20VC: The Radical Changes In Public Market Expectations, The Right Way To Assess Valuation & What It Means To Be A Disciplined & Diligent Investor with Randy Glein, Partner @ DFJ Growth

Randy Glein is a Co-Founder & Partner @ DFJ Growth where he looks to partner with entrepreneurs that have achieved market validation and are looking to scale rapidly. Randy's investments include the likes of Twitter, Tumblr, SpaceX and Tesla just to name a few. Prior to DFJ, Randy was CFO @ Feedburner (acq by Google), a business development executive at DIRECTV. Randy was also named to the Forbes Midas List in 2013, 2014, and 2015 as one of the world's top tech investors and to the New York Times / CB Insights list of top 100 venture capital investors in 2016. In Today’s Episode You Will Learn: 1.) How Randy made his way into VC and came to found DFJ growth? 2.) What does it mean to be a diligent and disciplined investor? How can a futuristic mindset be balanced with an analytical and academic approach to evaluation and due diligence? 3.) How does Randy evaluate invest time horizons? How important is it to push for liquidity events as soon as possible? What is it that LPs really want to see? 4.) How have we seen public market expectations of tech companies change over the last 10 years? What are public market investors willing to give up in exchange for predictability? What are the benefits of tech companies staying private longer? 5.) What are the metrics that suggest a company with market validation and ready to scale into hyper-growth? What are the required levels of revenue and ARR? Items Mentioned In Today’s Show: Randy’s Fave Book: Being Digital Randy's Fave Blog: Brad Feld, Fred Wilson Randy’s Most Recent Investment: Unity 3D As always you can follow Harry, The Twenty Minute VC and Randy on Twitter here! Likewise, you can follow Harry on Snapchat here for mojito madness and all things 20VC. Intercom is the first to bring messaging products for marketing and customer support together on one integrated platform. With Intercom, businesses can chat directly with prospective customers on their website, engage current users with targeted messages based on their behavior, and provide personal support at scale with an integrated help desk and knowledge base. This is perfect for Businesses that want to help people visiting their website become customers. Marketing and growth teams that want to onboard and retain users by sending the right messages at the right time and Support teams that want to move beyond email to provide personalized, scalable support so simply head over to Intercom.com/20MVC Cooley are 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 50+ 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. So to learn more about the #1 most active law firm representing VC-backed companies going public. Head over to cooley.com and also at cooleygo.com.

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

• 0:00Harry Stebbings?

  You are listening to the 20 Minute VC with your host Harry Stebbings at H Stebbings with two B's on Snapchat. And this intro is recorded live from San Francisco. So if you're listening to this and are in the Bay Area and would like to meet, message me on Snapchat at H Stebbings with two B's again. And it would be great to have a mojito or ten with you. However, to the show today and part two of our special feature week of growth stage investing. Therefore, today I'm thrilled to welcome one of the most successful growth stage investors of the past decade. So joining us today, I'm thrilled to welcome Randy Glynn. Randy is a co-founder and partner at DFJ Growth, where he looks to partner with entrepreneurs that have achieved market validation and are looking to scale rapidly. Randy's investments include the likes of Twitter, Tumblr, SpaceX and Tesla, just to name a few.

• 0:41Harry Stebbings?

  And prior to DFJ, Randy was CFO at Feedburner, acquired by Google, a business development executive at DirecTV. Randy was also named to the Forbes Midas List in 2013, 2014 and 2015 as one of the world's top tech investors. And to the New York Times CB Insights list of top 100 venture capital investors in 2016. I also want to say a huge thank you to Josh Stein at DFJ for the intro to Randy's day, without which the episode would not have been possible. However, before we dive into the show today, you must check out Intercom. Intercom is the first to bring messaging products for marketing and customer support together on one integrated platform. With Intercom, businesses can chat directly with prospective customers on their website.

• 1:21Harry Stebbings?

