Pod Insights The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch 20VC: Are the Best CEOs the Best Fundraisers, Are the Best Founders Insiders or Outsiders to a Problem, Why Ownership Should Not Be a Focus in VC & The Biggest Lessons Scaling MongoDB to $26BN Market Cap with Kevin Ryan, Founder @ AlleyCorp About this episode Kevin Ryan is one of the leading serial entrepreneurs and investors in New York. Previously he co-founded MongoDB, Business Insider, Gilt Groupe, Zola, Nomad Health, Pearl Health, and was the CEO of DoubleClick (Acquired by Google for $3.1B). Today, Kevin is the founder and CEO of AlleyCorp, a venture capital firm that incubates and invests in transformative companies in healthcare, diversified tech, robotics, and impact. Just yesterday, Alleycorp announced their $250M fund, their first ever external capital. In Today’s Episode with Kevin Ryan We Discuss: Early Signs of Entrepreneurship How did Kevin’s early life shape his career? How would his parents and teachers describe him? Does Kevin agree that successful entrepreneurs always show signs early? What does Kevin think about luck vs. skill? Why does Kevin think that most things are out of your control as an entrepreneur? Lessons from Founding 10+ Companies Worth $27BN Does Kevin agree the best CEOs are also the best fundraisers? What were Kevin’s biggest lessons from scaling DoubleClick from 20 to 2000 employees? What was Kevin’s a-ha moment behind Business Insider? What was the reason behind its success? Why does Kevin believe the best founders are always in unfamiliar fields? Incubating World’s Best Companies How does Kevin allocate resources between incubations vs. investments? What are the biggest commonalities between successful companies at AlleyCorp? Is Kevin a market-led or people-led investor? What does Kevin think is the most important element in achieving product-market fit? What was Kevin’s biggest miss on selecting founders? What were his takeaways? Current State of Venture Why does Kevin believe venture is more competitive now than ever before? What does Kevin know now that wish he’d known when he started investing? Does Kevin agree rich investors make better investors? Why does Kevin not care about ownership? Does Kevin agree with Doug Leone that venture has transitioned from a high boutique margin industry to a low margin commoditised industry? Does Kevin agree with Peter Fenton that price is a mental trap?
Transcript 13,155 words · 3 speakers
Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 Speaker 00 There's actually a lot of VC money, tons of cash sitting on the sidelines. That money is not going to be given back. That money is going to be spent. Here's the thing that I don't think about, which is our ownership. Sometimes we're paying a big price and we're paying a big price because it's an incredible team and incredible opportunity. If someone makes you an offer you can't refuse, don't refuse it. Take it.
0:20 Harry Stebbings? This is 20 VC with me, Harry Stebbings, and I'm so excited for the show stay with Kevin Ryan, the godfather of New York tech. The man is the co-founder of MongoDB, a $26 billion public company today. Business Insider also, Zola, Gilt Group, Kevin even sold DoubleClick back in the day for $3 billion to Google. And just yesterday, he announced that he's taken his first outside money with Ally Corp's new $250 million fund to innovate in incubating revolutionary generational defining companies. But before we dive in, Cooley, the global law firm built around startups and venture capital. Since forming the first venture fund in Silicon Valley,
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3:09 Speaker 02 You have now arrived at your destination.
3:12 Harry Stebbings? Kevin, I'm so excited for this. Listen, I've heard so many good things from so many people. So thank you so much for joining me first off.
3:19 Speaker 00 No, very excited to be here.
3:20 Harry Stebbings? Now, I know it's a weird question, but I just think we're so shaped by our early years in a lot of cases. When you think back to growing up, how would your parents and teachers have described the young Kevin Ryan?
3:31 Speaker 00 You know, in some ways, I haven't actually either progressed or changed that much from high school. I was running student organizations, I was head of the student council, I did a lot of sports, I was very interested in public policy. And frankly, today, those are still a lot of my interests. You know, I have always been a CEO from a very early age. I was president of my fifth grade class and my sixth grade class. People wanted, thought I should be elected to do these things. And I love doing them. I love managing people, I love working with people. I'm still very interested in sports and athletics and in very interested in public policy. So yeah, I haven't changed at all.
4:08 Harry Stebbings? Okay, so we both are in the people selection business. I have this weird thesis that the best people always show early signs of exceptionalism. No one comes out of McKinsey at 28 and suddenly becomes exceptional. They show it in their early years. Do you agree with that? And do you think that the best do show early signs of exceptionalism always?
4:27 Speaker 00 So we have to define exceptionalism and we have to think about also not just the job. I think people make a mistake in only looking at the extreme. Oh, Mark Zuckerberg at age 19, you know, dropped out of Harvard, was entrepreneurial. The vast majority of successful CEOs are people who went to good colleges, may have done two years at McKinsey, but were truly interesting. They weren't necessarily crazy entrepreneurial. I'll give you an example. I was the first investor in Walla, which is a mobile bank in Argentina. And there was a guy named Pier Paolo Barbieri. People thought a bank in Argentina is an insane idea. This is six, seven years ago. It's currently worth about $2 billion. I've been on the board since then. He is, was five beta cap at Harvard, did work at McKinsey, was truly exceptional.
5:12 Speaker 00 And then now is managing 1,500 people. I wouldn't use the McKinsey example that you use. I would say that no one just, you know, is a surfer for five years and then at 26, all of a sudden launches a billion dollar company. That doesn't happen as much. They, they showed drive and focus and success before.
5:30 Harry Stebbings? How do you think about the difference between luck versus skill? People often talk about it on the show and I'm never quite sure where to weigh it. How do you think about that?
5:38 Speaker 00 It, look, it definitely plays a role, you know, because there are things that are out of your control. And the reason you know that's true is that, you know, if you have people like me who've started 20 companies, no one has 20 successes. They may have more successes than your average person, but there are some things out of your control. If you remember a long time ago, I started a company called Gilt. Gilt, after four years, was doing $500 million in revenue. Crazy success. We did $175 million in revenue in our second year, which I don't think anyone in New York City's ever done. So you'd say, oh, God, you're killing it. What happened? Then everyone in the industry started discounting their merchandise online. So Marc Jacobs started selling discounted merchandise on their site. Macy's did, Farfetch'd did, everyone did. It
6:22 Speaker 00 became very difficult, out of our control, to make money. And so it ended up being less successful than you would have thought. And I didn't like the industry dynamics and so I sold the company.
6:30 Harry Stebbings? Did that hurt?
6:31 Speaker 00 Yeah. Yeah, because after four years, we were worth a billion dollars. And at the time, you know, everyone invested at a billion because they thought it was going to be worth two to three billion. And we ended up selling it for $250 million, despite having an incredible product, fantastic people. I funded many people who came out of there. Zola is all ex-Gil people. Security Scorecard is my ex-head of security. So many good things came out of it, but it definitely hurt. I put a lot of work into that and got less than I thought.
6:59 Harry Stebbings? Bit of a weird one, but when I go across your career, there's so many incredible companies. What do you consider your biggest success?
7:06 Speaker 00 Unfortunately, there's a couple of different dimensions. The monetary answer is Mongo by far. Mongo's worth $25 billion. There's only two companies started in the last 30 years in New York that are worth $25 billion. So that is a big, big success and still growing. And I think we'll be a $50 billion company someday. Double Think was the most impactful for me. I was 32. I had never managed more than 40 people. Four years after the beginning, I was managing 2,000 people in 25 countries. We went public 24 months after we started. We did 10 acquisitions during that time. I learned a tremendous amount. So that was the most impactful in setting up my entire career. Actually, Business Insider was probably
7:48 Speaker 00 the product I enjoyed the most because I just love business news. I love media and I love that challenge of, if I said to you, I'll give you a million dollars, you have two people, I want you to start a media company, you can never advertise, you can never spend $1 on advertising, but ideally you'll end up with 300 million uniques. Go.
