214. Crisis Coverage w/ Somesh Dash – Late Stage Impacts & Prioritizing Mental Health

214. Crisis Coverage w/ Somesh Dash - Late Stage Impacts and Prioritizing Mental Health
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Somesh Dash of IVP joins Nick on a special Crisis Coverage installment to discuss Late Stage Impacts and Prioritizing Mental Health. In this episode, we cover:

  • Quick background and what led you to venture/IVP?
  • Overview of the firm and your focus?
  • Covid impact on later stages
  • The 2008 crisis… ’08 was still strong for C round funding, steep dropoff in 2009, stayed pretty low in 2010, returning to fairly strong levels in 2011… thoughts on timing, severity and duration of impact on later stage funding?
  • Directional impact on average valuations at late stage?
  • Thoughts on exits?
  • What do you think happens in the secondary market?
  • What do you think happens with the well-funded, late stage companies in markets that are highly dependent on social interaction, mobility, travel, etc.?
  • Reasonable to complete deep diligence in a completely remote environment?!
  • You’ve been w/ IVP since ’05… best recollections of changes in strategy made at IVP in ’08/’09?
  • Suggestions on how early-stage VCs should adapt the playbook?
  • Best moves startups made to survive and/or thrive at that time?
  • Biggest mistakes you’ve seen CEOs make?
  • Investment in Lyra’s Series C….
  • Mental health now more than ever… expectations for industry amidst WFH/social distancing?
  • Tips for delivering hard news? — furloughs, layoffs.. especially remotely
  • Suggestions for leaders to help their people through this?
  • How to keep team morale high?
  • How are you adapting communication or work habits at IVP to better keep engagement of your people, your portcos and your LPs?

Guest Links:

Transcribed with AI:

0:03
welcome to the podcast about investing in startups, where existing investors can learn how to get the best deal possible. And those that have never before invested in startups can learn the keys to success from the venture experts. Your host is Nick Moran, and this is the full ratchet.

0:23
Somesh Dash joins us today from San Francisco Smash. He has general partner at IVP, where he focuses on later stage investments in Internet software, wireless and technology enabled service companies. Some of his investments include amplitude businessinsider, and Dropbox Subash, was recognized by the New York Times and CB insights in 2019, as one of the top 100 venture capitalists and by growth cap as one of the top 40 under 40 growth investors in 2019 Subash it’s great to chat again, and even better to have you on the show.

0:53
Great to be on the show, Nick is just a unique period of time and global history. And I just hope everybody that works with you everyone in your family is doing okay, health wise. And you know, my heart goes out to anyone who may be affected by COVID-19. from a health perspective. I

1:14
appreciate that so much. And I wish it were under better circumstances. I know that, you know, you’ve you’ve seen the effects yourself. And I really appreciate you making time for us in the audience. But just just to give us a quick intro, can you kind of walk through your background? And what led you to venture and IVP?

1:32
Sure, no, I’m happy to do that. It’s real pleasure to be with you. You hear a couple screaming kids in the background, and please forgive me. But I think for me, you know, I was very lucky, I hit the genetic lottery and that my parents were Indian immigrants but emigrated first, for graduate school to Toronto, in Canada, my dad went to Waterloo and then eventually ended up in Silicon Valley where they worked in the tech sector. And due to that, I got to be born in sort of the epicenter of you know, the digital gold rush and the digital revolution and didn’t know much about it. When I was growing up like any other kid, I was just, you know, playing sports and, you know, hanging out with buddies, and you can sort of tell the difference of suburban Silicon Valley in the 80s and 90s, versus any other parts of America really. But all around me, you know, I had a tight knit group of friends and family, friends who worked in different sectors, I started hearing more and more about startups and innovation. And I had the privilege of going to UC Berkeley, for my undergrad where I studied a kind of combination of science and business administration. But then really got inspired about this industry about venture capital because I started reading books. I was in school in the late 90s, just when things the first internet boom was happening. And I had a chance to see some of the people that were part of that from Jerry Yang. And Pierre Omidyar speak on campus, it was really inspirational to think about how they it’s such a young age, we’re building such amazing companies. You know, the, the first time I really was aware of what venture capital was, because my parents were technical and really, you know, didn’t know much about that were in the finance world was, I got to listen to a talk by John Doerr in the late 90s. And he talked about actually a deal that he had just done, which was actually Google, and was walking through kind of the series, a process and how they did it. And I think what stuck to me was just how much venture capital was about working alongside founders and entrepreneurs versus my impression of finance was always that, you know, sort of you were involved in a transaction, or you were had an adversarial relationship, if you’re a lender to them. I didn’t, I love the idea that you could actually be a part of a team and multiple teams. And, you know, the kind of quote that stuck with me was sort of having, you know, small interactions with teams that lead to big impact. And so for me, the my family in India was very involved in Public Policy and Social Work in journalism. And it was always not about, you know, amassing personal wealth, it was really about impact and helping people. And I just felt that any industry that creates jobs and creates innovation, you know, has impact. And I think the last thing was just inspiration, it’s still the reason that gets me so excited about work. Even as you know, we’re sitting on Zoom calls all day, it’s just founders are so resilient. And especially in the last few weeks when I’ve seen in spite of such trying circumstances, for many of them professionally, and personally, how committed they are to company formation and company scaling. I just think that really is the Benjamin Button, you know, Fountain of Youth Wellness. And so that was that was really what led me to venture. I also had a chance, I did a couple of different things, including working at Sony in an operational role. And then working at Credit Suisse. I worked at the Credit Suisse First Boston tech group, and it was run by a guy named Frank Quattrone, who you may know or be aware of who now runs catalyst and in that role, I was an investment banking analyst. I got a chance to see get an education about just how silly Can Valley works, I got a chance to work on with companies like Salesforce and Yahoo and Google in the early stages. And actually, it’s what led me to IVP. A few clients like concur that Travel and Expense software company and Polycom, the speaker phone company and Netflix that were lined up investments, they had just raised their second completely dedicated Growth Fund, which was their love and fun in history. It was 2004. And I came on as an associate and really had a view of doing this for two to three years. And then kind of joining the startup or going to business school. And then I did end up getting my MBA at Stanford, but I missed the firm a lot. And it was such a, I missed the people a lot. And so it came right back and about a decade plus runs instead and just been really, really lucky to work with such an amazing group of LPs that are in our fund founders, and of course, my partners and the whole team and IVP.

