353. The Current State of Venture, SaaS Growth Versus Efficiency, and Predictions for a Market Correction (Doug Pepper)

353. The Current State of Venture, SaaS Growth Versus Efficiency, and Predictions for a Market Correction (Doug Pepper)

Doug Pepper of ICONIQ Growth joins Nate to discuss The Current State of Venture, SaaS Growth Versus Efficiency, and Predictions for a Market Correction. In this episode we cover:

  • Growing ICONIQ Growth
  • Advice in a Post-Pandemic Economy
  • Following the Rule of 60 for Success
  • And more!

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Transcribed with AI:

Doug Pepper joins us today from Burlingame, California. Doug is a General Partner at Iconiq, investing in growth stage software businesses such as Calendly, BetterUp Canva, and many more. Prior to joining Iconiq, Doug was also a General Partner at Interwest Partners and a Managing Director at Shasta Ventures. Doug, welcome to the show.
Nate great to be on. Thanks for having me.
Of course, can you walk us through your background and your path to Iconiq?
Yeah, sure. Happy to happy to do that. So I was born and raised in the Midwest, Cincinnati, Ohio and made my way out to the east coast for college, I went to Dartmouth College, and followed a pretty traditional path. Actually, after college, I went to New York and worked for Goldman Sachs for three years, both in New York and Hong Kong, loved it, but really learned, honestly, hard work, teamwork, and the power of servicing customers really deeply. And it was a great first experience for me, but I knew I wanted to explore and see what else was out there. And so I found my way very fortunately to Stanford Business School, I was there during the first bubble from 98 to 2000. And I fell in love with startups. And I learned the power of entrepreneurship through that I worked for my summer at amazon.com, made the mistake of not staying there in 1999. But I learned about venture capital at Stanford Business School. And upon graduation in 2000, I joined the industry, not knowing really anything about investing, or even software, quite frankly, I was supposed to make internet investments. And when I joined my first firm called Interwest, in 2000, they disbanded their internet investing practice at that time and said, Doug, we want you to work on software. And I didn’t even really know what that meant. But I put my head down, dove in and started to meet with companies. And, you know, I really learned the business by doing it. And by learning from mentors, which is really what I think this business is, which is an apprenticeship and a mentorship business where patience is really required to learn, and to get to understand making investments and helping entrepreneurs. I spent 15 years at that firm Interwest. I then moved on to Shasta ventures, another early stage firm where I focused on early stage software investments. And then three years ago, I bumped into Iconiq and got to know Iconiq through a number of joint investments actually where they followed on to the companies that I had invested in early. And we can talk a bit about this. But I saw Iconiq is a very, very different platform at that time. And when the opportunity arose to join them. Again, I did that three years ago. And now I’ve been here since August of 2019. Making software and growth investments.
Got it and I think most are familiar with Iconiq or at least heard the name. But for those that haven’t, what makes Iconiq unique? And what’s the thesis that Iconiq Growth?
Yeah, as I mentioned, it really is a unique platform. And again, I got to know Iconiq through joint investments. So for me, it was very much firsthand, seeing the impact of Iconiq on the companies that we shared together. But I wanted to share a bit more about the thesis, which is to really be impactful to our companies. And that’s what I saw as a co investor before I joined. We have an incredibly broad and deep network of connections, obviously, it starts with the family office and all the founders that we help them manage their capital. But the rest of our LPs are also individuals, founders, CEOs, business leaders of hundreds of companies globally, both tech and non tech. And when you put it all together, it’s an incredibly powerful network that we activate on behalf of our companies every day, many of them become customers of our portfolio, advisors, board members, partners, and the network is just incredibly powerful. And we have an entire team internally, that’s thinking about making those very relevant connections every day. And I saw that as a board member, almost every board meeting the CEO with thank Iconiq for another introduction, that became a customer or some other important partner. And so it’s very powerful. It’s very real, and we work on it every day. But we also have other areas that we make impact on our company around recruiting data and intelligence and other areas. So we seek to be really the best partner to companies, both as individual board members, but also as a platform that can do so much more.