8:07 Speaker 00 I think you'd say, that's awfully hard. And that's exactly what we did. That was very fulfilling. And then the final answer is guilt was the most fun. I didn't know anything about fashion. And all of a sudden, my wife can't believe that three years later, I'm in the front row of the fashion shows in Milan, seeming like a super cool person when I'm really not.
8:26 Harry Stebbings? DoubleClick incredibly impactful. On the business side, what was one or two of the biggest business lessons?
8:32 Speaker 00 So this doesn't apply to every company, but we moved faster than everyone else. And so we started at the same time as some other people, but we were able to raise more money. People believed in what we were doing. We spent the money. We took the chance. But to open offices in 25 countries before your first country is profitable, in retrospect, is a bold move. Now, what was the result of that? If you were Procter and Gamble or Microsoft, and you have operations in 50 countries, we at least had offices in your 25 biggest countries. And my competitor was only in six. Who are you going to work with? You're going to work with us. The reason today, which is literally more than 25 years later, that DoubleClick, which is part of Google, dominates the world in ad technology is because we won the battle of the first five years
9:16 Speaker 00 by moving faster, more aggressively, took chances, made some mistakes, and have never given up that position ever since.
9:22 Harry Stebbings? How do you think about the importance of first to market? Everyone often talks about it. But then some alternatively suggests you learn from the first to market and can now execute them being second. How do you think about that today being an investor?
9:34 Speaker 00 It's true that sometimes the early bird gets the worm, but the second mouse gets the cheese. That can happen. Unfortunately, you never know. There are many, many examples where the first player who moves very quickly and gets critical mass is the winner. Now, you have to see, is that a business where it matters? So in things like Uber, being five times bigger than Lyft ultimately does make the difference. And so it was worth it for them to just go, we're going to be number one or we're going to die. In other businesses, though, that's not true. You don't have to be scale isn't quite as important. Quality is important. And also you have to adjust all of this to the capital available. It's all fine and good when people will give you a billion dollars.
10:15 Speaker 00 You know, Mongo, we lost a billion dollars before we had a profitable quarter. Over 10 years. That's, you know, a scary number.
10:24 Harry Stebbings? Could, could more have existed in a down period? Cause I guess it really lived in that bull period.
10:30 Speaker 00 Yes, it did. It would have existed and we would not have been able to invest as much and not been able to grow as much. Today, I don't know that many companies outside of AI. Where people will give you a billion dollars to lose. But today that exists in AI, it doesn't exist in a lot of other areas.
10:46 Harry Stebbings? I so many different areas. I want to go there. You mentioned like financing availabilities. Yeah. You went through the dot com with double click. And I look old, Kevin, but I'm rather useful. I must admit, I, I don't remember this as a professional. How was that? And what was some business lessons for you from that that you took?
11:04 Speaker 00 When, when two years ago, people were complaining about it's hard to get money and things like that. I really felt like your, your grandfather talking about the depression where like you just don't understand. We had no food in the depression because in 2001, 2002, there was just no money. And when I mean no money, no money. There were companies that went under that shouldn't have. Everyone pulled back two years ago or last year. You know, things were tighter, but the vast majority of our companies raised rounds. It was okay. Uh, so yeah, it was brutal. We did, by the way, we did seven rounds of layoffs. We went from 2,000 people back down to a thousand doing layoff after layoff. 70% of our clients went bankrupt. If anyone's taking notes, don't do that. It's not helpful for your business.
11:46 Harry Stebbings? The seven layoffs?
11:47 Speaker 00 No, the 70% of your clients going under.
11:50 Harry Stebbings? All the seven layoffs, no?
11:51 Speaker 00 That also, that's, you have to do that when 70% of your clients go away. And they don't even pay the last bill as well. So you eat tens and tens of millions of dollars of revenue you thought you had and then have to write off.
12:05 Harry Stebbings? Do you not think we're going to get worse from here?
12:07 Speaker 00 I do. I mean, right now the economy is very good. If we look over 30 years, on average, if the stock market is at an all time high and unemployment is at an all time low. If you said, are the odds that things are going to get better or worse? By definition, there's a reversion of the mean at some point. I don't plan for that. Things right now look pretty good, pretty stable. There's another characteristic in our business is there's actually a lot of VC money, tons of cash sitting on the sidelines. That money is not going to be given back. That money is going to be spent. We're only debating whether people are going to spend it over two and a half years, which they were doing four years ago, or over five years, which they're probably going to do now. But there's a lot of money out there that is going to keep this industry going. And the second thing, that independent of any macro factors you're
12:51 Speaker 00 talking about or thinking about, most things happen at a micro level. So we started a company in assisted fertility. Assisted fertility is going to grow. I can guarantee you that 10 years from now, more women will have egg freezing, more women will be doing IVF than they do it today. That's just going to grow regardless of the economy. And so there's a lot of things like that that are going to happen and are going to be fine.
13:14 Harry Stebbings? Listen, I'm so glad you said that. One thing that I'm always nervous to take as an investor is market timing risk. I don't think that I'm smart enough to predict markets in terms of the timing and consumer adoption. How do you think about market timing risk?
13:26 Speaker 00 I don't. I'll tell you why I don't. First of all, we're doing very early stage work. So the bet we are making is that in when we have an offsite, we think about, we put up the number 2034, 10 years from now. So all of the conversations we're having are about trends that we believe are 10-year trends. And the reason is, I know that unfortunately, you have to assume it takes 10 years to build a really successful company.
13:49 Harry Stebbings? Sure.
13:50 Speaker 00 And I can almost guarantee you that there's going to be recession during that time. And I have no idea when it's going to be. I don't worry about that. What I worry about is, we're big investors, for example, in the psychedelic industry. Is the psychedelic industry going to be 20 times larger 10 years from now than today? Absolutely. We have to create the right products, navigate our way and get there. But if I get that assumption right, you have a much, much better chance of having success.
14:15 Harry Stebbings? Are you a market-led investor or a people-led investor? It's just interesting, when you said there about that, I do the complete opposite because I'm like, I have no friggin' idea which markets are going to be big in 2034. It's the job of the founder to show me the future, and my job is to select great people. Are you a market-led investor or a people-led investor?
14:33 Speaker 00 They're both really important. And if I said, if someone comes to you tomorrow and says they're going to start a new department store selling clothes online, I don't care how good that person is, it's not going to work. Not a single one of those has worked in 10 years. So the market is, is a factor.
14:50 Harry Stebbings? Question for you. Do you not often get it though, where amazing people choose not great ideas?
14:55 Speaker 00 Yes.
14:56 Harry Stebbings? These is that they will pivot to something adjacent that works.
14:59 Speaker 00 No, because yeah, there are examples where that happens and you assume a good founder will do that. But if you are going into an industry that ends up just not happening, you know, you can't pivot and you won't be able to get the money to do that. If you're going to pivot into something that's slightly different, that's okay. But you're not going to start a lab grown meat company and then decide to go to solar energy. That's just not going to happen. So you've just got the industry right or wrong and that will happen. E-commerce, there's been no value created in five years. Same with media. You know, with the exception of actually podcasts, hardly anything has worked in the last five years in media. So that's why it's not as simple to say, just back good people. You're looking for a combination of a very good person and a thesis that you believe in.
15:41 Speaker 00 Ideally, a sector growing or an opportunity to create a better product.
15:45 Harry Stebbings? How do you prevent past mistakes or challenging markets? How do you prevent them from impacting future decision making? So like, for instance, I hate ed tech. It's a fricking hard market. Respectfully, I hate media. It's so fricking hard to make money in media. But I could be wrong, Kevin. There could be something great. How do you prevent past impacting future?
