Ed Sim of boldstart ventures joins Nick to discuss Maintaining a Disciplined Fund Size and Strategy, The Rise of NYC Tech, and Changes in the Exit Environment. In this episode, we cover:
- Walk us through your background and path to VC
- What’s the thesis at boldstart ventures?
- What was it like starting Boldstart in NYC in 2010?
- Tell us a bit about the thesis at investment and how things evolved over the years until the ultimate exit?
- What’s your preference… Niche and narrow problems or big and expansive opportunities?
- What is your mental model for investing in enterprise founders with ideas?
- category creation
- Why only technical founders?
- Will this enterprise bull market sustain?
- You’ve talked about being involved and sitting on boards from “whiteboard to scale” ?… how do you manage ever-increasing board responsibilities with other demands of the job?
- Where are VCs most lacking when it comes to the value that early-stage founders require?
- Do you think there’s too much money in venture?
- How do you win in a seed with so many seed funds?
- In the early days, when you try to build a community, it’s a long-term investment. And it’s like a faucet dripping, drip, drip, drip, drip. And then by year three, if you do it, right, and your patient, just say the dam explodes. And I think that’s the same way for venture funds..
- We call it founder market fit first and foremost, right. And so we love companies that are born out of a founders pain, where the founder, it has been solving a problem for a long time, waking up in the middle of the night or in the shower, you know, kind of thinking about it right? That that obsessive mission driven founder is something that we get excited about. And what comes hand in hand with that usually is this is that they’re so focused on the problem. They’re focused on who the user is. And you have to have that narrow, obsessed, niche focus perspective of what does the user experience every day? How do I make them a hero? How do I make their lives 10 times or 100 times better, because if you focus on the one, and then the 10, and the 100, then the 1000. That’s how you build an amazing business.
- Our equivalent is like, you need to give them a flying car and make it feel like a faster horse. So there’s that steady balance between, you have to nail it first, before you move to the next thing. And the definition of how you nail it, I think is up to each company, on how you nail it.
- Ed’s mental model for investing in early stage startups — the 5 P’s : Problem, Product Obession, Passion, Possibility, People
- My first question you need to think about is, rather than say, you know, why can’t someone do something, you need to ask if someone were going to do it? Who would be that person? How would they do it? And how big could it be?
- Technical founders can iterate fast. Paul Graham talks about product velocity as being an early indicator of success. I added kind of my own corollary to that product velocity plus hiring velocity.
- I think that the thing that boldstart does really well, is we help technical founders transition to becoming great CEOs. Just because you’re a founder doesn’t mean you’re a good CEO… it takes a village to grow a startup.
- We’re just in the second inning of digital transformation, right in the sense of, we’re entering a whole new era. I’m bullish on the future of enterprise software, particularly in early stage. There’s just going to be tremendous, tremendous opportunity.
- Ed’s three C’s of helping founders out: Know when to cheer, challenge, and chill.
- VCs on boards are like, margaritas. One is not enough. Three is too many, two is just right. VCs should never claim credit for a company’s success. But they can certainly claim credit for a company’s failure.
- Specialize and invest with courage and conviction.
Transcribed with AI:
Ed Sim joins us today from New York City. He’s the Founder and Managing Partner at boldstart ventures a first check fund for technical enterprise founders. Prior to boldstart ventures, he was founding member and managing director at Dawntreader Ventures specializing in early stage tech companies. Ed, welcome to the show.
Thanks for having me. Super excited.
Yeah. Tell us a bit about your your story and your path to venture.
Wow. I’ll give the abbreviated version. I’ve been a VC since 1996, about three years after college, and I was intrigued by venture having heard about it from a friend of mines brother, saying that, hey, you know, it’s really cool to kind of find founders and, you know, one day their product just shows up on the cover the Wall Street Journal, and you got involved when nothing really existed. And that kind of really intrigued me. And I had always been an entrepreneur myself anyway, just, you know, having run my own window, washing business, believe it or not, I sold Cutco knives. In college, I people made endless fun of me. You know, I don’t know why, but, you know, who’s laughing
So I had this weird thing about venture, I guess. And I ended up at JPMorgan, working in their structured derivatives group. And I was a analyst, which I really call a glorified data entry person with a nice title. And so basically, what I did was I learned Visual Basic learn how to code because I had to enter all this data. And every day, you know, when the markets closed, and we had this sophisticated options, trading strategy around around the data. And so eventually, when we did, we built all these spreadsheets by my partner, Jeff grills, and I built these spreadsheets and we automated our jobs. We come in and enter 20 numbers, we had the fastest Intel Pentium machines, if I want to date myself, wow. And three hours later, we come back, we’d move $11 billion of money using these spreadsheets. And one day, the the head portfolio manager came to us and said, What are you guys doing? Like you take these long