Kirsten Green & Geoff Lewis: Venture Capital
October 28, 2020 12:30 PM
Register for this event
Kirsten Green & Geoff Lewis: Venture Capital
October 28, 2020 12:30 PM
RegisterSpeaker(s)
Kirsten Green
Founder & Managing Partner, Forerunner Ventures
Geoff Lewis
Founder & Managing Partner, Bedrock
Moderator(s)
Peter Lacaillade
Managing Director, SCS Financial
Biography
Kirsten Green
Combining a unique and unconventional blend of professional history and acquired investment experience, Kirsten formed San Francisco-based Forerunner Ventures in 2010 where she serves as Founder and Managing Partner.
Kirsten’s 20+ years of success stems from an analytical eye into market sectors, forecasting high-growth industries, and a thesis-driven approach that has been the basis of all her investments — from pre-revenue startups to multi-billion-dollar enterprises.
Under Kirsten’s stewardship, Forerunner continues to be a pacesetter in behavior, staying ahead of trends by identifying compelling brands and visionary entrepreneurs across industries ranging from wellness, retail, content, software, logistics, and more. As a founder, Kirsten has led efforts to raise over $750M from leading institutional investors to date, and Forerunner has invested in more than 85 companies with proven portfolio resistance throughout periods of uncertainty surrounding macroeconomic trends and several now-unicorn companies.
She currently serves as a member of the Board of Directors at Nordstrom, as well as Forerunner portfolio companies including Glossier, Faire, Ritual, Modern Fertility, Curated among others. She also served on the board of Dollar Shave Club and Bonobos, two Forerunner portfolio companies with notable sale transactions.
Kirsten has been honored in Time’s 100 Most Influential People, named a Top 20 Venture Capitalists by The New York Times in 2018 & 2017, and is part of Forbes 2019, 2018 & 2017 Midas List, in addition to being named in the magazine’s World’s 100 Most Powerful Women in 2019, 2018 & 2017. She has been named in Vanity Fair’s New Establishment list in both 2018 & 2017, is a founding member of the female mentorship collective All Raise, and champions women in the technology industry.
Prior to Forerunner, Kirsten was an equity research analyst and investor at Banc of America Securities, formerly Montgomery Securities, covering publicly-traded retail and consumer stocks. Kirsten graduated from UCLA with a B.A. in Business Economics and has earned a CPA license and a CFA certification.
Geoff Lewis
Geoff Lewis is a Founder and Managing Partner of Bedrock. In 2019, Geoff was named as one of the Top 100 Venture Capitalists in the world by CB Insights and The New York Times.
Previously, as a Partner at Founders Fund for over five years, Geoff was an early lead investor in the now-mainstream on-demand services, mobile commerce, legal cannabis, FinTech, and labor marketplace sectors; being amongst the first to lead sizable early stage venture rounds in companies including Lyft (NASDAQ: LYFT), Wish, Privateer Holdings (NASDAQ: TLRY), Nubank, and RigUp. Prior to joining Founders Fund in 2012, Geoff was a founder himself. As Co-Founder & Chief Executive Officer of Topguest (acquired), he created a loyalty software platform that counted United Airlines, Hilton Worldwide, and Virgin America as clients.
Born and raised in Calgary, Canada, Geoff received his Bachelor of Commerce degree from Queen’s University at Kingston, Canada.
Episode Transcript
Peter Lacaillade 00:06
So maybe to kick things off, I thought it would be great to just introduce the audience a little bit to the origin stories, your backgrounds, how you got into venture, started your firm's maybe Kirsten. If you could kick us off.
Kirsten Green 00:22
Sure. Thanks, Peter. And thanks for having me here today. And it's nice to speak to all of you. So, Forerunner raised our first institutional investment fund in 2012. Prior to that, the first investing that was done under the Forerunner headline was an angel fund that I launched in 2010. And in the two decades leading up to that I have been an investor in throughout my career, spent the first 10 years in the public markets really fell in love with the markets, fell in love with investing, the, the learning opportunity it afforded. Throughout my course of investing in in public companies, and really doing thesis driven investing in the public markets, I got more and more interested in how the economy was evolving, how business was changing. And that kind of led me to private companies. That kind of more curiosity led me to early-stage companies, where it really felt the future was happening. It was as obvious as the early 2000's, with the internet, that technology was going to really evolve business in meaningful ways. As an investor, I was eager to participate in that. I think that combined with really finding the opportunity that early-stage investing is this combination of having a view on the market and bringing analytics and business rigor, but also relating to people and to founders. And playing a role in helping bring companies to life is an incredible job. That was a bit of an inspiration for starting the business and in 2010, I think it was the start of a lot of evolution that's taken place over the last decade in particular in the venture industry. As of 2010, the venture industry was kind of 30 years old and earnest. And I think we'd been through some cycles, and people were talking about Lean startups and different ways to get companies started and funding. I think people were kind of reevaluating what it took to be a great venture capitalist, and what were the right formats to do it. There was an Advent kind of a few years leading up to that of more angel investors and more seed investors became a class of investing and some new firms sort of cropped up. got really excited about that evolution that was happening and felt starting something from scratch was the best way to participate in it.