16:06 Speaker 00 I'm not sure that we do, or I do, or anyone does. And I see it all the time when we have a company going out and we approach 10 DCs. And three of them will say, I invested in this sector eight years ago and I lost all my money. I'm out. They haven't even read the deck yet, but I'm not saying I don't do that as well. I mean, when I've had a bad experience, I think it sometimes does influence my thinking. I try intellectually to not let it happen and I think I let it happen sometimes.
16:32 Harry Stebbings? Do you know which companies will get funded fast and well when they go out? I'm just intrigued. Is it the ones you think or is it actually a wide dispersion?
16:40 Speaker 00 You have a sense of two things ahead of time. One, you know, whatever fundamental numbers, how they're doing, which that helps. I mean, you know, I don't have any companies going out that have quadrupled their revenues in the last year that don't get funded. The second thing you know is you're going to have a sense of how your CEO does in fundraising. You know, I've had examples of CEOs who are incredible CEOs, great managers, visionary, but just don't present that well, aren't as confident and are worse at fundraising than they are at running the business. And they'll, they get penalized often in the market for that, especially in the beginning, when it's less about numbers and more about the vision. So those two things you know, and then sometimes you're, you're surprised. I mean, I have one example of a company that just couldn't raise money and I thought it was going to be easier for them than, than it turned out to be.
17:25 Harry Stebbings? Do you think the best CEOs are the best fundraisers?
17:28 Speaker 00 Generally, yes, because if you, if you can raise a lot of money, it increases your odds of doing well dramatically and allows you to make some mistakes. In the long run, every round that goes along, it's more about the business and a little bit less about the CEO. Cause obviously if one guy shows up right now with a PowerPoint, there's just a person in a PowerPoint. You know, that's it. If we're in the, around B, where the investors looking at unit economics, turnover, churn, there's a lot of things that are going to help that fundraise.
17:59 Harry Stebbings? When we think about that early founder analysis, do you prefer a founder who's an insider to a business, someone who's worked in that industry for years and is approaching it with relatively large levels of domain expertise? Or do you prefer the naive outsider who's approaching with a fresh perspective?
18:17 Speaker 00 It's going to be a little bit in the middle there. So I would say that a lot of the people we back are first time founders. Almost never back someone who comes from Procter and Gamble, a large company and seems like a smart person, but they don't know startups. I once looked through the top 100 consumer internet companies and the one pattern was that most of the people who were very successful had actually not come from that vertical, but they had come from another startup. In the same way that Henry and I had not been in media, thought we could do media different. When I went out to ask people at the Wall Street Journal about my idea, they all said it was a terrible idea because they were too close to it. And so, you know, the guys from Airbnb, do they come from the hotel industry? No, they didn't. They came from outside and as a consumer thought, hey, why can't we do it better?
19:00 Speaker 00 I will tell you that in the B two B space, there aren't that many people that come into enterprise software and weren't in enterprise software. So it's a little bit harder there. And actually, when we started Mongo, the reason we had trouble raising money, even though we had already had a very successful company, was because people said, you've never done a database before. Three of you have ad tech backgrounds. It's not the same thing. You've never done true enterprise software that you sold to a bank. We're not going to back you.
19:28 Harry Stebbings? I loved having Dev on the show, by the way. He's a fantastic person. I remember he said something to me that really stuck with me. He said that good news travels incredibly fast and bad news travels incredibly slow. And as a leader, you must always remember that. It was very insightful.
19:43 Speaker 00 Dave's done a great job at Mongo. We need to go over, we had fifty to a hundred million dollars in revenue. And today, there's two billion in revenue, just enormous. It's scale. And he has really scaled.
19:55 Harry Stebbings? You mentioned the difference between consumer and enterprise there. Sorry, my mind jumps around, but it's a Friday, so just roll with it, Kevin, you know.
20:02 Speaker 00 I'm not focused.
20:03 Harry Stebbings? Oh, great. So I always say now, you know, I was in quite a few of the consumer breakouts and they led to precisely fuck all returns, but you know, good brands at the time. And I laugh and I say to my LPs now, I learned something, which is consumer is fun, but enterprise makes money.
20:18 Speaker 00 Yeah.
20:19 Harry Stebbings? We haven't seen anything really great in consumer in the last five years.
20:23 Speaker 00 No.
20:23 Harry Stebbings? You think that will change in the next five years? Or do you think incumbent advantage is so embedded now that enterprise is just where we make money?
20:31 Speaker 00 I think it's less about incumbent advantage than it is that it's just an extraordinarily mature business. So unless there is a step function, you know, where consumer businesses came in was in all of a sudden, mobile came and Uber made sense. You know, when the internet came, that made sense. We're going to have some consumer businesses in AI. We don't know five years from now if Google is going to be the number one search engine. I just think that media and e-commerce. Are both sexy and accessible industries. So 50,000 entrepreneurs have gone after them. The next guy right now just probably isn't going to come up with a good idea. Whereas in the B two B that you're talking about, there are some things that have changed fundamentally, either because they're science driven, there are breakthroughs in regulation or in science allowing,
21:15 Speaker 00 I don't know, gene editing or psychedelics or something else. And so that's different than just another consumer application.
21:22 Harry Stebbings? The thing that worries me with AI, honestly, Kevin, is I just think that so much of the advantages accrue to the distribution that incumbents have, and a better product does not lead to a winning product. And I think Google will bake in so many features that existing application layer startups are building, that they just slowly get eroded over time.
21:40 Speaker 00 So I completely agree. And I'd use the example, a better example for me is that's at the consumer level. It's more like Salesforce. So we've seen 20 companies saying, we're going to build a new product that uses AI that allows you to contact potential contacts. But the, the truth is that Salesforce is going to incorporate that in. And, you know, a large company with a thousand person Salesforce is not going to easily switch off to a startup company. And so I have confidence that Salesforce will incorporate AI into their product. Maybe it's six months late, maybe it's a year late, but they're going to do it. And the switching costs are so high. And that's true of the pharma industry. That's true of the banking industry. That's true of others. So I agree with that.
22:19 Harry Stebbings? It actually goes to one thing that I actually always like. I love huge markets with no competition. I love it. How many founders go after Stripe or Shopify? And I'm always like, really? You chose Toby Luttrell and the Collatons as the weak founders? That's an interesting assessment. Do you agree with me? Or do you go, I like competition. It shows a big market.
22:37 Speaker 00 You want a big market. You'd like to have as little competition as possible. It's very hard to find that. You know, you know, Pier Paolo, starting a mobile bank in Argentina. Guess what? We didn't have as much competition, but there was geopolitical risk, you know, all kinds of risk. And he's been remarkably successful, but that's why it's going to be a $10 billion company. Because he went after a big market and there wasn't a lot of competition.
22:59 Harry Stebbings? Has your investing style changed over the years, Kevin?
23:02 Speaker 00 I'm not sure it's changed dramatically. The one thing I've changed, you know, when I was, had a small team, we weren't industry focused. So now that we have a 24 person team, I am a big believer in having more industry focus. So for example, we have five or six full-time people in healthcare. And so we're really seeing everything. We have relationships with payers. We have relationships with hospitals, a whole bunch of things that make us a more valuable investor. In 2021, we did not focus on robotics. We saw probably 20 robotics deals just randomly. Then I brought on now a two-person full-time team on robotics. They have visited Stanford and MIT and Georgia Tech and Carnegie Mellon, been to robotics conferences. We saw a thousand robotics deals last year.
23:47 Speaker 00 That makes you a better investor. If I show you the fifth company that is making salads, that just makes you a better investor than seeing one and having to figure out how it works. What is the salad industry like? So seeing everything is helpful.