5:54
Interesting. So were you were you at the firm and active when the 2008 crisis hit, or were you at ciphered. I

6:02
was it was both. So I actually had a chance to in the beginning of the crisis that was sort of when I was still at IVP. And I was I was actually working on deals, that we’re not too dissimilar from where we are right now being readjusted in the wake of a subprime crisis that was popping up that nobody had predicted. I also had a chance to stay involved in the firm in a variety of ways while I was in business school, and then come right back in 2010. And so I did have a chance to sort of see the impact of it, the fund that was raised IBP, 12, in 2007, really invested through that crisis. And interestingly enough, it’s in the last 20 years, it’s our best performing realize funds. And it’s just been remarkable the number of analogies and lessons and it’s really nice to be around with the same team that was part of that group there. Actually, even the venture capital seems like a big industry, there really aren’t a lot of people in growth that were able to institutionally invest through the last cycle given this bull market run lasted longer than I think what people expected. So we you know, there’s a lot of things that we’re talking about a resume right now with our team. And, you know, one of the lessons that really came out is, you know, cycles take a while, I think people are, people forget, we’ve had almost an 11 year Ranch, right. And we’re in sort of week four, week five of COVID. And the way people you know, some people are acting as if we’re going to recover immediately. And, you know, recoveries take a while it takes a while to digest that we haven’t seen the first set of public earnings calls. yet. We haven’t seen guidance given for q3, we haven’t seen 2021 guidance given we haven’t seen the bellwethers report. So that’ll all come in the next few months, and the economy and the markets will adjust accordingly. So one of the big lessons we had from last time is these things take a while to reset. And typically the public markets reset faster than the private markets. We’ve already seen that in the last four weeks. But the private markets will readjust and they will recalibrate. So I think you’d always stay in market, you always meet companies, you always perform diligence. But in terms of capital deployment and pacing, I think a trap would be to say, Oh, we’ve seen the bottom, it’s time to sort of double down as much as we can assets have hit their floor. i We don’t fundamentally believe that. And so we think it’s important to actually have capital ready to go as prices continue to decline. And it’s also in some ways a blessing because you get to know companies and see how they behave to an existential pandemic, which is a scenario that people you know, had literally in q4 of last year, no one was asking entrepreneurs about. So this is a great listening litmus test. It’s also a really important litmus test for entrepreneurs to ask VCs about, because I do think a lot of founders didn’t do as much work or spend as much time or references on VCs as they probably should have. With this new normal we have I think people have more time to get to know each other. Hopefully in person soon right now, it’s all virtually. But definitely, I think, actually, from a diligence perspective, we’re looking at three new deals right now this week. And it’s amazing with the tools we have between zoom and slack and Dropbox and other things, how much diligence we can do virtually. What’s missing, though, which is important to I think founders and also to VCs is not being able to meet an entrepreneur in person and being able to have a meal with them and get to know them is hard. And I think that’s something that we’ll see the comfort zone, different people and different firms will have different comfort zones on being able to invest. For me personally, a big criteria is just the feeling I have when I meet with an entrepreneur. And I think the same goes with many my entrepreneurs that we have a chance to work with. And you know, a lot of those interactions are so formative that I think people understand if you say we love the business, but it’s hard for us to transact if we’ve never met in person And so, so yeah, so really

10:03
sort of strange adjustment there. I just got off a call with Sunil Shah, we were talking about that very, you know, at the very early stages, like, precede seed seed plus, so much of the decision is on that feeling with the team, and do they have the right ingredients and the fundamentals, because there’s just not a ton there when it comes to, you know, product and, and interaction. So, yeah, I mean, I’m curious how diligence processes are going to adapt. And at the later stages, I mean, you’re putting a lot of capital on the line, I would imagine that, you know, meeting the founders in person, and doing diligence in person on site, you know, with teams and seeing how teams interact is a huge part of the equation.

