuation. Like, that's a risk that I'm willing to take. If we underwrite something five years and it takes us seven years, I'm okay with that. The last piece is just tech markets are bigger than ever and there's going to be a lot of market cap creation. And so if we're long term oriented enough, you know, we should be okay.

• 17:08Speaker 03

  You know, tech's about a quarter of US market cap and that's just going to grow fast.

• 17:12Harry Stebbings?

  Can I ask one? There's always a case where everyone's turned down a company based on price. What company have you turned down based on price that keeps you up at night?

• 17:19Speaker 03

  Oh, my goodness. The most painful one is probably Qualtrics.

• 17:23Harry Stebbings?

  Oof.

• 17:24Speaker 03

  Which, I mean, look, it's killer founders. And yeah, I remain friends with the guys. We turned it down based on price when I was at GA. They figured out a huge market hiding in plain sight, a sales model that that totally worked, fast product velocity, all the things that we look for, big markets where they're the leader, business model that was exceptional at scale, long room to run. So that's a very painful one.

• 17:46Harry Stebbings?

  I do love Ryan. Just never played golf with him. He's an absolute fiend. I do have to ask, but you know, you said there about kind of entry price no longer mattering with that brilliantly kind of provocative title. I was taught, you know, I'm from the old school of venture, temporal diversification mattered too. And that was a core part of any portfolio. Today with deployment cycles, it doesn't seem to matter either. Do you think temporal diversification matters today? Or do you think it's about adjusting to the game on the field and being in the moment?

• 18:12Speaker 03

  Look, I think it's more about adjusting to the game on the field and being in the moment. And then we don't invest in hundreds of companies. And so our goal is not to be an index fund of the overall tech market. Like, we just need to continue to outperform and do our best. And if we can see the path and get confident about the path to achieving our target returns, that's okay. Reserves are one way that you achieve temporal diversification. If you have more of your fund in reserves, you know, that stretches the deployment cycle of your fund over, you know, five years instead of two years, or whatever the number is, that naturally provides some temporal diversification.

• 18:43Harry Stebbings?

  I have to ask, man, we mentioned the price changes and the increasing price that we've seen over the last, especially year, but last few years, you know, we've seen P hedge funds, crossover funds, I mean, everyone and their mother investing in late stage and pre-IPO. I've got to ask, man, when you look at it, how do you think about this massive proliferation of capital at the late stage, especially with players who seem to be playing a different game in terms of return expectations, willingness to pay 2X what we pay? How do you think about this new landscape and how you win in it?

• 19:18Speaker 03

  Yeah, it's, look, it's a great question. First, I think there's a little bit of a misperception in the market about some of those firms who have been more aggressive recently. Their returns are pretty good. They've done a good job. I think a couple of things that we've done to adjust. So one diligence processes and fundraises, you know, they've gotten faster, to put it lightly. What that causes is it makes investors narrow the focus area of what they can cover in diligence. You have to have a prepared mind coming into things and you have to be really smart about where you spend your time. So, you know, we always focus on the three or four things, like what are the three or four things that are going to be return drivers? You know, I talked about business model being sort of a table stakes exercise for us, you know, so that's typically, you know, one, maybe two of those things.

• 19:59Speaker 03

  But, you know, the real decision-making process will come around that view of future growth. So we have to be prepared to make those judgments faster and assess those questions quicker. It used to, I remember when I started at GA, it would be like, okay, a company's raising money and, you know, let's take two months. And you turn over every single piece of minutia for a company like that's, it's probably more efficient and better overall for the market. That that's not the way it's done anymore because it's just inefficient all around. You know, on the competitive point, I think of us as playing the end game, like relative to some of the newer players. So we move fast, we pay fair market prices, you know, we can write very large checks and follow on into companies, you know, many times over the years.

• 20:41Speaker 03

  That's, that's all what some of the newer players are known for, but because of the way that Mark and Ben have built the firm, we can also do a lot to help founders as they scale. And that is relevant whether the company is at series A or the series D in the growth phase. So, you know, we tend to match make with the companies who see us as being able to deliver more than just dollars.

• 21:02Harry Stebbings?

  Can I ask, you mentioned Mark and Ben there. In terms of like investment decision-making, how does that look like for you, especially with the growth fund? Like, is that a different IC to the early-stage fund? And how does the actual investment decision-making work? Who's involved? Is there a Monday IC? Help me understand this.