24:02 Harry Stebbings? Do you think investors add value? You mentioned there about being a more valuable investor. I just had Trey on from Founders Fund who was like, investors don't add value.
24:11 Speaker 00 Easily 90% of the value of a company comes from the CEO and the team. Having said that, making sure you have the right CEO, which is the board slash investor's responsibility, is the single biggest decision. I mean, if you said, why is Mongo a very successful company? You could say, well, because Dave's been running it for the last seven years. I let the previous CEO go and hired Dave because we're getting to a new phase and the board as well. And I think that single decision was extremely important and well-executed, even though Dave has done obviously 99% of the work. The other thing I would say is in the early stages of a company, the investors play a much bigger role. We start so many companies, we're early stage.
24:54 Speaker 00 Often you have a CEO that has literally never raised money before. So when we get them in front of 50 venture capital firms, that is adding value. When they are hiring a CFO for the first time, because they were head of business development, they'd never actually managed a CFO before, having a perspective on that is important. The other thing I would say, I had incredible investors at DoubleClick. When you are a CEO, you are too close to the business. That is your job. And so some distance is often helpful because they would come to a board meeting and they've worked with 20 CFOs or seen 20 sales plans. And so they just had a slightly better perspective. And once in a while, I'll be like, you know, that's a good point. I had not factored that in, I was too close to it. But
25:37 Speaker 00 My point remains 90% of it is having the right CEO and the right team.
25:41 Harry Stebbings? I love serial entrepreneurs for the reason that you don't need to teach them how to fundraise. You don't need to teach them how to hire a head of sales. They've done most of it before and they've fucked up before as well, which means they should have learnt the lessons last time. Now, they'll make new mistakes, of course, but they won't make some pretty obvious ones. How do you feel about the, you said earlier, we like to back first time founders? Am I wrong in terms of my thesis on serial entrepreneurs and that heavy preference there? And how do you think about that?
26:10 Speaker 00 Again, if we look back at consumer businesses, out of the top 25 companies, how many were serial entrepreneurs? Almost zero. By the way, you'll see in enterprise software, more of a pattern of repeat entrepreneurs, also on average, slightly older. 24 year olds have trouble starting a database company and building up an enterprise sales force, meeting with the CEO of, or the CTO of Goldman Sachs, close that deal. Really doesn't happen that often. So industries are different. It depends whether the industry knowledge, experience and credibility is extremely important to success. And in consumer, it isn't because I just go look at your app and I like it. I don't really care whether you're 10 years old or 50 years old.
26:53 Harry Stebbings? What do you think is the biggest determination of whether a company gets product market fit from zero to one? Everyone always says speed is the single biggest determinator or determining factor. Do you agree with that?
27:04 Speaker 00 No, I don't think that speed is the most important thing. You do need to get out your product, you know, pretty quickly, but it has to be pretty good. So for example, we had no revenues after three years at Mongo, which is not great because we had to go slower. It had to work, it had to scale, it had to be secure. Whereas for consumer apps, it can be, you can, you can make mistakes.
27:25 Harry Stebbings? Did you question whether it would work? Three years in, no revenues. I can't remember how many years you said earlier, but nine, 10 years in, no profits.
27:33 Speaker 00 So nine years in, yeah, I knew it was working. There was no problem. Three years in, we were nervous. We couldn't charge for it yet. It was getting better and better. We knew the industry is very big. We knew there was an opportunity. We knew Oracle was too expensive and we knew that a non-relational database was a good idea. But, you know, you can also just run out of money at some point. We didn't have incredibly successful fundraises during that time. But what you could see is that if I showed you one chart, which is how many people are downloading the Mongo database, that was just a straight line going up to the right all over the world. And as long as that kept happening, we thought we were on to something.
28:10 Harry Stebbings? Do you agree that companies die more often of indigestion than starvation? I hear it often, Kevin, and I think it's bullshit. I'm like, do you know how many companies die because they run out of cash? A lot.
28:21 Speaker 00 By definition, companies only die because they run out of cash. The question is, why do they run out of cash? They run out of cash because they don't have product market fit, because investors are looking at the numbers, looking at the team and saying, I'm not going to put money in here.
28:35 Harry Stebbings? I do want to discuss the new fund, speaking of investors and putting money in. So can you share the news with us that I think came out yesterday?
28:42 Speaker 00 Sure. You know, we've been investing really my money in a different structure for the last decade. We have 120 companies in the portfolio, have made many investments, started over 20 companies. But we just announced that we, it's the first outside fund with outside investors. So we've raised a $250 million fund to continue doing what we're doing and continue to both start companies and invest in companies largely on the East Coast of New York, but not only heavily healthcare, heavily tech, robotics and social impact. So super excited. It's a great time.
29:13 Harry Stebbings? Okay. How do you do resource allocation between incubations versus investments?
29:18 Speaker 00 Yeah. So what I like is being industry focused. So the team in healthcare is doing both. I'll give you a good example. We decided to look at a vertical because we're doing deep research all the time. We're much more research driven than other firms. A person in our team started being interested in the shipping industry. So shipping industry is an enormous industry that needs a lot more technology. So she spends two months, interviews 50 people in that industry. What does she come away with? One, a new idea because realizes that there's a lack of a procurement marketplace. And so we started a company in that space called Port Chop. And because she was at multiple shipping conferences, which most of us have not been at, she ran across a company that people were saying great things about called Box Hub,
30:00 Speaker 00 which is a marketplace for containers based in Toronto, which we never would have known about, and we invested in that as well. So it stems from if you know the industry and know the players and know the opportunities and know the holes, you both can start companies and invest in companies.
30:15 Harry Stebbings? My warrior with incubations, and tell me I'm wrong, the best founders won't want to be like a hired gun CEO to an idea that they're brought in on. How do you respond to my concern there?
30:25 Speaker 00 Well, let's not forget the data, which is that Business Insider was one of the most successful media companies ever started. MongoDB, one of the most successful databases companies ever started. Exactly another formula you just said can't work, where we started it and brought in a CEO. The question is, are you bringing in a great quality CEO? And the answer is yes. And then are you incenting them correctly and making sure that it works? We've never had a CEO resign. My psychedelic company, I think, is one of the most valuable psychedelic companies started in the last four years in the United States, Transcend. So many, I mean, Guilt was a big success. These are all examples where we have done that very, very successfully.
31:03 Harry Stebbings? Kevin, why does so many incubators fail where you've succeeded?
31:07 Speaker 00 So one, in some cases, they've tried to do too many companies and just tried to crank it out. Second is the level of execution. You know, you've got to have money and expertise and credibility. You know, that CEO comes in is going to be sitting there thinking, yeah, I could maybe start my own company. One, I have to love this idea. Two, I have to feel like you've done a lot of research and are way up to speed. Three, I've got to feel like you're going to add value. And so hopefully some of these people are like, you know what? Kevin and the team have a lot of experience, have had a lot of success, can help me and increase the odds of my company working. The vast majority of companies that people start don't work. Our hit ratio is much higher than your average entrepreneurs. And we give people plenty of equity so that they are incented, but it's still not easy. I mean, we don't have 100% success rate.
31:52 Harry Stebbings? On the too many, how many do you like to do then? What's the right amount for you?
31:56 Speaker 00 So it's bottoms up, but we historically, last couple of years, we're doing somewhere between six and eight companies a year, but we have multiple industry groups and multiple people. So at any one time, people here, one person can be working on one idea or one research project.
32:11 Harry Stebbings? How do you do resource allocation between new projects? And you have to be efficient with financing. Cut it, inject more when there's milestones hit. How do you think about efficient resource allocation between those projects?