10:47
Well, I think what so a couple of things, one big difference, Seville has got this, his perspectives are spot on, I love following him on Twitter, he’s a good friend. One, one thing that is different than OAE is, I think companies have a lot more data available today than they did even 12 years ago, and growth. And if I think about the real time measurement tools that people can use to extract out, you know, how they’re doing, it’s pretty amazing. You know, in those days, you sort of had to wait weeks and weeks and weeks before you got even a quarterly assessment of how the last quarter went. Now you have, you know, through Salesforce alone, but all the tools built around, you know, the forest icon, ecosystem, real time data on how a quarter ends, you know, where you don’t even have to wait for next board cycle to do it. So and I even in our firm, the average length of time, we get to know an entrepreneur, before we ever invest is two years. So the reality is, for a lot of the companies that we invest in, we really already gleaned a lot of the insights and been tracking them for years, before we end up investing, even. And even more than that, I think a lot of what venture and growth have moved to is on both sides. So try before you buy, where a lot of founders want to say, hey, the pitch is great, but let me see the action. And I think we as a firm, you know, I’ve really adapted to that last five years. And the same thing goes of entrepreneurs, if you’re going to be writing a big check, you know, at a healthy valuation, you really want to get to know people and understand their motivations and see how they perform versus their own internal goals and plans. And so that part of it, I think, is actually positive. I think the venture ecosystem is calibrated for that. What’s interesting that the thing that’s been keeping me up is I think what I remember the most from the last downturn is when you become when if we see this progress the way I think it will, we will likely you’ll have to be contrarian, almost by definition, when you make a new investment, because the headlines will move very negative. And, you know, we’re already starting to see that happen. And now, you know, as a case study this, I remember when we made our investment in in Twitter, we led we call it the series B with Benchmark Capital in February of 2009. And I remember, you know, Lehman had just gone down, the financial markets were hemorrhaging, President Obama just been inaugurated, and the entire focus was on building tarp. And in the midst of this, we, you know, visited Twitter and in the course of this, you know, invested a $200 million post money valuation for business and 10 million unique users, no revenue, and they had four outages, basically, in the last, you know, 15 months, and the number of people in the media and in the venture business that Are you guys crazy how this thing ever gonna make money 200 post in the middle of this, do you know what’s happening the economy, and a very important lesson I learned was, you need to have conviction, you need to have a thesis. And they may be right. And you may be wrong. And but the amazing thing about our business is asymmetric risk return where if they’re right and you’re wrong, you can lose your principal, that is a real risk in any market, especially in a downturn. But if you’re right, and they’re wrong, and you were able to find a company that really would stand the test of time as Twitter did, then you have the chance to make your entire fund and that investment alone returned our $600,000,000.12 funds. And so it was one of our all time great investments. And so I think that will be an adjustment for a market that has been driven off sort of consensus, momentum investing, people will have to be able to withstand a lot of criticism, sometimes within their own partnerships. Sometimes I think, externally, where you’re going to have to look dumb before you look smart. Yeah. And I think having a group of people where we’re unafraid of that phenomenon, I think we’re all excited to know that there’s gonna be some amazing companies built in this downturn, and we want to be a part of them. And we welcome you know, the criticism and and, you know, my joke control is like, I always keep tabs of how many press releases come into how dumb IVP was to make this investment, because typically, that’s correlate that’s inversely correlated with the upside of it works. Yeah. So that’s, that’s just one of the things that we learned from last time.

14:56
That’s awesome that you were, you were the lead investor. For a series B for Twitter, I feel like, out of all the debates I’ve had with smart people over the years, Twitter and Facebook, have spent the most time talking about why those are great businesses. And I think, you know, the facts have proven out at this point. But so many skeptics in these these contrarian models in the early days.

15:19
Yeah, and I’ll tell you, you know, we saw it even with Snapchat, we were Series B investors in SNAP. And I have the world of respect for Evan Spiegel, it was one of my favorite founders I’ve had a chance to work with and the team at snap, a partner, Dennis Phelps led that investment. And it was amazing. Similarly, at that time, when we did the be, you know, it was an even higher price than Twitter by a multiple, less employees. But the when we saw the engagement data, we saw his vision for what he wanted to build from a, from a product standpoint, we just, you know, how to strong conviction going in that if this thing works, it could be a really amazing product in the consumer space. And I think he’s proven us right, in so many ways, and continues to prove us right and make us makes us proud.

16:05
So, you know, you talked about how funding in the fundraise market my my adjust, I kind of want to go a bit deeper there. Sure. So this crisis is different than previous crises, clearly. But in 2008, you know, OA was still strong for seed round funding. And then there were sort of a steep drop off in 2009. It stayed pretty low in 2010, and then returned to, you know, fairly strong levels in 2011. What are your thoughts on timing, severity and duration of the impact on later stage venture funding?

16:39
Sure. So I mean, my first comment is, it’s too early to know, I think, we’re in kind of week four, I think I speak for probably everybody, when it’s this time, it’s not purely professional. It’s so personal for everybody in this country. And you know, Nick, you and I are the lucky ones. Like we have the ability to be able to have a job and do it remotely. For so many of our health line workers, service level workers, parts of the country where they’re disproportionately lower middle class, lower class, I mean, it is frightening if you see the stories of what this has done to their lives. And that is the thing that I’m just my heart goes out to those that are going to continue being affected by this. And it’s not, it’s not going to stop even when we quote unquote, resume life is the impacts of this will be felt for years to come. We’re you know, we never believe we’re in the business of predicting cycles. But if we use the kind of historical frameworks of 2002 the.com, bust in 2008, I think this is likely to take quite a while. So first of all, this is a global phenomenon. This, like the.com bust, to me, having worked in tech at a time was very much a correction of Silicon Valley, and Silicon Valley excess and sort of IPO access, but it wasn’t as marked for other industries across America, and across the world. 2008 was very much a financial crisis in the US that definitely had spillover effects in parts of Europe and Asia. But again, it was the it was a scary time. Because, you know, the real question was, will the financial markets and institutions be solvent and you look backwards and see how you how much credit that administration must be given for how quickly they moved. And I give, and I do give credit to this administration to for moving fast in many categories. In terms of how they’ve reacted to COVID-19. Of course, there are some categories that they have not moved as fast on, which upsets me, I do think that the severity and duration of this one to me feels like it’s going to be at least as long as not longer than what we saw in 2008. Because it’s health oriented, and it’s global. And it’s affecting all socio economic classes and all business categories. I do think that, when it comes to your question around funding, we’re just in the early stages. So what we’re seeing so far is many companies that had talked verbally or had term sheets, and right before COVID hit, the good firms are honoring those, and they are finishing those transactions. They’re having conversations with entrepreneurs, about what expectations should be, if entrepreneurs, you know, fundraise on a plan that was built in January of 2020, even though that was only a quarter ago. It’s not proven to stick to that as the operating plan. I think, savvy entrepreneurs and experienced venture capitalists are coming together to say, hey, this may be a year in which we’re going to need to preserve cash even after this round and have a lower growth target, and have more operating leverage in the business and don’t penalize this. We’re having a conversation now. I do think that a lot of companies that are going out right now to raise around, it is going to be tough. It’s going to be a hard time to find investors that believe because most VCs are doing the right thing by focusing on their existing companies and reserving and allocating capital to make sure they defensively support those that Need it in the short period of time, and offensively also take advantage of this to own more of companies where they see coming out strong. On the other side, we just went through an analysis internally, and did a lot of work on this last three weeks, because it coincided with our 40th annual meeting. And actually, we 91% of our portfolio is either generating free cash flow, profitable, or breakeven, or has at least a year of runway in front of it for the 9%, that now doesn’t have a year of runway, we’re doing all the things you’d expect from studying the stimulus to see who can be who can apply and actually get some of it for their use cases, talking to the venture lenders to see if we can extend terms on on credit, seeing if we can make freezes and hiring, in some cases, cuts to extend our runway. But that’s been the real focus. As far as new deals go. We’re in market and we’re meeting lots of companies, but our priority has to be our people and our portfolio. And it can’t be just sacrificing on those two buckets to be able to prioritize the new opportunities. Right,

