20VC: The Pinterest Memo: Bessemer's Jeremy Levine on The Secret To Success within User Generated Content Plays, Where Most Investors Make Mistakes When Analysing Consumer Social and How The Pinterest Deal Wouldn't Have Happened without a Diverse Partners

Jeremy Levine is a Partner @ Bessemer Venture Partners, one of the leading venture firms of the last 2 decades with a portfolio including the likes of Pinterest, Shopify, LinkedIn, Yelp, Twilio and many more. As for Jeremy, five of his early-stage investments—LinkedIn, MindBody, Pinterest, Shopify and Yelp—grew into billion-dollar publicly traded companies. As a result of his incredible portfolio, he has featured on the Forbes Midas List for several years running. In Today’s Episode with Jeremy Levine You Will Learn: 1.) How Jeremy came to make one great decision and make one big mistake all in one rainy afternoon in Palo Alto? What was the story behind meeting the Pinterest team for the first time? Who was there? How did it go down? 2.) Market: How did Jeremy analyse the market at the time of the investment? What had been some core lessons Jeremy had learned on what made successful user-generated content plays? Where was Jeremy wrong in how he analysed the market? In what way is Jeremy surprised with how the market evolved? How does Jeremy analyse market timing today? 3.) Team: Jeremy has previously called Ben Silberman a "product visionary", what made Jeremy say this about Ben? How did Jeremy get over the concern of many VCs that Pinterest did not have a technical co-founder? Having seen Ben change over the last decade, what have been the biggest changes in Ben's leadership style over the last 10 years? 4.) Traction: When evaluating traction, where does Jeremy think so many investors make mistakes today? How should founders determine what is their core North Star metric? What gave Jeremy the confidence Pinterest could "cross the chasm"? How did the early Pinterest cohorts look both from usage and retention? What elements surprised and impressed? 5.) Pre + Post Mortem: What did Jeremy see as the likely reasons why Pinterest would not work? How did Jeremy think through what it took for UGC platforms to monetise at the time? Where was he wrong here? What did Jeremy see as the upside? What did he believe Pinterest could be if all the stars aligned? As always you can follow Harry and The Twenty Minute VC on Twitter here! Likewise, you can follow Harry on Instagram here for mojito madness and all things 20VC.

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

• 0:00Harry Stebbings?

  This is 20 VC with me, Harry Stebbings, and today is my favourite format of the show in any given month. Yes, it's the memo, the show where we break down the greatest venture deals of the last 20 years, all aligned to the core investment memo written at the time of the investment. And today, I couldn't be more thrilled to welcome Jeremy Levine to discuss his $10 million Series A investment into Pinterest back in 2011. As for Jeremy, he's a partner at Bessemer Venture Partners, one of the leading venture firms of the last two decades. And as for Jeremy's track, I mean, my word, five of his early-stage investments, LinkedIn, Mindbody, Pinterest, Shopify and Yelp, have grown into billion-dollar publicly traded companies. I do also want to say a huge thank you to Sarah Tavell for providing some fantastic question suggestions today. I really do so appreciate that.

• 0:43Harry Stebbings?

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• 1:26Harry Stebbings?

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• 2:10Harry Stebbings?

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• 2:51Harry Stebbings?

  solutions give customers a productivity advantage of 20 times their competitors at up to 85% lower cost. You can get in early on Nexa 3D and other unique opportunities at rcrowd.com/memos. The rcrowd account is free, just go to rcrowd.com/memos. But that's enough for me. So now I'm very, very excited to hand over to the one and only Jeremy Levine, partner at Bessemer Venture Partners.

• 3:20Speaker 01

  You have now arrived at your destination.

• 3:23Harry Stebbings?

  Jeremy, this is such a joy to do. I've wanted to see this one for a long time. So thank you so much for joining me today, Jeremy.

• 3:28Speaker 02

  It's such a pleasure. It's nice to be back here with you.

• 3:30Harry Stebbings?

  I know. It's been a long time since our first one, but we're going to unpack the original Pinterest memo that you wrote back in 2011. And I want to start with some history, with some context. So tell me, what was the first meeting? Paint that picture and context for me around those first meetings with the team.

• 3:44Speaker 02

  Yeah, so it was in early 2011, and it was a day where I made one great decision and one terrible decision. And so, as I often do, I live in New York, but I do a lot of investing in California. And I probably 15 or 20 times a year, take a 6 a.m. flight out of Newark or JFK, land in San Francisco around 9:30, do a set of meetings, and then go home on the four o'clock flight because I really like sleeping in my own bed. And I was working with my then colleague at the time, Sarah Tavell, who is based in our California office. And I emailed her, called her the day before, said, hey, I'm coming tomorrow morning for a 10 a.m. meeting with Miriam Nefesi at Minted, which was a small startup, and why don't you come and join me? And so Sarah joined me and we Met with Miriam and a good chunk of her team and we were evaluating what would have been, I guess, the Series A investment in Minted. And we spent half the day with Miriam. We had lunch

• 4:28Speaker 02

  with her. Then afterwards, we discussed it and we decided we were not going to pursue an investment in Minted. We were just too nervous about how backend loaded their revenues were in the fourth quarter of every year. And it was just so hard to assess the business, having been through, you know, all of one real holiday season. And I was a little bit depressed because I'd spent basically a whole day traveling in California and we decided not to move forward. Of course, in hindsight, we should have invested in Minted. That turned out to be a great business. And I got to know Miriam years later on the board of Yelp. But it was literally like a raining, whatever it was, a Tuesday afternoon or something. And I had a couple hours before my flight. And I was just going to go to the airport and kill some time. And Sarah said, hey, you know, there's this company I met down in Palo Alto. It's super early, but I'd like to introduce you to them. And we can go spend some time there. And I said, sure, I've got literally nothing better to do. And so we drove down to Palo Alto to meet with Pinterest. But it was a super rainy day. And