  They can engage current users with targeted messages based on their behaviour and provide personal support at scale with an integrated help desk and knowledge base. All products are powered by live customer data, helping businesses avoid the stiff spammy status quo and have real conversations to build real connections throughout the entire customer lifecycle. This is perfect for businesses that want to help people visiting their website become customers and marketing and growth teams that want to onboard and retain users by sending the right messages at the right time. So simply head over to intercom.com/20MVC. And speaking of serving your clients better there with Intercom, I've always been a big history man. And so I want to talk about Cooley, the global law firm built around startups and venture capital.

• 2:04Harry Stebbings?

  Since forming the first venture fund in Silicon Valley, Cooley has formed more venture capital funds than any other law firm in the world. With fifty plus years working with VCs, they help VCs form and manage funds, make investments and handle the myriad of issues that arise through a fund's life cycle. So to learn more about the number one most active law firm representing VC-backed companies going public, simply head over to cooley.com and also check them out on cooleygo.com. But enough from me, so I'm now delighted to hand over to Randy Glynn, co-founder and partner at DFJ Growth.

• 2:40Speaker 01

  You have now arrived at your destination.

• 2:43Harry Stebbings?

  Randy, it's such a pleasure to have you on the show today. I really appreciate you taking out the time to join me.

• 2:48Speaker 02

  Thanks very much, Harry. I'm thrilled to be doing it.

• 2:50Harry Stebbings?

  Now, I'd love to get started today, Randy, with a bit about you and how you made your way into VC and a little bit of an intro on you.

• 2:57Speaker 02

  Sure, happy to do that, Harry. You know, getting into venture capital has definitely not been a straight path for me, for sure. Then I guess I'd describe it as more of a winding trail on my career journey. There's a few things that I think are relevant to being in venture capital that I've had in my background. Over the past twenty-five years or so, I've gained experience as an engineer, an operating executive, an entrepreneur and of course, an investor. And everything I've done in my career has been related to being involved in technology-driven businesses, being part of creating innovative, high-growth businesses with almost, in all cases, a focus on transforming markets through technological advancement and innovation. So that's been, I guess, the foundation for my career.

• 3:42Speaker 02

  But as I mentioned, it's been a bit of a winding path to get to where I am today. I started my career as an engineer and I think the technical and analytical underpinnings have served me very well. There's lots of ways to find yourself in this business, but for me, that was essential to give me that perspective and that underpinnings. I started my career as an engineer at the old Hughes Aircraft Company, founded by Howard Hughes, and I was in their space and communications group. And early in my career, everybody goes through these journeys and in my career, I had a fortuitous couple of opportunities that, you know, thank goodness, I took advantage of. Case of Hughes, I was, I was early in my career, I was able to move into their new ventures group.

• 4:26Speaker 02

  And there I got some great mentorship and also exposure to the process of building, creating businesses, thinking about markets, assessing technologies, investing in new advancements that helped enable us to create some new businesses. And along the way, I was able to be part of a very small team there that helped create the businesses that became DirecTV and XM Radio. And at the time, those were very disruptive and innovative businesses because they were delivering media, television and radio over digital systems for the first time and giving consumers a wide variety of choice that they hadn't had in the past. So those experiences were critical for me.

• 5:10Speaker 02

  They gave me this real passion for, for building businesses, for developing companies that were founded on, you know, new and innovative technologies. And so that for me was, I guess, early in my career, kind of a turning point from being a technologist and an engineer to being more of an entrepreneur at that point, an intrapreneur, because I was able to actually join the team of DirecTV early in its life to be part of a small team that, that built that business.

• 5:37Harry Stebbings?

  I, I do have, I'm super intrigued then, and starting with a question from, from Tim Draper. So he, he wants to know, when you discuss your investments with Hughes in the early times of your career, how does that then compare to the growth investing that you do now with DFJ when you look at the two?