21:06
right. You know, how do you think the exit market for companies adjust? Here again, this is so early, right, we’re only three weeks in. And so you’re not predicting the future here. But you do have experience with a previous crisis, you work with a lot of folks that have seen multiple, this is going to be a crisis of a different nature. But do you think a lot of those exit paths evaporate? Do you think there’s a market for strategic acquisitions and or IPOs? is significantly depressed with with some other things?

21:46
Yeah, so it’s a it’s a great question. And again, it’s too early to know. But my own sense, and I think most would agree is the IPO window is going to be shut. So those that filed in q4 of last year, q1 with the hope of going out in q2, q3, it’s just not going to happen. Like we’re just not going to see the receptivity by institutional public shareholders to buy in and IPOs when, you know, the key thing. So one of the unique aspects of IBP is a true crossover fund from IVP. One onwards, where we can allocate a portion of our our existing venture fund to public investing, we typically use it selectively to bind the IPOs, where existing companies or support them in the aftermarket, we, but we really haven’t for periods like this were in whether it was 1987, or 1991, or 2002, or 2008, we have an opportunity to make select long, only public investing in tech companies where we have a three to five year hold period, whenever short stocks, and actually have the opportunity to we’ve done really well. In the last few crises doing that in the last crises, we bought SuccessFactors Data Domain Omniture. We knew the teams, we had done diligence as private companies, and just felt like those are better risk returns as the private markets were still correcting. I do think the IPO window is suspended? I don’t think it’s shot. I think it absolutely has the opportunity to open back up in q4 Because my our perspective on the pandemic is there are certain sectors that are getting hit really hard, whether it’s travel or hospitality or retail. But fundamentally, you know, we I’m very optimistic that we will get through this as a country and as an industry. And people will go back to taking vacations, buying things, you know, having shared experiences with loved ones at restaurants. And so in that case, I think things get delayed. I don’t think it shuts for any fundamental reason. I do think the m&a window is actually very active. We saw a number of deals announced last week in the security space in the enterprise infrastructure space, we have a few companies that have actually had conversations accelerate, most tech strategics are pretty cash rich, and view this as an opportunity for them to get better value and do a few creative investments than they may have at the peak of where valuations were high and startup land in the last 1218 months. So I think the m&a window will be quite active in the next two quarters as IPO window shut. And I think in terms of private equity, it’ll be interesting to see what happens there. A number of private equity, global private equity firms are going to be fundraising, credit markets are changing dynamically. So historically, especially in software, we’ve seen firms like VISTA and Thoma Bravo, be very active. I think they will be active in a certain size and scale. But in terms of large new control investments, I’ll be interesting. I think they may suspend also for the next few quarters.

24:34
Do you think startup founders should spend more time exploring potential m&a At this point to kind of hedge situation I know there’s there’s many founders out there. I don’t want to speak for specific ones in my portfolio, but there’s some that were on that IPO path or bust you know multibillion dollar company and amidst the situation and cash being constrained and venture firms take Longer some sources going away? Do you think that founders should be spending more time engaging with strategics to have optionality?

25:12
So you know, as a former once upon a time, for sure, part of my career investment banker, I always believed in the phrase that I think Frank had coined, which was companies are, are bought, not sold. And so I actually think that, you know, founders are under a tremendous amount of stress, both personally and professionally. And I think we, as investors need to be careful, Nick, about the guidance we give them, you know, to tell a founder right now, hey, you know, the most important thing for you to do is sort of create an m&a process and go out and talk to these people. That is, that should not be a top priority for any founder of any scale. I think most of the big strategic requires corp dev teams, are very savvy and understand this as an opportunity, and many are reaching out proactively to companies. I think there’s a reason why good advisory firms exist, it’s to help them if they’re serious about wanting to figure out what their options are, engage the right advisory firms to make sure that you know how to even think through the conversations if you’re a founder and haven’t been through before. I think the first order of business is actually having control of your own assets, and giving yourself runway and liquidity. So most of the founders that we work with at the at the late stage near IPO stage, are thinking through the next 30 to 90 days. What are the areas in which they can see savings? Where’s the potential upside, you know, for all the dark companies, of course, in our portfolio that are affected by this disproportionate because of the nature of what they do is that there’s other companies that are really benefiting in many ways that were unexpected. We’re investors in companies like masterclass discord, which are seeing a huge rise of a plan in terms of engagement on gaming, and on content consumption on coin base, which is seeing trading volumes increased dramatically. You know, we’re public investors, we were private investors in Slack, which is seeing huge growth and teams and subscriptions in the last year stewards talked about this on Twitter. So, you know, it’s affecting companies differently. I would say, the broad advice I’d give if you’re thinking about m&a is instead of sort of saying No way, Jose, if you believe that, it could be an event that has value for all shareholders, not just the founders, it’s a good time to engage your board on this, engage your your management team and engage the right advisory firms, but I would not recommend trying to go out and sort of running your own road process.