It clearly has been working quite well. And it has been an interesting couple of years for growth 2021 set a new record for venture capital dollars deployed. Now we’ve seen a tremendous pullback in 2022. What is the current state of venture capital?
Yeah, it’s a very interesting time, obviously, and dramatic change here just in the last nine months or so, you know, I’d say we’re still in a pretty dynamic phase for venture capital. And I think still in the midst of a bit of a reset, obviously, we’ve seen dramatic pullbacks in venture backed public technology companies, you know, as dramatic, as we’ve seen since 2099, and 2000, where we’ve had our companies and many others pullback between 50 and 70%. And so how is that impacting the private technology market? One, it the impact has been slower than maybe we should have expected. Why is that? The main reason is because at least at the growth phase, most of these companies have raised dramatically more capital than any other time in history. We looked at the runways of our companies in 2000, when the pandemic hit, and then of course, here in 2022, as we’ve entered this new market, and the results are very different. The average runway of our companies in March of 2020, at the beginning of that pandemic was 14 months, the average now is over three years. And that’s because most good companies raised two to three rounds, often hundreds of millions of dollars in the last cycle. And so companies have very long runways. And for the most part, the good companies, which is what we want to invest in, have their heads down, executing, building and trying to grow into the high valuations that were set in 2021. And the result of that is the growth stage, venture market is largely still frozen, there’s very little happening. And there’s occasional inside rounds that are happening to top off, there’s a few firms out there that are still logo chasing. And some of those rounds are happening at high valuations. But it’s those growth rounds that typically inform the earlier stage on what the new valuation metrics are, that trickle down hasn’t quite happened yet. And so again, we’re seeing the growth market largely frozen, there’s more activity at the earlier stages, because those companies naturally have raised less and have shorter runways. But it’s still a trickle compared to 2021. Valuations are resetting, but still probably not enough yet to match the valuation multiples in the public markets. So I still think we’re kind of in this messy middle of resetting the private venture market. It’s happening, I think it’ll happen continue to happen over the next, you know, six to 12 months. And we’ll eventually get to a point where I think founders and investors realize that the multiples in the private market need to, in some sense match what we’re seeing in the public markets.
How does the current market compared to prior downturns?
Yeah, that’s a good question. You know, given my age, I’ve been fortunate to see, you know, 99 2000 2008, you know, the flash crash of 2016, and SAS, obviously, 2020 with a pandemic. And now today, they’re all different. And so it’s very hard to draw, you know, specific parallels that this is exactly like one of those others, I would say that it feels a bit more like 2000. Than then some of the others were there were very quick recoveries for technology, obviously, 2008 2009 was devastating for the broader economy. But for technology, actually, it was quite a it was it was a blip. And there were great investment opportunities already or in early 2009. I think this is going to be a bit more drawn out. And the reason I say that is the ingredients for this specific downturn that we’re in now, happened over the course of a decade, right, really, since the Great Recession of 2009. We then in this extremely low interest rate environment, very free flowing monetary policy, all of that was supercharged in the pandemic. And now we’ve got, you know, inflation and rising interest rates. And, you know, it stands to reason that if the ingredients were being created over a decade, that it might take some time to unravel some of this. And so I think we’re in an environment that could last for a while. And you know, make no mistake, we’ve already seen the impact. I mean, again, we’ve had our public companies dropped by 50 to 70%. We haven’t seen that, that much of a pullback since 2000. So we’re already seeing the impact. And it’s very real, and I’m not sure valuations recover dramatically in any short period of time. And we should also realize that while valuations are down that much, they’re just now kind of slightly below the five and 10 year averages. So it’s not like things are cheap out there in the public. With markets, they’re just down significantly since the bubble, you know, of 2021. And so what I would say is, we’ve already seen a very dramatic pullback in the public market valuations similar to what we saw in 2000. What I would say, though, is I’m much more optimistic than I was in 2000, about the ultimate recovery, in particular, where we focus, which is more on enterprise and software technologies. If you think back to 2000, the companies that were in the public markets that were, we’re seeing the pullback, were largely internet companies without revenue, and many without business models. And today, not only are the companies real in the sense that they have dramatically strong revenue and revenue growth, but the ongoing demand for the technologies of those businesses is very sustained, and very real. In all of the drivers of the companies that are in the public. And the private markets that we invest in are very real. And we think ongoing, unlike 2000, where many of those companies shouldn’t have existed. And so you know, for the areas we focus on, we’re very confident in their ultimate recovery. And the issue today really is more around valuation, not demand. You know, obviously, if we were crypto investors, I might feel differently. You know, for crypto, I actually think this is more like 2000, where those companies were highly valued in crypto, but not real and, and no business models, and no real demand. And so for them, I think there’s a more significant challenge ahead, and maybe longer time to recovery of ever.