• 21:19Speaker 03

  Yeah, it's a little more on the informal side. We have a three-person investment committee. It's Mark, Scott Cooper and me for the growth fund. Just like we do at the venture fund, we have a single trigger puller model though. We have discussions, deep, robust discussions about investment decisions, but it's ultimately the call of the GP who's sponsoring the investment. I serve as the fund manager and so I'm called a generalized specialist. I heard Paul. In right use this term recently. It works for us. And what that means in this case is I sit across all the industry groups that we invest out of in the growth fund. Theoretically, what that allows us to do in terms of investment decision making process is the best ideas win across the various industries that we invest in.

• 21:59Speaker 03

  So, you know, we can measure the relative excitement of a B two B software company versus a bio company or crypto opportunity or consumer. And this is really helpful in balancing the fund and sort of measuring relative excitement and attractiveness. So the other piece on investment decision making, and it goes back to the matchmaking point is, you know, we try and prioritize companies where there's still some degree of company building that takes place. So we can help companies given what Mark and Ben have built. Sometimes we get access to opportunities that not everyone does. And a big part of our decision making process is we have the luxury of partnering with our early stage GPs and deal partners across the firm. So we feel like we'll have unique insights into big trends or themes early from being a part of the early stage business. And they contribute to our investment decision making process as well.

• 22:43Harry Stebbings?

  You mentioned the single trigger element there. I'm really interested because, you know, at the end of the day, you've just got to have the courage to pull the trigger and go. And it's a big courageous moment to write that check and put your name to it. I guess, how did you approach that? How did you mentally get over that with your first? And would you have any advice? I remember with mine, I was shitting myself and mine was for a million dollars, not for a hundred million dollars. Well, it's better to be honest. I mean.

• 23:11Speaker 03

  Better to be honest, man. Look, I totally agree. And like I, the first time I did that, I still remember, I mean, it's not, it was not a single, single trigger pull or model at, at GA. But I remember my first investment there and I was panicked. Like, am I making the right decision here? I don't know. I've grown to get comfortable with it over time. I think the benefit of the single trigger, and this may be obvious, but the benefit of a single trigger pull or model as opposed to committee decision making is it's the ultimate measure of conviction. So if that individual has conviction and gets feedback from the partnership and maybe the feedback is constructive or negative and still wants to make the investment, that's conviction, right? And if there's a committee model, sometimes, you know, one of the negative things that happens is they're selling. So because often a committee will look to the person and try and measure or gauge conviction.

• 23:55Speaker 03

  And so they're selling. And so my experience, I think it leads to less intellectually honest conversations and open conversations. Because, you know, there's some element of convincing that needs to happen as opposed to personal conviction building by challenging and, you know, asking questions and exposing concerns and getting feedback on those.

• 24:14Harry Stebbings?

  This is a tough one, but do you think there is internal politics? I mean, there is at most firms. Do you think there is internal politics in Andreessen? Do you think there's anything that you or one can do to maybe prevent or minimize them?

• 24:25Speaker 03

  It's gonna sound like I'm bullshitting because it's like the politics are pretty smart. Look, if you're a single trigger puller model, lots of the politics come from shit like that. Trying to convince people, trying to advocate your own ideas, trying to shit on other people's ideas because, you know, maybe there's a deal that gets done instead of yours.

• 24:43Harry Stebbings?

  Why would that introduce politics if it's single trigger? Because it's like, I like this deal and I have conviction, so see you later. Rather than like, I have to get you on side. I'll vote for your deal if you vote for my deal.

• 24:54Speaker 03

  Yeah, no, that's what I'm saying. I'm saying the same thing. I'm saying the single trigger model eliminates the politics, right?

• 24:59Harry Stebbings?

  Right.

• 24:59Speaker 03

  Yeah.

• 25:00Harry Stebbings?

  Fantastic promotion for the Andreessen model.

• 25:02Speaker 03

  And then the other thing that causes politics internally is like promotions path for people. And I think part of the benefit of the way that, just the background of most of my partners being founders of companies, is they've actually run companies. Like this is typically a problem with investment firms. It's like superstar investors end up running the firm. Whereas, you know, we, our firm is run by people who have run companies.

• 25:22Harry Stebbings?