• 5:13Speaker 02

  sometimes, the 101 is a nightmare, driving from San Francisco to Palo Alto when it's raining. And so we were just in bumper to bumper traffic. And I think we got to the Pinterest office like around 2:45. And my flight was at 4pm. And so we sat down and we had a sort of gracious introductions. But I said to the team, I'm like, guys, I apologize. But in like 20 minutes, I have to go because I have a flight that leaves at four. And they said, no problem. We'll sort of talk quickly. We ended up spending maybe two hours in the meeting. So I missed my flight. I ended up going on the red eye, which was painful later that day. But it was totally worth it because that obviously led to an investment. And so it was not for the faint of heart, because the team was in perhaps the dumpiest apartment in all of Palo Alto. It was one of these sort of ground

• 5:53Speaker 02

  floor garden apartments. I'm pretty sure most of the people slept in the apartment, like that was their house and they worked in the apartment. It was dingy and kind of gross and didn't smell that nice either. But the passion and the vision for what they showed us on slides was super compelling.

• 6:07Harry Stebbings?

  Can I ask, Jeremy, was there a moment or an unlock in that meeting when you went from, I'm going on my flight home, back to my nice bed, to, hang on a minute, I'm going to miss this flight? Was there an unlock when you were like, oh, my gosh?

• 6:18Speaker 02

  Yeah, I mean, at some point, you make a decision as you watch the minutes start clicking closer and closer to the point where you know you're not going to make it. You have to make a call and say, all right, I have to leave here or I'm not. But for me, like, the key connection was that this is 2011, and in 2004, 2005, and 2006, I made a bunch of investments for Bessemer, all focused on the same theme, which was, I wouldn't go so far as to say controversial, but unpopular at the time. And it was an idea that if you build a media business with all the content generated by users or consumers, you can end up with a really powerful company because media businesses in general are pretty profitable because they make content once and then they sell it over and over again. And the idea that you could build one of these media businesses without even having to pay for the content, the content is free, was extremely intriguing to me.

• 7:02Speaker 02

  And so that led to investments, literally six years before, in Yelp, in LinkedIn, in Wickeia, in OLX. And so I had done a whole bunch of these. By the end of 2006, which is when we made the LinkedIn investment, the insight was no longer uncommon. And so if you look back at history, starting in 2007, lots of investors were throwing money at the idea of user-generated content business on the internet. And that's when I kind of lost interest. I'm like, OK, if everyone's doing it, I don't want to be doing it anymore. It's much harder to make great investments, even if the companies are great, when you have to pay through-the-nose prices. So I sort of backed away from it. But there was one company I had tried to invest in for years and just couldn't find. And the idea was user-generated content around products because I felt like products are so incredibly monetizable, it's so closely connected to commerce,

• 7:47Speaker 02

  that I wished that company had existed. But frankly, it didn't. The closest thing, back in the 2005 time period, to a product-oriented, user-generated content company was eOpinions. And you're probably too young to know eOpinions. I think it might have folded before you were even born, Harry. But eOpinions ultimately merged with another company called DealTime, and then eBay acquired it. And so that never materials. And I actually think eOpinions was a genius idea, but it might have been 15 years too early for the internet to be ready for it. And so when Ben was describing his vision for Pinterest, it hit me like a ton of bricks. I'm like, this could be that company that got away, like, it just never existed back then. And it wasn't only about products, Pinterest at the time, but so much of what people were pinning and getting inspired by were products. And so I thought, I know. This business model, this is really powerful if you get the flywheel spinning.

• 8:32Speaker 02

  And while the data were scant and very small, and the number of users was maybe it was in the six figures, but it certainly wasn't in the seven figures. You could see the pattern of people just falling in love with it and using it over and over again, which was quite similar to the pattern of some of these other businesses like Yelp. Yelp had an early set of users who they called the Yelp elite because they were so passionate about the product. And it wasn't because they got paid or it wasn't because they were getting some kind of rewards. They just loved it and you could see the same type of segments emerging in some of that early Pinterest data.

• 8:59Harry Stebbings?

  Before we dive into the deal itself and, you know, a lot of the other surrounding areas, I would love to just touch on an element you said there about kind of losing interest when it became much more popular narrative and then opinions in terms of maybe being the wrong time. I'm always questioning myself around market timing. How do you think about the importance of market timing? And how does that play into your investing mindset, do you think, today?

• 9:18Speaker 02

  So there's lots of styles that can be successful for investors and you kind of have to know yourself. And so I talk about this with some of my partners at Bestmar all the time, but some of us, especially like the former athletes among us, are super competitive. And when we see a contest, I disparagingly call them beauty contests. But when we see a sort of a scrum around an investment opportunity where there are three or four or 19 firms who all want to make an investment, some of my partners derive energy from that process. And they're like, oh, it's a competition. I want to win the competition. I want to become the investor. And when I see that, I just get deflated. I'm like, ah, what I really love to do is analyze the business and think about the possibilities. I don't like to perform. I don't like to sell. And so the exercise, when it's highly competitive for an investor, becomes a sales exercise, not an analytics exercise.