• 5:55Speaker 02

  So in my career, I was actually in two strategic investing groups, Hughes New Ventures, which I just described, and then later Tribune Ventures, which is actually where I started to get to know DFJ and the DFJ team very well, Tim Draper, Andreas Stavropoulos, John Fisher and, and the other partners here. Both of those groups pursued their respective investment strategies by emphasizing the same things that we emphasize as more financially or institutionally motivated venture capitalists, namely a focus on opportunities that transform large markets through unique and disruptive Technologies. So while we evaluated the same things, people, products, markets, competition,

• 6:35Speaker 02

  business models, growth rates, valuation, exit path and so forth, we also had this other dimension, which we called strategic fit. And so everything we did went through a lens that was focused on how could we as a corporate investor help these companies uniquely because of our position in these markets that they were addressing? And also, how was it relevant to us thinking about the future of those companies at Hughes and Tribune? So I think it added another dimension. But for me, they were great training grounds because I think they taught me how to be a disciplined and diligent investor. I had the good fortune of having great mentors while I was at both of those firms. But what I didn't learn there,

• 7:17Speaker 02

  and what was certainly uniquely different, is I didn't really learn how to manage a fund, how to raise capital, and how to invest on behalf of our limited partners as opposed to a large corporate backer. And so, of course, that has come through my work at DFJ and through mentors and tutelage from folks like Tim and John.

• 7:37Harry Stebbings?

  So I have so many questions that offshoot that. I mean, firstly, you said there about learning to be a disciplined and diligent investor. I'm really intrigued. What does that mean? Does that mean a particular cadence? Or does that mean a rigidity of mindset that means you're focused? How does that look when you discuss a diligent and disciplined investor?

• 7:56Speaker 02

  Yeah, that's a really good question. I think, at least for us and how we practice at DFJ, and in particular DFJ Growth, where I'm, you know, one of the partners that leads that practice, I think it means being theme-driven, being conscious of the way the world is changing through new technologies, new sources of innovation, having a mindset that allows you to think about the future, say, five to 10 years ahead, but then also being able to apply all of the experience and analytic approaches to assess both the timing, as well as the, I'll call, efficacy of business models and markets and growth rates, and then ultimately assessing the people.

• 8:40Speaker 02

  People that you're partnering with, these visionary entrepreneurs that are leading the way, thinking about the future, trying to change the world, but to have an approach, when I say disciplined, where I wouldn't say it's so methodical per se, although it can be, but it's really trying to think within the boundaries of how to build a business, how to grow a business, how to create a business that's that's healthy and is building value, while at the same time is pursuing these passions and these dreams of the entrepreneur, but you know, kind of wrapping that all up into a package for something that can be sustainable over long periods of times that addresses real needs in the market.

• 9:16Harry Stebbings?

  And so that's what you learned. And then you said what you didn't learn was about investing with fiduciary responsibility. So I'm really intrigued then, when you made the transition, how did the transition affect your investment mindset and decision-making process, if it did?

• 9:31Speaker 02

  At least at DFJ, I would say it actually opened up some grand possibilities for me because DFJ has a heritage, I would say, of investing in some true forward-looking innovation, but very broadly across technology sectors. So today, you know, we talk about three main sectors we invest in, enterprise technologies, consumer-oriented technologies, as well as disruptors or disruptive enabling technologies. And when you're in a corporate investment environment, you do have some, you know, some restrictions in terms of your purview, the things that you can really go after. And here, it allowed me to think much more broadly about the way technologies are impacting the world

• 10:13Speaker 02

  and the timeframe where those technologies are being realized in terms of the market opportunity. And so I'd say it both opened up possibilities and allowed me to think broader, but then also really got me focused on investment horizons. Because in this business, when you're trying to generate returns, both cash on cash, you know, return multiple, which we tend to focus on, but also IRR, which a lot of institutional LPs focus on, really does start to hone your senses towards particular timeframes and time horizons at which you're trying to build value and also find exit opportunities. Your final liquidity for your investors.

• 10:52Speaker 02

  That's some of the, that's some of the discipline that came with being, moving over towards the, you know, more institutionalized venture capital side of the business.

• 11:01Harry Stebbings?

  And, and kind of talking about your now stage of growth with, with DFJ and, and the growth fund. Uh, your last two IPOs, a boss and Twilio have IPO'd with, in the low tens of millions an hour, I think I'd be right in saying. So I'm really intrigued then, when you compare, when you compare this level today and what you've seen with DFJ to, to what you've seen in the past with, with the two previous, um, investing roles that you've had. Uh, how does it compare when you look at public market expectations? Have they altered significantly over time?