Peter Lacaillade 03:01
Jeff a little bit on your background. You've obviously founded Bedrock having been at Founders Fund. Maybe a little bit about your background and the origin into venture would be great.
Geoff Lewis 03:17
Thank you, Peter. Very unusual road in tech and venture. So, I actually started my career as a summer intern. As Peter or Mo mentioned, I grew up in Canada and started my career as a summer intern, at Yonge and Shepherd at Procter and Gamble in summer of 2003, when I was going to the Queen School of Business in the commerce program in Kingston. Ended up joining P&G, full time after graduation in Cincinnati, Ohio. That was around 2005-2006 when Facebook was really starting to take off amongst my cohort of recent college grads and was really energized by that and kept trying to convince my superiors at P&G, that we really had to start advertising on Facebook, and no one would listen to me. So I was , I have to get out of here. So, I negotiated, a transfer from Cincinnati to San Francisco and landed in San Francisco around 2007. Right when this whole next wave of technologies was taking off and was basically just trying to build relationships. I was in the sort of technology transfer type role between P&G and Silicon Valley. I was 23 years old, and I was trying to build relationships between P&G and startups, ended up networking my way into meeting some of the folks that play with the PayPal mafia. Initially, Max Levchin, who is the CTO of PayPal. He introduced me to the folks at Clari Capital, one whom was Peter Thiel, and they ended up convincing me to actually go the investment route and so I did a 180 away from technology, joined a hedge fund run by Peter Thiel in 2008, two weeks before Lehman Brothers collapsed. I was convinced to not do technology and ended up at a hedge fund. I fell in love with the art of investing and also with never lost my entrepreneurial drives. Ended up starting a technology startup with one of my colleagues at that hedge fund. Founders Fund was our earliest investor, such that when we sold the business in late 2011, Founders Fund invited me to join the team there. I was still in my 20's and quite honestly always anticipated I'd go back and start another startup. I figured I want to go back and really try and build something meaningful, but ultimately just really fell in love with venture and had a phenomenal 5+ years as a partner at Founder's Fund, g on got involved with amazing companies, led the first round, and left after they sort of launched that new business, served on the board of directors. Let me fast forward to 2017, I had sort of built this amazing track record, knew that venture is what I want to do for the rest of my career and never lost sight of my entrepreneurial desire and decided to team up with a longtime friend who I've now known for 11 years. An entrepreneur I'd invested in and served on the board of directors of his company via Founder's Fund, Eric Stromberg. I founded Bedrock in late 2017, we manage now approximately half a billion dollars and really pursue a similar strategy to my strategy of Founders Fund except in a much more stage focused context. So really quite narrowly focused on early stage, and, and more disciplined in terms of the number of companies in every portfolio. We're now on our second fund.
Peter Lacaillade 06:55
Great. Thanks, Jeff. Both of you at SGS, we have a barbell approach where we back some very established leaders but really backing emerging firms. I think, I would categorize Forerunner and Bedrock as two of the most kind of exciting kind of new guard firms. But when you think of the venture ecosystem Sequoia Benchmark, these firms have been around for decades, and very well-established brands. What has it been being one of the kind of new guards and building a brand and competing with these very well-established venture franchises? Kirsten, you want to kick off?
Kirsten Green 07:41
Yeah. I think one of key ingredients to, if you could say we've had some early success in establishing our brand, has been an approach, our startups. Every startup has an incumbent that they are aspiring towards, think they have a competitive advantage, something they can do better or different. But they still have to prove themselves in the context of that market and that competitive set. We definitely started our firm with a startup mentality. We have ambitions about where we're going. The biggest ambition is to be great disciplined investors, and good partners to founders and high conviction investors, and to use that to be able to make early investments. But there's a process I think, by which you earn your way into that. We thought about having a wedge into the market. A lot of times when we're evaluating a company, we're thinking about, what category are they participating in? What is the landscape look ? What is the big vision kind of 5-10 years out, and then pull it back to today and think about what's realistic to pull off today that you can do in a way that creates some noise in the market that starts to build some mindshare and some credibility around your organization? We take that same approach as investors, and said let's start somewhere, let's be fairly specific about it, let's have a disciplined approach, let's prove that we can do those things that we aspire to do on a bigger scale over time. In general quarters, a thesis driven firm we believe in the quality or the impact of a primary research to sort of help us shape where we're going to spend our time and energy and focus. We also work hard to gain the necessary set of experiences or networks or insights that enable us to compete in those areas. But when you start and you're one general partner and one analyst, instead of trying to do that in 10 areas we picked on. My first job I feel was relevant to what I'm doing today. I was an equity research analyst, and I followed retail companies. In some ways, I've mapped that, that category of business for the last 20 years, and have a real point of view on where it's going, and a deep a deep history in the category and network. So, we took the thesis driven approach, we targeted in that area, and really went to find the best of the best that were operating in new models and challenging that category in new ways. Then over time, we started to take that same playbook and parlay it into other segments of themes. Now as you did kindly, and Mo, in your introduction covered that we invest in a fairly broad range of companies, but there is common connective tissue, and that we always have a thesis driven approach. We really anchor it in the consumer. We lead with that as our kind of North Star if you will and pursue that with a disciplined approach.