lunches, you’re accurate, you’re asking for more work. And we showed them. And they said this is great timing, because we’re gonna actually take live Reuters data feeds and build a real time trading platform. And we want you to work with the with the developers and be kind of like the business QA. So I got heavily involved in developer process, I downloaded mosaic browser, and I figured you know what, I’m gonna try to get into venture now. I’d been there, we automated our jobs, everything worked. And at the time, and I like to tell the story at the time in 1995, when I was looking at venture 9596, the only way to get an adventure was to either go to Stanford or Harvard Business School. I mean, there were very few venture firms out there, there wasn’t much out there other than what was kind of your Netscape browser just come out. And I was like, Okay, I guess I got to go to Harvard or Stanford if I want to get into real venture. And I did not apply to business school, I did not get in. I got an award in Chicago, which which were good schools. But I said, You know what, I still want to do this thing. And I, I found an ad in the Wall Street Journal, believe it or not about building out a venture capital firm in New York, because there was no tech kind of investment market there. And answered the ad. An hour later, I got a call and fast forward and ever went to school and join this firm that had money from the New York City economic development corporation or to build new york No, to build new york into a VC platform and a startup ecosystem. That was 1996. Yeah, so So fast forward, I did that for two years. And then I ended up getting to Harvard Business School, five years out of college, and it never ended up going. I started Dawn Treader, with the vice chairman of Morgan Stanley, at the time had Smith Barney. And our thesis was to bring the best of both worlds at the time, the internet was just kind of cranking along in 98. So bring the best of startup and internet mentality from Silicon Valley, along with kind of all these corporate relationships, which Bob had backing, you know, all these large companies. And so I guess I was the the young guru who would bring the internet tech experience kind of to the platform. And at the time, it was kind of like the great equalizer almost the way that cryptocurrency was a great equalizer for young people, because no one actually had the experience before. So, you know, I was just as, as experienced as anyone else at the Internet at that time. And so I started doing charter with Bob, and never ended up going to Harvard Business School. And fast forward. You know, here I am, many, many years later, that was 1998. I started that. And in 2010, I left to start boldstart. So maybe a long entry point, but that’s how I got into VC.
So you’re a builder, you’re like, you come from an operator background, like real tools. We hear these cliches about the difference between east coast investors and West Coast investors and they have just like fun, fundamentally different sort of heuristics and approaches to venture. Is that real? Or is it more just the about the individuals?
It was real back in the day right you know, the whole East Coast West Coast rap, you know, Tupac the smallest thing that was always big man. And that was the same thing in venture by the way. And really like when when meeting with Bob Bob’s like, Ed, let’s bring up let’s bring a West Coast mentality to startups in New York, because at the time that we started like in the mid to late 90s. The only VCs around work or spreadsheet jockeys. And frankly, you know, they weren’t looking at founders team, new markets product, right? Because that’s kind of the mentality that we brought, like, let’s bring a product mentality. Let’s bring an internet first mentality. Let’s not look at spreadsheets. The only thing that matters in a spreadsheet is how long will the expenses last? How long will the cash last to get you to your milestones? Right? That was the only thing that mattered. So when Bob and I started, Dawn Treader, I was fortunate to lead the first round, literally the first investment into liveperson, which is still a public company. Today, we’re three and a half million. Rob Locascio, they started the first kind of internet chat craze. And customer service craze, you know, in this in the SAS world. I also did go to meeting, which is a West Coast company, where once again, it was all about the product. We ended up selling that to Citrix and fast forward, they ended up generating about $600 million a year of arr. So yes, there was a divide between the way that East Coast folks and West Coast folks thought about the world. And the founders actually used to get frustrated, like, hey, I need to go to the west coast to raise capital. And that really bothered me. And I was like, No, we have that same mentality. So fast forward. I think that’s kind of going away, or has gone away for the most part, just like that, just like it’s gone away in the rap world. But it was a thing.
Yeah, it’s funny, I, I migrated back to Chicago from being out west in like, 2012 timeframe. And I remember, one of my first epiphany was like, wow, the the investors in the greater Midwest, not calling out anyone specifically because there’s a lot of good ones, but they just looked a lot different than the West Coast VCs, they, they acted different. I mean, it was a lot of private equity folks trying to do early stage and
you nailed it. That’s exactly what it was around here. And they would talk about, let me call five customers, let me do this. But like, by the time that five customers don’t need your money. You know, and by the way, boldstart we’re all about is we’re about no product, no customers. So we’re in a completely different ballgame. I mean, we’re earlier than almost everyone kind of out there. So
yeah. Tell us more about the thesis bolster.
