Rebecca Lynn of Canvas Ventures joins Nate to discuss Why Good Marketing Beats Good Product, Emerging Use Cases for AI, and Tactical Advice for Founder to Build Their GTM. In this episode we cover:
- Product Market Fit, Customer Needs, Marketing Strategies and Product Development
- Marketing Strategies for Early-Stage Founders
- Venture Capital, Marketing, and Scalability
- Investing in Health Tech and Fintech Companies
- AI in Legal Tech and Debt Collection
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Our guest today is Rebecca Lynn, co-founder and general partner at Canvas Ventures, an early-stage venture firm that specializes in FinTech, Health IT, Mobile and Enterprise investments. Rebecca has been named to the Forbes Midas List five years in a row, a Woman to Watch: Senior Deal Maker by the Wall Street Journal, and a Top Woman VC by the New York Times. Some of her notable investments include Doximity, Luminar, and Lending Club to name just a few.
0:45
Rebecca, welcome to the show.
0:46
Yeah, thank you. Thank you for having me today.
0:49
Yeah. So we’re going to spend quite a bit of time talking about Canvas ventures, obviously. But I’m curious to hear more about your time at png first, what about your career at png applies most to the way that you currently approach investing in startups?
1:04
Yeah, I think there’s a lot that I learned at that early, early experience at Procter and Gamble. And predominantly, I had a really unique experience there, I actually was putting a role where I was reporting to the head of the global category. And we were launching new products in new markets. And I realized now with the benefit of hindsight, that that was an incredibly unusual position to be in. And it was really, you know, a point in time to and p&g was rolling out their paper category internationally, it was us only at that point in time. And so I had been selected to basically report to the head of the global category and help them with that rollout. So I was on the ground, and lay down, you know, helping figure out what the what the what the customer preferences were. And what was so incredible about that experience, is I learned from really the best in the world, I would say at p&g, how to figure out product market fit, how to listen to the customer, right how to figure out how to hear what the customer says and doesn’t say, to design a product that meets their needs, and that they find really compelling. And I learned from the best, right. And so it’s really interesting, that whole ability to to figure out customer needs and segmentation and product market fit, and then design a product and market the product and the customers words, I learned that you know, from probably the best people in the world at p&g, and that carries forward with me today. And I think probably the the two things I tell people that are maybe the most salient are one, you know, it doesn’t matter what you think, it doesn’t matter. And I hear all the time I sit in board meetings, I sit in my own firm, and I’ll hear investors use the word Well, I think x about the product. And it just it shakes me to the core because it does matter. And that’s what people don’t understand. It doesn’t matter, you’re not the target audience, you’re not the target user. And at Procter and Gamble, it was really humbling, we would design all these new products and the engineers, I was an engineer in my old life, we would make bets on which one would work or in which one that consumers would prefer. And we were always wrong, always wrong. And it was humbling we and so you learn how to how to really ask the consumer, and then you know, there’s nuances of how exactly you ask the consumer about the product, right? And people, they get it wrong all the time I hear, right? And if it’s leading, or the consumer thinks there’s any kind of, you know, judgment attached to it, they’re going to tell you what you want to hear, right. And so there’s really nuanced ways that I learned of how to how to ask that question, right? And so and then how to market it later, right? You don’t you know, it’s, I see all the time. We call it like, advertisement by feature, right feature feature feature feature feature. And it’s just inverted. And so you know, people that really understand how to get to that higher level benefit, the higher level revenue, higher level consumer pain point that you’re addressing, are unique. And I would say, you know, few few people have done that, you know, we can talk about some examples. Travis Kalanick was one person that I would say, nailed it out the gate, right? Making people feel like rock stars and celebrities. Everything else was you know, just execution. But what was it he was really going for? He was going for that feeling of, hey, I matter, right? I have power, this car is going to come and pick me up like I’m a rock star, right? He got that before he took over Uber when he was an early stage investor. And then the second thing from p&g, there’s probably more but the two probably top ones are the the golden rule of product. Don’t make me think like if the consumer has to think if the consumer has to make too many decisions. You’re dead in the water. And the analogy is sort of Google versus Apple. I mean, Apple spent countless amounts of resources and time figuring out how to design the iPhone to where you Joe have to think, right? It just does what it should do. Whereas Google took the opposite approach, they thought that everyone wanted to design everything themselves, and customize stuff and every little bell and whistle, and maybe the three to 5% of people out there that, you know, their bank account might want to do that. But that’s pretty much it. And so that the top line thing is you’re making me think too much Do not make me think if I’m a consumer or an end user. I want to
5:28
double click on both of those. But maybe let’s start with a second one. Because before the show, you mentioned, great product doesn’t always win. And when I hear a single product where the user doesn’t have to think which Apple certainly is, in all their products that they’ve created, for the most part, right? The Great product doesn’t always win, though. And you mentioned that you’d rather have good marketing and an okay product in I’m curious, so how do you assess what good good marketing looks like? And how do you strike that balance between simple product and good marketing? And what is that balance between the two? And what you what you’re looking for, as an investor?