Yeah, I was reading the other day that cloud software’s one or 2%, penetrated, still, which is unbelievable, given how large we’ve seen some of the SAS companies become, it’s also prompted the question in my mind, where if we’re bullish on the long term future of SAS and continuing to penetrate through the enterprise, why or how do growth investors think about keeping the freeze in their current investment decisions? Warren Buffett once said, that it is wise for investors to be fearful when others are greedy, and greedy when others are fearful. How do you think about this statement as it applies to your own decision making being an investor and being long term bullish on the industry and where it’s headed?
Yeah, I think it’s a great question and great quote from Buffett, and I agree with it. If I think about, in some sense, my biggest mistakes as an investor, and what I wish I could do over was to go back to 2009. And make more investment, go back to March of 2020, and make more investments and, and invest when others were fearful. And I think it’s a great opportunity. And we think about that a lot right now. And I’d say a couple things. One, we are investing now. And we are meeting with more companies than ever before. But where we’re making investments today, and where we see the opportunities is actually more in the public markets than private. You know, as we mentioned, the reset has happened dramatically in the public markets, amazing companies, great teams, high growth rates, and those companies are trading at dramatically lower valuations than earlier stage, much riskier companies. And so to the extent that we’re investing today, we’re investing in the private market, but we’re probably investing more in the public market now, which is unusual for us. Because we’re private market investors, we can do both. But the real opportunities today, we’ve seen are often in the public markets, because as mentioned before, the private markets haven’t reset fully. And so we’re still largely waiting. We’ve made a number of private investments this year. But overall, the markets haven’t quite reset the way we would want them to from a valuation perspective. And so we’ve done less in the private markets this year. But make no mistake, we are fully engaged in the market meeting with companies. We made a number of investments, including, you know, term sheet this week. But you know, we need to see the market come to reality a little bit more. On the private side.
On the private side, would you say valuations are half compared to what you saw last year? Can you just give us a ballpark of how far valuations have dipped?
It really depends, you know, for some of the the top companies that, you know, through the last two years have been the most successful brand names and technology private. You know, those have not come down a lot. Many of those are asking still for flat rounds on their 2021 valuations, maybe 20% down. And so those have not come down much again, they’ve got two, three $400 million on their balance sheet. And they’re saying to investors, if you want to invest, here’s the price, otherwise we’re not going to raise so they have a lot of power. And I respect that those valuations have not come down much for companies that are earlier stage that still have a lot to prove and that need Eat capital, they’re actually fundraising. Now it’s different. And those can be down, I’d say 50% from where they were last year. But again, some of the public companies that are that are doing very well are down 70%. So even that 50% reduction in their valuation relative to their last round, or what they might have gotten now, might actually not be enough.
Yeah, we did a data poll internally here. And I think the median Ford multiple on Arr, for the top 20, public SaaS companies was 50x. And now that same figure is, I think, below 10. So it’s been quite a dramatic fall from what we saw a year ago,
about, you know, six or seven times, then it’s right around that 510 year average, depending on how you measure it. And, you know, clearly, you know, we’ve we’ve gone into what I think is accurately described as a double dip, right, we had lows back in about May. And then it felt like maybe we were through it, and we recovered through the summer. And it felt like the worst was over. And now, of course, the last couple of months, some of the Fed’s decisions, and their communications have indicated this is going to last longer than we might have thought from an inflation and rising interest rate environment. And here, we are now, testing the lows, again, for many of these technology, public technology companies. And I think that’s been important for the psychology of private investors that this is very real, we’re not seeing a V recovery, many of those who bought the dip in May or earlier, are down. And so it just feels very different than some of those V recoveries that we saw over the course of the last five years. And, and so I think that is going to really drive home the psychology of private investors that we do need a proper reset in terms of valuations.