Yeah, so look, in 2010, when I when I left, Dawn Treader, to start bold start with my partner, Elliot, the thesis was this, I just had a bunch of exits, you know, go to goto meeting was sold five years before, we had just sold greenplum for $400 million to EMC that eventually became pivotal software, by the way and went public. And all these founders kept coming back to me saying, hey, there’s this thing called Amazon easy to, there’s open source software. And everyone one wants three to $5 million check. I just need 500 K or a million or a million half dollars to get started. And I need I need like real venture. And there’s no venture for that. And so I kept hearing that over and over again, I started writing my own personal checks into some of these companies, small checks. And I was like, hey, Elliot, I think there’s a gap here. Let’s go after this enterprise seed thing. And at the time, there were only generalist seed funds seed was a new category, there weren’t 5000 seed funds, like there are now or 500, or wherever you call it, or 10,000. I don’t know, everyone, everyone’s a seed investor now. So but at the time in 2010, there are just a few folks out there, and they’re a generalist feels like floodgate. It was it was soft tech, which became uncork It was first round, and we wanted to be specialist and enterprise, and people thought were absolutely nuts. That is the on the investment side, how are you going to build an enterprise seed enterprise fund? how you’re going to be seed? And how you doing it out in New York? I mean, are you guys nuts? And so anyway, we did it. So got that. And our strategy was built around what we saw as founders, like we saw the founders coming to us saying, I don’t need all that money, I just need a little bit. So fun. One was just a million dollars as an experiment. It was 10 100 k checks, kind of we made and we returned over four x of that already, there’s still a couple companies left in there. So I think they’ll do fine. And then that launched us out out to two successive funds, which that was kind of our pre seed round, if you will. And, and our last fundraise, was fun for which was an oversubscribed $212 million fund, we announced last year, and we did an opportunity fund of 45 million. So see, I said that that’s kind of what we do. I mean, we love getting in first, we love when founders are thinking about an idea. And I think half the time where if not three quarters of the time, when we actually want to invest, we’re waiting for the founders to even get incorporated to so they can file the 83 b election. That’s how early we like to go. I mean, that’s the same way with customer. We’re just chatting about that earlier. We were like we met Brad and Jeremy, as you know, I’ve done customer service before with live person. And they came with this kind of unique story around how tickets were siloed pieces of information, right? Because if Nick if you reached out via chat or, or text or email or phone, there are separate tickets, but they weren’t tied to you. And they wanted to build a unique data structure tied to you first. So that Yeah, so that so there was a unique insight around that and and we almost didn’t limit we actually basically didn’t let him out of the room without letting us trying to invest. And they said, Well, well, let us just get incorporated first and far at three B elections before we get going. But that that’s par for the course now, you know kind of what we do is most of the time, I think 9% of the time there’s no product when we invest
good lesson. Don’t let them out of the room before get
something done. I
made that mistake. A few months ago it was I actually drove six hours to meet with a founder to get something done. And I didn’t leave with a deal done. And Nick,
don’t let allow the zoom right.
Now the zoom, don’t
let them out of the Zoom Room.
Here. I’m sending the DocuSign right now.
Exactly. have it ready. Now.
Fortunately, we still got it in that deal. But we didn’t get delete it.
You know, so well, you got it. Yeah. Now, you gotta love that. Right? You just know. I mean, like, if you focus in the same space for a long time, like for us that was like, I know, this customer service space, you meet the founders, like, yeah, this is where do we sign?
Right, right. Yeah, it’s funny, you also mentioned about like, your pre seed fund and stuff, I, I see these founders in our portfolio going on to A’s and B’s and beyond. And I still tell them, as a firm, we’re still at the seed stage, we’re five years in, and we’re still at the seed stage.
I respect that coming. Because honestly, it’s one of those things, as you know, just like any founder, like, we invest in a lot of developer tooling and infrastructure companies, and like to say that in the early days, when you try to build a community, it’s a it’s a long term investment. And it’s like a faucet dripping, drip, drip, drip, drip. And then by year three, if you do it, right, and your patient, just say the dam explodes. And I think that’s the same way for venture funds. And, and everything else, right? Because for us, I mean, our journey was, we started in 2010. And in 2015, we got our first close of 20 million on fund three. So let me go from 1 million to 10, to 15, to 20. And then eventually, that fine became a $47 million fund. But the point is, it was a steady drip. And then eventually, if you if you’re passionate and keep doing the same thing, like you’re doing, it’s just gonna, it’s gonna hit for you
like that. Slow titration. But over time, exactly.
I was gonna ask you about customer, but we kind of knocked that out congrats on on the exit. It was public, the public numbers I saw were over a billion. So a big one there. Nice for
all can say is no comment, other than the fact that I can confirm that that is signed.
Very good. Okay. So let’s talk about the companies you’re investing in a little bit. What’s your preference, a niche and narrow problem, or a big and expensive opportunity?
So and we, we face this this challenge frequently, because we often start with the narrow problems with founders. But, you know, founders are often asking me, at what point at what progress point or at what stage of funding, you know, do we start expanding the aperture and going broad and, and taking more of either the technical stack? Or, you know, maybe adjacent customer markets?
Yes, so for us, it was just, the customers drove a lot of that, too. So, you know, we were in the node piece worked really great. And then we kept getting questions for, Hey, I’ll pay for this if you had Ruby as well. So you hear that enough times you had Ruby, right? So fast forward, you know, over time, we penetrate a good portion of both, and they’re like, hey, please add Java. And then it’s like, oh, can you actually do this for container images? Right now, I want to scan my images before they even get into production for containers. And and now so now it’s a balance of kind of leading, you know, I think, was it. Henry Ford, I don’t know if it’s true or not. He said, If I asked my customers, would they want a faster horse, right. So you know, our equivalent is like, you need to give them a flying car and make it feel like a faster horse. So there’s that steady balance between, you have to nail it first, before you move to the next thing, right. And the definition of how you nail it, I think is up to each company, on how you nail it. But you know, I’ve you know, for snakes case, it was like they nailed that they nailed the problem in one language and another and they felt confident that once they had three languages, they can move to the next technical problem, right, and then eventually, and then test that out. So then what we did is we tested out, we would attach that sale to the initial open source sale. And then eventually, what we did was we spun out separately, and we would sell directly against kind of the Aqua securities and the twist locks as well. And we’re like, oh, that worked pretty well. Now, I think we’re ready for the next one. So it’s always a series of creating the right hypothesis, the right test, and then having kind of a result around it.