27:34
So much, what do you think happens in the secondaries market?

27:38
I think that’s a good question. I think. And again, if you stratify companies, so when it comes to buying secondary shares, there’s different constituents, we do a lot of in an IVP. I do think that seed and, you know, many first time funds and seed investors are going to probably see in the next few quarters, the need for liquidity. You know, we talk a lot to our limited partners. And the reality is for IVP, has always had this crossover focus. And you know, we’ve, in the last decade distributed, you know, on the order of $4 billion. So we’ve always had liquidity as a central tenant of the partnership and our relationship with LPs. For a lot of other smaller funds, they haven’t distributed anything to their limited partners. And as they’re young, and they’ve kind of ad distinct their investment cycle we typically see for any fund, your one through four is sort of the primary investment cycle. Your four through seven is sort of the harvesting cycle. And your seven through 10 is a liquidity cycle. Some of these funds are sort of in your three, your five, your six, they haven’t seen any liquidity. And so we view this secondary markets will get quite active where larger funds like IVP, and others will have the opportunity to enter existing companies, but also new companies actually provide that liquidity to these early angel investors. I think many we’re seeing this in real time, many teams are really making the hard decisions to do pay cuts for executives. We talked about this today as a partnership but one of our companies just decided that the full executive team will take a 40% cash pay cut. Different people have different levels of kind of personal liquidity available to them, some can manage that others you know have yet to buy a home, you know in New York or the Bay Area and have kids that they want to be able to provide for so we think in those cases, Insight investors will go in and buy their shares and provide impartial liquidity to help them out these crises and we’re actually having an active discussion one coming out involved in right now on that. I do think that you know, many of the companies have raised enough money you know, before COVID-19 hit will be able to weather this and if you are a firm that wants to get in, I think one entry strategy we’ll be going in through liquidity. The question will be pricing thing right now you’re seeing most secondary deals still happen at like a five to 10% discount for the hot deals. For the last prefer that delta last time this happened in 2008 2009 will get larger, as more and more quarters go by. And a few companies will be able to, you know, probably see smaller discounts, or maybe even price parity just given. They’re growing so fast. And maybe they’re in industries that are counter cyclical, but, you know, many of the companies will have to see secondary deals happen and much more significant discounts. So their last preferred.

30:24
What? What’s your take on some of these late stage companies that are in sectors markets that are hardest hit, right by the crisis? So we’ve got the service industry, travel, services, and hospitality. You’ve got mobility, you know, companies like bird companies like Airbnb. I think Airbnb was planning on going public in 2020, which may not happen now. What happens to these well capitalized companies that are just getting crushed by the nature of this crisis?

30:58
It’s a good question. And again, we’re just I think they’re so they’re reacting, I give Brian Chesky a lot of credit, we’re not investors in Airbnb, we wish we were, he’s really an amazing resilient entrepreneur, in light of, you know, for no fault of his own, you know, the changes that’s happened to their kind of status quo. The amount of support Airbnb is providing for health workers around the world and their community of homeowners is just remarkable. And I think it just shows, culture matters. If you have that kind of a culture and you have that type of leadership, you will come out stronger. And I’m a firm believer in the long term prospects of Airbnb, I do think it’ll likely delay their plans to go public delay their plans for a new product introductions, things that are discretionary will have to get pushed out. But I still fundamentally believe in the value proposition, right? People will travel again, people will go around the world, people want to share experiences, people community, you know, one concerning thesis on Airbnb is community will matter even more, in many ways. I think if there’s one thing we’ve all learned already, collectively, in four weeks, it’s the importance of, of humanity. I don’t know about you, Nick. But I’ve reconnected on Zoom, happy hours and zoom family calls, people who I had lost touch with, you know, frankly, in the busyness of the last 10 years. And it just, it makes us all realize how much more we have in common than we are, then we have that are differences. And I think a lot of us will, when we resume will not probably go back to things exactly the way they were. I think the prioritization of friendships and family will be higher on the Maslow’s hierarchy of needs, I’d say then, sort of may it may have been before. And I think because of that, companies that harness community and harness these shared social experiences will do well. I will say, you know, there’s other markets like we are investors in line, which like bird is to their to the best companies in scooter space, both those businesses are doing very well, in terms of just they got the unit economics down, they had both had figured out about a year ago that the path to profitability and operating leverages went public investors, one after watching Uber and Lyft go public, and have made so many of the necessary changes their business models, I’m actually very confident about both of them. Because if you think about micro mobility for a second, you know, they did the right thing, both companies by taking scooters off the streets, where there were quarantines and social distancing was mandated. But as we as if you look at South Korea as a data point, scooters are back up and running in South Korea. And actually, for many of the food delivery workers, health line workers, it is a more affordable choice than having their own cars is actually a more environmentally friendly choice, which, you know, climate change is another topic that’s coming up a lot where people are climate conscious now than they were before the crisis. And people frankly, feel a little bit better about their about preventive abilities of catching COVID If you’re on a scooter by yourself, and if you’re in a crowded subway, crowded bus or even a crowded Uber pool, where you have five people in a small, constrained area. So there are some counter cyclical trends we’re seeing in Asia, where they’re on the other side of this faster than we are in United States. So but it’ll be a tough period where both companies will need to think about resetting expectations and the suspension of these markets. You know, we’ll be interesting to see how they will endure that in the next few quarters. Well,