• 11:32Speaker 02

  Yeah, I think they have for sure. Uh, in fact, one of the reasons that we started DFJ Growth and I had the opportunity that I have today to help lead that practice here at DFJ is because of a trend that we were seeing specifically in the public markets. So if you go back really eleven or twelve years ago, when we started conceiving of DFJ Growth as a new practice or an extension of our core venture capital business here at DFJ. One of the trends we saw was that companies, uh, were starting to stay private longer. And, and that's definitely a meme that's played out over the last decade or so. Companies stay private longer now because the public markets want more maturity and predictability than in the past.

• 12:14Speaker 02

  When they embrace companies and allow them to, you know, to, to go down the IPO path. Uh, so public market investors, I think today are more willing to give up growth and alpha in terms of the return profile in exchange for lower risk associated with less mature companies. So they want that predictability and maturity. And I'll give you a couple of examples. Uh, in the, I'll go back to the, you know, seventies, eighties and nineties, you know, prior to the last fifteen years. And companies in the tech sector, um, often you'd see them go public, raising forty or fifty million dollars in general. Coming out with enterprise values of a few hundred million dollars. And that would be an IPO company still growing fast, but you know, relatively small in terms of scale. Since twenty ten.

• 13:00Speaker 02

  We've gone back and looked at all of the tech IPOs since 2010. It's nearly 160 IPOs. And the median market cap at IPO is a billion dollars across all of those IPOs. And that's in contrast to this period of the of the past. So if today's IPO is a billion dollars and early-stage venture capital, in our view, wasn't really well-suited to get companies to that level of scale and value because of fund sizes and so forth, horizons. So we decided to create a dedicated practice. We call DFJ Growth to focus on that stage of the development. It's really the scaling phase of the business as opposed to with our early-stage funds,

• 13:42Speaker 02

  we focus on, you know, the inventioneering phase of the business and building that initial product, bringing that technology to market, finding product-market fit. Whereas now, we focus on product and market validation, the scaling phase of the business, the hyper-growth phase of the business in order to help companies both fund their growth but also to navigate all of those challenges that come at that stage of growth, where you're going from tens of millions of revenue, as you mentioned, or ARR, to literally hundreds of millions. In fact, the last two IPOs that we've seen at DFJ over the last couple of years, Box and Twilio, were both companies that were on nearly $200 million annual revenue run rates before they got public.

• 14:24Speaker 02

  And that's a very different environment than what we had, you know, 10 years ago and more.

• 14:28Harry Stebbings?

  I'm super intrigued. I had a guest on the show the other day who stated that the the cause for this increasing time for privatization and companies not wanting to go public was because of kind of aggressive PE firms and buyout firms who kind of have these sub $1 billion companies at their mercy. Do you agree with that thesis then in terms of that cause?

• 14:50Speaker 02

  I'm not sure if that's a cause. I think it's a little bit of a byproduct. I think coming out of the 2000 era bubble bursting, that first generation of internet companies that got funded at somewhat breathtaking valuations for that era, many companies going public before they were really mature enough to be in that position. A public company creates several different incentives than you have as a private company. We actually think having companies stay private longer is very healthy because you're not on that quarterly treadmill and you're able to really pursue hypergrowth and navigate the challenges of going through that hypergrowth without being in the public market and having to do that kind of quarterly grind of and focus on short-term results as opposed to the long-term strategy.

• 15:33Speaker 02

  But to answer your question specifically, we actually believe that what we call the growth stage of the private markets now has really segmented over the last few years as a result of where the public markets are focused. So if the typical IPO now is a billion dollars or so in the tech sector, we tend to focus on that early growth period that, you know, call it tens of millions of annual revenue or bookings or tens of millions of users sometimes in the consumer segment. Whereas the folks you described, the mutual funds and some hedge funds and some of the private equity firms, they've started to come into the very late stage of the private markets, which is a little bit beyond where we typically start investing at DFJ Growth.