Well, in an insight, I mean, that I think you’ve elicited that some founders Miss, I think, is that if you’re the one selling the horses, over a long period of time, and building trust, and credibility, when you show up with a flying car, they’re much more likely to embrace it. Whereas, you know, if you show up with a flying car, and you haven’t earned that trust and credibility in a small way, first, you know, building out your product offering with them over time, then, you know, tougher, but
I, you just nailed it right there. And that’s, that goes back to myself, the product market division. So you build the trust by saying, Hey, here’s the product that you can use today. But by the way, if you stick with me and take the bet with me, instead of going with that incumbent, I’m going to iterate much faster than that incumbent because they have eight different proxies they’re working on, here’s what three months from now I’m gonna deliver, here’s what nine months from now I’m gonna deliver, here’s 12 months. So, you know, there’s some companies that public roadmaps out there, I think front, which is one of our portfolio companies as well, until we put out a public roadmap and Trello. This is where I’m gonna offer for you, you have what you have today. But then this is where the priorities are next quarter and the quarter after that. And then you continually build trust, oh, I’m buying you now. Even though your product is 80% as good as the incumbent. I know that in a quarter, you have much more stuff, and then two quarters, so you’re gonna have much more stuff. And that’s it goes back to your point about credibility and building that trust. But that’s also marking a bigger vision too, right? Because you have to sell a story that’s much bigger than what you have today.
Right? And what what do you have a mental model for, you know, investing in these super early stage enterprise founders, you know, at the idea stage?
Yeah, you know, it’s something I think about a lot. I guess I call it kind of the five P’s in my way, you know, I think about the pain and problem first, right? I mean, we love founders who are highly technical, we only fund technical founders, by the way engineers, or at least, you know, one of the co founders as an engineer, and they typically start a product born out of a pain that they’ve experienced. And that’s kind of where the founder market fit comes in, right, the deep understanding of a problem, then, you know, with that these founders who are technical usually can combine that with a unique technical insight or unique type of technical breakthrough, you know, like the customer example that I gave you earlier, right, in the sense of, you know, they spun the data structure upside down, to make it easier and faster for support reps to respond to. The next thing is product obsession. Right. And that goes back to something I talked about earlier, which is like, you need to be so obsessed, obsessed with the product that you understand from the deepest detail of how a user is going to use it, you know, starting narrow and then going big, you got to start small to go big, passion. Passion is something that that is going to allow a founder to who’s mission driven to actually run through walls. Cuz, you know, Nick is, you know, starting a fund as well. We’re founders too. And, man, there’s some dark days, there’s some days, you’re like, Did I do the right thing? Did I make the right investment? How do I raise more capital for my fund? And, and what what keeps you going is clearly you’re passionate, you run this podcast, which is pretty awesome. I mean, you’re passionate you love what you do your students the game. And that’s what we look for in founders. The other thing we look at possibility, right, kind of, is it possible for this to be a billion dollar company? Or is this possible for this to return our fund? You know, and it’s not like, I need kind of like hard market data, because most of the time, you know, in the enterprise space, where I like to say, we’re investing in unchartered territory, so there’s no market map for a lot of the things that we do. Right. So. So if you’re on a market map, you’re probably too late for us is kind of the the running joke that we have. So they’ll kind of kind of be the other other key for us from that perspective. And then the final piece is the people, right? Because it’s all tied together with everyone else, kind of you know that that’s kind of the framework that we use. And the thing I think about, you know, two things, I think you need to kind of change your mental model on because people say, how do you do this? I have a hard time investing in later stage companies, right? Because I just can’t do that. Right? I don’t understand the mental model. But you know, Mike, first question you need to think about is, rather than say, you know, why can’t someone do something, you need to ask if someone were going to do it? Who would be that person? How would they do it? And how big could it be? So that’s one question, you need to get yourself kind of over. And the second thing I think about is this. And this kind of hits home. Another point we talked about, it’s not about the total addressable market, that a company starts with, but it’s the TAM that they exit with. And, and so the point is, you can’t sell a platform, a lot of founders come in and try to start with this, I’ve got a $10 billion market, Tam, here’s the platform. But guess what, no one buys a platform, they buy a product, I like to say on day one, focus on the microscopic, you know, how keymaker users life 100 times better, you know, with your software than without, and then you can kind of think about how to expand to a team to an organization and to an enterprise. And then how do I eventually add a new product, but you can’t start with a platform? So those are the two things we really, and by the way, we miss a lot too, because sometimes, on the art of the possible, we maybe we weren’t thinking big enough, right? And so So look, that framework is going to constantly be changed and updated. But yeah, sometimes we miss things too, like, right? Oh, my God, like, how do we not see that that was three years later gonna be this big. But those are the, you know, big ideas. A great example of that we funded Dimitri and Nimrod, you know, before GDPR, was passed six months before GDPR was passed. And we didn’t fund it because of GDPR. But we funded it because we felt like there’s a comparable in the space called mandiant. mandiant was a public company. And what they did was, after someone got hacked like a target, they would go in and try to figure out what data was was hacked, who they need to learn and everything else. And those are very manual process. And and big idea was all about them, their mantra was, you can’t protect what you don’t know. So they would go and using all the latest data scanning techniques, machine learning to, once again, this will sound very similar is how do I find all the data about you, Nick, that might be sitting in 3030 different systems, or 50 different systems. And it could be everything from your IP address all the way down to your social security number. But they’ve organized it by kind of user very similar to kind of what you heard about it with customer organized by user. Because in the space, by the way, there was technology called DLP technology that allowed you to see social, social security numbers, like running over the wire or a credit card number, but it wasn’t associated with a person. So their breakthrough was, I need to associate all this data with a person so that eventually, so we thought there was value in and of itself with that. And then we’re like, hey, if this GDPR thing ever passes, it could be pretty big. So they struggled for a while they ended up getting their first customer, you know, a large, large customer, I can’t name who but a fortune 20. And and then they’re at RSA security, is that the big security conference, and there’s a startup show called the RSA innovation sandbox, and usually the the company that wins that, you know, it raises a ton of capital raise a very high profile that, you know, the best judges from Silicon Valley. And the day that Dimitri was presenting big ID was the day that Mark Zuckerberg was testifying in front of Congress about privacy. I mean, you can’t, you can’t actually time this any better. But it was three years of being in the right place at the right time to be in the right place at the right time. Facebook
gets shown up here, Ed,
do you know that I
Customer Data? I don’t know. But guess what, guess what? Dimitri won the contest. And then he closed a round after that. And fast forward. He’s off to the races. I mean, you know, now it’s it’s scale. It’s Bessemer. It’s Tiger global. You know, Salesforce, he’s, he’s got it. But yeah, the first few years usually, as you know, even when you start your fund, and I started mine is always a struggle. It’s always a struggle to get yourself out there to get yourself known and kind of kind of push the boundaries.