34:18
I have to admit to you I’ve only tried one scooter ever, and it’s been lime. And ever since I tried it for the first time I’ve been a frequent customer. It’s it’s an amazing experience not having to wait for you know, the Uber to come you just hop right on and you go and often you get there quicker and much cheaper. So with with solid unit economics, I mean, the scooters are certainly here to stay. So Smash, you’ve been at IVP since oh five, what are your best recollection recollections of the changes in strategy that were made during? Oh 809? Well,

34:53
I think the the key the key thing going into any change in the environment is you need to the most important thing is you How to stay in business. Okay, you have to be able to a lot of firms that I didn’t think did as well in that period, they just stopped looking at deals, they stopped meeting entrepreneurs, they stopped building relationships, I think, you know, the lesson from otoo annually and IVP was always you stay in business meet companies, you continue to be a value added thought provider and service provider to them. And so, I do think that that is one of the most important lessons. The second thing is, it’s actually a great, these are always, in most cases, the best vintages. So for from an LP perspective, you can never time the venture markets, it’s important to you know, what’s happening right now the LP world is a lot of them are saying, Oh, my God, if you look at the headlines, like startups are, you know, under duress, and many of our LPs, you know, are so delighted that they continue to support us through the Oh 809 downturn. And because of the performance of that fund, and have that view, which is venture is a cyclical process, you know, this bull market lasted longer than we think. But this is the exact wrong time to get to the asset class. And so we’re very empathetic that many of them have to think about their processes, as they think about new fund deployments, because they’re working from home committees are getting pushed, they have other many most LPs, as you know, Nick have assets across different classes, whether it’s fixed income, equities, debt, and of course, private equities and alternative asset class, which includes buyouts, early stage venture and growth. And so they’re going through the adjustment on their allocation processes as we speak right now. So we’re very, we’re collaborating and talking to them about that. But I think you over communication is sort of what I would say is one of the most important lessons which is, at this time GP should be over communicating, most importantly, with their teams. And this is a health crisis. This affects families. I mean, one of the things that’s been the most rewarding in the last three weeks is, you know, having these zoom happy hours, I’m learning things about my colleagues, I never knew before, at all levels, not the partnership, but just you know, our IT team, internally, our finance back office team, we have a newsletter that we put together, or my colleague, Janet puts together every Friday, and today, we had pictures of pets, and we got to see their names. And it was just really fun. And that stuff matters at a time like this were so many of us are under stress. I think it’s just really nice to be able to laugh with your co workers a little bit and people are sharing funny memes and videos. So over communicating with your LPS or entrepreneurs, it’s also important for CEOs to over communicate right now. Like, I think long board meetings are being supplemented by just quick zoom calls, quick slack calls I’ve talked to, you know, every entrepreneur I work with multiple times the last three weeks, just and it’s for some of the most meaningful conversation in my 15 year career at IBP. You know, I’d say the other thing I’d probably say about a lesson learned is you have to remember that venture capitalists are job, we’re minority stakeholders, our job is to be sounding words, I remember a quote that Mark Lesley, who’s going to mentor and former professor at Stanford said, which is, if you don’t listen to your board, you may get fired. But if you listen to your board, you will get fired as advice to CEOs, which I thought was one of the great quotes. It is hard as a CEO right now you’re getting inundated with inputs and advice. And it’s important to know your true north your compass, but your intuition, your voice, as a CEO is what matters the most. And so solicit input, but you got to figure out which ones are relevant. You got to figure out what people’s self interests are. And you got to trust most importantly, your intuition or gut, you know, and I think as CEOs, we, you know, we just salute all of them for being they’re so resilient. You know, in normal times at a time like this, I’m just, I’m just so proud of the ones we work with an IVP, to be able to communicate with them, but to be able to empathize with them and understand that none of us have the answers. We’re trying to figure this out together. We’re a team, right? We’re not, you know, adversarial. I think that’s the pattern that we’re seeing emerge with the best conversations with investors and founders. I think the biggest mistake that CEOs make is not communicating enough. And then people feel blindsided or not heard, I think, in some ways, being an investor or board members like being a parent, like with your with my kids, you want to make sure they’re, you know, you’re heard and valued and respected. But your kids, you know, they’re going to do what they’re going to do at some point, you can control the outcome to better how much you want. That’s how our relationships are with one of our founders.

39:31
I love that I was doing some onboarding today with some new interns. And the point came up about, you know, how involved do you need to get in, you know, how much should we guide the strategy and I had to tell the group like, Look, if we should not be the difference between success and failure with the startup that’s right. We can accelerate it and we can help guide and we can help them achieve success in a less painful way. But if we are the difference between success and failure that is not an investment we should make. And that’s our personal philosophy at new snack and doesn’t have to be everyone’s but we do not want to be subsidizing the management team. Well, the