6:06
Yeah, and I think there’s a little bit to unpack and this right, and so it’s really interesting. I was told really early, I’m a product person, right? I was an engineer, I just, I design and build products, right? In my own life. And the President of p&g on one of these plane flights to Mexico wanted the thing that the wisdom he wanted to tell me is that, you know, your product just has to be good enough, right? And then you kill it on marketing, right? And so there were really two things Gary Martin would tell me this guy was the president of every plant in the world at p&g, and had been there his whole life, right? One is that is that you know, you want a product that is good enough, right. And the thing is, is it takes sort of, let’s say, half of the money to get from zero to like, 95%, good enough, right. But then to go from 95 to 99, is can be like multiples of that, right? And so he’s like, you want it to be good enough. And then what you want to do is kill it on marketing, right. And by killing it on marketing really means positioning it in a way that the consumer understands it solves a pain point, right? Really hit that and solve it and address the consumer, the consumer problem there, that that’s kind of where it’s at. And you can always build the product better later, right? Once you’ve got the consumer, you can continue to refine the product, that you want to make sure the marginal cost of refining the product makes sense, right? And so you know, a lot of what they struggled with at p&g, they would hire these very type a kind of engineers and they wanted to go play everything, right. And they want and, and so what they what they teach you is mock it up, make it you know, quick and dirty, but give the consumer something they can react to, right? Don’t make them imagine your product, give them something tangible. They can see touch and feel right, and then get the reaction and response, and then figure out how you’re going to market it right. And don’t go and go play something in a vacuum. And I see I see engineers do and founders do that far too often. You know, the biggest, one of the biggest challenges is with heavily product oriented CEOs. And I’m like, my joke is I’ve never they’ve never met a go to market challenge a feature couldn’t fix, right? And they just believe, hey, if we just do one more feature, one more is kind of bell or whistle like everyone will buy it. Right? And it’s like, that’s not how it works, right? That’s just not how it works. You have to get it into people’s hands. You have to give them something they can react to. And and then if they’re not buying your product, as is one more feature isn’t going to be what what turns over the cards. Right. The other thing about that is that I don’t have a belief in first mover advantage. I think it’s I think it’s first mover death usually. And so I would I would challenge you to name a huge company out here that was truly the first mover, because what happens is the first mover is really the one that goes out and they have to sort of prove the market exist. They have to put in tons of money to to really educate the consumer. And then the second mover comes in, and they can just say thank you very much. They don’t have technical debt, right? And they’re off to the races. And I would say I mean, maybe Google and not even Google has made so many search engines. I would be hard pressed to find like a single example of bird mover advantage out here. And the VCs are hilarious. They always talk about first mover advantage and at p&g, they made a very, they never wanted to be first mover. They always
9:44
say we say a lot of things.
9:47
They say a lot of things, the virality or product lead growth. Those are my favorites, right? I’m like really, you just built a product and people just happen to find it. I don’t understand that
9:56
hitting on the principles that you’re talking about now from the practice. and gamble story that you’re you’re mentioning is for Brees strikes me is a great example. Oh yeah, the product. Are you familiar with that story very
10:09
I was there I was there when they were trying to figure it out. Yeah,
10:12
that that I forget where I read about that story. But that is such an iconic example of the product not changing a whole lot, but the way it was positioned in the market,
10:24
they struggled with that product. They strive, if you could tell the story. Yeah. I mean, I wasn’t on that team. But again, I had really high level exposure. But given who I was, you know, given that the people that were launching the new categories, and that team was so interesting, because that is that was actually an anomaly of they were first mover, right, that the concept wasn’t the first mover but this whole idea that you could actually design and maybe the chemical engineering feats, that that product was truly unique, right in terms of how it attacks the the odor molecules, and so truly amazing chemistry that they developed. And they do have some pretty amazing chemists and scientists. And they illustrated another one that I don’t know if you know that story or not, but that one’s funnier. But, you know, for Brees that to market it to people, they struggled with how to message it, because when they would when they would tell people Oh, you can use it for XY and Z people would only use it for those specific things, right. And so they really had a hard time, you know, kind of getting it out there. And that that product they had, you know, internally for years before they actually could really push it out. And really figure out how to talk to the consumer and and really get it out there. Yeah, and it took a lot of focus groups, and a lot of like deep dives with agencies to really understand,
11:48
I was reading that they were watching videos of consumers reacting to spraying it. And there was a woman that walked into a room and breathe with like a, almost like a breath of fresh air. And that was like their cue, and then they pumped it with more perfume. And then it became not just this destroys odor, but this is sort of the finishing touch.