• 10:02Speaker 02

  And to me, that's much less rewarding. And so, like I said, I disparagingly call these things beauty contests. Like, I'm not interested in entering beauty contests. I don't find them fun and they sort of suck my energy away as opposed to produce energy. And so while it can be clearly hugely profitable to invest in Uber trends that everyone agrees in, and there's a reason why everyone agrees in these trends, because it's happening. It's clearly happening and these things are taking a bigger and bigger hold on the economy and the tech world in particular. What I like to do is I like to try to find trends that people kind of are ignoring or don't believe in. Because then, when I find a company that's pursuing something consistent with that trend, there aren't 65 other VCs lined up at the door of that company. And it's just much more interesting. It becomes, like I said, an analytic exercise and it becomes hugely rewarding if a year or two or three after we invest,

• 10:46Speaker 02

  then everyone becomes enamored with the trend because not only does it mean that we can invest in great companies at reasonable prices, but then it also means a short time thereafter, everyone is excited about the trend. And so those same companies can then get access to much cheaper capital on really great terms, which benefits not only the company and the entrepreneur, but us as existing stakeholders. So it comes down to this idea of like, if you can be contrarian and correct, like that's when you make phenomenally great investments. It's just really hard. It's easy to be contrarian, but it's easy to be contrarian and wrong. Like, there's a reason why lots of other smart people are thinking the same thing. And if you have a different thought, you better be damn well sure you're right. Otherwise, you're just gonna look silly when it's all said and done.

• 11:25Harry Stebbings?

  I love your style in terms of really going deep on the business and the analysis and really spending the time there. My concern is with the proliferation of capital that we have today. The timelines are just so much more compressed. How do you feel your style translates to today when the proliferation of capital is just at a level that we haven't seen before?

• 11:41Speaker 02

  Yeah, it makes the beauty contests even harder because it used to be they could be multi-week beauty contests and you at least had an opportunity to let your real personality, your real strengths and weaknesses shine through to determine compatibility with an entrepreneur. When the beauty contests are compressed to literally two days, it's more like a shotgun wedding and no one really knows what they're getting into. And so it's a little scary, I think, for all parties. And so it's a fact of life. Many of the best companies have many options for where to get capital. So we compete and I think we do pretty well. But it's so much more fun when you think you've sort of found an undiscovered gem that other people are just not interested in. And so when you're willing to go off the beaten path, and historically that's been both in terms of areas, but also in terms of geographies, it's just easier. It's a more pleasant process. You can actually date someone for a while before you have to get married.

• 12:26Speaker 02

  And I think that suits both parties really well and those are the circumstances I really enjoy. They're hard to find and they're increasingly hard to find because to have an idea that other people don't share when there's 25 other venture capital firms out there, isn't that hard? But when there's 250 other venture capital firms out there, chances are someone else is thinking about the same idea. And so competition is tough. It motivates all of us, but it's the most destructive force in capitalism, no doubt about it.

• 12:49Harry Stebbings?

  Can I ask, what idea do you think you have now that others don't share?

• 12:52Speaker 02

  As far as I know, I'm not being remunerated in any way, shape or form for this podcast. And so that is an expensive insight that you have to pay top dollar for.

• 13:00Harry Stebbings?

  But no, no one listens to the show. You've got no VCs listening. No, I'm totally with you.

• 13:06Speaker 02

  Then there's no sense in sharing it anyway, is there?

• 13:08Harry Stebbings?

  That was a totally cheeky one of me. I do want to go back to the Pinterest deal itself. So let's like just lay the foundation. It's like, what was the Pinterest series A deal? And what was the structure there? And then we can dive in.

• 13:17Speaker 02

  It actually came in two steps, if I remember correctly, and this is 10 years ago now. But the first step was a simple $10 million investment. It was a $40 million pre-money valuation, $50 million post-money valuation. I think Bessemer was eight and a half or nine million of the 10, the existing investors put up the balance. And then there was a second component to it whereby a bunch of the early seed investors, they had invested in something else. It was actually originally called Tote. And so before I even came across Pinterest, the founders had launched this product called Tote. And it was not a success, but there was one particular feature inside of Tote that consumers really liked, which was essentially the idea of pinning or saving something. And so much to their credit, the founders sort of did a, I wouldn't say a sharp pivot,

• 14:00Speaker 02

  but changed the business around that feature and launched Pinterest. And so many of the very early investors had been in it for a while. I think their initial investment was, you know, at like two pre or three pre. And I think at one point, the founders actually, they were sort of desperate for money while trying to make this pivot and they, they agreed to lower their salaries. I think their salaries were like $65,000 and they said, well, lower them to $40,000, but please, you know, give us a little bit more money and some more time. So when we came along and we're investing at a $50 million valuation, which was, I think 10 times more than what some of those seed investors had paid a year or two before, a bunch of them wanted to sell. And so we did a second financing within just a few weeks of the first, where we put a little bit more money into the company. And then the company actually bought back some of the stock from those very early investors.

• 14:45Speaker 02

  It wasn't a large amount, but it might've been another million dollars. And so it was probably the best use of capital the company ever could have come up with, given what that stock ended up being worth not that many years later. But look, sometimes when you're up 10x, it's hard not to take something off the table. So I can't really criticize any of those seed investors who did it. And most of them kept meaningful chunks of their positions too. So they did just fine in the end.

• 15:03Harry Stebbings?