Peter Lacaillade 11:08
Jeff, I would certainly say, your approach is more opportunistic as it relates to industries at Bedrock. How would you contrast that with the thesis driven sector approach that Kirsten takes?
Geoff Lewis 11:26
Absolutely. So, it's a combination of opportunities, and thesis driven work on our end. A saying that we often refer to hear a Bedrock is "when the facts change, we change our minds". You always want to be open to new opportunities and new areas. The basic genesis of the more optimistic strategy for us is - I actually would add a lot of this stuff Kirsten, said, I think she made some really good points - that the basic view we have here is that venture is sort of an asset class. It's relatively easy to enter and incredibly hard to be to be successful. Having spent a number of years at Founders Fund, quite frankly, when I joined it was not a top tier your firm was not seen as a number one brand. It was an emerging manager when I joined in 2012. And just knowing how we had to brute force our way into the best companies, I was in this constant search for things that that other investors weren't looking at. We really sort of brought that to bear at Bedrock. I'd say that the approach on our end, initially, when we first launched the firm in late 2017, we closed our first fund launched it really formally and in early 2018, it was really leveraging the relationships I built at Founders Fund with a handful of top entrepreneurs. So specifically, the Lyft founders where I was, we're very close to them on the board for many years. RigUp, which is a marketplace for labor, initially in oil and gas, thank goodness, they've expanded over the years into all sorts of skilled trade work. Renewable energy, defense, construction. Really meaning on the founders to basically a give us allocations into some of those companies. So RigUp, for example, is one of our largest positions at Bedrock. It's a crossover investment right initially by the Founders Fund. We've run a number of rounds alongside Founders Fund via Bedrock. The athletic would be another where we teamed up with Founders Fund to co-lead around, that's an opportunity we sourced, brought it to Founders Fund subscription sports media. So really leveraging my affiliation with Founders Fund initially, such that we could really get into top deals or through partnering with that firm early on, and then using that as a springboard into really building a universe and brand of our own, that founders can really get behind. It's been this combination of just the founders we've backed in the past vouching for us. So, some of those folks that I've mentioned, and in many cases, we go back 9-10 years with these entrepreneurs coupled with the agility, and Kirsten spoke to this with the agility of a really small team. There are just two of us on the Investment Committee here that enables us to do our analysis much more quickly. A sense that the entrepreneurs where we get a lot of our inbound, they know what we're looking for, we're looking for these companies that cut against the popular narrative, that are that somehow are being overlooked or underestimated by the market at large. Then the last thing I'd say on sort of old guard versus new guard is every, every 10 years or so there does seem to be a new old guard. The old guard becomes that the old guard goes away and there's a new old guard. I certainly was part of that. I was part of that changing of the guard at Founders Fund over my many years there. I really do feel a similar dynamic is happening now. When I started founded in 2012, I'd never heard of Kirsten now her name comes up all the time she's seen as , quite frankly, an established manager on par with these names that have been around for many decades and it is this very dynamic asset class where yes, the brand is very important, but the new brands can rise very quickly and overtake old brands. That can happen in a short period of time, which is why it's such an interesting asset class to compete in from my vantage point.
Kirsten Green 15:37
I think that's one of the things about this business that I love is that you just can't run the same playbook. You have to keep pushing your thinking forward. You have to figure out how to use the experience you've had, and the commonalities and the lessons to become a more effective board member or more effective at accessing out opportunities. But you have to keep an open mind. You can't invest in the same company or the same model you did even yesterday because things are evolving and changing. As Jeff points out, it's a good point. The puck is moving on how people view venture firms, so it's on us to keep pushing that. At the end of the day, I do think that returns are what's going to build a brand and we're all we're all working to build that track record. As you start to accumulate that, that's leverage in the market.
Peter Lacaillade 16:36
Yeah, I mean, I imagine Kirsten it's probably getting a lot easier to win and compete now that you're so established.