32:22 Speaker 00 Look, that's just a judgment call because you're, you know, looking at very different ideas. Sometimes we do, we just did two or three months on a fintech idea and just didn't get conviction. And so, you know, we're not going to do it. But that's a judgment call at the end of the day. You just get to the point where you're like, I know this is going to work and I want to devote the next five years of my life to doing this. And sometimes you get it right and sometimes you don't.
32:45 Harry Stebbings? Do you think you pull the ripcord soon enough on the ones you do quit?
32:49 Speaker 00 When we start a company, we don't bail out on the company, but we put a million, million and a half dollars in. We hire a CEO if we've made the decision to go forward. Now then the market decides because nine months later, they're going to go out to raise money. And I would say four out of five times they go out and successfully raise around and someone has an outside lead investor. And once in a while, the market's like, no, we hate your company. So that's what determines it.
33:15 Harry Stebbings? Has that ever happened and you've gone, I disagree with the market. I'm going to keep putting money in.
33:19 Speaker 00 I can think of one time where what we'll do sometimes is do a bridge round and we'll say, you know, we just need six more months because we'll have a launch. We'll have customers, things like that. We have more confidence in the market. And then sometimes there we were right and then sometimes there we were wrong.
33:35 Harry Stebbings? How much have you invested before this structure of your own? This is a lot of.
33:40 Speaker 00 Yeah, 250 million.
33:41 Harry Stebbings? Have you told your wife?
33:45 Harry Stebbings? Don't worry, Gil Group got you a lot of bonus points, dude. You're fine.
33:48 Speaker 00 No, look, I, you know, I've devoted my career to this sector and so our returns have been, been extraordinary. Things have worked. There's nothing more fun in life than going after a new area. Psychedelics being an example, super interesting, ahead of the curve, starting companies, investing in companies and then, and seeing it work. And I've done that for a long time and really, really enjoy it.
34:09 Harry Stebbings? How do the deal structures, you mentioned a million and a half there. Is there a standard deal structure or does it depend on a per company basis?
34:16 Speaker 00 Roughly the team and CEO are probably going to get around 40, 45% of the company. We will have the rest because we came up with the idea, put in the money, did all the work and everyone gets paid from day one. So in order of magnitude, it's going to be that.
34:31 Harry Stebbings? Why do you invest as well? And what I mean by that is like your ownership when you invest on a good day is like 50. I'm guessing here, but running investors 15 would be good. When you have 50 or 60 in the incubations, is it an efficient use of capital to be an investor?
34:46 Speaker 00 It is because, one, as I said earlier, the, the time you spend learning an industry gives you an advantage in investing. Secondly, you actually can't invest that much money in incubations. If you and I start a company tomorrow and we build a seven person team to build this, I mean, that's a million and a half dollars. And I don't have enough ideas. I wouldn't be able to come up with 30 ideas a year. So you've already done the work in a sector. You find out about incredible opportunities. You're seeing deal flow. I mean,
35:15 Harry Stebbings? Is it, is a year long enough? I'm sorry, I didn't mean to interrupt you, but if you think about bringing a team together, maybe take three months to hire people, three months to ramp them. Gosh, that's six months of execution. That's not very much.
35:26 Speaker 00 Yeah. And then at that point, depending on the company, often we're able to raise money outside. But often we put in another million and buy ourselves another six months or nine months. Ideally, the product is out. Some companies are using it. You can sense that it works. You've got a sense for pricing. Now we're just going to debate how big an opportunity is it?
35:46 Harry Stebbings? Tell me, how do you think about price? I'm intrigued. You've invested in like so many businesses now. Peter Fenton once said to me, price is a mental trap. How do you think about price and your own price sensitivity?
35:56 Speaker 00 Here's the thing that I don't think about, which is our ownership. Meaning if you were going to buy a piece of an apartment and you said, I really want to own 10% of this apartment. Does that mean, and you have a certain amount of money? That means you're just never going to buy a really good apartment because the price is higher. So if I see three startups that just started six months ago, one of them has an incredible team going after an incredible market. That company is worth more than the other ones. And if I put a million dollars in, I'm going to get less of that company. But that doesn't mean it's a worse investment. At the end of the day, you're just trying to figure out, is this going to work or not? You know, sometimes we're paying a big price and we're paying a big price because it's an incredible team and incredible opportunity.
36:34 Harry Stebbings? I also worry about dilution. I've had quite a few investments which ended up being amazing, but because of the capital that went in, you got like a three or a four X and you're like,
36:42 Speaker 00 No, but that's just another factor. You should factor in how much dilution you're going to take. What are the gross margins going to be? Super capital intensive businesses are going to be worse investments than ones that take very little capital. On the other hand, if you do present a, to continue my example, a great founder in a big business in a very capital efficient industry, yes, that's actually worth more than the opposite.
37:05 Harry Stebbings? I agree. It's why I love like low competition markets. Like you said there about shipping. I love shipping too, because not many great entrepreneurs out of Stanford or Harvard or you name your great university go, oh, I'm going to innovate in shipping. They all go, I'm going to innovate in payments or in B two B.
37:22 Speaker 00 So the non sexy areas, we just invested in a company that is creating software to manage the food, the meals in a hospital. So there's a thousand different people in the hospital staying overnight. One has a peanut allergy. One is kosher. It's super complicated. You have to have a piece of software to manage that. There are very, very old systems. It's the sort of thing you and I would never think about. These entrepreneurs came in, they'd created a much better product, starting to close hospital deals. It's a huge sector. Hospitals pay a hundred fifty thousand dollars for this software. And we're like, that's a great, good team, good market.
37:56 Harry Stebbings? That's really interesting. And in the US, you obviously have a lot more private hospitals because you need customers who have budget. In the UK, you'd sell to the NHS, which is the national.
38:04 Speaker 00 Oh, yeah. You know, we don't do any healthcare outside of the United States because the US healthcare market is both enormous and terrible, which is what you want when you're in a hospital.
38:13 Harry Stebbings? Totally. Kevin, what's been your biggest miss? And what did you learn?
38:17 Speaker 00 The biggest miss is in, if I knew now what I knew then, I would have been much more aggressive early on in starting more companies, building up more of a team. Sometimes it takes five to seven years to know that things are going really well. If we had sat here, you know, six years ago, I'm an investor in this crazy company, uh, you know, in Argentina and this company called Zola. Which I started, but who knows if it's going to work. Turns out a lot of these worked and I would have actually doubled down that that was a golden age of the last decade.
38:48 Harry Stebbings? How do you think about reserves financing? You mentioned, hey, we put the million and a half in, they go out, they get venture. Do you double down? Do you say, hey, no, no reserves signaling is dangerous? How do you think about concentration of capital?
39:01 Speaker 00 So we aren't that concentrated. So we continue to invest in our companies until probably a hundred or $200 million valuation. We generally don't put more than 10 million, might go to 15 million in any one company. And sometimes we'll leave some money on the table and, and other people will, will take it. We want the highest return investments and that's why we've had, you know, very good results because, you know, when our companies are worth a billion, we're just not investing in them at that point. And sometimes that would have been a good idea, but you know, sometimes it's not.
39:30 Harry Stebbings? The other challenge that I find is selling and when to sell.
39:33 Speaker 00 Yep.
39:34 Harry Stebbings? What have been some big lessons for you in actually liquidity management and when to sell?
39:38 Speaker 00 Look, the biggest challenge in the last three years is that there is no liquidity. There are very few sales. But when you have an opportunity, you should take it. But again, that, that's company specific, like we're never open to selling Mongo, no matter what. Because we really thought we were building a 10 or $20 billion company. We had confidence. We had conviction. I sold Business Insider not because I wanted to, because we were doing 40 million in revenue and someone offered me $450 million for a media company. And so I said, yes.
40:06 Harry Stebbings? It was not an easy, it was not an easy decision.