40:12
two, the two pieces of advice that I’ve been talking about Nick with our companies, I should say two, three. The first is the lesson from Twitter, Zynga, Yext AppDynamics, the companies we funded in the last downturn as you never stop investing in innovation. And so I think there might be, if you read a lot of the consensus views right now, it’s Oh, you gotta cut, you know, across the board and cut deep. The reality is, the reason startups exist is to innovate. It’s to build products, it’s developed by p. And so even in a market like this, we’re going to ambiguity and uncertainty, you can’t stop the innovation process. And frankly, you can’t stop it even if you want to, because startups are like organisms that can grow on their own. And so your team will rally around, continue to build and innovate. The second thing that I think is really important is riffs are hard, they’re really hard. I mean, our founders have spent years building up these teams, and countless man hours have gone into identify great talent, recruit them, reference, check them, and then onboard them. And it’s really hard on both sides to have to do this over zoom. And that’s one of the things that’s been the most crushing is how many of our CEOs who’ve had to go through this or the stories we hear this is some of the toughest days of their professional careers. And some of them have worked for two to three decades. One of the things that I think is important is early in my career, I was an intern at Sybase, which was going to turn around. And, you know, I was too young at the time, but I was, you know, the recipient of a riff, right, and the cut the entire marketing department and because of a strategic direction change. And as someone who had been laid off and had been affected by or if I just I can’t forget that conversation I had, it wasn’t done very well by my manager at the time. And I just think it’s important if you’re a CEO, or a manager, and you need to do it, talk to people who’ve been on the other end of that, and learn from them about what went well, what didn’t, people were giving you advice, who’ve never been in a position of letting people go or been the recipient, that news, you know, I take some of that advice with salt, it’s an emotional thing for both sides, it’s one of the hardest things to do. And so I think that’s the other piece of advice is solicit those who done it really well. And a related point, my third piece of advice, it’s a good time to build your kitchen table, cabinet, your board, because those who’ve been through previous crises, those run public companies in the public eye, when you’ve had these downturns, they really have sort of a muscle memory. And I’d say in momentum markets, you know, a lot of people aren’t sought out for that type of advice, but John Chen, who ran Sybase when I was, you know, a lowly intern from UC Berkeley, he was one of the first CEOs I got to see in action, He’s exceptional, I just communication with his stakeholders, and how he thinks he, you know, turned around Sybase and so jsap. And now he turned around Research In Motion, your Blackberry, where he’s CEO now, and I think those are the kinds of people that you should use to complement those that have growth expertise and venture creation expertise on boards and advisory boards.

43:07
Love it. I mean, you’ve said it a couple of times here, but choosing mentors, choosing board members, choosing advisors carefully, is so important, right, people that have experienced but but not just experienced, like the right folks at the right time. It always kind of makes me cringe when I meet a founder that’s going through these, you know, iterations with 30 different mentors and getting all this different advice, and they can’t parse the right advice from the wrong advice. And I just don’t think anyone can be a mentor. And anyone can be an advisor in this industry, just because they’ve worked for a startup or the you know, they spend time as an angel investor, for instance.

43:50
I totally agree.

43:52
So, I’d like to talk a bit about lira before we wrap up. Sure, sure. led the series See, this startup of courses is focused on mental health and mental health now more than ever, is just super important. I think there’s so many people struggling, whether they’ve had direct exposure, you know, to, to the virus itself, they have friends or family that have and then there’s just some others that are really struggling adjusting to isolation. I know, you know, I’m an introvert and cash the first couple of weeks felt really refreshing, you know, not doing a whole lot from that standpoint. I mean, there are a lot of challenges. But I know there’s a lot of extroverts out there that are are struggling significantly right now. So, back to the point on Lyra, what are your thoughts on mental health and the effects of work from home and social distancing? On folks?

44:54
Thanks for bringing it up, Nick. It’s such an important topic. One that’s very important to me personally, as well as Of course through lira professionally, before we even talk about lira, I think it’s important for anyone who’s listening, if you feel like this is becoming a difficult time for you, you feel unsettled. It is important to know that you’re not alone, you can get help. There are communities, and of course clinicians to support you lynda.com actually has a lot of resources that can be potentially helpful. This is a very isolating time, we are seeing the data come in via lira and, you know, from light anxiety, to more severe clinical depression to also unfortunately, suicide rates are starting to really rise to a dangerous level, they’re already high in this country, they’re continue to go up higher. And it’s really, really worrisome. i The silver lining is telemedicine may be the bridge that was always missing between traditional psychiatric care, clinician care, and the vast the millions of Americans who have liked to severe mental health disorders. It is something that I’ve seen, you know, across my own family and my wife’s family, I’ve seen it with friends have lost friends from it over the years. And it’s something that I just cared a lot about passionately. The crisis is definitely exposing the fact that we need to have a stronger conversation and, and more awareness about mental health. I’m really proud of kind of where the United States has gone in the last decade versus where it was two, three decades ago. The stigma is no longer as marked as it was, but different cultures and different agents react differently. And so it’s I think, important for people this to be part of the national consciousness. The story of Lyra was actually interesting. You know, we were talking earlier about the length of time we typically meet people as two years, I actually met David Eagleman, the CEO a decade before we ever got a chance to work together. He was the CFO of Facebook. And we had a chance to look at a few of the Facebook rounds that he was organizing on behalf of Mark Zuckerberg and Sheryl Sandberg, he was hands down one of the most impressive executives and of course, one of the most impressive public company CFOs we’ve ever seen from both being CFO of Genentech and Facebook, in some ways, the perfect background for a company that’s really working on building what we call a blended care product, which has both physical providers, you know, EBT CBT, trained clinicians, psyche, psychiatrists who can come and help employees of large companies or customers, but also coaches who can work virtually on apps to sort of be there to care for patients when they can’t see them in person, like right now. So we’ve actually seen the data show that this is top of mind for so many employees of companies that are customers of Lyra. I think what’s really impactful is this is such a mission driven company. But as we announced as part of the financing, it’s also really good business, you know, we have 100 million of revenue kind of insight, we have the opportunity to transform, you know, some incredible businesses across different verticals, where it’s not just about the executive team getting help, it is down to the service level workers being able to access help. And, you know, the vision for the company is if we most of us work in organizations where we have health plans that provide us with some flavors of vision care, of course, health care and dental care. Why not mental health as a part of that kind of quadrant, right? I think it’s important, just as important for me and my family to be able to get help, to actually, to help us with our minds and our mental fortitude as much as with our vision, our teeth, our physical health. And so we all know now how much these things are interlinked. And so you can’t be the best version of yourself with your family or with your co workers or with your classmates, if you don’t have the tools to cope with mental health anxiety, right. And so, really proud of the work that Eva has meant and the team that Mira has done, as they themselves have had to transition to a work from home organization. They’ve been able to still provide amazing service to all their customers and so many of their other employees that they touch indirectly.