Kirsten Green 16:54
I still have work to do. I'd love to tell this audience, I win every single time, but we still have work to do. Actually honestly, that's okay. I expect to always have work to do, there's always going to be new competitors, and we're always going to have to keep upping our game.
Peter Lacaillade 17:13
People always talk about brand in venture capital. If you put yourself in the company's shoes, being associated with, with a top tier brand, which is going to help you raise, subsequent rounds and hire talent, that says that real smart money has decided to back your company. Versus kind of value-added board advice. One thing I hear people say is the dirty secret and venture is that the best companies need the least hand holding. And then also evaluation, right? Do you want to take a Forerunner or Bedrock discount? Say, when you are counseling your, your existing companies, and having them think about their next round of financing, and who to bring in, what are some of the things that you think companies should look for? Obviously, it might vary company to company, but what are some of the things you look for in the other Venture Partners you want to bring out of the captive?
Kirsten Green 18:38
Good question. It's a layered question. To start with the first one, what does brand mean in venture capital. I think you could get 10 founders on stage, and 5 of them would tell you, they would pick the single person that they work with, as above all. The other 5 would tell you that they would pick the brand as the platform. There's the good news, and that's where it opens the opportunity for competition. Ideally, you could be both. That's I think what , Jeff and I are striving for, but different people prioritize different things. Jeff, do you feel differently?
Geoff Lewis 19:24
I would tend to agree with that. The nuance I think on the brand with the firm's is ultimately I think the brand and VC is really ultimately just what companies has the individual person at the firm invested in. That's what drives brand. It's what companies has Kirsten from Forerunner invested in and then you can ultimately create a halo for your firm from the companies and the individual partner at a firm has invested in. So, I'd say that the brands are actually far less important than what one might think, and I think there's maybe one exception that proves the rule, which is Sequoia. They're this one counter example. They have this machine that's endured for five decades. There may be the exception that proves the rule. I'd say outside of them, it really is what companies is the person invested in. When we were getting the firm off the ground, we would have gone through jaggery, being , "Oh, you're the guy from South America," I was on the board of directors of New Bank, which is certainly the largest venture story in South America over the last five years, and folks would know me as the Latin America FinTech guide. And I'd only done one investment there and we would reach out even though we didn't really have a brand day one with Bedrock. It took time to build up. It is this personal chemistry thing with entrepreneurs, secondarily, and then primarily, it's, well, what companies has the given partner invested in. The last thing I'd say is, it is a highly networked industry and if an individual partner has a negative reputation or has made gets mixed reviews from founders, that percolates out very quickly into the market amongst entrepreneurs. It's just this constant relationship by relationship type dynamic with entrepreneurs that drive the brand over many decades.
Kirsten Green 21:24
Yeah, and to your question about how do we think about follow on investors? I mean, what does the company need? Right? We're, generally series A investors. One of the goals we have is to be pretty close to that founder. At that point, when we're investing, there's a small team. Hopefully, what you're getting is somebody who can talk about strategy, priorities, milestones, goals, a whole range of things. Perhaps, if you got that relationship, as a founder with one of your investors, the next time you're looking for somebody who complements that, and maybe there's a particular industry skill set, or category of companies that you want to do business with that they can help you unlock. Being strategic that is worth giving thought to at every step of the way. Then of course, there's still dynamics. So, I think they get waited.
Peter Lacaillade 22:32
Jeff, one thing you said how, when people come to Bedrock, they know, they're basically it's you and Eric, and you can make decisions quickly. And there's been this rise of the solo capitalists right now that, that founders, no, they're just talking to the one individual, and they don't need to, they don't need to deal with the politics of the VC firms, etc. The question that I have a little bit actually is more for Kiersten, which is, how have you thought about scaling? , for runner over time? Talk to me a little bit about the evolution of the team still relatively nimble by certain firm standards. But , getting larger than then Jeff is at Bedrock at this point in time.
Kirsten Green 23:28
Really applying a bottoms up approach we've thought every time a combination about where do we think the opportunity is in the market? And how do we think we're set up to meet it, and let's get the fun that sets us up to hopefully outperform. And I think that we've been fortunate as a team, a small team, I'll be it, I think, a mighty team. And I think that ambitious people who are ready to go and have ideas and things they want to invest in, make us feel more confident about our ability to put together dynamic portfolios and continue to compete in a broader range. And as we've considered that and thought about, okay, where are their sweet spots in the market? Interestingly, there's kind of a barbell in the market, there is in almost every business category, where there's everything from individual angels, to accelerators, to sub-100-million-dollar funds, that are generally competing for that first round of funding. And then there are the kind of been around for decades have built up a track record and have the flexibility and opportunity and have earned the right to be raising multi strategy funds or large funds. They're maybe investing across the spectrum, but they're able to do a lot of later stage stuff as well. And so in a lot of ways we felt Gosh, classic series A Series B It's certainly not an unpopulated area, but to be able to bring focus to it, and to think about how do we get all eyes on serving that segment of the market, and challenge ourselves to find companies that that time felt something that our team was prepared to run after wanting to run after and was available in the market? Then we thought, Okay, what does it take, from dollar standpoint, to compete for the best-in-class series A on it? And how do you think about portfolio construction with that deal in mind, and building some flexibility around that? Build a model, come up with a number. Right now, we've been on a path of increasing our fund size because of the various components of what I just described, but maybe things change, and next time we're back out with a smaller size, or maybe it's meaningfully big. It's really staying in tune with where the market is, where the opportunity is, and where you think you're set up to succeed. Then making sure you're capitalized in a way to do that.
