Greg Sands Discusses Technology and Investment

name Netscape. And he is not just a technologist, but a venture investor and a very insightful person who sits really at the nexus of a number of fascinating aspects of business, finance, technology. Go down the list. Uh, they're out in Palo Alto. He is an early seed investor. UM. I wouldn't even call it a stage or be a round. He's earlier than that. Uh. They focus on a number

of really interesting technologies and platforms. If you're remotely interested in anything having to do with angel or venture capital investing, if you're intrigued or fascinated as I am about technology and how it's going to develop and impact. Uh, the economy and society at large. Then you're really gonna enjoy this conversation. So, with no further ado, my interview with Greg Sands of Costa no Ah Ventures. My special guest today is Greg Sands. He is the founder and managing

partner of Coast to Noah Ventures. He was the first product manager at Netscape Communications, where he not only wrote the initial business plan in but coined the name Netscape. Greg Sands, Welcome to Bloomberg. It's great to be here with you. So you're a founder and a managing partner at a venture capital firm. Is this the sort of career path you were expecting to take? Your background is not quite um total VC, although I guess in hindsight we could say that, well, it isn't what I saw

myself doing as a kid. I grew up thinking I wanted to be the Senator from the great state of Minnesota, and much to my surprise, Al Franken holds that job instead of me. So that's funny. I expected to be a fighter pilot or an astronaut, so we had very different goals, that's right, absolutely, and so that evolved as

I as I got into my career. Initially, at a management consulting firm in Boston, made my way to business school in at Stanford, so in the in the heart of Silicon Valley, and then just started navigating my way through the software. So so from Minnesota to Cambridge in in outside of Boston to southern California. Did you how did how did that transition go? I'm always surprised at how people find their way to California and it's, oh my god, it's beautiful. The geography is spectacular, the weather

is great. It's hard to leave there, isn't it. Well, yes, and so you know we're we're we're in Palato in the in northern California, near near San Francisco. And I ended up, having spent seven years in Boston and Cambridge, having the opportunity to head out there. And I didn't know what I was getting into. I literally told people, Hey, I'm I'm going to Stanford. I'm going to the beach. And they said, it's not anywhere near the beach. Have you ever been there? And I said no, but it

sounds great. The weather, everything is still spectacular. Boston's winters are not not easy winters, well, they're easy when you spent the first eighteen of them in Minnesota. I guess it's all relative, isn't it. So so let's talk a little bit about, um, what you were doing at at uh sutter Hill. You started at a very story I guess the first venture capital firms sutter Hill goes back

to the early sixties. Yeah, that's right, goes back to the early sixties, and it's the longest running venture capital firm on the East Coast. There were a couple of earlier firms, but that don't still exist now, don't aren't they also out in Palo Alto or y? I mean then the original am I misremembering the original Sandhill VC? Or or were they not not on sand Hill? But you would think of him as basically the original West

Coast venture capital firm and a storied firm. Uh. You know, a great group of people, very high integrity, great values, performed exceptionally well, incredible companies video and just the list of of companies that they backed were astonishing. And you were there for more than a decade. What was that experience? Like? Well, I came in having been basically uh GM of business unit,

most recently at ne Tscape. So I had never been a professional investor, and I came in there was a group of five partners or managing directors who had all been there at least, you know, really thirteen to twenty five years, and so I got to learn the trade of venture capital. And so even in our at Coastineau, we talked a lot about the old school craft a venture capital and being a partnered entrepreneurs and being a

company builder. And I really did get to learn that with an extraordinary group of people and feel really fortunate to have been able to do that. What were some of the companies you worked on when you were at a Sutter Hill so Yoku, which is about the world's third largest video property now owned by Ali Baba, but went public on the New York Stock Exchange and was had a five billion dollar markets going to say, that's a good exit to Ali Baba. That's right now, that's

an excellent one. Quinn Street, which is a public company. It was a guy in twenty power point slides. That's a performance marketing company. And one that I that I love but isn't very well known as a company called mrs Said Systems. It was a call center performance management

software company. That's and we uh, we are they still independent or they were brought by Nice Systems, which is a billion dollar public software company and uh, and one of the two founders there is working with us at Coast to know Mark selco Oh really, that's really that's really interesting. I recall you did something with feed burner. Was that at sutter Hill. So back at Cutter Hill,