12:13
Well, and it’s exactly the thing. So what this exactly how people are here, start so this destroys odor. So you’re going that’s a reason to believe, right? But the higher level benefit is the breath of fresh air. So that’s your high level bundle. That is that is positions, the problem you’re solving. And then you have to give consumers the reason to believe it. Right. And so you usually and so that, that and so oftentimes, in we’re dealing with this with some of our companies, right now, people are starting out with the features and the reason to believe and the technology underpinnings behind what they’re delivering. But what you’re delivering to the consumer is the breath of fresh air. Right. And so and so the salient thing, too, that you point out in that example, is that they they listened to the consumer, right, that was probably through, you know, hundreds of focus groups, right, and listening to how the consumers were talking about the product after they use the product, right? So give the consumer the product, have the music haven’t? And then really listen to the words that consumers are using of how don’t tell them how they should encounter your product, listen to what they’re telling you. Right? And that pulling those messages out. And that ability to listen to the consumer is absolutely it’s magic when you get it right. And and that’s where I don’t think a lot of people out in Silicon Valley are trained to do that. Right? Yeah. And they think they just know, well, I can tell you, Steve Jobs didn’t just know he had 1000s and 1000s of users testing, you know, and taking the feedback and refining the product. And people can have a knack for it. But you at the end, there’ll be a consumer or one person and one insight that you’re like, Damn, that just absolutely nails it right. And then you use that.
13:52
Another area I wanted to double click on was I’ve heard you use this term, the umbrella concept from your Procter and Gamble base. Can you describe what that is?
14:02
Yeah, I mean, an umbrella concept is kind of the overall umbrella of like, what your brand stands for, right? So I mean, you could take brawny paper towels like mom’s the hero, like that was sort of an umbrella concept when I was there, like bounty paper towels sort of enabling mom to be the hero and kind of common if you remember this, those commercials of mom, the kids like, oh, I spilled the milk and the mom comes in and sweeps it up, and then everyone smiles, right. So that’s so everything under that, in that brand would be under that concept. But then you could have you know, line extensions, you can have sort of the microwavable paper towels which are hilarious because they’re exactly the same as normal paper towels, they just have these like little white dots on them. And so you have you have like the all the different brand extensions, right of the you know, whatever you’re going to market and something analogous in tech. I think it are we deal a lot with like the platform companies, right? And so let’s say I suppose in Figure Eight that your aid was provided picks and shovels to machine learning and AI companies, right helping with data tagging and imaging and things like that, and help build the models for that for AI, including including companies like Apple. And, you know, we could serve everyone we could do, we could, you know, any company out there, but and so the umbrella concept is really help us, you know, superpower, your your AI and machine learning models. But then underneath that you have to really speak to your customer, right. And so we you peel off your verticals, and you say okay, for e commerce, here’s what we deliver to you. And oh, by the way, here are the five companies in E commerce that look just like you that have exactly your same pain points that we helped out, right. And oh, you’re a bank, great your bank, here’s our overall here’s your umbrella concept of you know, we solve your AI and machine learning challenges. And here are five banks that we have that look just like you your same size, your same problem, your same everything. And here’s how we help them solve that problem, right? And so, really, and so too often, you know, people approach it from one, one or the other, and not both. And so the really, the thing to keep in mind is you need your umbrella concept, you need your umbrella, like what is this company kind of do overall, you know, and what does it stand for? And that’s usually like the high quality. And then underneath, then as long as you have that umbrella, you know that that sort of aspirational? You can you can peel off sort of like lithium, even lower end products with that same brands, and that that still carry that kind of umbrella of aspiration?
16:35
No, it doesn’t make sense. On the go to market side, what are some of the common mistakes that you see early stage founders make on the go to market in the marketing side of the business? Evaluate how
16:46
many feature feature a feature like that is super common, especially when you have a product oriented CEO, which oftentimes we really love product oriented CEOs, right, that they they market the features, and it’s a feature war, well, you’re never going to win a feature war, mostly because competition will just lie about having whatever feature that you have, right? Or they can develop it or whatever. And so you really want to understand your what what is the pain point you’re solving? What are you helping them accomplish? Right. And that should be your lead marketing message. And then your the features you deliver to accomplish that goal are just your reasons to believe, right? That you that you really want to understand what your higher level benefit, I’ll give you an example is check, right? So check sold to intuit and check was a personal finance kind of manager. And and initially they would talk about here’s all the here’s all the things you could do with us. Right? But in reality, they were solving the problem, they were making the stress of your finances go away. Right? Again, it’s Don’t make me think make make the stress of financial management go away. And and the reason you believe they could do that is because they have these features. Right? And so it was, again, it’s just inverted marketing, oftentimes. And so I find that people often do that. The other thing that’s quite funny is that people often don’t understand who their audiences right. And so I will always ask founders, you know, who who’s your audience? And I just, they always like, Oh, they’re millennials, you know? And I’m like, really? Okay, especially when it comes to finances? And I’ll just and I’ll say, Well, how do you know that? And they’ll talk about how they design the product? And then and how do you know who’s using your product. And there have been more than one occasion, there have been many, when they’ve said, hey, it’s this cool hit millennial consumer constituency. And it’s actually 55 year old housewife, when they do the work, and they’re like, let’s just do the work. Let’s just, like dive into the covers and figure out who this really is. Right? And, and so that that’s always that’s always fun to help them really understand who their who their end users are, who their customers are, and to help them get their messaging, right, you know, and help them really, really figure out how to how to go more, more mainstream and more scale.