  Yeah, I do totally agree with you and see that. One of many reasons I work alone. Well, that and, you know, no one likes me. But other than that, it's totally cool.

• 25:30Speaker 03

  Everybody loves you, man.

• 25:31Harry Stebbings?

  Ah, I was fishing, total fishing.

• 25:34Speaker 03

  You, I stepped right into it.

• 25:36Harry Stebbings?

  Anyway, I do want to ask as well, like final couple, but it's like, you know, everyone's got a SPAC now. I've been tempted by 20 VC SPAC. I think that's so cool. But anyway, everyone's got a SPAC. Like, how do you think about like the rise of SPACs, the SPAC market, whether it's good, bad, an opportunity?

• 25:53Speaker 03

  Look, I think SPACs are great for the company side. They provide another form of liquidity and getting public for companies. I counsel, I've talked to some of my company's founders about, you know, going down this back route. And the thing that I say to them always is, it's a totally fine path to go down as long as it's not seen as a milestone and you're just ready to be a public company, you know, after you're done with it. So it's good from the company side. I think on the issuer's side, it's valuable to the market if there's some uniqueness that comes along with it. So, you know, if there's a value proposition that's unique, great, it will be appealing to the right founders. If it's just a financial vehicle, I think the proliferation of so many SPACs will make it a little more challenging to generate really attractive returns in that market.

• 26:36Harry Stebbings?

  Final one, you mentioned some of your companies. I spoke to some of your companies before the show, and one, Ali, who I love, by the way, but Ali said to me, you've got to ask this guy, he's been super successful and he's achieved so much. What drives you today? And how do you think about your relationship with money?

• 26:55Speaker 03

  On a plane last night, and I was texting with Ali about something similar. It's not, money is not what drives me. I love learning new things every day. I get the chance to work with the best founders in the world, building awesome companies, just like you. You know, I love my job. I work all the time. I do have a deep fear personally and paranoia of failure. And I'm extremely competitive. And so returns and generating returns are one element of the scoreboard for me. Like, and I love that competition and I want to be the best. There's a mission, you know, mission side of our business too, which is generating great returns for our limited partners. So these, you know, universities, nonprofits, it's the same as you. They've entrusted us with their investments and I want to make sure I work as hard as I can to give them the best outcomes in the market so that they can use those dollars to good cause.

• 27:38Harry Stebbings?

  How do you prevent that fear paralyzing you? Because I too, I have this kind of relationship with fear.

• 27:43Speaker 03

  The way I channel my fear, I channel it into working harder. So if I have a fear at any moment that I, you know, I'm not doing the right things, or like, the way I try and compensate for that is I dive in, I work harder, I do something different, I reach. And, and the beauty of our business, you know, same as yours, is there's an endless amount of work that you can do. You can always get smarter about a company. You can always get smarter about a trend or a theme. You can always try and form a differentiated point of view on something. You can reach out to people who you learned from. There's just an endless way that you And you know, expend work time. And so when I feel like I'm not doing well or failing, I tend to, you know, go deeper into that stuff.

• 28:19Harry Stebbings?

  I do want to move into my favorite though, David, which is a quick fire round. So I say a short statement and then you give me your immediate thoughts. Does that sound okay?

• 28:26Speaker 03

  Let's do it.

• 28:27Harry Stebbings?

  Okay. So what's the favorite book and why, David?

• 28:29Speaker 03

  Okay, I'm gonna give you two. One is like a business book that I think is the most important one, which is for the business that I'm in, which is Increasing Returns to Scale by Brian Arthur. The second one is my fun favorite book is Count of Monte Cristo.

• 28:40Harry Stebbings?

  Tell me, have you read Seven Powers by Hamilton Helmer?

• 28:43Speaker 03

  I have not, but it is downloaded on my Kindle.

• 28:46Harry Stebbings?

  Honestly, for what we do, it is amazing. Tell me, what lie do rich people tell themselves most often?

• 28:52Speaker 03

  I think it's over emphasizing their own work and underplaying the role of luck and some circumstances and other people who contribute to their success. It's like forming like just world fallacy.

• 29:02Harry Stebbings?

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

• 29:05Speaker 03

  It's constantly evolving to changes in the competitive market. So I mentioned this earlier, Mark and Ben turned the industry on its head 12 years ago and people are constantly trying to figure out the next thing to turn on its head. So our strategy and how we work with companies always has to change with that.