40:08 Speaker 00 It was. Yeah. I say to the, to my CEOs, if someone makes you an offer you can't refuse, don't refuse it. Take it. Three years ago, I bought the company Meetup for 10 million because WeWork was getting rid of it and had panicked. And COVID had just started and I just sold it. It was announced in January, sold it for seven or eight times that amount. Because there was a buyer who wanted to buy it and the company's making now a lot of money where it had lost $20 million the year before.
40:34 Harry Stebbings? What did you, sorry, I'm just fascinated on that one. So Meetup, you buy for like 10, it was like a distressed sale from like a distressed seller at the time who just wanted to get rid. Did you do much to the asset or was it just a unique buying opportunity?
40:46 Speaker 00 So both. It was a unique buying opportunity. No one would touch the company because COVID had just started and you couldn't meet the CEO. Who buys a company when you can't meet the management team? No one. Except that the CEO, David Siegel, who's incredible, worked for me at DoubleClick 20 years before. So I knew him and he had been reaching out to me asking about the business in the six months before, just as a mentor. And finally, he said, God, they're panicking. I don't know. I think they're going to shut it down or give it away. I said, wait a second, why don't I buy it? So I got one or two other investors, bought it. But we also went from 130 people the day I bought it to 90 people a week later, which is the right amount. Today it has probably 80, or
41:28 Speaker 00 when we sold it had 82 people. And it went from a $20 million loss on 32 million in revenue when WeWork owned it the year before to now we're making five or $6 million in profits. It's a great business. So David did a great job. Team was good. We ran it well. That's not the normal thing we do. It was just a one-off situation. It was a brand I knew based in New York and I knew David, so it made sense.
41:51 Harry Stebbings? Can I ask you, we had some of those amazing successes. What's been your biggest loss? Which one's the one that was the most expansive and costly where you lost the most money?
41:59 Speaker 00 It's not about losing so much money is that, you know, in, in 2000, I had probably $100 million worth of DoubleClick stock on paper, which ended up being 10 million. We were a year away from going public at Gilt, where Goldman Sachs said, Kevin, you've got about $165 million. I'm feeling really good about this. And that ended up being 10 million. So things evaporated along the way, even if they were paper gains, but you think that they're going to exist. And so that happens.
42:30 Harry Stebbings? Could you have sold them?
42:31 Speaker 00 No, the Gilt I couldn't have. And I did sell all the shares I could at DoubleClick in 2000. So I couldn't have, but still, it's disappointing when you see 90% of the company you're focused on, the value evaporate. But, you know, in my week, every day, we have 130 companies, something's going wrong somewhere in the portfolio. I can think of another company that I thought I had a $50 million position. And right now, my guess is I'm going to, you know, end up getting very little or getting my money back. But on the other hand, there are, there are big gains. That's the game we play.
43:03 Harry Stebbings? Do you care about loss ratio?
43:04 Speaker 00 I mean, in the long term, you do, but it is what it is.
43:07 Harry Stebbings? But the truth is honestly, Kevin, like, if you only ever had Mongo, the outliers are so disproportionately large, if they really are.
43:15 Speaker 00 Yes.
43:15 Harry Stebbings? Nothing else matters.
43:17 Speaker 00 Nothing else matters. So, you know, you should be doing this business because you love doing and you find it exciting. You like helping entrepreneurs. You like coming up with new ideas. Creating new categories, that's what's fun about it. And then if you do it well, you're probably financially in our business going to do very well. But I don't think about that day to day and we don't talk about that internally. We talk about we are building companies. If we build good companies, everything will work out fine financially.
43:43 Harry Stebbings? Doug Leone said recently to me that we have turned from a high boutique, high margin industry to a low margin commoditized industry. Do you agree with that transition statement?
43:56 Speaker 00 No, what is true is that when you are a late stage investor writing $50 million checks, that you are what we used to call private equity. You're competing on price. There's already an established board. You're not adding that much value. It's just a different world. It's changed so much. When Apple went public, when they went public, they raised $9 million in the IPO. So it's very different today. In the early stage business that Union Square Ventures does, that we do, you know, the first check in, that's not a commodity business. You have huge wins. You have some, a bunch of losses. And by the way, I was on the board of Yale and on the board of the Yale Endowment. So we were the lead investor in many of the best firms.
44:38 Speaker 00 And as you know, in VC, there's a huge difference between returns that let's say a benchmark and a Greylock have and 90% of the rest of the industry.
44:48 Harry Stebbings? 100%. My fear is that we've just seen multi-stage firms commoditize seed so efficiently that everyone has a seed strategy. I'm always asked by LPs, like which funds on the West Coast should we do? Cause you meet everyone, Harry. And I'm like, honestly, Sequoia and Andreessen just come in and bid up every great round at seed. You might as well just be in Sequoia and Andreessen.
45:10 Speaker 00 No, we don't see in the last, you know, 20 seed deals. They're not in there very often. They don't have the coverage of the, you know, $2 million checks. And also a lot of entrepreneurs are very nervous about taking their money. On the West Coast, people just take their money regardless. But here's the risk. If a huge fund puts a million dollars into your initial round, and if they don't lead the next round, your company's dead. Whereas if a seed investor invests in your first round, it's understood that you're going to go out to someone else. But the negative signaling that occurs, and it's happened to me. I had a big, big, big firm join in. Everyone was very excited and then they lost faith, partly because the guy who invested in our company left the firm. And they're like, ah, we don't really, we're not really into it. We're going to pass.
45:55 Speaker 00 And then the company was dead.
45:56 Harry Stebbings? Dude, getting orphaned is the worst thing in a portfolio. I completely agree. But the, the, the chat, so I'm with you 1,000%, but I always get multi-stage investors push back on me. Obviously, everyone has to defend their corner, but they say, oh, rubbish, Harry. Every round gets preempted today. And of course, index does not call up Sequoia, who've done the pre-seed or the seed and say, oh, you're going to do the A. And so the signaling doesn't exist because of the prominence of preemption rounds.
46:25 Speaker 00 I, I think you're being misled by the 10 supposed hottest deals who get preempted. That's not where the industry is. The vast majority of things are not being preempted. They're going out, they're raising good rounds. They take a couple of years to be really, really big. That's the meat of the industry.
46:41 Harry Stebbings? Do you think venture is more competitive than it has ever been?
46:44 Speaker 00 Yes. Look, the, the reason one should be concerned about venture today is that there's probably four times as much money in funds today as there was in 2017. And the question is, are there four times as many opportunities? And I don't think there are. I think it's shifted. There's more opportunities in AI, but frankly, far fewer opportunities in e-commerce and media, as we discussed. I think there's actually even fewer opportunities in straight enterprise software. You know, does Bank of America need new software products this year that they didn't buy last year? They've already purchased a lot. I think there's just a bubble of money. There's more money than the industry needs. And as we've discussed later, they'll spread it out. And unlike in the hedge fund industry, our money doesn't leave very easily.
47:27 Speaker 00 It takes a long time. It's sticky. Now, you'll see Tiger, which had a fund that was whatever 100 and now is now 50. So you'll see new funds being smaller, but that takes time to work through the system.
47:38 Harry Stebbings? Are you worried about the illiquidity? I'm looking at M and A markets thinking, fuck it. I don't think IPO market is going to open in 24. I know we've just seen Rubrik grow out, but I think it's one of few for sure. Are you worried about the illiquidity? And how do you think about that?
47:52 Speaker 00 Yeah, I do worry about it and there's nothing any of us can do about it. It makes no sense to me that you just can't take a company public, even though your numbers are 70, better than 70% of all publicly traded companies that are already public. And yet the banks and everyone will be like, yeah, yeah, you can't go public. There's no opening for that. It's just closed. It would be as if you're selling your apartment in New York City and everyone's like, no, no, sorry. No apartments are going to be sold for the next two years.