19:01
Yeah. So I’m curious for you as an investor, like, when you think about this spectrum of risks in saying yes or no, like, I’m going to invest in this company, or I’m not how, like tolerant, are you? I guess, as an investor, when it comes to bad marketing, because on one end, it is an opportunity where if they have a decent product, and they’re selling it, and you’re like, they’re just not even doing a good job of positioning, it’s a product minded CEO. Wow, if they could just, you know, have some help on the team bring in a world class marketer, whatever this and could really go, That strikes me as an easier problem to fix versus someone who doesn’t even have an hypothesis about who their ICP might be, like their ideal customer profile. But I’m curious how you think through this matrix. So because founders in the early days aren’t going to have answers to all these things, like which risks are acceptable for you as an investor and which ones are or not? And put you on the wrong side of Yes.
20:04
Yeah. So that was a big question. So so the risks that are acceptable there are way outside of marketing, right. But in terms of marketing, quite frankly, don’t really care what they’ve done so far and marketing, because it’s never right in the first I mean, it’s never going to be there in state anyway, because marketing is an evolution, right. And so I look at it, I always put the hat on because I was I lead marketing it next card, which is one of the top online advertisers, you know, all the four years are there, I think we were like only behind Yahoo, and Microsoft. And then I ran a whole go to market company for a while my own company and I had experience in capital and his clients, right, so. So I look, I put my hat on is what I take this on, that I take the product on, as a client, right? Or, or if I weren’t doing this great job that I absolutely love, and I’m so grateful to be doing what I’d be the CMO. And when I look at that, I don’t even care what they’ve done in marketing, right, what I care about the product, and I care about how they’re thinking about the consumer and the product journey, right. And so if the company and the CEO, in particular, listen to what their consumer are telling them, what I love, what I do the quarter signs that they adjusted and changed based upon how the consumer was interacting with their product. And so if they do that, then I’m like, they get it, like they get who they’re serving, right? Because very often, almost always, I would argue that the company evolves out of a need the CEO hat, right. And at the company continues to be sort of in the shadow of the CEO. It’ll be it’ll be kept, there’ll be a problem, right? But if the CEO sort of started out saying, Hey, I saw this problem, I saw this need now I’m building this company. And then once that product is live in the hands of a few consumers, they start thinking through, like what it means to be a consumer. And it’s more about the the user and the consumer than their individual problem. That to me is a good sign. So I’ll ask a lot of questions around that. The marketing position is always a math, like they’re always trying to figure it out, right? And every now and then they hit gold the first time out, right? But you know, but usually, they’re in a channel, you know, that they’re at least getting some feedback, right? From the consumers. And so maybe they’re on Facebook, right? Well, we know that’s probably going to tap out at a certain point in time when we want to diversify their channels as well. But you get enough of a read, right to know that it really like the dogs are eating the dog food is what we’re looking for, right. And then and then positioning is in marketing is sort of it’s an evolutionary thing, right, as they go forward. And so I think, I think that is, it’s always fun. And so I just look at it. And I actually kind of like when the marketing the math, because I’m like, wow, if they’re doing this well, and the marketing is this messy, like where’s the you know, it’s like a kid in the candy store, you know, how you can fix it. And, and so, you know, I had, I had done marketing and run marketing for the next card, which was the first online credit card company, believe it or not, we actually had the patent for real time approval of credit online, like we were the first ones out there doing that, which was fun and challenging, and all of that. And then when I when I found Lending Club, you know, they were, I think they were doing SEO or something, or SEM, and I looked at what they were doing, and the CAC was way high, but I knew I could fix it, right? I didn’t care. Because they had done, they did a great job, like just nailing the product, and understanding who their customer was. And they hadn’t made mistakes in terms of underwriting yet. So I was able to come in and really help them hire the team. And, and I’ll say, too, I mean, I, I, if I’m the one doing the work to fix it, that’s a bad thing, right. But what I like to do is go in and just work really closely with the company, figure out who they have on board already what their skill sets really are. And that and then work with that company to hire the person internally. That’s going to head up the marketing and and that work. And then that’s the person I can kind of work with going forward. And but I have to own it. Because there has to be this conversation back and forth where there’s a good amount of brainstorming. And then there’s the process of testing and iterating and figuring out really what’s going to move the needle and what’s not. And it’s always fun to me that it’s just it’s so much fun to design this test and try new things right and and figure out what really the breakthrough is, and it’s where a lot of time and energy and effort I think should be spent early on.
24:28
Yeah, well, I think Lending Club is a nice segue to Canvas ventures. So I’d be curious after Procter and Gamble what ultimately led to founding the firm.