I was an investor at feed Burner. So Brad felt from founder group and I let around and so I was I was an observer on the board and worked with Dick Costello and team and it was a terrific experience. One of the things that was very interesting about it is that Fred Wilson came in a year later and said, I turned it down at the last round, but now all of my friends in the publishing industry are using it, and I want in. He's a blogger. I've been blogging

for a hundred years. When Google acquired FeedBurner, everybody I know is using feedbourder as a way of shooting out their daily update. To to this was this was back in the day when everybody was using block feeds and not actually going to specific websites. But FeedBurner was a great property and that was a good exit. Was that was a good exit. And yet one of the things that I think is most interesting is that the investors

actually wanted to keep going. We felt like there was a bigger, broader opportunity when we were when we were offered, UH Google UH came and offered to buy the company, and Dick Costelo, to his credit, he looked at us and we put together basically effectively a competing offer that

would provide some founder liquidity. But he looked at us and he said, we have in fact won the war for the hearts and minds of bloggers, and we are deployed everywhere, but we haven't yet figured out how to monetize, for example, how to use to insert ads in the RSS feeds. And if we had figured out monetization, I would press on the gas and go for it. But I don't think we've eliminated that risk in a business, and as a result, I recommend that we that we

take this offer and we sell. And that's I think a great example of the partnership between great founders and leaders and great investors, and that Dick Costello has been involved in other tech startups, hasn't he yes, as it turns out he he ended up leading Twitter, and he's now has his own company and is a is A is a great friend and a and a great leader. What does a product manager do in a tech startup? So product manager is really the person who connects market

to technology. So ultimately that person decides what you're going to build and then works with the engineering team to make sure that, uh, what you're delivering basically meets the requirements that you've mapped out. So it's a combination of making it work, making sure the features are as promised. Are you involved in the branding or marketing or is

that a different team. It's done differently at different times, but mainly mainly not mainly the there's a separate marketing organization, and there the product management often does product marketing, so articulating the features and benefits and capabilities of that product, but not of the company as a whole. So you put together the first business plan effectively for Netscape. How

what was the thought process like behind it? It was clear that if this worked, it was going to be revolutionary, but how was the company ever gonna make any money? It was fascinating exercise. So we did, in fact have the company and innovated on on a whole variety of things, including public beta, including affiliate programs and the like. But it really was a very early version of a freemium business model where the product was free for personal use

and use in educational institutions, but we charge businesses. And so that's basically what we came up with. And I will point out that working with Jim Clark, and you know, with his guidance, we came out and we had a plan that said the first year of revenue we were going to do a little over fifty million dollars. And then they hired three vps who are all much more experienced than I. I was a kid, a puppy dog, and they came in and said, you know what are

you doing? We actually are going to be responsible for delivering this. This is ridiculous. They lowered the plan to thirty five and then we went out and did eight. So Jim Clark is a fascinating character. I love Michael Lewis is the new new Thing. Tell us a little bit about working with Jim Clark. Well, Jim has an amazing capability of spotting mega trends and assembling incredible people

to do it before the trends are understood. A well known he's we can all see a trend when it's fully robust, but his genius is really this is where the trend is going to go. Am I over didn't know it's exactly right. And so to his credit, he went out and saw this thing coming and he went and grabbed Mark and Reason, who was also a kid years old right at the time, and said, this is the guy who has been the innovator in the category. I want to work with him. We can go do

this together. And there aren't very many people who are already luminaries, who have already started and led public companies who go and look to a twenty one year old right and say we're going to do this together. We're partners, and and be right in his selection of people. And by the way, Andreason was a prior guest. It's one of everybody's favorite interviews because he is just fascinating. So you were working with him in the early days, tell

us a little bit about Mark. What was that like? So, uh, it was really clear that not only was Mark brilliant, but he was just learning at an incredible rate. And so I know about you but at twenty one, I had no judgment about anything, certainly not about guilties. And he us was a voracious reader and a voracious learner and sought out mentors and got better and better and better. And to me, that was really the most striking thing

about Mark in those days. That's that's fascinating you say that because when I sat down with him out in Palo Alto to do our conversation, he described Mark Zuckerberg, founder and CEO of Facebook, as quote a learning machine and pretty much that's how you're describing andrees. And it's interesting each of you have described you describing him, him describing Zuckerberg more or less in the same way. That's right. So so let's talk a little bit about um, the name.

Where did the name Netscape come from? So the I had been keeping a notebook of possible names. I'd led brainstorming exercises with the engineering team, and we came up. We were just coming up with anything. The company was founded as Mosaic Communications. There was saber rattling about trademark infringement and lawsuits from from who else, from the University of Illinois. So Mark had been at the University of Illinois and it created the freeware product Mosaic There gotcha.

That's that's not an unreasonable claim on their part. I agree with that. And so one day I was Jim Clark, Mark and Reason and Mike Homer, who was our new vice president of marketing, pulled me into Mark's office, which was a tiny little office with stacks of paper and boxes of honeycombs everywhere, and they said, this is critical. We really need to do something about it. And I've been working on it. We've all been working on it.