  And you mentioned earlier how you thought about kind of products and how closely it tied to the transaction. I'm intrigued kind of with that foresight, obviously being so right. When you did the analysis at the beginning in terms of kind of market evolution, are there elements that maybe were surprising to you in terms of how the market evolved? Or in terms of maybe where you were wrong?

• 15:20Speaker 02

  I think the biggest thing we got wrong was just how big it could be and also how global it could be. We really weren't thinking about that at all. I expected more of the initial business to be more closely related to transactions. In fact, at one point many years ago, Pinterest flirted with third-party vendor. I think it was called Skimlinks or Viglinks, but it was one of these affiliate commission monetization tools just to see what would happen. And I always assumed that the monetization would be more connected to actual transactions. Today, obviously Pinterest is a media platform and most of its revenues come from advertising. Is it possible that one day it gets closer to transactions? I think so. And in fact, you can see in the product, they like to make it easier and easier for consumers to transact in Pinterest. And they have shoppable pins and things like this. I thought that would be necessary to monetize.

• 16:05Speaker 02

  It turns out that it's not. I think it's necessary important for consumers to have a great experience, but has been less critical to monetization.

• 16:10Harry Stebbings?

  Yeah, no, I totally agree in terms of especially kind of the market and just appreciating how large it is. When you were also making the investment, you know, the landscape itself is important to address. How did you think about the competitive landscape at the time and how did that factor into your thinking?

• 16:24Speaker 02

  Yeah, so we'll touch on the competitive landscape and then there's one other really important topic I want to come to, which is just sort of the team and their backgrounds relative to what was happening back in 2011. But on the competitive landscape, there were two other companies that we spent a lot of time looking at. One was called Supply and it was spelled S V P P L Y. And the other one was called The Fancy and they had similar concepts. The idea that you could catalog a bunch of stuff that you saw online by saving it to a board of some sort or another. And when we first invested, we and the founders tracked Pinterest progress against those two other companies. But I think it within eight or nine months, they just stopped tracking those companies. Pinterest had grown so much more quickly and had far surpassed those other offerings. And when you ask why, I think so much of it is super subtle.

• 17:08Speaker 02

  The difference is if you look at the three companies from 50,000 feet, aren't that significant. The concepts were really similar, but it goes to show the importance of extraordinary attention to detail on all the subtleties to make what could be just a good user experience into a phenomenal user experience. And hats off to the Pinterest team. They just got that right with obsessive focus on making sure those details really worked for consumers.

• 17:29Harry Stebbings?

  Yeah, no, I'm totally with you. In terms of that kind of product experience and the focus there, you obviously mentioned kind of the team obviously being the enablers of it. So I do want to kind of hand over to you on that. And I guess what drove the excitement around Ben and the team and gave you the conviction that you had?

• 17:42Speaker 02

  Yeah, so when we invested, it was controversial for a few reasons. One is the sort of the flavor de jour for Young internet founding teams included a highly technical founder and Pinterest had no technical founder. And so I think when a lot of VCs met them, they're like, wait a minute, like, who's building the product here? And the answer was, it was like a hodge podge outsourced group of people. There was a part-time engineer. Like, there literally was no technical leadership in the company. Obviously, they managed to build something really compelling, but it wasn't because they had a young Mark Zuckerberg as a founder coding away. They had to sort of beg and scratch and find talent wherever they could to actually build the product that was in their heads. So that was a hugely unusual and somewhat controversial move. And I think the other element of the story that's really

• 18:25Speaker 02

  important to share is that the product was used at that time, probably by women in 90% of all cases. The male user base was tiny. Even to this day, I think Pinterest is still more often used by women than men, but it's much more balanced. At the time, it was extraordinarily imbalanced. And so in 2011, if you looked up and down Sand Hill Road, it would be very difficult to find a woman. And yet, I had been working at Bestinmer for about five years at that point, every day with Sarah Tavel. Sarah's now at another venture capital firm, but she got her start at Bestinmer and we worked super closely together. And so, you know, it's sort of a theme de jour in the venture and tech industry to talk about diversity. But I have to say, I don't think I would have met the Pinterest team had it not been for Sarah, because she herself was a user. And most other VCs, they just

• 19:09Speaker 02

  didn't get it, because they weren't in the core demographic of the user base. And so it was a combination of Sarah's interest in the product as a user, and my experience with other user-generated content businesses from five or six years before, that allowed us to sort of put the peanut butter insight together with the chocolate insight and say, oh, wow, this is something really special and magical. And so when people talk today about like, the power of diversity, in my mind, like, that is a perfect example. Had we not had, at least on a gender basis, a diverse duo of people looking at the investment, I think we would have missed it too. Thankfully, we didn't. But somehow, I think virtually every other firm on Sand Hill Road did.

• 19:42Harry Stebbings?

  I mean, that's fantastic to hear about Sarah. And I spoke to her before the show, actually, and she gave me many questions, which we will get to. But that's great to hear. Can I ask, on the technical founder's side, like bluntly, it's something that I would have definitely tripped up on, like, having none in a hodge podge building. How did you get comfortable with that?

• 19:56Speaker 02

  I mean, ultimately, the proof is in the pudding. And so while none of the early Pinterest team was obsessively experienced in building a tech product, they just had really interesting insight into product and design. And Evan, who I think was largely responsible for collaborating with Ben on the whole, what now is like a very common, but sort of grid, ever-flowing format that you see on products all over the place, like, he's an architect by training. I think he was studying to be an architect at Columbia before moving out to the Bay Area, and he worked at Facebook before Pinterest. And so in my mind, it was like, the product vision was there, and that, yes, they were going to encounter tons of technical challenges, particularly on the scaling side.