Peter Lacaillade 26:17
When we first started to get to know each other, I was probably one of the only LPs telling you that you're undercapitalized.
Kirsten Green 26:23
You were the only one. You were right because we've raised top funds on top of all of those funds, because there were great companies in there. It's a balancing act, all of it.
Peter Lacaillade 26:37
I want to ask one question, then I'll pivot a little bit. Jeff, what have you learned from your work with Peter Thiel for many years very, kind of interesting contrarian thinker? Love to hear maybe some of the key takeaways from that. Then ask both of you about what's your kind of most non consensus viewer idea today? I know that's an interview question that Peter probably hit you with, when you were interviewing with Clari, or Founders Fund. I want to hear Kirsten's take too, but I'll kick it over to you first, Jeff.
Geoff Lewis 27:22
I never actually was asked that question. In the one rule of the question is actually the only correct way to answer which is not answer it. But I will answer.
Kirsten Green 27:32
If that's what you learned. That's good advice. I'm taking that.
Geoff Lewis 27:40
To the extent that you actually do you believe something that's truly non consensus If it was actually, the only right answers are ones that would really alarm the audience, it would be sort of really would be really, really concerning. If it's truly non consensus. But no from I'd say, I'd say from here on, really, it's about first principles thinking and looking at every, every opportunity from first principles, every market from first principles, what is the company's specific story, and, and, and, and not trying to pattern match or extract lessons from , one market or category to another. And so, when I was looking at Lyft, very early on, it was within my first few months, it found respond, they just had a few dozen cars in San Francisco with these crazy mustaches. And they were the only company doing peer to peer ride sharing regular people driving other regular people. Uber was about just the black car business back then. And, and there was no sort of analog for that. And so, sort of learning from Peter how to think about a peer-to-peer ride, transportation business model, what that would look from a first principal standpoint, and then applying that sort of first principles, thinking again, and again and again, quarter after quarter in the context of different investments and, and different markets. And so that'd be part one. , I'd say the if I if I'm forced to answer your dog consensus question, Peter, I'd say that the thing I believe right now that I think is very non consensus is that basically, if you look at sort of geopolitics, and sort of the formation of prices over the last 25 years, there have only been five new countries found in over the last 25 years. And so yeah, you have Serbia, Montenegro, South Sudan, Sudan, Kosovo, and other than five new printers over 25 years. I think we're going to have five new countries over the next five years five plus. And so, I think we're in a, we're entering a phase of massive geopolitical flux. I think there is an opportunity for the private sector and technology specifically in this ship, amongst with charter cities and sort of other opportunities. And I think all of this flux means that one very interesting place to be investing right now is defense technology. And we've actually done that in the US In the Bedrock portfolio and, and, and so it's basically that I think things are far more unstable globally than most people doing.
Kirsten Green 30:11
I'll tell you what, I have a non-consensus idea. Maybe it's not as interesting as Jeff's but one of the biggest themes in venture right now has been remote work. Everybody's jumping on everything for remote work. If you've got a video conferencing this or that, game on. If you've got a software tool that means you never have to sit in the same room again, term sheets are flying at your face. I actually think there's a lot of really important tools that are being built, that will be used, regardless of whether there's remote work or not. I'm not ditching on that whole space at all. But I actually think that this year has definitely shown us that people can work differently than we have before. They can do it effectively. But I don't think everyone wants to work by themselves in some holed up location. People to collaborate, to be in the room, get energy off of each other, and get the flow going. This is great. I'm happy to see you today, Peter and Jeff and have this conversation, but it's going to be a lot more fun, we can do it in person next year. That's true for work, too. If you're trying to figure out how everyone's going to scattershot across the world and not be in the same location again and leaning into every kind of technology that supports that, I'm probably going to let other people invest in that.
Geoff Lewis 31:56
I also agree with that, however, the timeframe on this thing is a lot longer than everyone thinks. I actually don't think it's going to be next year. Basically, to get back together in person, safely on a sort of day-to-day basis, you need the rapid antigen testing mass produced a mass scale or you need to get to basically herd immunity either through a vaccine or the virus going through the population. My other non-consensus view is that we're looking at three more years of a real pandemic raging, at least in the United States.