24:37
Oh, wow, that’s a lot of water. Yeah. So after Procter and Gamble, I loved working at Procter and Gamble. I was putting a very special kind of category there, you know, in terms of this new market entry global team, and and I knew I didn’t want to go back to Cincinnati and sort of, you know, be at Procter and Gamble you know, for 25 years, which was sort of the what would be next. And so, you know, the.com thing was happening in California. So we moved to California. And then I, I remember, I had this crazy position that was offered at Oracle, in marketing. But you know, here I had been at p&g, you know, to step down from the CEO pretty much. And then at Oracle, they would pay me a lot more money. But you know, the org chart, I was sort of at the bottom, and they had this, I remember sitting in the office of the HR person, and, you know, I see I was at the top, and here I was down at the bottom, I’m like, that’s not gonna work, you know. I said, I want to, I’m gonna, we’re in California, I’m gonna just start up, I want to work for a startup instead. And so I chose next card, mostly because of the people who were there. I mean, they were all just amazingly talented, experienced people in in banking and financial institutions. And I was employee 30. So that company scaled from 30 to 1300. And the years I was there, and we really dominated, you know, in the online marketing space, and we, I took my knowledge from png to run everything, you know, statistically correct and buy the book. And we ran it like a stock trading floor pretty much but had to build things, even our we had to build our own affiliate platform, because no one was big enough to handle the volume that we were generating. And so we didn’t we did balancing complete block test on splash pages, like in the late 2000s, or late night, early 2000. Right, which I mean, Pete, the fact that people can’t get a B testing, right really blows my mind. But that that that, unfortunately, is still a challenge for some people today. And so anyway, so I was at I was at next card and love that work and love being at a startup. And then that company went public and then then got delisted, they had a massive subprime crisis. And I was on sabbatical at the time, I actually after being there for four years and bouncing servers at midnight, and having, you know, I needed a break. And so I decided to do it and equestrian school in France, which was like mini boot camp, and another whole story. And while I was overseas, the company failed. And I got a call from the CEO saying, Can you come back? And can you help? And unfortunately, they hit there were too many issues. And so I then called a bunch of CEOs and general managers like Experian, and Vidya and and others that I had been competitors or had been working with and said, I can help you with marketing. And they said, Great, come work for us. And I didn’t want to move and I said, you know, no, but I’ll I incorporated my own company and hired all my old people. So it was virtual work, you know, back before that was a thing. And we ran a fair amount of experience volume and help Capital One and Providian, and others really scale. So I did that for a while and then decided I wanted to go back on a quote another quote sabbatical and get a JD MBA. And the ultimate irony, which is kind of funny, in hindsight, was that you know, what I discovered running this consulting business as it was a services business, right. And it wasn’t inherently scalable. And I was looking at these tech companies and software companies, I thought, gosh, you know, what I need to do next is this, like, high margin sort of software tech company, right? So I go to business school, and I’m working on a couple of different startups with my friends. And I’m running the business plan competition at Berkeley with the goal of, you know, meeting a bunch of engineers and, you know, fellow classmates to start a company. And I ran into Gary Liddell, who’s my partner here at Kansas ventures, he was at Morgan Baylor at the time, and he says, Hey, why don’t you come and help us with venture? My initial response was No, I literally was like, I think I had my eyes popped wide open. I’m like, No. And, and, and predominantly, I mean, I had experienced with VCs, right. And, and my knowledge base is they were like a bunch of old white dudes from Harvard and Stanford. And they had their little cute names embroidered on their shirt, collar shirt cuffs and nice people, but I didn’t really see myself fitting in that mold, right. And I was on this path to start, you know, a couple of companies I was working on. And then a friend of mine pulled me aside and he’s like, What are you thinking? That’s like, the nicest man in venture capital. And you know, that firm is so well respected. And I would kill for that job. And you better go and apologize right now. And so I and I had a three month old baby at home, right, I was not thinking clearly. And so I kind of took the and I said, you know, he’s probably right. And so I went up and apologized. And so if you would consider still speaking to me, I would love to, you know, love to talk more. And you know, here I am, you know, many years later, still working with Gary, which was great. But I laugh about that, because here I am and his services business, right. That is not. Yeah, yeah. And we and we continue, like, you know, it is not highly scalable. And I think they thank you for the thank you for backing up my decision. And yeah, it was it’s been fun. But we continue to when we operate this firm to I mean, I think that the scalability is always this question and venture and what I found is we’re a services business, right? And there’s just no other that’s what we get paid for. We get paid for our knowledge, our expertise, our know how, and the idea that you know you can you wrap police do not hire an army of people to then come and magically make this happen. I mean, I’ve never believed in so when I came into venture, you know, I was right after, you know, all these firms had just scaled from like, you know, boutiques to like, you know, billion dollar plus funds, and they all had just failed right after the.com. So I came in post.com, and sort of saw the carnage and and just really thought long and hard about, like, what does it mean to be in venture? Right? What what is our business model, and, and so we have decided, you know, sort of very focused very targeted at a place where we believe we can regenerate the highest number, amount of returns, you know, cash on cash for LPS. So we’ve stayed sort of series A and B focus, that’s, that’s what I love that sweet spot, when there’s sort of this symbol of the product market fit. And we can just come in and help them scale their marketing and pivot into new verticals. And then we’ve had chances to grow. I mean, I like this fun size of like 350 400 million, all the data shows, that’s where you make the highest amount of returns, right? It might not be where you make the most money in fees, right. But it’s where you kind of be where you make the most money and carry, which is what I care about, which is really the scalability factor, right. And so, you know, we have chosen not to do things like growth funds, we’ve chosen to really stick to earnings really understand deeply what we’re good at. Right? And, and when we’ve considered things like, what if we did a growth fund? We said, Okay, well, if we did that, we would have to hire a team, well, then I’m in the business of managing people. Right? And, and I’ve been through that before, with my, with my prior company, at the end of the day, when you know, the shit hits the fan, they want you and so, so you really have to be kind of aware of that. But and the other thing, too, is that, you know, my partner, Paul comes from a very large platform of NDA, and they have huge funds, right. And the challenge with that is if you’re a partner, you’re you know, you’re an investor, and you have this billion dollar company and this huge hit, and you don’t get a carry check, because you haven’t returned capital yet. So really demoralizing. So we always like to think about, you know, every deal we do is it could return it has to be able to return the entire fund, like every new investment we make has to have the ability to return the entire fund. And if it does, they don’t believe that we don’t do it. And so it’s really been good at helping us maintain sort of a Northstar, I would say,
32:22
you know, are there areas that you’re focusing on sectors or spaces?