• 20:38Speaker 02

  The world had watched Twitter go through so many fails and keeping its product up all the time. And I expected they might run into some of the same problems. But the product itself, like, it worked. It wasn't completely flawless by any stretch of the imagination, but it was compelling. And so the fact is, like, they managed to get it built. And so the bet was, wow, they got this far. On the strength of the idea and the product, they'll find a way to recruit other talented engineers and technical people to complement the team they have. And sure enough, they did. And of course, as the company grew and became more well-known, it just got easier and easier to attract some of that technical talents. And eventually, the problems didn't get solved. They also had one other clever thing, which was part, I think, accident and part genius. And that was, in the early days of the product, they put up a velvet rope in front of the sign-in flow,

• 21:23Speaker 02

  so it wasn't open to the public for anyone to sign up. In order to use the product, you needed to be invited by another Pinterest user. And I think, honestly, the main reason that they did that was because if they let anyone sign up, the thing would have fallen over and it would have gotten crushed by the onslaught of traffic. And by forcing people to get invited by someone who's already in the service, it just allowed them to control the pace at which it grew. Other companies have done something similar, like Facebook, when it was growing in its very early days, launched university by university, which had the same benefit. They could control the pace at which new users flooded the system. So it wasn't entirely innovative, but it was super effective. And then it had this other side benefit, which is, in addition to slowing the onslaught of traffic that would have otherwise come, it also essentially forced each user to hear about the product from a friend.

• 22:07Speaker 02

  And the friends would often explain how they used it and why they used it. And so it allowed Pinterest to take advantage of its user base in educating its future new users on what it meant to pin something. Eventually, once they took the velvet rope down and anyone could just sign up for the service. Honestly, I think the newer users started to understand the product much less well than the first iteration of users. And so eventually Pinterest even had to change some of the lingo because like, what does it mean to pin something? If your friend explains that to you, you'll get it. But they changed the adventure to just save, which obviously is a much more intuitive verb for what you're doing. And so I think they, I don't want to say that they could be a little lazier, but they could certainly rely on the early users to help evangelize a product because of that velvet rope.

• 22:48Harry Stebbings?

  Speaking of that self-education on the user side, I mean, I think for me, that would be a moment when you're like, wow, this is really working, especially if you saw that in the wild, like educating each other in terms of usage and behavior patterns. Like for you, you know, I had Jeremy from Lightspeed on the show discussing Snap recently. And he said, when they became number one in Norway, it was a clear inflection point in terms of the spread of Snap and it being a monster in the making. Was there a moment for you in Pinterest journey when you were like, wow, I mean, this is working beyond belief and we really have something on our hands here?

• 23:17Speaker 02

  I don't know that there was one particular moment. I think in that first year or so after we invested, the business was growing like 50 or 70% in a month. It was just extraordinary. But when you're at 100,000 users, wherever they were in the earliest days of our involvement, and you go to 150,000 users, it just doesn't feel that big. But it turns out that if you compound at 50 or 70% a month for 12 months, it makes a big difference. And so I always like to joke that the Wikipedia is the biggest overnight success story that took 15 years to achieve. And I think in Wikipedia's case, it grew like 6% a month, but over literally a decade. And you know, the law of compounding is if you can grow at 6% over a decade, it's like that old elementary school brain puzzle where, you know, what would you rather have?

• 24:02Speaker 02

  A million dollars or a penny today, two pennies tomorrow, four pennies the next day, eight pennies the next day, and it keeps doubling for a whole month. And because those numbers start so small, a lot of people's intuition says like, oh, of course I'll take the million dollars. But in fact, if you do the math out, if you take a penny and you double it for 30 days, you get two to the 30th, which is well beyond the billions. I think it's into the trillions. And even when you divide that by 100, because you want to go from pennies to dollars, it's still a much, much bigger number. And so I think the same thing happens with a lot of companies. It's not about growing really fast, really quickly. It's about building an engine that will compound over time and sustain. And so if you can grow at five or 6% a month, but for 10 years, you're going to be massive. But you're never going to go from small to big overnight. It's going to be a very gradual process. It's like watching a child grow up. If you see the kid every

• 24:47Speaker 02

  day, you don't notice it. But if you leave for a year and come back, like, oh, my God, that kid is unrecognizable.

• 24:51Harry Stebbings?

  So I agree in terms of that appreciation of kind of go slow to go fast and actually the power of compounding on growth. The challenge that I often hear back from founders is, I get you, Harry, but I show the VCs and they look at my cohorts and they're going, oh, it's growing 12%, not 25%, which is what benchmark and market standards say. For founders who have that mindset of like, oh, I need to get that number for the VCs to be excited. What do you say to them?

• 25:14Speaker 02

  They're talking to the wrong VCs. Tell them to come talk to me. Now, that said, if you're growing at 7% per month, particularly off a very small base, it is hard to get a lot of excitement for what you're doing unless you can articulate how and why you can sustain it. And so you have to be able to understand what exactly is causing that growth and why is it such a deep well, or why is there such a deep well of future users that you should be able to continue to grow at that rate for a very long time to come. By the way, even Pinterest, which obviously has grown to be massive and has hundreds of millions of monthly active users today, it hit a few speed bumps along the way. Like, while the first year or so after we invested, it did grow really, really fast. There were moments where it hit air pockets and the growth paused. And I'd say the other thing that's really remarkable about the team was that that didn't cause them to throw their

• 25:57Speaker 02

  hands up in the air and say, oh, well, it was a good run. We got this far. Too bad. They went and solved the problem. And in many cases, it wasn't one silver bullet that suddenly unlocked another horizon of growth. It was dozens of little things that each improved the numbers by 0.1% or 0.2%. But when you have this culture of constant iteration and experimentation, those little 0.1% and 0.2%, they add up. And next thing you know, you're back to driving really consistent growth again.