Peter Lacaillade 32:34
I hope you're wrong on that. I miss the both of you. Riffing on that a little bit, talk a little bit about what it's to try to close founders remotely, doing deals, how your companies are handling kind of remote work. What are some durable, long-lasting shifts? I personally think that the idea that San Francisco is dead, or that New York's dead - I take the other side of that. Jeff being in Hawaii right now imagine you're looking at some new deals, you're probably not going out and meeting the people in person. Talk about how you're coping with the current situation, because the activity doesn't seem to slow down much, at least from our perspective.
Kirsten Green 33:37
It's accelerated.
Geoff Lewis 33:40
Yeah, I mean, the way that we're looking at it here would be really, the last number of investments we've made are companies where we've known that known entrepreneurs for in many cases, several quarters. And so that typically is how we operate Well, we'll get to know a founder and opportunity, over several quarters, have multiple interactions in multiple in person meetings historically, before investing. And so I think there's only one investment we've made even though we've been very active over the last few quarters, there's only one investment we've made, every one of us on the Investment Committee hadn't spent through at least a few hours with the entrepreneur live face to face, how we're doing it going forward as we actually we will we are meeting entrepreneurs in person for large investments and so I would echo what Kirsten had to stay around it is hard to make these really important business decisions and certainly whether you want to invest millions or 10s of millions of dollars in a company and vice versa. So, whether a given entrepreneur wants to work with a given VC is a really important decision we do think that that needs to happen for the most part in person and so , entrepreneurs will be flying out here I'll be I'll be going to California shortly to meet to meet entrepreneur. So it's not we're doing dough in person, but the bar is just much higher, and we're front loading a lot of the analysis and quite frankly anchored more toward things that come in network versus just cold out of the blue our way, just speaking, honestly, in this in this context that we're in, , I will say that COVID, I do think that and this is not a contrarian view at all, it's I think writing sex among VC. But it really was a 10-year accelerant on a lot of technology driven trends that are already happening. So, this moves towards a more remote working environment sort of already happening on the midst of all these other trends we're already having accelerated by 10 years. Basically, the framing on what it means for us as venture capitalists is, , basically, I think it corrected what retrospectively was a mispricing in the market for all these tech technology assets. And so, you could argue that, because everything has been sped up 10 years, and so the mispricing had to get corrected, and it got corrected very quickly, and so on. So yeah, I mean, it is it's difficult to operate, I think the companies we're invested in, would echo what you're not to say we're the sort of itching to get back together in person more. And then at the same time, I do think a lot does move out of I don't think any of these cities are dead, I don't believe in the death of any of these cities. But I do think that certain shifts are irreversible. So, for example, engineering, which historically has been very centered in Silicon Valley, and extraordinarily high cost, you have this, you have this geographically constrained labor market with engineering for the Silicon Valley tech companies, driven by Google, Facebook, apple, where the salaries got exorbitant the perks got just absolutely exorbitant on and basically led to this tremendous sense of entitlement within the engineering labor market in the San Francisco Bay Area. And the founders that we work with now that they're , we can hire engineers from anywhere, that's not going to revert back to engineering teams being in the bay area that is a permanent shift of remote work for engineering now, will executive teams want to be together again? And is the most obvious center of gravity? San Francisco? Bay Area? Yes. , so I do think it does stay there. But at the same time when I started out in tap with my startup in 2010, no one was based in SF, almost everyone was in the South Bay. And then the next few years, everyone moved up to San Francisco, things can shift, they might, they might shift only, only a few hours, maybe it all shifts to Reno or Todd or something that. But anyway, I'll stop rambling here.
Peter Lacaillade 37:34
What are you seeing in terms of new investments? Have you made any investments without meeting in person?
Kirsten Green 37:40
I was thinking about that, while Jeff was talking. I think we've made one met one. And now we are kind of we are going and taking walks outside and, and spending time with people in person. I mean, when you are making a series A investment, you are making a bet on that leader. I think smart, disciplined investors have a view on the market, they know what category they're investing in, they know what's possible in the realm of business and that segment and how a business model stands to unfold and some opportunities in that regard. But you are looking you are considering that leader and their ability to translate that vision into action, attract resources to what they're doing, create and direct priorities and what the quality of your working relationship might be. There is a lot of it that you can accomplish over video, we've tried to instead of having deep, long dive meetings, we've broken them up a little bit more, so that you can have kind of a video interaction and then a phone interaction, and then maybe you're changing some thoughts on email. So, your kind of , creating some dynamics, so you can see how that threads together and holds together. But I do think that it's a missing element if you don't spend time with somebody in person.