Clearly there was an insight there that hadn’t been addressed before. But you said that there was like a public comp that was You know, trying to do with what the startup was doing so was was that category creation you know, like the the non Gartner measured or like
that was a new category right PII and data discovery, I mean big ID was was one of the first out there out of the gate. The public comp was not a public conference, this it was just more of a public cop. Was this what the tech can do? Like if I can automate what Mannion does, which is post hoc analysis? Oh, I see my understanding. Yeah. So we’re like, hey, if that if that’s, if that’s what we have today. That’s a big enough business. But it’s this GDPR thing passes. It’s a massive business. And, and that was kind of the gamble we made, right. That’s the bet he got to make bets. But that was a bet we made and knock on wood. You know, it’s it’s, it’s turning out pretty well.
And why only technical founders?
Well go back, go back to some of the pieces earlier, I talked about kind of the, the product itself unique product insight. I mean, look, technical founders can iterate fast. Paul Graham, you know, talks about product velocity as being an early indicator of success. I added kind of my own corollary to that product velocity plus hiring velocity. For example, if I find two, two founders, you know, one’s an engineer, or both are engineers, and they can hire three more engineers for 12 months, then the proc philosophy is not going to be there either. If I find two founders, and there’s an engineer two, and they have four ready to go, because these engineers are top notch, and they can have people follow them anywhere, and the day I give you a check, is because you’re these people are dying to join your company, guess what, I can guarantee you the product velocity is going to be there, right? So so that’s why engineers are really important to us. And the second thing is, look, I’ve been through two of the worst downturns in history, I’ve been through the 2001 bubble, you know, and that was held for two or three years. I mean, like, you know, it’s like an existential crisis, like, Am I doing the right thing is the internet even around me? So I went around, like, I was interim CEO at a company, I was interim CFO, I had to kind of go in and let people go, which is terrible, right? I think you get a lot of empathy for founders. And the one thing you learned, by the way, is not not don’t prematurely scale, because the worst thing is letting people go, you know, versus adding people but but the point is, is that technical engineers, the ones that’s that that survived, those hard times, were the ones able to kind of, you know, cut their teams back, cut their own salaries back, but continue building an innovative product, they were coding away, those were the technical founders. And those were the ones that made it through, because they’re also the ones that were on a lifelong mission to solve a problem. And they weren’t gonna let kind of a bubble beat them, or a second bubble beat them, they’re gonna fight through it all. And that’s that that’s the lessons that I’ve learned, it may not be the right thing or wrong thing, because there’s plenty of founders who have have started, I mean, amazing businesses that are technical, but this is kind of the one insight we like to bring. And the second thing is, from a value add perspective, from an investor, you got to know kind of where you can add value and how you can help people. And I think that the thing that bolt shark does really well, is we help technical founders transition to becoming great CEOs. Just because you’re a founder doesn’t mean you’re a good CEO. That’s great. And, and there’s a lot of work that goes into that, right. And so we like to say it takes a village to kind of build a startup, right? I mean, like, like that old African proverb and it takes a village, it takes a village to grow a child, it takes a village to kind of grow a startup, not to say that a child and a startup are the same thing. But the point is, is a lot of different people that have to have input. And it’s taken us 20 years to build our village of experts from some of the best and fastest growing SaaS companies from the developer companies. From the very beginning, we actually think about the cap table, how do we create room for some of the best angels in the world to create right 510 25 k checks. And next to them, you need a product expert, let’s bring this person in from you know, figma, or something, if you if you want someone from DevOps is bring up the person from Mongo, if you want plg, let’s bring a Trello purse, right. So these are the things that we’ve we’ve done. And these are all people that can give this is a village that can give advice to help founders get there faster, because our perspective is like if you have 18 months to burn, but if we can help you get there in nine months, or 10 months, if we can, if we can actually, if you can be that freshmen in college with senior knowledge, like think about all the things you could achieve, think about how easy or all those years could be that’s we want want to help you do. And it’s easier for us to do that with a technical founder, because we’re not going to be the ones going there coding the product, I’m not building the product. So those are these are all the reasons why we kind of figured out, you know, where do we best fit on the team spectrum to help you know, founders succeed.