• 16:14Speaker 02

  They've come in because they're looking for alpha in their portfolios that it's hard to get now in the public markets. Because the public markets, they want more predictability, more maturity, less risk. They're also going to get less growth for that, right? And so if you really want that high rate of growth, you're often going to be forced to dip into the private markets like some of the mutual funds we see now doing at the later stage of the private markets. It also gives them a little bit of an edge, if you will, because the public markets have largely consolidated. You know, there's big pools of capital now in the public market investors. They find that they can get, if they can get access to private companies late in their private life, it may give them an edge in terms of IPO allocations and information

• 16:57Speaker 02

  as those companies become IPO candidates.

• 17:00Harry Stebbings?

  I love to hear that you like the extended time of privatization. I am intrigued by one element though. As a VC myself now, we all have to think about liquidity to LPs. Does that concern you in terms of the available liquidity to LPs when the public markets aren't so liquid and there is this extended time of privatization? Does it concern you?

• 17:20Speaker 02

  I would actually say that for us, in particular DFJ Growth, so specifically to our growth strategy, you know, we identified this trend more than a decade ago and it really became the foundation for our growth funds and for our growth strategy. So the fact that the private markets have lengthened in terms of the time it gets to be a public company, I think has opened up a market opportunity that we think is both healthy for companies to get funded privately through that that hyper growth stage, but also has given us an opportunity to create a strategy like DFJ Growth. In fact, for our growth funds, you know, we have a typical target holding period of about half the length of an early-stage venture investor now. So the typical venture-backed company to get to IPO

• 18:02Speaker 02

  takes eight to 10 years, sometimes longer now. And our strategy at DFJ Growth really targets companies that have more of a three to six-year horizon to IPO. Now, what I what this doesn't mean, though, is for early-stage venture funds, I think there are still plenty of opportunities to build companies in relatively short timeframes to get them to enough value where you can generate good returns as an early-stage investor. But that will happen more often than not through M&A at that stage. If you want to take a company all the way to the public markets, it just takes longer now because of the trends that we talked about earlier. I think it's created this new market opportunity where folks like us

• 18:44Speaker 02

  can specialize at the growth stage. The other thing that's happened is there are some new opportunities for liquidity in the private markets that didn't exist 10 and 15 and 20 years ago. So historically, we've had, you know, strategic acquisitions and potentially IPO for companies. And of course, more more companies get acquired, I think, venture-backed companies get acquired than they do go public. But we also now have trends where some of these larger investors you described, specifically private equity firms, have started to come into the technology markets and be buyers of companies that allows companies to stay private longer, but allows early-stage venture capitalists to take liquidity before that, say, they get to that eight or 10 or 12-year point in their life cycle. The other thing we've seen now is for certain companies...

• 19:30Speaker 02

  And I think this is more more of an exception, but for certain companies that are special and that have built brands that are recognizable, you have a secondary market that's formed where early investors can can get liquidity as these companies continue to grow privately.

• 19:44Harry Stebbings?

  And you said about the the holding period, though, for those investments that you make. I am really intrigued as to the potentially, and I and I hate this question, so I'm sorry for it, but I'm too intrigued, the kind of discernible metrics and benchmarks that that indicate a three to six year time horizon and indicate an investable proposition for you. Are there definable metrics and and benchmarks?

• 20:06Speaker 02

  Yeah, of course. I think as a growth stage investor, at the stage we focus, which I called, if you segment the growth category into early growth and later growth, you know, we mentioned earlier, we we tend to focus on companies that have market and product validation, really important to us. We spend a lot of our time in our partner meetings talking about two things. We talk about is the company validated? Are they in the hyper growth phase of their business? Do they have a big enough market opportunity that based on the valuation we're paying today, that they can generate the kind of venture like returns we want in the future within that three to six year time horizon typically? And are they emerging category leaders? And so when you put all of that together, you know, do they have breakout

• 20:48Speaker 02

  potential? We look for really, I would say, several metrics, but two that are really important to us. Obviously, the scale of the business. Have they moved past the early product and technology risk phase of the business so that they have that market and product validation? Are they in the scaling phase or the execution phase of the business? So so we look for metrics around that. Typically, for us, that means what we have found over the last decade is that typically takes, at least in our mind, kind of the $10 million annualized revenue or bookings run rate or more. So we typically are looking for companies that have low tens of millions, sometimes as much as many tens or even low hundreds of millions of annualized revenue. But for the most part, it's that the sweet spot for