Peter Lacaillade 39:18
Thinking about the past, you think of the bubble bursting in in 2000 and now certainly valuations are very high. But how is how is today's environment, different what are you kind of observing in the valuations in the private market? Then some of the things that are happening in the public market as it relates to some of the new tools in the toolkit, whether it's SPACs, direct listings, things that. Any kind of quick observations?
Kirsten Green 39:59
I was working in the public markets at the time of that 2000 crash. I think that the internet was new. It was a whole new frontier. People let dreams and , hyperbole kind of drive a lot of that. I remember distinctly working among my colleagues and just feeling a little bit left out of the investing activity, because I just couldn't underwrite any of these investments. I mean, they just were not under writable. From a math standpoint, there was no model to build, it was all on the dream and the vision of the internet. That's what drove that cycle. Today's cycle is driven by something entirely different. We all know, the internet. That doesn't mean we know the future. But we know, this new playing field that we're living in. We know the capabilities of digital, we have a good idea of the adoption, we know the ways in which it can be used. We've seen it influencing business now for two decades, we're actually at a place where it's pretty mature. I think that what you are seeing in the market is that there's a reconciliation going on, around that, where you look at the public markets, and you look at the majority of the market cap in the public markets, and they really, truly are old guard companies. I don't say that with disrespect for those companies, but they had business models that were based on entirely different foundational elements. Entirely different operations that were about an economy pre-Internet, and they've been pulling threads forward. But the business model, in many cases isn't fully modernized. And it can't be fully modernized. , I think about those companies that I'm referring to these bigger public companies that that people have been trading in and out of in stock market for years. They were growth companies at one point then they were value companies, which is probably where they've lived for the last handful of years. Now I would argue that they're , on the decline, because value still needs to have some look to the future. If you're a public market investor, thinking about where to put your money, and you're thinking about the economy's going to look in 10 years, there is a dearth of things to invest in. Which is why the Fang, or the five, those five companies are , 20% of the market cap of the entire market. I mean, they're awesome companies no one would disagree. But are they that good? Part of it is because there's just no supply, but the demand is growing over here. Meanwhile, we've been keeping companies private for a lot longer. The private market, funding cycles have gotten a lot longer as there's been more capital coming into the private markets, you can raise a series F, or series G before you go public. This year there's a confluence of things that happen where you start to, , run up against those points of friction. A few companies start to go public, and people see the energy behind them, they see a snowflake. They see a few of these things happen and I think people are waking up to this evolution and that what's trapped in the private markets are not startup companies. They're established companies that are meaningful to the economy that can move on to the next chapter. Maybe we got to move a few of these along a bit faster. So, when I think about , the next decade, I think it gets ruled by a changing of the guard and the markets.
Peter Lacaillade 44:03
We had a question come in and it was really the value add that VCs can have on their portfolio companies. And, Glossier is one that's a very, very interesting company. Maybe it'll be going public in 2021. Who knows? Possibly. I saw something in the news the other day about, but how do you see yourself as being one of our early supporters there?
Kirsten Green 45:01
Thanks for the question. It's personal to each company and its personal to the dynamic between yourself and the founder and what the founder needs. glossier in some ways was it's unusual in its own way it stood out. Glossier is a company that sells its own brand of makeup. It's kind of known in the market for having created a new movement, where they've, in some ways, co-collaborated on this journey with their customer. They've been very engaged, kind of across digital social channels with their audience. They struck a chord. That's been a very solid underpinning for the business and something unique that has tangible ways it gets executed. It's data, it's analyzing and using that information to be that much more thoughtful about what products you're launching, etc. There's a little background on what the company is, so people know, but I met Emily when she had an idea. She had previously had a blog and out of that experience had a lot of observations about how the beauty market was changing, how the customer was changing, and where there was a mismatch between what was available, how products were being sold, and where the demand was. She had about five, maybe seven ideas on how she was going to address this. Actually, she was going to do all of them to address it. What caught my imagination was, I thought many of her ideas, if not, most of them were really credible. I was really impressed with the fact that she had gone out and gotten all this experience on her own. Now one of the things you're looking for is can somebody have an idea or an inkling and then actually put action behind it? When they do put action behind it, what happens and what sort of results do they deliver? She was one person, she had a camera, she had a notepad, she created a blog with over a million unique visitors and a million month of revenue, which was basically straight to the bottom line to her. Out of all of that she came, and she said, "I've been on a journey with this consumer for the last 16 months, here are the 10 things I've observed about them and here are the ways in which there's opportunities to address that." I was really impressed with that get-up-and-go, and that ability to be constructive literally all on her own. We had a lot of conversations about what she wanted to build. Ultimately, I think the first bonding advice was around the power of focus, which I brought that to the conversation. Which is to say, I Iove the idea of putting all these ideas together and thinking about a big company. But I also believe you got to start somewhere. So, let's take that big vision and walk it back to today, think about where a really solid place is to enter the market and start to establish the company. We had a meeting of the minds around that through a six-month period of talking. I built the conviction up in her and our partnership. And she came back to me and said, let's start with a product, I know how to make a product, I know what they want, I know what the margin on it is. From there, we can think about how we bring in community aspect, how we bring in third-party selling or how we advanced the model on retailing. That became the genesis for the investment.