A moment ago, you’re talking about the amount of cash that some of these startups have on their balance sheet, you know, in the hundreds of millions at times, and maybe less talked about is the amount of dry powder that venture firms have. I was reading The Wall Street Journal a couple of weeks ago, and they reported that venture firms are sitting on, I believe, was 540 billion as of July. So with piles of capital sitting on the sidelines of a two part question for you. First, what needs to be true in order for the market to correct in starting to see some of this capital deployed? And to when it does swing back? Do you think it will be deployed wisely? Or do you think there’ll be another period of exuberance given how much capital is pent up? And it could be a runaway?
I think it’s good question. I think we’ve all been seeing different figures about the venture overhang. You know, many don’t believe it, I haven’t seen the 539 I’ve been seeing the $290 billion number. Either way, it’s a huge number, and a lot of funds raised in 2021 and 2022. And given the pace, it’s largely undeployed. And so I think there’s there’s no denying the fact that there’s significant dry powder out there. By the way, there always has been, we’ve talked about the overhang of dry powder and venture capital for nearly all of the two decades I’ve been in it. And so it doesn’t really scare me as much. And I think it’s been a reality for a long time. But But to get to your questions, you know, what’s it really going to take? I think it’s going to take a sustained. And I think what I just said around this double dip, sustained change in the public market valuations, an IPO window close for a year or two that will cause first growth investors and then early stage investors to grasp the new reality. And I think not only do investors need to grasp the new reality, but so too do founders. And many of the founders, rightly so I’ve really been in business since 2010. So they’ve only seen an up market, a market where you raise every six months at double or triple your last valuation. And I think it’s going to take time for those founders to grasp again, the reality. But what what makes it reality arrive more than anything else, it’s the balance sheets of those companies reaching a point where they actually need to fundraise. And once they don’t have three years or two years of one or one year of capital left, but six months. Now reality really sets in and you know, the expectations of founders and the reality of what investors are willing to pay will meet. And that might take time because of how large the balance sheets are. It may not be on average until late next year, or even 2024 where the balance sheets come down enough that those investments happen in the new valuation reality. So I think that’s what it takes. And I think that’s how long it’s gonna take it might be another 1218 months before we start to see transactions happen. To the new reality in terms of the behavior, given the overhang that we’ve discussed, I think it is an issue. Right? The interesting thing about private markets versus public markets is the public markets, it’s a market, there’s lots of investors that set the price in the private markets, of course, it only takes one investor to screw up a good financing. And I’ve always said that and so, you know, could it be that in any great company, you have one investor that just decides, for whatever reason I need to do this deal. I haven’t made an investment in six or 12 months, and my partners are mad at me. So I need to make an investment, and therefore I’m going to do whatever it takes to win. Yeah, I think there’s some reality to that. And I think we are going to see ongoing, irrational behavior by investors investing, you know, at hot prices that are too high. And that’s okay, right? I mean, you do what it takes to win the very best companies. But I think on average, valuations will come down, it’ll be a more rational environment. And certainly, there’ll be pockets of ongoing craziness, but I think it’s gonna get a lot better.
I’m sure you do most of your thinking about the growth stages, and not as much on the the earlier stages like seed, but data released, I think it was a month ago, showed every stage has seen a valuation dip, except for seed, which is actually up 33%. I’m curious, why do you think that is? And do you think that the current environment will eventually trickle down to seed? Or how do you think about seed valuations moving forward?