• 21:29Speaker 02

  us is low tens of millions. And then do they have rapid growth into large market opportunities? Either emerging market categories where they're paving the way or transforming existing markets? Or being bringing something that's disruptive to those markets. And there we look for growth rates that are at least a hundred percent or more with a product or technology that we believe has room to run at those hyper growth rates for some extended period of time. So very fast rates of growth, a certain degree of product advantage and differentiation that we believe is sustainable in the market, continued innovation, and then of course, a very large market where the company has gotten to some level of scale. So they they put that risk behind them. Well, actually, if if they're not validated,

• 22:12Speaker 02

  we often say that might be a startup in disguise. It's a company that has some traction, but isn't yet really in that scaling phase of the business where you're taking more execution risk than market and product risk. And we definitely want to err towards the for a growth stage investor, the execution and scaling risk as opposed to taking product, technology, or market risk.

• 22:32Harry Stebbings?

  And then and then final question, sorry, before we move into a quick fire, and talking about kind of the growth stage that you're in, often, obviously, I speak to much earlier, even seed stage investors, and and price doesn't very much play a role in their investment decision making process. So I'm intrigued for you, how much of a role does a reasonable price to to pay play? Does that make a big difference?

• 22:53Speaker 02

  Yeah, of course. I mentioned that I that there are two things that we talk about in our investment committee meetings. Is the company validated, truly validated, and are they in that scaling or hyper growth phase of the business? And there's there's not a bright line test for that, right? Other than some of the metrics we just talked about. Of course, we look at you know, you unit economics and business model and gross margins and all the things that matter about the financial profile and business model of business. But the other thing we talk about consistently, is this a fair and reasonable price to pay for the company? Does it give us enough opportunity to generate the types of returns we're looking for within the time, you know, within our time horizon? And not only does it give us the opportunity to generate our target returns, but does it

• 23:37Speaker 02

  do that in a normalized environment? So you have to step out of current environment. What are valuations today? What are multiples today? But think about in a normalized environment, what's, you know, what's a reasonable or rational multiple? to pay. Of course, we're investing in companies that are typically growing at more than a hundred percent a year. And so you may find that you're going to pay a premium. I'll tell you at the growth stage, I never feel like, you know, we're not a value investor. So I never feel like price we're getting is is cheap. It's not a value play. We're investing in hyper growth companies. So there's a premium to pay for that. Our job is to assess whether the the valuation we're paying is reasonable relative to the scale the company can get over the next several years. And the way the the public markets or the M and A markets will value that company

• 24:22Speaker 02

  several years down the road because it may be different than the way it gets valued today. And we have to try to have that foresight.

• 24:27Harry Stebbings?

  But I'd love to dive into a quick fire round with you now. So I say a short statement and then you give me your immediate thoughts in sixty seconds per one. How does that sound?

• 24:35Speaker 02

  Perfect.

• 24:36Harry Stebbings?

  So let's do your favorite book and why?

• 24:38Speaker 02

  Let's see. That's a great question. Probably the seminal book for my career is a book titled Being Digital. It was written by Nicholas Negroponte in the mid nineties. He was the founder of the MIT Media Lab, a brilliant and forward looking thinker. I actually had the chance to work briefly with him and his team in the early nineties when we were preparing to start DirecTV at Hughes. And I think what he did in that book really foretold the coming era of the internet, the digitization of information, the advent of broadband, the transition of phones to wireless from wired and trading places with that. The advent of television from wireless to wired distribution. He envisioned voice and touch computing and so much more. All because of this concept of digital bits or binary digits,

• 25:23Speaker 02

  where he called that bits are bits, where digitization was taking the place of physical atoms. So really important book for me. And then the last thing I'll throw in is on a personal level. I've, since I was a teenager, I've been a huge fan of J R Tolkien, all of his magnificent works. He's a creative genius and who couldn't love the tales of Bilbo and Frodo Baggins from the Shire?