32:26
Yes, there are. There are sectors and spaces that we absolutely focus in. And then as I tell my LPS they pay us to see around the corner also. So we might do a couple crazy things every now and then. But definitely fintech. I mean, in every cycle. There are billion dollar companies made in FinTech and we know FinTech incredibly, deeply and well, and sectors of FinTech like credit and underwriting and risk that that I think are unique to our firm. We do a lot in Health Tech, we were actually one of the very first firms out there doing health tech, I actually dove in and oh, 809 with Practice Fusion. And it was funny at that time, you know, only 6% of medical records were online. That was it. And I did Practice Fusion Series A. And I was actually a couple, you know, VC friends of mine who’d been in the industry for a bit, pulled me aside and said, Please don’t get into healthcare and health tech, there are so many bodies on that track and want us to survive. And it was really just us in Venrock. And so when Series B when the series B was supposed to happen in Practice Fusion, I realized there was not a single investor, I could think of that would do that too. And not one that was doing health tech. And and so we did a compromise and we’re going to have to do something. And so I knew that health, the High Tech Act and the Affordable Care Act, were really now I did a lot of work looking at the policy angles. And so I reached out to a Nish, Oprah who was the US CTO at that time. And Todd Park, the head of HHS, through some connections I had at Berkeley, and they said, Would you please come out? Will you please come and like just educate Silicon Valley on what’s happening here with the High Tech Act and Affordable Care Act and that there at the time, there’s a macro trend that makes it possible. And so they agreed to come out, I think it was their first time out here. And I held this conference called DC to DC with the end. And it was really interesting. Initially, I think we had 50 people that we I had to call and asked to come and we were going to hold it in the Practice Fusion headquarters. And then literally a couple of weeks before we were supposed to happen. We got this real in this huge influx of inbound interest. And so we had to change venue with two weeks beforehand. And we had I think, 250 people there. And it was really interesting. And then I mean, at that time, too, there wasn’t a single health tech incubator anywhere. So the next year we held it again and we did a we did a call for plants, right or call for companies and we scoured the US and put a marketing out there to get inbound plans. And we held it again and did more of a pitch session and then the next year there I think there were five health or three or five and health tech debaters numbers at. So we partnered with them to get their best of the best. And then, you know, a year or two later, there were so many health tech incubators, you couldn’t throw a rock and hit and hit one. And we stopped doing that conference, because our business is not the business and conferences, but you know, so Health Tech is one that we really like. And we’ve been super successful there. We did Doximity. In their series that series B, we looked at the seed in the A, and didn’t get get there then but we did the B. And then and that one was when we really liked and then we I love companies. The other thing too is we always look at like our own experience, right? And we always have this lens and like how did we weren’t doing this job? Like, what would we start? And that’s how case texts came about. Right? So I went to Berkeley Law, and the really, really actually enjoyed law school. But it was unbelievable. Like you’re you’re using these search tools and Lexus and Lexis and Westlaw. And the way you wrote your search query was ridiculous. It was like, I need to find, I don’t know, car within three sentences Uber within the same paragraph with this day, I mean, crazy way, it’s sort of like almost like writing a sequel string, but not right. Not that hard. And, and it you know, there wasn’t really anything about AI in it. But you know, it just, it just had to be and so I said about looking for this, you know, company to really reinvent the $6 billion, sort of legal tech industry. And it took a few years. And then we found case text. And it was that we’d seen the a, again, they weren’t, it wasn’t quite the product that we you know, would probably wasn’t worried kind of wanted to be an A but then this series B, they really were sort of finding their footing and wanted to take on the legal legal research industry. And that was exciting. And they had a really great deep tech to their Jake was both a developer and a lawyer, and a really amazing focus founder. And so we jumped in. And then as technology kind of evolved, they continued to be just at the forefront of AI. And we had been very deep in AI and natural language went and language models and LM and all that we had been in Siri, you know, very early ribbons are first invitationals and Siri, when I was at Morgenthaler, we had done figure eight, which was picks and shovels for AI. And then you know, so and then Luminar two is one of ours, which is very deep AI. So the autonomous driving company that’s now public, and they Yes, they did all the LIDAR stack or reinvented it, but they also had a massive sort of software AI team behind that as well. And then with case text, they didn’t start out as AI at all, it was just this vision of reinventing this whole legal space. And that they stayed ahead of the curve. And I sort of told me, we had this great founder dinner last night with all the AI founders, and I was telling them, you know, you can’t really start de novo when a new technology comes in, it doesn’t work. You as Ultraman, you’re surfing, you have to just have that momentum. So when the wave takes you, you can react to it, right? And so case Tech’s was that they had a great tech team, they were staying at the front of the curve, and all the all the great tech and the LLM models that were coming along, they had developed a really phenomenal parallel search technology that was better than anything Google had. And then because they were sort of at the front edge of that curve, they were invited into the sandbox very early for GPT. Four, and and then having been there, but were able to fully leverage GPT four, and because they had, you know, 10,000 clients already, and huge trove of data. And they understood the use cases, and they really, really tricky edge cases, because they’ve been working through that those problems, you know, for 10 years, they were able to fully sort of realize the promise of GPT for early. And then they were just just acquired by Thomson Reuters. Right for an all cash offer. 50 million. Yeah. But they that it wasn’t an overnight success. And that’s one thing. Thank you for that. It wasn’t overnight, but it was really you know, how a company is often truly built right? And in a really fun process. So we do look around the corner. So, FinTech, health tech, and then maybe maybe what we say the companies we would build if we weren’t doing venture on the topic of AI,
39:13
what are the most compelling uses? You haven’t seen yet? For AI in the market?