49:17
Yep. Would you know more generically, what sort of advice or suggestions do you have for leadership teams, you know, that are going through tricky times, trying to keep morale high, maybe having to go through furloughs, layoffs, you know, other really hard decisions.

49:34
The first is that, you know, it’s it’s, I was watching, you know, Goodwill Hunting a couple of months ago, and there’s that line that Robin Williams says to Matt Damon, which is it’s not your fault, right? Yeah, it’s not your fault. It like I think as someone you know, we touched on this earlier. If you’ve been the if you’ve been part of a furlough, or a layoff or a rift before which I have, the mind can’t help but think especially You’re younger and less experienced that it is my fault. It’s my fault, I could have done something differently. And you need to first personify the fact that many of your employees, many of your stakeholders feel this way. And you need to the key role of the leader I think, is to allay anxiety to to lessen anxiety, not heighten it. And so being conscious and self aware of that is the first tip, which is just realize it is not your fault, you’re in this situation, nobody predicted a global pandemic, I don’t care what anybody says, we’re very lucky that there are pundits and experts who at least cut it early. But none of us could have seen this coming or the impact it would have had. And it’s really unfortunate, and I think we’re will be much more prepared. God, I hope we never have one of these again, but if we do, I know everybody will be more well prepared the next time. I think, you know, keeping morale really high, celebrate the wins, you know, just little things like, you know, if you’re a company that typically sells a million dollar deal at the end of a quarter, and you just got a 10k deal, guess what, like a wins a win. So celebrate it drink to it, have you happy hour, you know, it’s it’s, it’s really important to make people feel like they’re part of something, you got to redo the goals like some people just forget, but people are still sitting there looking at their performance reviews from last year and thinking about the goals they have for 2020. And say, I’m not going to hit this like this just an expectation you need to lay, you need to recreate those goals and understand that, hey, we don’t know what our own business is going to look like, you know, two quarters from now, much less the end of December, know that we’re going to work with you and work alongside you to create the right kinds of goals. And we’re not going to just, you know, hold you to a standard. That doesn’t make sense anymore. But I think the most important thing is make sure that people can take care of their families, because they take care of their families, they take care of themselves, then they can help be productive colleagues and co workers. If that part of it is not there. And people are suffering, you know, they just can’t come to work with their 100% best self. And so I think that’s the most important thing is just show the human side, you know, celebrate the humanity that’s there in all of us. And I think we’re gonna get through this as an industry. I think we’ll get through this as a country. It’s been a really I just know when you and I last chatted five weeks ago, neither of us had any idea that this was going to happen. But boy, I feel like I’ve had a decade’s worth of learning personally and professionally the last four weeks

52:17
seriously. Just wait for the next couple of quarters. Yeah, exactly. Well, we should wrap up here some SG have any final advice for for any of the listeners, whether they be investors or founders?

52:31
Yeah, I think the key thing is just take breaks. Like I think whether you’re watching a lot of CNN or reading a lot of VC, Twitter or you know, doing a ton of zoom calls, it’s hard to clear the mind. Right, be safe out there, don’t do things that aren’t recommended by the CDC or local or federal authorities. But I think it’s a fun time to actually pick up hobbies and passions that a lot of us suspended because of just big life changes or big professional requirements. I have a feeling I can say, as a father of two young kids like some of the most special conversations I’ve had, have occurred in the last three weeks. Of course, it’s coupled with some frustrating conversations given we’re all getting sick, we see each other the same small, confined room. So we all need breaks from each other. But I do think that it’s going to be a time that I think we’ll all look back for decades to come and remember, and there’s going to be a lot of sad memories associated with this period. But there will be happy ones too. And I think a lot of us will have a sense of belonging and community and love. That, you know, was not quite there when we’re all running at 100 miles an hour in our normal, crazy lives. And so I’m trying to save her this, I think, you know, that would be my advice is savor the good as much as you can and realize that there are people out there that care about you and want to help you and you know, that’s kind of it. And, you know, we’ll kind of see what this all looks like at the other side, hopefully over a real happy hour, but if not at least a zoom virtual writers

53:57
write any recommended resources for the audience.

54:02
Sure, the NBC is doing a good job, I think of putting together stuff on the venture side that talks about the stimulus bill and what can be applicable or not. I would say you know, there’s on the mental health side of tech the lire I’d like to plug Thrive global as well, which is in partnership with CA Foundation and the Harvard School of Public Health, doing a lot of work on mindfulness. Thrive was founded by Arianna Huffington and has been focused on how do we think about mindfulness and productivity for knowledge workers, and that’s another acute need right now. And I think there’s just a lot of great I really liked. David Gilovich wrote a close post I retweeted on just how to do a riff if you’re a founder and I just thought it was really authentic, but empathetic and had a lot of good practical advice. So there’s really good content if people want to follow me on Twitter. I try my best to retweet things that I think are good that I’m reading. And or just drop me an email. I’d love to hear from anyone as da sh S. dash@ivp.com

54:59
Wilson mash. This was a real pleasure. I mean, it was great chatting with you a few weeks ago, I wish that we didn’t have to do it under under the circumstances because there were so many other things that I would have loved to cover with you. But I’m so glad that you made time to help the audience here and help me think through this crisis and think how it’s gonna affect, you know, later stage capital.

55:18
Well, I appreciate it. Nick. I’m glad to hear you and the team are healthy and the family is good. And so just, you know, we’ll get through this I look forward to keeping in touch.

55:32
That will wrap up today’s episode. Thanks for joining us here on the show. And if you’d like to get involved further, you can join our investment group for free on AngelList. Head over to angel.co and search for new stack ventures. There you can back the syndicate to see our deal flow. See how we choose startups to invest in and read our thesis on investment in each startup we choose. As always show notes and links for the interview are at full ratchet.net And until next time, remember to over prepare, choose carefully and invest confidently thanks for joining us