• 25:44Harry Stebbings?

  I have to admit, I've I've never read or seen the films or or read the books, but it's on my to do list for twenty seventeen for sure.

• 25:52Speaker 02

  It's a can't miss.

• 25:53Harry Stebbings?

  I can't miss it. Okay, I'll write it down now. And then let's do the hardest element of your role with DFJ. Is there a kind of? Continuous recurring theme that challenges you.

• 26:02Speaker 02

  Yeah, it's, you know, it's, it's everything. This is a, it's a hard business for sure. I have colleagues and friends and partners who've done great things in their careers and have been incredibly successful. And I think across the board, folks I know would say, you know, this is a hard business because it's so multi-dimensional and, and you, you know, have to really have the same passion for these businesses of the entrepreneurs you're backing. You have to have that disciplined approach towards selection criteria of the investments you do make. I would say for us, or for me, it's really building our own team here at DFJ and DFJ Growth to be positioned as a truly effective and valued partner for the world's best and most, you know, visionary entrepreneurs, providing an environment for our team that

• 26:43Speaker 02

  rewards great instincts and judgment, but also teamwork and collaboration. I think the difference there, what I want to highlight is many venture capital firms, you know, they, they operate differently. They have, and not that it's worse or one's better than the other, but they operate in, with partners in isolation or in silos based on their individual specialties. At DFJ Growth, we consciously buck that trend and that temptation because we want everyone on our team to be knowledgeable enough to express an opinion and to contribute to the decision that we're making and to contribute to the diligence process on our investments. So we really, I guess in that way, more generalists where we have to be experts in many things, but to have a team that can all contribute and collaborate towards the end goal, which is to back the world's best and most visionary entrepreneurs and

• 27:27Speaker 02

  be a great partner for those entrepreneurs.

• 27:29Harry Stebbings?

  Randy, I'm going to be straight on you, 60 seconds, but I do, I do want one now, and this one do you have to ask, and it's Rory at Scale recently said to me on the show, markets make outcomes, team not so much. How do you respond to this at this stage of, of the company's life cycle when, as you said, we're moving into hypergrowth and scaling and it's not so centered around the team as it maybe once was at such an early stage?

• 27:53Speaker 02

  That's a good question. I agree with Rory that the size and the state of the market is paramount to growth stage investing, but I also believe that the success in delivering value and achieving growth in that market is all about having a hungry and qualified team of people that have the vision and the The operating shops to execute that against that vision. And so our our companies are nothing without their people. So while the market is a prerequisite for creating opportunity, uh, the degree of success as a company, I believe, is largely based on taking it and taking advantage of that market market opportunity, depends largely on the team of people that are part of that business.

• 28:30Harry Stebbings?

  And then what's your favorite blog or newsletter? The must reads when they come in.

• 28:33Speaker 02

  Good question. I read a lot of newsletters, um, as I'm sure we all do in our business. I'd say, you know, for me, most of my news comes from Twitter. And, uh, when I want something a little more edgy, I go to Reddit. In particular, I do have two go to VC blogs that I've read. Friends of mine, Brad Feld and Fred Wilson, I've been reading their blogs religiously for more than a decade.

• 28:52Harry Stebbings?

  Yeah, absolutely. Love them both. Uh, and then penultimate question and one from Tim, uh, Tim Draper. So he says, how did you feel when the Cubs won? I had to ask him what the Cubs was, but apparently it was a big event.

• 29:05Speaker 02

  Oh, wow. Well, so, you know, the Cubs is a is a major league baseball team here based in Chicago. And I know Tim is asking that question because I took him to game seven of the two thousand and three National League Championship Series, where the Cubs lost three straight games to lose an opportunity to go to the World Series. So, and when we were at that game, it was kind of an infamous series, but you could literally hear a pin drop in Wrigley Field where the Cubs played. The opposing team, the Marlins, celebrated their victory. So it was surreal and it was so sad. And so now here we are in two thousand and sixteen and wow, uh, pure joy, exhilarating, great relief. You know, I say fly the W and, uh, you know, I sang the song, the Cubs are gonna win today.