39:17
That I haven’t seen yet? So then I because
39:21
most of them are. Tools, right, like,
39:25
yeah, you know, I bet I, I’ve seen a lot, right. So it’s hard to say what I haven’t seen, what’s captured my imagination, I would say. So there’s a lot of these companies that we’ve always wanted to invest in, or like, if we’d only find company did x, we would invest. And there are a lot of those companies that are out there that the consumer problem they’re solving is incredibly compelling, but the margins don’t work because of how it had to be delivered. And I’ll tell you, the one that I love is debt collection, because or help not debt collection but on the other side of it helping a consumer negotiate their debt down. All right. And because I just feel like the consumer is at such a disadvantage, right? And and there you have these debt collection agencies and they have these telemarketing arms and they’re out there just doing whatever. And the idea now that you can it consumer could have a company helped them get out in half that debt is medical right and and that’s a whole nother like can of worms that we can go down I just think is completely attrition should stop happening. But to actually like, let’s say, negotiate their debt, negotiate their their medical bill, but the idea to the consumer could just simply go to go to a platform and say, Here’s my bill, and then they can please go take care of this for me. And now AI can there’s a voice and AI driven voice, they could call the debt collector, and negotiate it. And I love that I’m like, That’s just like turning everything on the head, right. And so you could never have the margin would have never made sense before having, you know, a human do that work. But now it’s like you turn that you turn like the machine driven like bone straight on the on the company, right, which is kind of hilarious. Well, who
41:09
said that the early stages? I’ll be I’ll be sure to let you know. But absolutely. One of the other things I want to get your opinion on was Business Insider recently posted an article that there’s going to be a Darwinian moment approaching for startups in late 2023. And that there’s likely to be a mass extinction extinction event. What’s your take on this?
41:28
I mean, startups are mass extinction event, they always are, like, only one in 10. Maybe make it right. I think that’s generous. I don’t know about mass extinction. But there’s a lot of companies that just had been, you know, way over funded, that don’t have business models, right. And those companies will probably die, or they’ll take the money they have and maybe rethink things. But I You see this huge influx of capital, right, in the last year 2021 2022 in venture capital. And, you know, I think, I think a lot of that capital, you know, will not be returned to LPs. Unfortunately, we went really slow during that time period, when the prices got incredibly high. We help and we’ve been so now we’re seeing the prices really come back down. And we’ll be becoming really active again. So, so I think, I don’t know the Darwinian moment sort of like the Sequoia like rest in peace tombstone, right? Yeah, adventure cyclical, it absolutely is cyclical. And, and so what we’ve done here through what I believe is sort of the buffet approach, right? Just keep a consistent strategy, right? Don’t try to time it. So we believe in it, we only invest when we can have high ownership. Because we do a lot of work, we don’t have a spray and pray approach. We don’t believe that a VC can possibly be on the 25 to 40 boards, which some people are and do any meaningful work or help. And and people bring us on board in their companies, when they want a partner when they want somebody to help them, really hire their go to market team, help them figure out strategic issues and and help them grow their company. And so we just maintain a very steady hand. And when things get super frothy, we’ll we’ll take a step back and, and we’ll help our existing portfolio companies through that. And then when things look good again, and there’s another wave coming, and I think AI is a really great, great wave to jump onto, it just makes a lot of things possible that weren’t possible before in terms of business models, will jump anytime. So that’s probably pretty active at this point.
43:30
And to wrap up, if we could feature anyone on the show, who should we interview on? What topic would you like to speak about?
43:36
Well, Elon is always fun, right? never boring. I think Austin iluminar would be super interesting if he just bought Forbes and the whole, like, you know, that whole backstory of why and what he’s going to do with it. You know, I’m meeting with him next week. And I think he’s pretty focused on on his goals there. So that could be interesting. Do you want to be see or
43:57
that that’d be great. I mean, I think Austin Forbes would be really interesting. I think that’s a great suggestion.
44:03
Yeah, he’s very, he’s very thoughtful and very entertaining.