• 29:20Harry Stebbings?

  What do you know now that you wish you'd known when you started at Andreessen a couple of years ago?

• 29:24Speaker 03

  I mean, Andreessen is still pretty fresh for me. I wish I had known earlier in my career and growth to spend more time thinking about what can go right as opposed to modeling or trying to predict what may go wrong.

• 29:34Harry Stebbings?

  This is a tough one. What advice do you often give that you find hard to follow yourself?

• 29:39Speaker 03

  It goes a little bit back to our fear point, but there are going to be ups and downs over the life of an investment in a partnership with a founder. Don't get too high from the highs. Don't get too low from the lows. It's one thing on the investing side. The same could be said for building a company, but probably times 100 in magnitude.

• 29:55Harry Stebbings?

  Final one, David. What's the most recent publicly announced investment? And why did you say yes and get so excited?

• 30:00Speaker 03

  So it was Loom. So the frameworks that I love is I try and invest in companies that are pull companies, not push companies. What that means is the market is pulling their product from them as opposed to they're trying to push their product out to the market. So they're an asynchronous video company. It's viral. It's spreading organically. It's growing 10x year over year at scale. You know, they're building enterprise top down sales onto bottom up traction and run by founders who are passionate. They're domain experts. They know the product. They're building a brand and they're building a great business.

• 30:29Harry Stebbings?

  I've got to ask this one final question. With pull and push businesses, often it's pull in the beginning and then it goes to push. Do you get worried when it goes to push and how do you determine how long you have to run on the pull?

• 30:41Speaker 03

  Yeah, this goes into the market work that we do. I think you can form a pretty sophisticated point of view on this. Like, one, if it's something that's very unique and they are the market leader, the pull will probably last much longer. Secondly, as part of our diligence, like we talk to non-customers probably more than we talk to customers of companies. And you can get a pretty good sense for how they're going to behave in the future based on those conversations to try and predict it. And then back to my table stakes, business model comment, you know, you just got to make sure that as pushing that comes along with the pulling, that the economics of that are going to make sense.

• 31:15Harry Stebbings?

  David, listen, I've absolutely loved this discussion. Thank you so much for putting up with my completely wayward questions, but it was amazing and I so appreciate it.

• 31:23Speaker 03

  Thanks for having me, man.

• 31:26Harry Stebbings?

  I mean, if you couldn't tell, I absolutely love that discussion. I want to say huge thank you to David for being so patient with my completely off-schedule questions. He was just fantastic there. And as I said, just loved it. Shows like that made me really appreciate what I do. But before we leave you today, I have to say I just love using Angel List's Fund Admin platform to manage my investments. The team and the platform at Angel List takes care of all my back office needs so that I can focus on working with great founders. Leading fund managers have made over 10,000 investments into 6,000 startups by Angel List, all online and all in one place. And with the recently announced Rolling Funds, you can easily find and invest in these top fund managers on angellist.com/rolling. And let's face it, this new world of remote work is here to stay.

• 32:08Harry Stebbings?

  And so are all of the new headaches that come with running a remote team, though, which is a nightmare. Rippling, though, helps fast-growing startups automate their HR and their IT. And now they're making it super easy to manage employees and contractors anywhere. When you hire people in new states, Rippling can now automatically register your startup with each state tax agency and keep you compliant with all the different local labour laws. From there, Rippling lets you onboard new hires in literally 90 seconds. You can instantly set up people's payrolls, benefits and all their apps like Slack and GitHub. So if you're looking for an easier way to run your startup remotely, or just a better way to manage your HR and IT, visit rippling.com/20vc. And finally, did you know that there will be 1.4 million job openings for developers in 2021?

• 32:53Harry Stebbings?

  That's where my friends at Terminal come in. Terminal helps fast-growing companies build remote, high-performing tech teams. By connecting you with elite global talent and owning end-to-end processes from hiring to onboarding to remote teams integration, Terminal delivers the product building powerhouse your business needs to grow. From workspaces to on-the-ground support, they take the guesswork out of remote management so that you can just thrive. But don't take my word for it. Take the word of high-growth businesses like Gusto, Chime, Hims, all trusting Terminal with their remote teams. And you can find out more today at terminal.io. As always, I so, so appreciate your support and I can't wait to bring you a fantastic episode this coming Thursday.