Yeah, I’ve seen I’ve seen those numbers as well, they’re a bit perplexing, you know, and it’s hard to know, for sure how accurate all of that is. But I guess it makes sense, you know, in the sense that these companies are so early stage, the valuations are extremely low, on an absolute basis. And many of those investors are individuals who, you know, are not necessarily looking at, you know, the average valuation of their portfolio, but rather just getting involved with the very best founders and projects they find interesting. And so the difference between a $5 million pre or a $10 million pre, you know, truthfully won’t change significantly their outcome. And so I don’t think that it is crazy for those valuations, not to have come down as much there’s tremendous upside on those investments, if the companies are successful, and if they aren’t, the valuation doesn’t matter, either, because it’s zero. And so I don’t think that that’s crazy. But I also do believe that this does trickle all the way down at some point, and that seed valuations will moderate but probably not as much as the more the kind of institutional rounds of series and beyond.
I think the nomenclature is always shifting around a bit to where, like, I don’t know, maybe five years ago, 10 years go precede wasn’t a term and now it is, and there could be a number of founders that maybe can’t go and raise that Series A, so they’re raising a $6 million round, and they’re also labeling good to see. So the variance is tremendously high, as well. But it’ll be interesting to see. And, I mean, see, it is the wild west right now. You know, I’d like to shift to talk about tactically how you’re thinking about advising founders, and what the ramifications of the current environment are for these companies. How should companies think about growth and efficiency in this market? And what benchmark should they be considering?
Yeah, we’ve thought a lot about this and actually recently released a report. We do this annually. But the 2022 report, I think, is the most interesting, we’ve done so far around growth and efficiency, benchmarks, metrics, and really the impact of the current environment. And you can find that on the Iconiq growth website. But I’d say a couple of things. One, you know, what’s the dynamic facing most of the companies we’re involved with, and in general and technology, every company has slightly different impact. But a similar story, which is, you know, real tailwinds and extraordinary growth during 20 and 2021. When, in general, there was a real demand for technology, ecommerce, Internet technologies, all the infrastructures to support that. And so it’s just was a really incredible rising tide in 2020, and 2021. And then all of the companies that did well, in those years, of course, set very aggressive goals and their expectations for 2022 and 2023. And obviously, the most aggressive impact has been seen by companies that saw the biggest tailwind in the pandemic. Companies like peloton and zoom are the most obvious, but to some extent, every company that we’re involved with, saw that tailwind in the pandemic, and now some moderating of demand this year and next year, so all of our companies in some way or another are replanting right now. They’re likely moderating their growth experts. patients for this year and next year. But importantly, they’re also changing their spending, because the prior very aggressive plans for revenue also had very aggressive plans for spending. And so, you know, what we’re doing is really working with our teams to assess the impact the post pandemic impact that they might be seeing on demand. And given the new fundraising environment, which is going to be much more challenging, reassessing the runway that they might need, and therefore the spending, that’s prudent in order to drive growth and drive a different and longer runway. And every company, as I said, is facing a very different impact from that dynamic. And we really don’t believe in a one size fits all approach. We have some companies, about 20% of our portfolio that are doing some sort of riff, where they actually, you know, increase their expenses enough relative to maybe a decrease in demand, but they actually need to reduce force. And that’s very hard to let go of good people, we probably have another 20% that have frozen hiring, that have decided, okay, our current workforce, which of course, is the biggest area of spend, is sufficient for the near term. And they’re freezing hiring, I’d say the remaining 60% are, in some ways, moderating their growth plan. And they’re still hiring, but more selectively, more carefully, and planning to end this year and next year, with fewer employees than they expected to, but still growing. And so those are conversations that are happening every day, not just at board meetings, but many conversations between board meetings, to really help companies set more rational, less risky plans going forward.
I have the benchmarks or expectations around how quickly the startups are reaching milestones such as 10 million ARR shifted at all, or how quickly and consistently should AR be growing today, as a business is scaling to 10 million arr.