• 26:23Harry Stebbings?

  Totally with you, especially on kind of the point one and point two is again compounding. You know, if we think about kind of that usage growth as one element, the other element is, as we both know, kind of the dangers that come with leaky funnels on the retention side. What gave you the confidence that we had an incredibly retentive sticky audience in the earlier days when you made the investment in Pinterest?

• 26:42Speaker 02

  I mean, the numbers were small, but you could see it in the numbers. The consumers just loved the service and kept coming back. I think there was a chart in the initial pitch deck they shared, which was, it was a distribution. So this is before the days of people being obsessively smart about cohorts and how to think about cohorts. But they showed a chart that showed the number of users who've visited once in a month, the number of users who've visited twice in a month, three times a month and so forth. And it was a series of bars. And then there was one on the far right, which was like 20 plus times a month. And the 20 plus times a month bar, I think, was as high as any of the others. Would show that like some people just love this product and kept coming back to it. And I think the other mistake I think people make in evaluating internet products is that everyone thinks of Facebook these days as the gold standard.

• 27:25Speaker 02

  And Facebook or Instagram, from its pretty early on in its inception, would start broadcasting a particular metric, which was DAU divided by MAUs. And so the number of users in a month who were active on a daily basis. And Facebook had this incredibly impressive metric, which was, it was like 50% of them. 50% of the people were using it on a daily basis. And if you think about the core of what Facebook is, it's fundamentally about keeping in touch with your friends. And like humans are inherently social and we like to talk to our friends. And it's an activity we do every single day. Not necessarily the same friend or friends every day, but we all talk to some friend or friends every day. And so it's not surprising that a service designed to help us keep in touch with our friends was being used every day. Pinterest is not that. Pinterest is not an inherently social service.

• 28:09Speaker 02

  There's social elements to Pinterest for sure, but Pinterest is a place that you go to get inspired, often to do things that are not online, they're offline. And that is not inherently a human activity that we do every day. Thinking about where we might want to go, what we might want to cook. A gift we might want to buy, even planning our wedding, whatever it is, that's an activity that we might do once or twice a week, but not every day. And so I think one of the challenges in evaluating any business, and it was certainly a challenge as we thought about Pinterest in the early days, is what is like the ceiling on how much a product can be used? And if you compare everything against the human social interaction, which happens every day, in fact, multiple times a day, there are many other products that will look much less addicting by comparison. But it doesn't mean they're any less powerful if, in fact,

• 28:51Speaker 02

  they're approaching whatever that theoretical ceiling is for their use case. And I think in the early years of Pinterest, seeing that something like 40% of the users who had ever signed up were using it month on month on month relative to most consumer services was unbelievably impressive. Relative to the social communication services like Skype in its early days, it wasn't because people do like to talk to their friends every day. But I think figuring out what the relevant benchmark is really important, and it scored really well.

• 29:18Harry Stebbings?

  How do you advise founders in terms of determining that? Because I find people always love the silver bullet of, oh, it's DAU to MAU. And people are like, oh, great, I have that as that's the guiding metric. But as you said, it's wrong and it's fundamentally misleading because not everything is Facebook in terms of the behavioral patterns that are aligned to it. So how do you advise founders in terms of determining the metric that guides their success and how successful they are?

• 29:40Speaker 02

  I think you have to put your thinking cap on and be a little bit creative about it. But I think you have to decide, okay, if I'm building this service and this service is useful to a consumer three or five or seven years from now, how often does that consumer need to use the service for me to feel like it's an actual part of their life? And if you happen to be building a service that's a daily use, that's amazing. And clearly, as Facebook and Instagram have demonstrated, or WhatsApp, a daily use case service is phenomenally valuable. But there's also enormous value in stuff that's used less frequently. And you just have to figure out what makes sense logically. And then you have to commit to that as your North Star and say, okay, we're going to drive the features in our product that will help. Reach that target. And if you take a product that's not inherently about social

• 30:21Speaker 02

  interaction and you start driving toward a DAU use case, you're going to start building in all sorts of social chat features in the product. And guess what? What you're building is sort of a second rate social network and the world doesn't need another one of those necessarily. And so you have to be careful because wherever you set that north star, you're going to be led in that direction and you're going to be tempted to create product features and enhancements that will drive that behavior. And so you've got to pick that carefully.

• 30:44Harry Stebbings?

  Yeah, no, totally with you in terms of like the selection and the importance of it. Can I ask one final thing on Ben before we move to pre and a post mortem, which is like, obviously people and leaders transition and change over time a lot. When you look at the evolution of Ben as a leader, what were the biggest changes in Ben as a leader over time, do you think?