• 29:44Speaker 02

  It was, uh, it was an amazing thing for me and our family because we moved here to Silicon Valley from Chicago about ten years ago. And, you know, now the curse is over for all Chicagoans. A dark cloud's been lifted. And, you know, for those people who take such great pride in their city and their beloved clubs, I say hats off to them. It's, uh, it's fantastic. Uh, and thanks to Tim for the question.

• 30:04Harry Stebbings?

  That's fantastic. And then final question, what's your most recent publicly announced investment? And why did you say yes?

• 30:11Speaker 02

  So, uh, I'll talk about a company, uh, Unity Technologies. We invested in it earlier this year. I co-led the investment with one of my partners, Barry. Unity Technology is a remarkable company. It sits at the nexus of several trends around the next generation of computing and entertainment. It's led by a very seasoned entrepreneur and CEO, John Riccittello, former CEO of Electronic Arts, the big game development company. And the thing that got us to yes here was that Unity has a leading development platform for publishing and developing 2D and 3D electronic and mobile games. They have nearly 2 million developers that build on their game. These games reach nearly a billion gamers every month.

• 30:56Speaker 02

  So they have this great core engine for developers that we love, and they've built a big, sizable business already there. But what got us super excited is the fact that Unity's core engine and development platform is perfectly suited for the next generation of computing and computing interfaces, namely virtual reality and augmented reality. And already, they've repurposed or redirected that development platform towards VR and AR software applications, and have 70 to 80% market share of all development that's happening in VR and AR. And so that really got us to yes, is that dramatic upside to participate in this next generation of computing.

• 31:36Harry Stebbings?

  Absolutely. I had David Helgerson on the show a while ago, and it was a fantastic

• 31:39Speaker 02

  Oh, he's great.

• 31:40Harry Stebbings?

  ...story. But Randy, thank you so much for coming on the show today. Josh told me it'd be a fantastic episode, as did Tim. So I really appreciate you taking the time out today to join me.

• 31:48Speaker 02

  It's really been my pleasure, Harry. Congrats to you on all that you've done to help reveal the personalities in venture capital and expose some of the mystery of what we do. It's very much appreciated by all of us, and thank you.

• 32:03Harry Stebbings?

  Immensely kind of Randy to say that, and that really means so much to me coming from him. I'd like to say a huge thank you to him for giving up the time today to come on the show. I also want to give a big hand to Josh Stein at DFJ for making the introduction to Randy today, without which the episode would not have been possible. And if you loved the episode today and would like to see behind the scenes at the 20-minute VC, then you can follow me on Snapchat, @HStubbings, and find some more academic thoughts and writings on our new blog, mojito vc.com. I'd absolutely love to hear your thoughts and feedback on that. But before we leave you stay, do not forget to check out Intercom. Intercom is the first to bring messaging products for marketing and customer support together on one integrated platform. With Intercom, businesses can chat directly with prospective customers on their website, engage with current users with targeted messages based on their behaviour,

• 32:47Harry Stebbings?

  and provide personal support at scale with an integrated helpdesk and knowledge base. All products are powered by live customer data, helping businesses avoid the stiff spammy status quo and have real conversations to build real connections throughout the entire customer lifecycle. This is perfect for businesses that want to help people visiting their website become customers, and for marketing and growth teams that want to onboard and retain users by sending the right messages at the right times. So simply head over to intercom.com/20mvc, that's 20mvc. And speaking of serving your clients better there with Intercom, no one can beat Cooley for serving their clients for the longest. Cooley is a global law firm built around startups and venture capital firms. Since forming the first venture fund in Silicon Valley, Cooley has formed more venture

• 33:30Harry Stebbings?

  capital funds than any other law firm in the world with 50-plus years working with VCs. They help VCs form and manage funds, make investments, and handle the myriad of issues that arise through a fund's lifetime. So to learn more about the number one most active law firm representing VC-backed companies going public, head over to cooley.com and also check them out at cooleygo.com. As always, I so appreciate all your support and I look very forward to bringing you Friday's episode with Gautam Gupta, founder and CEO at Naturebox.