All that love that lots of good messages in there was just talking to my team a few weeks ago about our like a new initiative, we’re starting on helping our founders become CEOs, because there is there is a big difference between being like a great bootstrapper that can get something off the ground and, you know, becoming enterprise grade CEO that can hire the team support the team be focused on metrics, prioritize. It’s just, you know, it’s a, it’s an evolved skill set.
Yeah. And then the question is, is the passion still there for that kind of stuff, right? Like you have to really know and look deep in yourself to figure out if that’s something you really want to do to
add you mentioned, you know, after 2000 what We saw that and the challenges there. How do you feel about the market right now? And will the Do you think this enterprise bull market sustains?
It’s funny, I just had a conversation with a friend of mine, you know, at a at a, you know, large hedge fund technical hedge fund. And we’re had this kind of ongoing debate about have all the multiples pulled forward so fast because of this cloud transition. You know, I mean, as Satya said, we’ve seen two years of digital transformation two or three months. And, and so here’s the question, right, is that the bear case in the stock market would be that all the returns have been sucked out? Because Because it’s, you know, the terminal value is 10 years from now from a revenue perspective had been pulled forward, but they’re not changed. Right? That that’s the bearish case. Case in point would be, I’ll give you three snowflake. They beat their earnings by 100 100%. year over year. I mean, while I’m at that’s incredible, and their stock went down eight or eight or 10% of the day yesterday, I haven’t seen today on zoom, zoom is up, you know, I don’t know, few 100%. year over year, guess what their stock got hit, because expectations are so high for both. slack. The slack Salesforce by the reality of it is is yes, that’s a big number 27 point 7 billion, but they only grew 55%. year over year, so and teams was taking a dent out of them. So So that’ll be the bear case, right is looking at that is that has it all been pulled forward in the public? The the bull case would be we’re just in the second inning of digital transformation, right in the sense of, we’re entering a whole new era. I was talking to a CIO of a fortune 100 company the other day, and they said look at we did all the easy stuff. We closed all our data centers down and we built all the net new applications that were customer facing that we could do we create a better employee experiences we bought, we brought more SAS in but guess what the other 80% that’s the tip of the iceberg. The other 80% I have is on my legacy systems, there are legacy applications connected to my mainframe, there’s old apps, we haven’t touched it, I want to hit those now I want to get I want to move those off, and I’ll move them to the cloud, that’s going to take me five to 10 years. So how many of those are out there? Oh, my God, there are a ton. Here’s another good example, Capital One, finally announced like two months ago, that after six years that they finally closed their last data center, how many more capital ones are out there right now and the global 2000 that are struggling to do stuff. final example be JPMorgan has 50,000 technologists right now. And they’re just kind of putting frameworks in place to, you know, have that central policy control, while giving developers the flexibility and freedom to kind of do self service. So if you look at all those kind of opportunities, I would say that we’re at the tip of the iceberg, just from a spend perspective, ignoring the stock market. So I like to be you know, a bull. So I’m pretty bullish on the future of enterprise software, particularly the stages we get involved in Nick, you know, it first check in, I think there’s just going to be tremendous, tremendous opportunity. The final thing I’ll say is that the future of work is quite interesting. Now. I was talking to someone the other day on a newsletter and just said, Look, mule soft was probably one the best buys from Salesforce ever, right? I mean, it was like 3.7 billion $4 billion. And that was all about tying the back end infrastructure together so that you would no longer have siloed apps and data together, right on an infrastructure perspective. And the thing is that slack is competing with Microsoft now. And, you know, Microsoft has teams and they have email, Salesforce has no chatters was was not kind of it never worked right there. They’re kind of chat platform. slack is the equivalent of mule soft and the app side on the on the customer facing side. Think about that is the digital nervous system. That’s the integration platform where different apps can communicate with people with different people internally and externally. So in my mind, it’s almost like a mule soft on the front end. And so I think that’s gonna be super interesting. So this whole collaboration part to the space, I think it’s going to also explode in the next five years, too. So that would be my, my, my bull case for both.
I mean, it’s funny, you bring up mule soft, that was one of the very first companies we talked about on this show back in 2014, with an Winblad Oh, it’s amazing how it turns He’s
a legend. She’s an absolute legend.
She is she is that. And, you know, you’ve talked before about being involved in sitting on boards from whiteboard to scale, you know, as an investor myself, how do you manage this ever increasing responsibilities, you know, board responsibilities with with other demands of the job?