• 31:01Speaker 02

  He was a really young guy when we invested in the company. I don't even think he's 40 now, so he wasn't 30 then. And so it's been amazing. He's not the first person I've seen grow from a 20 something to the CEO of a multi-billion dollar company. I saw Jeremy Stopman do it at Yelp and I saw Toby Lutke do it at Shopify. It's perhaps the coolest thing to watch and that I think people's true personalities come through more and more as they grow in stature and confidence. And Ben continues to be himself. He's such a pleasure to work with and interact with. He remains super humble, super focused on building Pinterest to be the business that he wants it to be. And so I actually think he's sort of stayed the same more than anything else. Now, he's had to learn to do a whole bunch of things that he didn't need to do when he was leading a six person

• 31:43Speaker 02

  company in a crappy Palo Alto apartment. But I think the business wouldn't obviously be what it is without him. And I think his super strengths are his ability to innovate and come up with product that consumers love to interact with. And I hope and I believe he'll continue to do that for many years to come. As the business gets larger, there's a thousand other things to worry about. And so obviously, one of the critical things is then being able to recruit, attract and retain really talented people to cover those things too. And he's done that extremely well also. But yeah, he's inspiring. He's also super demanding. And I think it's made for a really nice and really talented team there.

• 32:18Harry Stebbings?

  I mean, before we move into the quickfire, you mentioned Sarah Tavel earlier. I spoke to Sarah before the show and she said, you have to touch on the scenario planning exercise that we went through for Pinterest. So if we start on the good in 2011, if I were to ask you at the time, if all the stars align, what does this look like? What would you have said?

• 32:35Speaker 02

  I mean, at that time, in 2011, LinkedIn was still a private company. And LinkedIn, when it went public, I think in late 2011, if I remember correctly, or maybe it was spring of 2011, it sort of opened the floodgates for the second generation of publicly traded internet companies. The first generation had mostly gone public 10 years before in the internet bubble. And there was a bit of a exit desert for consumer internet in between. And so from the first generation, Amazon was still around in 2010. I think it might have had like a $30 billion market cap. eBay was around and Yahoo was around. And most of the other stuff had already hit the skids. Some of the online travel businesses were still in existence and doing pretty well. But to be worth a billion dollars was extraordinary. Like, it so rarely happened.

• 33:19Speaker 02

  Literally, just a couple of months later, LinkedIn went public. And I think its initial market cap was four or $6 billion when it went public. But I think to dream about anything beyond a billion or maybe $2 billion was like impossible. Whereas these days, you can't go into a coffee shop in San Francisco without running into at least two founders who have companies valued at a billion dollars privately. And so the world has changed basically by an order of magnitude since then. And so the idea that Pinterest would ever have, I don't know what it has now, a 40 or 45 billion dollar market cap was completely unfathomable.

• 33:48Harry Stebbings?

  Got you. Okay, so that's on the upside. On the flip side, you know, it's always important to do like a pre-mortem. What were your thoughts around the core reasons why it might not work?

• 33:56Speaker 02

  So, one, it was tiny. And so with a media business, it's a little bit like a birthing process to get to the stage of monetization. And it's sort of like a venture capital cliche, which is grow, grow, grow. Don't worry about making any money. And while that sounds good or scary, depending on your perspective, for a media business, it's completely out of necessity. Because if you go to an advertiser, even with a silver platter, asking to take their ad dollars to advertise against your audience of 100,000 users, you'll get laughed out of the room. No advertiser in his right mind is going to spend the time to understand your media platform to reach 100,000 users. And critical mass in the US is probably around between 5 and 10 million users. You need to get there before you can get the first dollar of advertising revenue. So the first big question mark is, can you get to 5 or 10 million users?

• 34:40Speaker 02

  Well, when you're at 100,000, that means you have to grow your business 50 to 100 times before you can make the first penny of revenue. In hindsight, after you get there, it doesn't seem so bad. But looking ahead at that challenge, it's incredibly daunting. And so the first thing you have to assume is you're just not going to get there. And therefore, you can't monetize. And therefore, you'll have no revenue. And therefore, you have no business. And the chance of that for any business with 100,000 users is really high. And so I don't have the memo in front of us, but you can see we have it on our website. I think bvp.com/memos. And the chance of it being a big zero for a company at that stage is at least 25 or 30%, which means that the chance of it working is also not going to be huge. But of course, if it does, the value more than makes up for the likelihood of it being a giant zero. And then even if you do get to five or 10 million users, you then got to convince advertisers to buy.

• 35:25Speaker 02

  And that wasn't obvious at the time either. Because there's so much connection to commerce in the Pinterest platform, I thought there was a pretty good shot. But until you do it, you haven't done it. And by the way, Pinterest was at zero revenue for the first several years after we invested. I think in the first year they tried to monetize, I think they made $40 million of revenue. That was extraordinary. I'd never seen anything like that before, to go from zero to 40 million of revenue. Now, there are many other companies that have done it, but it tends to be a pretty small group of elite companies that do that. And I think the next year after that, it was well into the nine figures. So in fact, it did work. They got to the critical mass to monetize and then the monetization worked. But until it happens, you just don't know.

• 35:59Harry Stebbings?

  I did not know zero to 40 million in a year. That's pretty incredible. I do want to move into my favorite though, Jeremy, which is the quickfire. So I say a short statement around Pinterest, of course, and then you give me your immediate thoughts. Does that sound okay?

• 36:10Speaker 02

  Okay.

• 36:11Harry Stebbings?

  So what's the most challenging moment of the Pinterest journey for you?