48:16 Harry Stebbings? Well, so I have so many VCs on the show who say like, oh, it's complete rubbish. How you can always take a company public, you just might have to change your perspective on the price that you're willing to go out at.
48:26 Speaker 00 That is wrong. If your company's growing at 60% and profitable, yes, you can always go public. But at the margin, it is not easy to take companies public. There's not a lot of appetite. Many, many companies that'd be very happy to be public and they're not because they either can't do it. Somehow we just have not opened that up. For 15 years, I've wanted to solve this problem that we need a way for companies that are, you know, $100 million and growing at 20% to be able to go public. And that doesn't exist.
48:53 Harry Stebbings? What are the main reasons why companies plateau? Because you see quite a lot of companies that kind of 40 to 60 million in revenue. They're sitting on a billion, a billion and a half valuations and you're looking at them going, it's probably 500. Why does that happen? And what do you think will happen to them?
49:08 Speaker 00 So one, if they've plateaued their growth, they're not worth 500. 10 times revenue for a company that's not growing that much is not going to fly in today's market. That company's worth 200 if they're starting to be quite profitable. But that's normal. You should expect that out of every 100 companies that start, 20 go out of business after two years, a certain percentage get to 10, 20, 30 million, a smaller percentage get to 50, a smaller percentage get to 100. It just keeps funneling down. That's normal. Not every market is a trillion dollar market and not every product is going to get 30% of its market.
49:39 Harry Stebbings? You've mentioned some incredible wins and accumulated personal wealth. I have a lot of founders on the show who talk about challenges with their relationship to money. How has your relationship to money changed over time?
49:51 Speaker 00 So actually, surprisingly little. I don't focus it on that much. Five years ago, the only car I owned was a used minivan. I'm not that into stuff. I am into experiences, so great travel, things like that. I'm absolutely willing to spend money on. But no, I mean, it's been a long time for me that I haven't had to worry about money, but I also just don't spend money to spend money. And so I don't have any problem with it all. I have no concern about the relationship with money. Some people are so focused on money that once they made money, they didn't know what to do. For me, that changed nothing. I enjoy what I'm doing. When people ask me, sometimes I'm at a college, a business school, they'll say, why are you still doing this?
50:31 Speaker 00 And my answer is, does anyone ask a really good NBA player who's 32 and who's made a ton of money, why are you still playing basketball? Why don't you retire? Like, no one would ask that question, right? Because he would say, yes, they do pay me a lot of money, but I love what I'm doing. And I can't think of anything else I'd rather do. So I'm going to do it as long as I can. And then eventually it'll end and I'll do something else. And that's exactly how I feel.
50:56 Harry Stebbings? Final, final one before the quick fire. Has New York lived up to the hype? And what like Europe has not, if we're blunt. And people say New York hasn't either.
51:04 Speaker 00 So Europe, so New York City has so outperformed the expectations, people have already forgotten it. So in 1996, the number one question I got running double click was, why aren't you in Boston? Boston is the tech center. You're giving me a perplexed look because you can't even remember that.
51:22 Harry Stebbings? I was born in 96, Kevin. I can't remember.
51:25 Speaker 00 That, you know, Dec and Wang had been in Boston. And so it was known as the tech city. And when we went public, we couldn't even find a lawyer in New York City that had ever taken a company public. And I said this at the time, but if you had said, wait a second, Kevin, what do you think that if 25 years from now, is there a chance that there'll be more tech jobs in New York than in San Francisco? And that we are now some quarters competing for the amount of money? You would have said, I'm sorry, that's impossible to imagine. And so New York has grown faster than any other city. It still doesn't have as many big wins as San Francisco, but don't forget, the big wins are from 15 years ago. We talk about Mongo and Datadog, they started in 2007. So what we're trying to decide is right now, are more and more smart people starting companies in New York? Absolutely. Are there
52:10 Speaker 00 five times as many venture capital firms? We hardly had any VC money. When I went out to raise money in Silicon Valley in 97, they said, we will not invest in you unless you move to San Francisco, which we weren't willing to do. Today, every one of those firms that turned me down for that reason, has an office in New York City. So that's the trend line. So yeah, New York is killing it and will be the number one company, clearly 15 years.
52:34 Harry Stebbings? What other $10 billion companies are there but Datadog and Mongo?
52:38 Speaker 00 Uh, so Etsy is in the same category. Give you some context. Five years ago, there was not one publicly traded company in New York City startup that was worth more than three billion. Now we have two at 25 or 30, one at 10, more on the way. So these things take time. But yeah, I mean, I was just in the Google office, they have 15,000 people in New York City. And I remember 20 years ago, people saying, oh, but there's no tech talent in New York. You can't, you can't start an enterprise software company here. But somehow they found 15,000 people.
53:08 Harry Stebbings? Do you worry about the centralization of AI talent in San Francisco?
53:11 Speaker 00 No, I think San Francisco absolutely has an advantage in AI. It stems from the fact that, you know, I just started a company in material science AI. And the university that dominates that space is Berkeley. And so Berkeley and Stanford are stronger than New York, than Columbia and NYU. And they've had companies and deep talent. So absolutely, San Francisco has an advantage in that area. But we're seeing, you know, 10 companies a week starting in New York. They're starting all over this country. Many of the smartest people are doing AI, and it will distribute more. What I always tell people when I'm traveling internationally, and they used to ask me, which cities are going to dominate in your country? It has nothing to do with tax policy, has nothing to do with anything.
53:56 Speaker 00 I say, people who went to the top 20 universities in your country, where do they want to live? Where are they going to move? That's going to be your tech center. And guess what? That number one place, those places people want to move is New York City. San Francisco is still a great place, and has history and many things going for it. So it's an amazing, incredible place. But I'm not seeing the tech talent in Miami, and I don't think it's going to get there. I'm not seeing it in Chicago. You know, don't forget, 15 years ago, the number one internet company on the, on the East Coast was AOL, based in DC. Is DC the tech hub that New York City is? Not at all. That's super smart people from Harvard, Yale, Princeton, MIT, they want to live in New York City.
54:34 Harry Stebbings? I could talk to you all day, Kevin. I am mindful of time. So I want to move into a quick fire answer. I say a short statement, you give me your immediate thoughts. Does that sound okay?
54:42 Speaker 00 Sure.
54:43 Harry Stebbings? Slightly weird and out there one. What's the secret to a very happy marriage?
54:48 Speaker 00 First of all, it's putting the time in and the commitment. I've been married for 32 years. You know, it's friendship at the core and a common purpose of, you know, hopefully, if you're doing it, raising kids. And we've been very lucky. I have three kids in our twenties. It's a big part of our lives. It's been amazing.
55:04 Harry Stebbings? How do you bring children up with such financial success to be humble and also hardworking and ambitious?
55:12 Speaker 00 Yeah. You know, you have to install that from day one and understand and treat them that way, too. I was, you know, with friends of mine and they said, maybe I shouldn't have given my 18 year old a $75,000 Porsche. And I'm like, yeah, of course you shouldn't. My kids don't have any of that. They graduated from college. They, they have to make it on their own. They hopefully go to good schools. You're installing that from day one.
55:35 Harry Stebbings? Tell me, what have you changed your mind on most in the last 12 months?
55:39 Speaker 00 You know, I thought there was going to be more of a recession. Other than that, you know, my, my opinions don't change dramatically because I really have to have this 10 year perspective, as I was saying earlier. So it doesn't change day to day. My industry focus, things like that.
55:53 Harry Stebbings? Why do you think there will not be such a big recession that you thought would happen?