Yeah, so So look, I it’s funny, like, like, I remember when LPs would talk to us, like, Hey, how are you seed funding on these boards, even at the series E or F on these companies? Like, what’s the point of that? Like, you know, how do you actually continue scaling? And look, I think every founder and company goes through different journeys and different stages of crisis or opportunity. And, you know, maybe there’s a critical juncture where, you know, companies going through a hard time you got to dive in a little bit longer. But then as they kind of hire their team and expand and grow, it’s a different kind of challenge, right? Maybe Maybe there’s less time required, maybe there’s more strategic thinking, right? So, I guess like what I’ve learned over time and I’m trying to get better at MMP doing this for 24 years, and I’m planning to doing it for another 20 knock on wood God, God willing, is that I’ve kind of come out with more of a emotional aspect of thinking about how to work with founders. I think that whole emotional aspect is lost. And I always like to put things in the other world comes in, like three to three legs of the stool, all kinds of things. So I call it the three C’s of helping founders out. And so we can call the three stages. And I like to say it, you have to know when to cheer. And, and so if an investor only cheers all the time, it’s not gonna help a founder get better. And the time to cheer is when the time is when the founder of down, the founder is down, and they’re kind of you gotta kind of give them the confidence or just fire them up and say, Look, I’m here for you. It’s tough. We’ve seen it before. But we know we know you can kind of, you know, survive through this. And if you do look at the opportunity had there other times, we need to know when to challenge right? And the times a challenger when things are going great. It’s like, hey, how do you add another zero to that? I’m glad you got your first customer, your second customer? My question is, is, what is the expansion look like? How have you thought about pricing, right, in terms of creating a repeatable pricing model? You know, I love that you got your first customer, let’s think about the next thing, right? So that’s, that’s what you have to think about. The third part is no one to chill, there are just times where a founder just does not want to hear from you. Right, I mean, their heads down. So so i think i think balancing and understanding all those three kind of ch or three C’s is really, really important. And I think over time, that that if you understand that kind of the ebbs and flows of the business, because things don’t change overnight, and I think that that will allow you to to have a good relationship with your founders. And that’s why, you know, we think about our NPS scores when founders come back to us, after we funded their first company, you know, Rahul from superhuman, we fund his first company reported, and we ended up being his first check in a superhuman guy from sneek, we funded his first company Blaze and we ended up being his his first check jevin and Gavin from go instant, they sold it to Salesforce, we funded each of their next companies as their first check. So so that that’s, that’s probably because, you know, I think we take a balanced approach to how we work with founders, you know, always trying to get trying to help them get better.
Well, I think that the balance between those three changes, a challenge, chill and cheer. I think that changes depending on your role as an investor as well. Right? Like, if you’re, when we started, we were a small co investor, right? 100 k 200 k checks and the much bigger rounds.
Been there, done that, right. Okay, I get where you’re at. But I mean, it’s more cheering, it’s
more supporting when they need you, right. And then as you graduate on, you become a co lead and the lead and you take a more active role, like you gotta, you got to help more, and you got to be kind of that primary person to know when to push, you know, when to promote Winda to help. And it’s, it’s a different role as an investor, depending on, you know, when you get involved in how much you invest,
that’s a great point, when we were early, we’ll be like to say is that when we had our million dollar fund, we’re making 100 k checks. It was like, Look, we can let’s pick one thing that we can do really well, that you need help on, right, and just like, lean on us on that, and we’ll be there for you. Right? And so just have to start with something.
That’s right. That’s great. You’ve set sat on a lot of boards now and you’ve had, you know, some big successes. So I’m sure you’ve seen a lot, the good and the bad. But where do you think VCs in general are most lacking when it comes to the value that they could be providing to early stage founders?
Yeah, I’d say a couple of things. One is, I’ll give another saying a friend of mine once said, VCs on boards are like, Margarita has one is not enough. Three is too many, too is just right. And another thing I’ll say is this is that VC VCs should never claim right? And can never claim claim credit for a company’s success. But they can certainly claim credit for a company’s failure. Right? Meaning that if you get three different VCs in a room with three different ideas of where the company should go, that’s an absolute disaster. Right? So I think carefully crafting that cap table in the beginning and then carefully crafting on who you add and make sure that everyone buys into the same vision, you know, maybe has different experiences. I think it’s super important. I think, when you talk about problems, the problems are when a VC micromanages situations from the board. I mean, if you’re micromanaging stuff, and you’re kind of getting too far into the weeds, you know, I think that becomes problematic over time, because that means you probably don’t have the right team in place, right founder in place, if you find yourself doing that. You’re like, you know what, let’s go talk to the founder and say, I think you need to hire someone here or there, whatever. So micromanaging is the wrong thing. To is it goes back to kind of what I said before, is that if you’re just a cheerleader, not challenging kind of it’s for them to think bigger. Like I think we have to we have to challenge founders to think bigger. How do you always had an There’s zero, you know, for every company that became, you know, $100 million company, they might have turned down an offer at 50 million, and for every company became a billion, they might have turned down a $200 million offer and every company that’s 10, they probably turned down an offer 2 billion. So how do you get founders to think bigger and think strategically. And so I like to say, we need to be able to zoom in, zoom out, you know, zoom in a little bit, but don’t micromanage, but just give some advice, and zoom out and say, Hey, we’re not in it on a day to day basis, we’re supposed to look at the forest and not the trees. And we have to make sure that that we help them see the bigger picture of what what we see in the market. Right, you know, and so i think i think that’s, that’ll be my perspective, which is always ever changing. Because the one thing about this job that I love the most is that we’re always learning.
You wrote a great article on that you have a substack. I can’t think of the name of it like,
Oh, it’s what’s hot. That’s hot, calm. Yes. I was thinking fire. Yeah.