• 36:14Speaker 02

  The most challenging, ah, there were a few. I mean, honestly, in the early days, we wrestled a little bit over to the extent that the founders and the investors disagreed, who would ultimately have control. These days, it's pretty commonplace for founders to have all sorts of super control over their companies. It was much more rare a decade ago. And so there were some stressful conversations about that. That's probably the biggest thing. In the end, when everything works out, it doesn't really matter who has control. It's irrelevant. It's only if things don't work out. So thankfully, we never had to go down that door.

• 36:41Harry Stebbings?

  Tell me, if you were to choose one thing above any else that drove their success, what would it be?

• 36:45Speaker 02

  The team, no doubt about it. I think they invented things that didn't exist on the internet before, which have since been copied 100 times over. And there are just so few people who can create brand new ideas out of nothing. And the Pinterest team was one of them. And so that sort of problem solving mentality and innovative mentality, that carries you a really long way. Because even when you hit some other brick wall, you can creatively brainstorm your way over it, through it or around it. And they did that a whole bunch of times in the life of this company.

• 37:11Harry Stebbings?

  Speaking of the innovative product mentality, how do you advise founders in a world where Facebook can spin up a team, copy your product, and then have it out in a week? How do you advise founders on that today?

• 37:21Speaker 02

  There's no one answer, but I think there are a whole lot of techniques and tactics. One is, I probably wouldn't do something that's like square in the middle of Facebook's roadmap, because they almost certainly will do what you just described. Two is, I think a lot of people, particularly around their early financings, like to go tell the world about it. It's validation. If nothing else, it's nice to have your mom read about you in TechCrunch. But the truth is, that does almost no value. It adds no value to your company. In fact, I'd argue it detracts substantially, because you don't get tons of consumers from an article in Facebook. But what you do get is lots of investors interested in what's going on, lots of entrepreneurs saying, oh, maybe I can do something like that. And the large companies saying, huh, I need to check that out. And so if you can grow your company quietly, without tons of press and attention,

• 38:06Speaker 02

  it may not be as fun for your ego, but it may be much better for your long-term prospects. And in fact, we don't talk about this often, but I think our initial investment in Pinterest was maybe in March or April of 2011. You can't find anything on the internet about our involvement with the company for at least six or nine months. In fact, it was the subsequent financing that somehow got leaked to the press. That's the first time anyone found out about our financing too. And it was an impressive financing. Like, they had raised $10 million as a young company in early 2011, and yet, hats off to the team, like, they didn't tell anybody about it. It was unannounced, and it was a secret. And I think had they told more people about it, larger companies at the time would have spent more time saying, wait a minute, like, what is it that's attracted investors to put $10 million to this company? We need to understand what's going on more. And so the more you can keep a secret, a good secret, a secret,

• 38:50Speaker 02

  the more advantage you have in building your own critical mass, to the point where it's much harder for someone else to come copy you or knock you off.

• 38:56Harry Stebbings?

  Who do you think are the unsung heroes, or who's the unsung hero for you from the Pinterest team? And what did they do behind the scenes?

• 39:03Speaker 02

  I think there are lots of unsung heroes. I mean Pinterest had so many talented people who contributed meaningfully over years who aren't necessarily at the company anymore. Off the top of my head, I'm thinking about people like Natalie Fair, who was sort of like the first finance person at the company. Or Mike Yang, who was the first general counsel at the company. Or Tim Kendall, he was head of product, he was president at one point, he had so many different hats. And I think ultimately either their own personal interests ultimately took them somewhere else. Or they were great for the company at a certain size and not another size. And you know, some people like Ben scale all the way up. And he was an incredibly effective founder of a brand new company and also an incredibly effective CEO and leader of a multi-thousand person company. Most people aren't so versatile. It doesn't mean they're less talented. It just means that like they figured out what really works for them.

• 39:48Speaker 02

  And I think there are many of those people who contributed massively to Pinterest along the way. Sarah, my former colleague, who ultimately left Bessemer and joined Pinterest is yet another example. And she was at Pinterest, I think for three or four years and did all sorts of stuff. Including, I think her first project was to buy the Pinterest domain name in lots of foreign countries. And I remember having a brainstorming conversation, like how to convince some squatter in France to give up Pinterest dot F R. And then later she ended up managing product teams. So I think there's, there's tons of them. I wouldn't say there's one particular person without whom it wouldn't have all happened.

• 40:18Harry Stebbings?

  And then the final one, what's your favorite story or memory from working with the company? Which ones wanted to like, you think most fondly of?

• 40:25Speaker 02

  I don't know. I'm actually sort of, Bessemer is still a shareholder, I'm still a meaningful shareholder and I'm still on the board. And so maybe I'll answer that question with a note of optimism, which is that I'm hopeful that the favorite story is yet to come. There have been so many of them, but I think there's still so many great things ahead for this company. And I hope to be involved with it for a while to be.

• 40:42Harry Stebbings?

  Jeremy, this has been such a pleasure to do. I really appreciate you opening up on the journey. And so thank you so much for joining me today.

• 40:48Speaker 02

  Always a pleasure. Thanks, Harry, for having me.

• 40:51Harry Stebbings?

  I mean, what an incredible journey. And I want to be so thankful to Jeremy for opening up there. We did not cover all the questions on the schedule because I went totally off schedule, but he was fantastic. If you'd like to see more from Jeremy, you can find him on Twitter at Jeremy L. Likewise, it'd be great to welcome you behind the scenes. You can do so here on Instagram at H Stabbings nineteen ninety six with two Bs. But before we leave you today, 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. Well, Rippling helps fast-growing startups automate their HR and 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 labor laws there.

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