55:58 Speaker 00 The combination of the stimulus, the fiscal stimulus, what the Biden administration has done, which doesn't get credit for, combined with the Federal Reserve, has been remarkable management. You know, I read the French press and they talk about Bidenomics and how do we compete with this, compete with it because it's so effective and our French companies are setting up factories in the United States and creating jobs. I think it's been remarkable management between those two. There's not a single economist that thought this was going to happen.
56:24 Harry Stebbings? Will Trump win?
56:25 Speaker 00 Either way, it's going to be 50 50. I think Biden's going to win, but it's actually going to end up being out of our hands. Either one of them has a huge health issue that could do it. If there is a, something happening from a geopolitical point of view that goes horribly wrong, that could change it. I think that the Substance and the success of the economy at the end of the day, combined with the fact that the Democrats are winning every single election that is occurring across this country and outperforming since the Roe v Wade decisions means that at the margin, the Democrats are going to win.
56:59 Harry Stebbings? What's the biggest piece of startup advice that you think's most BS? Like the most commonly said that you're like, oh, I can't believe this is still a trope.
57:07 Speaker 00 You know, move fast, yes, but if your product sucks, that's not good. So startups and business are a series of decisions and compromises that are situation specific. That's where judgment is important and that's where I do think investors and good CEOs play the role.
57:24 Harry Stebbings? What's the luckiest thing that's ever happened to you?
57:27 Speaker 00 Oh, by far financially, it was working with two other co-founders and starting Mongo.
57:33 Harry Stebbings? Is that luck though?
57:34 Speaker 00 Well, look, I had, it was my CTO, I was the CEO of DoubleClick and the CTO and I wanted to start, we started companies together. We had started one or two that didn't work and then we started Mongo. But the intellectual and execution of Mongo came more from them than from me. They built the product. I benefited even more than I deserved to, you know, making the decision to get involved with the internet in 96, which, you know, I thought was going to do well, but you know, I, I've had other thoughts over time that I thought were going to do well and they didn't. And that changed my life and my career.
58:05 Harry Stebbings? What do you know now that you wish you'd known the day you started investing?
58:09 Speaker 00 The judgment of seeing many things work and not work is how it makes you more decisive on just feeling like, you know, I'm just not feeling it and trusting probably my gut feel a little bit more. It just doesn't feel right. It doesn't feel right.
58:22 Harry Stebbings? Penultimate one, what are you most concerned about in the world today?
58:25 Speaker 00 Trump. For me, the single thing I'm worried about, I'm actually, the world from a safety and security point of view is, is actually okay. I'm obviously very biased on this. The single thing that I'm concerned about is Trump winning on multiple dimensions, giving away Ukraine, Supreme Court justices, very, very, very poor execution of every aspect of government, a level of corruption that I think would follow. That's the single thing that worries me the most.
58:50 Harry Stebbings? I think the thing that worries me the most is we've seen the normalization of corruption across so much of government, while we're almost not surprised anymore.
58:56 Speaker 00 So I don't agree. I don't think there's a single example in the cabinet of Biden after four years that you can point to where we could point and say, I think that's actual corruption.
59:08 Harry Stebbings? I suggest you look at the UK government.
59:11 Speaker 00 Okay, that's, I'm sorry, I'm not commenting on the UK.
59:15 Harry Stebbings? You're absolutely right with the Biden administration. In the UK, we've had some very interesting decisions made on a lot of different.
59:22 Speaker 00 Oh, that's a whole nother conversation that we should talk about. But, you know, from a corruption point of view, with the benefit of hindsight, I, you know, the Obama administration was extremely clean. And the Biden administration has been extremely clean. I'm not saying that they all did everything right in their policies. But from a corruption point of view, I don't argue that either White House had a problem.
59:43 Harry Stebbings? What was the most corrupt of the Trump administration?
59:46 Speaker 00 Well, I mean, there's 15 people that have been convicted of crimes that worked there. The National Security Advisor was convicted. So many people have been convicted in that administration and are serving time. There's many people in jail.
1:00:02 Harry Stebbings? Final one for you, Kevin. When you think about the 10 to 20 year time horizon for you and for the funds now, what does that look like?
1:00:10 Speaker 00 The business we're in does not scale infinitely. We're not trying to accumulate assets. So I don't want to be a $2 billion fund. I want to continue doing what we're doing. We may go bigger in some areas, like we have a deep tech practice. I would like that to get bigger over the next couple of years. So next time we raise a fund, if we could, I might increase the size a little bit just to increase verticals. But we're going to continue doing what we're doing. And look, I lead my life because I want to be enjoying it, having fun, you know, doing athletic pursuits, going to Burning Man, making great investments, helping entrepreneurs, spending a lot of time with my kids, you know, out there having fun.
1:00:47 Harry Stebbings? Kevin, I've loved this. Thank you so much for doing it. Thank you so much for sharing so many of the lessons learned and you've been fantastic.
1:00:54 Speaker 00 It was great to do this. It was a great conversation.
1:00:56 Harry Stebbings? I have to say, for me, the joy of doing the show is discussions like that, ones where you can really learn from many, many years of incredible wisdom and experience. I want to say huge thank you to Kevin for being such a fantastic guest there. You can check out the full video on YouTube by searching for 20 VC. We always love to hear your thoughts there. But before we leave you today, Cooley, the global law firm built 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 60 plus years working with VCs. They help VCs form and manage funds, make investments and handle the myriad issues that arise through a fund's lifetime. We use them at 20 VC and have loved working with their teams in the US, London and Asia over the last few years.
1:01:40 Harry Stebbings? So to learn more about the number one most active law firm representing VC backed companies going public, head over to coolie.com and also cooliego.com. Coolie's award winning free legal resource for entrepreneurs. And speaking of providing incredible value to your customers. Travel and expense are never associated with cost savings, but now you can reduce costs up to 30% and actually reward your employees. How? Well, Navan rewards your employees with personal travel credit every time they save their company money when booking business travel under company policy. Does that sound too good to be true? Well, Navan is so confident you'll move to their game changing all in one travel corporate card and expense super app
1:02:22 Harry Stebbings? that they'll give you $250 in personal travel credit just for taking a quick demo. Check them out now at navan.com/20vc. This podcast is sponsored by Squarespace. Squarespace is the all in one website platform for entrepreneurs to stand out and succeed online. Whether you're just starting out or managing a growing brand, Squarespace makes it easy to create a beautiful website, engage with your audience and sell anything from products to content all in one place, all on your terms. What's blown me away is the Squarespace Blueprint AI and SEO tools. It's like crafting your site with a guided system, ensuring it not only reflects your unique style, but also ranks well on search engines.
1:03:03 Harry Stebbings? Plus their flexible payment options cater to every customer's needs, making transactions smooth and hassle free. And the Squarespace AI, it's a content wizard helping you whip up text that truly resonates with your brand voice. So if you're ready to get started, head to squarespace.com for a free trial. And when you're ready to launch, go to squarespace.com/20vc and use the code 20vc to save 10% off your first purchase of a website or domain. As always, I so appreciate the incredible support and we have an incredible show on Friday, a 20 sales episode with the one and only Sam Blonde, one of the OGs of sales.
Previous 20VC: Postmates Founder Basti Lehmann on How the Uber Deal Went Down and How a $2.65BN Deal Turned into $5BN, Why Great VCs Add No Value and VC Value Add is BS Marketing & Why The Biggest Companies in History Will be Born Today and Replace Incumbents Next 20Sales: The Biggest Sales Lessons Scaling Brex to $400M ARR, Why Startups are Doing Outbound Wrong and How to Fix It & Why Demand Gen is the Bottleneck for all Startups and How to Solve it with Sam Blond, Former CRO @ Brex Page updated October 26, 2026 · transcript and summary are machine-generated