Yeah, I think the benchmarks, they’re still the same metrics, but maybe how we’re looking at them is slightly different. So let me unpack that a little bit, I would first start by saying, for better or worse, in any environment, I think for all of the companies that were involved with growth is still the most important metric, you know, these are large markets, big Tam’s, that are highly competitive. And in order to be the market leader, you want to be growing typically the fastest. So growth still is critical. But that being said, I think that we’re entering a period where the need for more efficient growth is paramount. And in our report that you can find, we looked at the correlation in terms of public market valuations, between pure growth and efficient growth. And it’s no, it shouldn’t be surprising that, you know, before 2019, the public markets valued companies that were efficiently growing, that was the highest correlation with your valuation model. And then we kind of lost that between 20 and 21. The emphasis and the correlation of pure growth, to value public market companies dramatically outweighed efficiency. And then, of course, in 2022, that dramatically flipped again. And the markets, both public and private, are looking for efficient growth. And so, you know, we’re having lots of those conversations with our companies about what that means. And there’s a lot of different ways to look at that. One is rule 40, you know, growth plus your free cash flow, the other is burned multiple. And as you know, burned multiple is really, you know, what, some cash burn relative to net new ARR in a given time period. And, you know, we went back and looked at, you know, the most successful companies we’ve ever been involved with, it’s about 92 companies, many of them very large private companies, and many of them the most successful public companies. And what we’ve seen is that, not surprisingly, the burned multiples went up dramatically. The last two years, you know, the companies that we’ve seen be the most successful, were burning basically to x burn to net new ARR when they were at about 10 million arr. So they’d be adding 10 million net new ARR and burning about 22x. And then over the next five years, that burn multiple drops down to less than 1x. That is the kind of last generation of very successful companies. The current generation has been burning 3x 4x 5x cash to net new ARR dramatically less efficient. Why is that because it was so easy to fundraise. And despite those burn rates, you could raise two or 300 million you were are being rewarded for growth, so why not burn. And of course, that’s all changed. And so we need to get back to the world of all the prior successful public, and very large private companies, and relearn how to grow, while burning less, while being more efficient. And companies are gonna still need to grow, we just need to find a way to do it without burning, you know, three or four times what you’re adding in terms of net new arr. And I think that’s a tough pill for all of us to swallow, because it’s harder. And it takes, I think, more effective management, more prioritization, saying no more often, and really figuring out what are those key leverage points for a business to grow?
Now, it’ll be interesting to see what happens because there’s so much capital on the sidelines that it feels like it needs to go somewhere. And management teams are growing at undisciplined of efficiencies at times, because to your point, they can raise capital. And as we take a look at venture as an asset class, it has only grown over time, more capital has been pumped into the system. So I don’t know,
let me respond to that. Because I agree with you about the overhang being there. And I think the capital is there. But I believe, on average, investors are going to demand more from the companies they invest in, I don’t think more growth but growth, and they’ll demand more efficiency. And why will private market investors demand that it’s because they know that the public markets are demanding that already. And so even though that overhang exists in the capital exists, I don’t think it’s necessarily going to let founders off the hook and operators in terms of the efficient growth they’re going to need to show because ultimately, they’re going to have to get there for the private markets. And I don’t think, necessarily that it means you have to reach those public market metrics today. But you really need to start showing that as you reach the growth stage, and show that path. And for a long time, you know, many weren’t asking those questions.
What is best in class efficiency look like today? And does it come at the cost of productivity and growth?
It doesn’t have to, and, you know, all these numbers are available in the public markets and our reports, but, you know, I think the looking at rule of 40, as you know, that’s, that’s kind of growth plus your free cash flow percentage, you know, the benchmarks always been 40. And it could be, you know, 30% growth plus 10%, free cash flow margin. But the very best companies do better than that. And when we look at our public market investments, and our holdings through companies that have gone public, you know, we really look at companies that are rule of 60, or better. And, you know, the very best companies are able to achieve those metrics and sometimes better, and in how do they do that they do that through incredible efficiency. And efficiency takes on a number of different factors. One of them, as you all know, is around net dollar retention. And the best companies that are able to achieve rule of 60 are amazing. In their early days, that new logo velocity, and they, they really never lose that. But they’re even better relative to other companies at retention, upsells expansion, either through new product velocity, or usage based models that can often drive their net dollar retention to 150% or greater. And when you’re getting that much business out of your existing customer base, which obviously getting new dollars from existing customers is much cheaper than getting a new dollar from a new customer. Those are the businesses that we see be the most efficient, and drive that rule of 60. Or about
the it’s easier to keep management teams aligned to right like if you have a metered service, where do sales and product, they’re all oriented in the same direction. Doug, if we can feature anyone on the show, who should we interview? And what topic would you like to hear them speak about?