44:07
What book article or video, would you recommend to listeners something in recent memory that you found either informative or inspiring?
44:15
Yeah, so I saw that I saw this question you had about Book Article. It’s always a hard one. But you know what I was thinking about it. And I actually saw Barbie the other day, and I had not planned to see it. And then a couple of girlfriends said, Hey, actually was pretty good. And so I funnily enough, I took my 13 year old son in his front, and, and we saw it, and it was really amazing. You know, how it, how they kind of nailed it. Right. And they nailed it, because Ken is the role that most women play, right? You know, it’s, it’s, it’s, I am so and so’s wife. I’m wife of whomever, you know, and, and to look at it and be like, Damn like that. That was that’s really It’s kind of what I fought against, you know, being a girl growing up, you know, I didn’t play with Barbies, I had fashion candy because you could dye her hair. So that was kind of cool. But I didn’t play with dolls or Barbies. I thought the guys had much better toys. So I wanted the remote control cars and the racetracks and, and all that kind of stuff. Right. And I really, I really, I really think that, you know, it was it was that’s what spoke to me was that the role that I sort of had fought against my whole life is like being Ken. Right. And that’s what most women fight against. And so and so you know, that I have that be like a billion dollar success. That’s pretty cool.
45:39
Yeah. And then what is the best way for listeners to connect with you or Canvas ventures?
45:44
Oh, this is funny. You know, the best way for people to connect with Canvas ventures? I mean, we definitely mean we have emails, great. I’ll tell you I had a an Email does work, you know, so email works. My, my, my founders all MIT has all texts me, they know that. That’s probably the best way. But Email does work. And it works. So well. I had this random email that came in. It’s It’s unbelievable. I always tell young people reach out like people reach out ask, don’t ask for money. That’s, that’s usually people don’t respond then. But, but ask for advice, like people are very willing to help out. And so I got to really rate it when I beyond random email, to my personal Gmail, and it was a girl who was going to college and she was part of this group of women who have been accepted to college, and they’re going next year, and they’re all in STEM. And it’s called, like a hack club or something. And it was written really authentically, right. And I will tell you, at first, I just deleted it. But there was something about it. And I went, I got it out of my trash. And I looked at it again. And I’m like, well, maybe this is one of my daughter’s friends at her high school. And so I responded, and I’m like, Well, you know, do you know my daughter? Like how to do it? Because I was really, it was it was surprising, like no, but here’s who I am. And she’s from a local public high school. And what she’s done is tried to find women who will have a group of these young high school seniors in their home, and then answer any question they have, that are and the all these kids are all there. They’re all girls, and they’re all going into computer science or stem. And I was like, wow. And I thought back to when I was an engineer. And there were many times when I was working three jobs to put myself through a chemical engineering school. Right? And and how there were many times I thought about bailing and not doing engineering, because it was so hard. And people kept me in. And I was like, you know, what, that really mattered? And so I said, you know, what, what does this entail? You know, what is Is this real? Is this thing, I had no idea. And I sent it to her head of marketing. And I’m like, is this real? Can you talk to her? And sure enough, it was, and it was incredibly authentic. And so I said, of course, and so tonight, I’m hosting this group of girls are like 1818 year olds, probably at my house. The nice thing is, it won’t be that expensive, because there’s no liquor involved. And I’ve been 21. So and it’s gonna be fun, you know? And I said, Well, can I invite a couple of my daughter and one of her friends, they, you know, hopefully we’ll do engineering, as well. And they say yes. And so I really love that. And so I say that because it isn’t that hard to get a hold of us, right? Like, if you come with this authentic, kind of ask for advice and suggestions. Like, I love doing that, and, and especially things you said, we care so much about, right. And so, you know, there’s this big push for women in venture and I agree 110% With that, and that, but I think where I can make a big difference is just showing women that we can, we can win, right? And that, you know, the success of having all these exits. And then I like to get involved more grassroots. I think that’s for me, when I look at like, what really mattered. It was really like Junior High High School, and some in college to just keep me in the seat, right? Because there were many, many, many, many exit doors that I almost took, because it was hard. It was really, really hard. And it’s hard to be the only woman in a class of dudes, right? Yeah, and it’s sometimes it’s fun, but it there’s a lot to that. There’s a lot to unpack around that. Yeah. Yeah. Well,
49:20
that was a really cool story. And next time you come on the show, I’m looking forward to hearing how one
49:24
Yeah, absolutely. Absolutely. Thank you so much. We would invite you but you don’t. Yeah, yeah, it might
49:29
be short notice. Sorry. But thanks again for doing this, Rebecca. I
49:33
appreciate it. Super fun. Okay, thank you so much.
49:41
All right, that’ll wrap up today’s interview. If you enjoyed the episode or a previous one, let the guests know about it. Share your thoughts on social or shoot him an email. Let them know what particularly resonated with you. I can’t tell you how much I appreciate that. Some of the smartest folks in venture are willing to take the time and share their insights with us. If you feel the same, a compliment goes a long way. Okay, that’s a wrap for today. Until next time, remember to over prepare, choose carefully and invest confidently thanks so much for listening