But yeah, sign up for that subject. That’s one to read for sure. Do you think there’s too much money in venture?
I’d say that there’s too much and too little. I’ll say there’s too much money, and there’s too little good money out there. Right. There’s a lot of money coming in from everywhere from every, every place, every hedge fund every sovereign wealth fund, I mean, these money come from all over the places, right. So I think the most important thing for founders is that, yes, there’s lots of money, but finding the good money is the most important thing, the good money for you. And the good money for you may not be the might not be myself and might not be you might be someone else. Right. So but just there’s lots of opportunities out there. And I think that, that, you know, I think finding good people and good money is the harder challenge, not not finding money.
You know, how do you how do you think about continuing to win in, in seed, when there’s been this explosion of seed funds?
That that’s a good question. I guess when we think about is just I go back to product first principles like what’s our Northstar? Like I asked founders kind of what is their prognosis are and I think about ourselves, and, and for us, look, we’re not for everyone, if you’re a technical founder, if you’re thinking about starting starting a business, and you’re an infrastructure or SaaS founder, then, you know, we’d love to chat with you, right? Because we’re specialists, we have, if you look at the portfolio that we have, whether it’s developer lead, or infrastructure, or even, or companies in the, you know, SAS kind of application stack, I think we can help you kind of get there faster, right. And when we have this whole, we have ahead of people in Natalie lead better, we have kind of a whole advisory group of some of the best founders out there, we can help you craft your cap table. And then we have a lot of great series A and multistage funds that follow kind of, you know, our lead. So I think we can help you get there faster. And once again, we’re not for everyone. And I also would say that if you are a technical founder, that that wants to be CEO wants to wants to be the person that’s running that $10 billion company will do everything possible to help you do that. And we will support you to kind of get there because we’ve been through that journey before with other technical founders. So you know, I think, by the way, Nick, the bottom line is you guys specialize. And the final part is, we love being first, right? Because there aren’t a lot of people who write a check who follow someone else. But you know, Rahul, from superhuman told us we’re asking him kind of which we What’s our tagline he goes, you know, what I like about you guys, you invest with courage and conviction. So that’s on our website now that came from Rahul, he’s a you’re not free, you see something, you’re not afraid you don’t need anyone else to give you social proof, you guys know. And we wouldn’t, we wouldn’t let roll out of the room without writing a check. We tried to give a million dollars, he only took 250. from us, it took us like six or nine months to dribble in 250 at a time to get to the million so. So anyway, that’s a funny story in and of itself. But the point is, is that you guys specialize. And I think being there first and actually being crazy enough to have that courage in fiction to lead the round not to read a small check. But to lead that round and join the board seat and set everything into motion. That is kind of what we love to do. And we can do well and that can help founders kind of, you know, get their fundraising done faster with the right people.
And what resources would you recommend the listeners?
What resources I love listen to like to geeky technical podcast, right? Just Just for fun. So I like software engineering daily from Jeff Myerson. He’s, he’s interviewed a bunch of our founders too, but I think he runs I think he runs kind of some good podcasts out there. Twitter, I think just just being on Twitter and being active, I think you learn a lot. I think podcasts like yours, you know, you know, teaching and educating folks, I think a great you know, Harry stepping says good podcast was faster and 20 minute VC as well. I think podcasts are a great way to kind of hear stories if you can’t have the day to day conversations. But for me, the best way of learning is meeting tons of new founders. And just being in the middle of the action every day and learning and taking bits from one company and learning from from another. You know, I’m always learning from other investors, too, who are in the later stages, whoever who just think about the world differently. So I think always keeping an open mind. And I find conversations and boards and founders every day just trying to learn and then take that and apply it. I think that’s that’s what makes this job the most amazing thing. In the world is that you know, you’re never, ever really good at what you do. And if you think you are, then you’re not right, and you should probably be doing something else.
Great point at what do you know, you need to get better at? It’s perfect segue.
Me, you know, honestly, I’ve been told that when we’re out raising kind of capital, like at the end of fun three and being a fun for whenever LP said, you have the greatest thing, which this was an institutional piece of the greatest thing about you guys is that the people that know you really know you? The worst thing about you guys is that the people that don’t know you don’t know you. And she goes solve that second problem. So I guess the point is that maybe we’re not the best marketeers because I’ve always been a believer, like kind of that the founders of them are the rockstars. And, you know, being on a podcast like this is super helpful, but we don’t really market ourselves the way that other funds do. Because partly, we just like we just like kind of just cranking away and, and doing the work, but it does become important, to a certain extent. So that’s something that we can always get better at is, is doing some more content marketing and things like that, and I’m aware of it.
I do have to admit, I heard from an institutional LP that a boldstart is the firm, that’s probably what was the comment she made? It was it’s the the best, you know, firm relative to, you know, the lowest marketing that
that she had experienced. Interesting. I’d like to kind of get the marketing up a little bit. Nick, that is to your point.
Well, good. And then finally, what’s the best way for listeners to follow along and connect with you?
Oh, yeah. So just find me at Twitter, which is at Ed sim eds. I am subscribed to my newsletter, what’s hot.substack.com? And you can always comment there, and I’ll respond to messages. Yeah, that’d be the best way.
And this is great. So many lessons learned. I appreciate you taking the time.
And Nick, thanks for having me. Really appreciate it. This is helping my marketing problem.
All right, thanks.