You know, one that comes to mind? Because it’s it’s related to a topic that’s so near and dear to my heart is a founder of a company called lattice named Jack Altman. And the reason that I bring him up and was quite frankly, the first thing that came to mind is because for me in my investing career, more than product, more than metrics, what has driven my investment thesis, and why I invest in companies as much as anything else has been culture. And I believe that culture is a sort of secret almost superpower that many of the best companies have. And it becomes this virtuous cycle. of great culture, camaraderie, collaboration, fun, within a business that drives better recruiting, better retention. But even goes outside the company where customers, partners, analysts, investors just want that company to win. And again, I think is a virtuous cycle. And I think of lattice and what Jack has done as founder, CEO there to drive that kind of culture to be quite remarkable. And if I were founder, I’d want to go to school, on how to do that, how to create a culture like that, that creates a flywheel of success, both internally and externally. So I want to investigate that. And we have many other companies like that highspot comes to mind braise comes to mind companies that I work with, that I invested in almost specifically around that culture, yes, we believed in the market, we believed in the category and their product, but it was the culture that got us over the line.
How do you assess that? As an investor? Do you go to the offices and embed yourself there? How do you go about evaluating something that’s more qualitative than it is quantitative?
It’s a great question. And I think it’s harder today. I learned this lesson back early in my career, where I didn’t visit a company made an investment, and it failed. And I committed myself to never make an investment, again, where I didn’t spend significant time on site at the company. But yes, for all those investments that I just mentioned, going to the headquarters, meeting, the whole team having lunch, they’re getting the feel for the energy, that culture, the camaraderie was critical, and I think is critical. And so that’s how we do it. And we’re increasingly doing that, again, as we all return to office, but during the pandemic, it was harder. And I think we had a bit less ability to assess that culture than we did in the past.
How do you feel about remote work? Is that an immediate disqualifier for you? Or how does that impact your analysis of a business if you’re trying to embed yourself in the office, but everyone’s distributed?
Yeah, it’s not a disqualifier. And I think it’s it’s hard to have hard and fast rules like that, because we have incredible companies like GitLab, that had been remote since day one that are incredible. And then others that are really in office, like a high spot that built their culture that way, and they’re returning to that. So we’ll invest in both remote distributed hybrid and fully in office. And each company just needs to decide, you know, what’s the right culture for them? And do they have the right systems and processes to be effective in that workstyle. And so it’ll depend, you know, with those that are fully remote, we’ll have to find ways to, to get to know that culture in a remote environment, we still spend time in person with those teams, by the way, getting to know them going to dinner with them going on walks with them, those that are returning to Office. Yep, absolutely, we’ll go visit those companies and spend time where they are at their headquarters. And so we have to adjust and be nimble and flexible to get to know the companies the best way, depending on you know, how they’re building their own their own cultures.
Doug, what do you know that you need to get better at?
That’s a good question. You know, I would say, one thing is, I’ve been doing this for 20 years. And I think it’s so important for investors at any age and stage to realize they don’t know everything. And so I feel like I’m still learning, still making mistakes, still getting better, and learning from others. And, you know, for me, that’s just the constant process, and kind of knowing that I need to get better, is half the battle. And, you know, there’s, there’s some people who believe that, you know, after the age of 45, or after 15 years, that you really can’t be a venture capitalist anymore. And, you know, I don’t really believe that if you retain that learning mindset, if you retain the hustle. If you’re open to fresh ideas, I think you can retain that youth mindset of a young investor, which I think is important, no matter what age you’re at, and I think I tried to do that and retain that those dynamics every day.
And Doug, what is the best way for listeners to connect with you?
Pretty easy to connect with me. You can find my email on our website at Iconiq Growth. You can find me on Twitter at handle Doug Pepper. You know, I’m pretty open for business and willing to talk to anyone.
Awesome. Well, it was a pleasure having you on and thank you again for the time.
Really enjoyed it. Thanks, Nate.

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