Peter Lacaillade 48:53
It's a great story. Jeff, how about how about RigUp?I t's been an interesting year for the company. Can you talk to me about your involvement there? Obviously predates Bedrock, right?
Geoff Lewis 49:12
RigUps had a very interesting year and not it historically is a business that primarily was a provider of labor in the in the oil and gas industry. But now at this point, is basically a two-sided labor marketplace across all skilled trades. You can think of it as something a Fiverr type business except actually bigger scale than fiber at this point, although it's a private company focused on skilled trade labor instead of these sort of quick freelance gig jobs. So, think about someone doing a major industrial solar panel installation, doing a construction project, in the defense industry. They're doing a lot in maritime right now. It's across all these different skilled trade verticals. When I first got involved in that business, analogous to Kirsten, although the Kirsten story is I think, very special and that that type of story is very rare, but somewhat analogously. I met the founders when it was just a DAC and an idea and basically was really drawn. I think similar to Kirsten, there was this really unique founder specific story on why they'd be sort of uniquely positioned to build this. They had a vision no one else had. In the case of RigUp, Shen, the founder, first generation immigrant, son of the owners of a Chinese restaurant in small towns Texas, went to Texas A&M, became best friends with one of the Texas A&M quarterbacks this guy, Mike Wedi. Then Shen went on to New York to become an oil trader at Citadel. Mike became a petrol engineer. Through his work at Citadel, Shen just identified that the way that labor was sort of flowing, the labor flows in oil and gas were really inefficient. There was an opportunity to use software to really create a labor marketplace that would result in in folks being able to get more work and more efficiency for ENPs. Really had mapped out the entire vision and there was this unique yin and yang between Shen and Mike and this unique ability to penetrate, at the time, the oil and gas industry, given their backgrounds. Similar to towns Emily at Glossier, having that unique lens on beauty from her blog. You're always looking I think, for the story. With RigUp, it was really all along the way working, working pretty closely with them on strategic decisions where to focus, where to not, on positioning on the company. The latest quote unquote, value add thing I've done as a board member there now really since day one, has been we're changing the name of the company to reflect the fact that is well beyond oil and gas at this point, away from RigUp. They actually came up with the new names. They'd hired this, this naming agency, this branding agency, they came up with, 500 names, but Mike didn't any of them died. I came up with a new name, and we tested that, and it scored through the roof with all the core constituents.
Peter Lacaillade 52:12
Remind me what it is.
Geoff Lewis 52:13
It's Workrise. It's always company specific. You always want to under promise and over deliver. You can always add the most value, Kirsten when you've been involved from the very, very beginning of the story.
Peter Lacaillade 52:31
One other question I just want to ask, and it's I think it's applicable for Kirsten particularly. How should venture capital change? You've been very involved with the raise initiative. Personally, I feel there needs to be more representation, whether it's females, minorities, Canadians.
Kirsten Green 53:08
The startup ecosystem is aspiring to build the companies that shape our economy and our lives for the next decades to come. And those companies are going to be serving a very diverse US population, and increasingly a global population. And so, thinking from the very beginning about that diversified audience, and understanding your market, and those dynamics is essential for companies. And one way of doing that is having that represent that diversity represented on your executive team, and on your network of supporters, investors being one. So, I think that everybody benefits, when we have a more well-rounded perspective at the table. And it's been honestly it's been, we can talk about it being frustrating that there's not enough females or there's not enough diversity, I'm going to focus on the fact that , in three short years, we're making material progress. And I'm hopeful that continues. I think you do need a snowball effect. , you need to have the three needs to be role models, there needs to be success stories and case studies. And we are we are getting there happening. And I think more people are feeling they can see themselves in this industry. I think founders are recognizing it. They're certainly recognizing it for their own teams, they need to be thinking about it also for their investor groups. LPs should be thinking about it, too. It's just Smart Investing. It's just Smart Investing because it's on pace with the future. And I think that it's encouraging that there's progress, it would be great if it could happen faster, but there's there is there is progress happening.
Peter Lacaillade 55:05
Well, this has been great. I really, really appreciate the two of you taking the time. Mo and Prime Quadrant for setting this all up. I can't wait to see you all in person.
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Kirsten Green & Geoff Lewis: Venture Capital
October 28, 2020 12:30 PM
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