We had nothing that was any good. And it literally just popped into my head that you've the this visual view of the Internet and the ability to navigate across it. And I said how about Netscape? And everyone looked around and they said, yeah, that might be it and we walked out of the room and that was it. Bank just like that. Yeah, that that's unbelievable. So Netscape goes public in nine fourteen months after the company was founded,

which is an incredibly short period of time. Uh. People looked a little askance at it, thinking it was well, they have a business model, but look at the valuation. It just blew up on I p O. Was there any sense in that this was starting to become unhinged, or was that still so early days that hey, we rang the bell, let's move on to the business of running the company. It was really more the ladder, I think it was the way I think of it. There were kind of two phases of that bubble, and we

were at the beginning of phase one. So we really did have a sense that we were doing something special and remarkable, that we were in the right place at the right time. And you know, it literally was siege mentality, and we were just after it every day, no room for rest, no room to think about it, sitting at

the eye of the hurricane. But the company, if you think about it in the context of today's internet companies and technology companies, it had an eight billion dollar market cap, which is which is a big market cap, a little

rich but but enormous potential, but enormous potential. It actually mainly drifted down, and then at the end the acquisition by A. O. L really was about an eight billion dollar acquisition, so it did end up getting back to that number, but it pretty quickly drifted down after it after the early days when you were at Netscape, after the I P. O. There was a tremendous amount of potential and it looked like, hey, this could be a giant company that really brings the Internet forward to the

twentieth century until the beheamoth from Redmond's Washington named Microsoft, said hey, we want a piece of that. When did you guys realize that, oh, these guys is are really going to put a herd on us. It was about a year in. It was about a year in and they had started writing a little bit about it, and at some point we saw Bill Gates memo on it, and then you could really start to see them attempt to make a difference. And it took them out about

another year to warm up. But by the end of year two they had gotten their guns trained on us and started having a pretty substantial impact on the business. What once they built Internet Explorer into Windows. Every piece in the world comes with their web browser. Why would anyone have to download Navigator? Well, it's particularly challenging if Steve Bamber Bill Gates is calling the CEO of your hardware manufacturer and telling them if you include Netscape Navigator,

they'll stop selling you Windows. And hence the subsequent anti trust trial which ultimately Netscape. Was there a settlement, Well, yeah, there were no Ultimately there there was a settlement. It was frankly long. It was two years after the sale to a well, so it wasn't fast enough to have any useful impacts as old patent litigation and any trust litigation tends to be um And then eventually the any

trust case was settled. And but that created a Cambrian explosion of people freed from the oppressive thumb of Microsoft. And at the same time you end up going to the starting uh as a venture capitalist. What was it like in the mid to late nineties when there was a lot of cash going to startups and a lot of innovation and software and semiconductor and hardware. That was really you know, it must have been an amazing period

of time. It was an amazing period of time. So I started in September of ninety eight, so I think of that, I think remember the Asian Flu that period in there, so that's right when I started. And basically coming out of the Asian Flu was phase two of the bubble, which is about ten x on phase one

of the bubble, and it really was quite insane. And did you realize you were in a bubble in real time, because everybody says, well, you know, you can only identify it after the fact, but you're right in the thick of it is are people looking around and saying, hey, we've valuations have become unhinged from reality. In nine and

early two thousand, I think it was pretty clear. And so you know, one of my I was sitting with a very experienced group of investors and we were just looking at a whole bunch of things where you'd say, you know, we're not gonna We're just not gonna do it. We're not going to touch it if it goes into

those into those kind of categories. But it's still the case that I can think of one specific example where someone was offering US fifty million dollars for a company, which was an irrationally high price, but that but the comps were much higher. In the end, the company turned down the acquisition and it, you know, ended up being worth less than a hundred million dollars. Regretted, regretted not

selling into the bubble. That's right. So there's one of the one of the legends of the of the venture capital industry. When the bubble finally blew up, said basically, you know, thank God had ended, because I was just holding on to my principles, like I was just about to let go. I couldn't hold on anymore that that crowd enthusiasm. It's really easy to get swept up, both positively and negatively. When the crowd is surging. It's it's a siren call that is really difficult to resist. And

it sounds like you successfully navigated that. I think it's an overstatement to say I said, well, so I you know, I was the new guy, and so you were a little cautious to begin with. Well, no, I would say that I was the new guy, so I was unencumbered. I mean, the venture capitalist is most dangerous when they start because you don't know very much and you've got a clean slate. You're not sitting on ten boards already. And I was the guy who knew the internet stack,

so I wasn't doing crazy consumer internet things. It's still I made I went too quickly. I made nine effectively pre revenue venture capital investments over an eighteen month period. Early seed, very early stage. Yeah. Uh, you know in ninety nine there wasn't anything called the seed financing, so they were you know, Series eight financings and formation just

very early. That's right. And so in Quinn Street, which is now a public company with three hundred million dollars in revenue, was the one that paid for the other eight. I have to ask you, Coast to Noah, there's nobody on your team page named Coasta Noah Where And I keep mangling unfortunately the name Where does the name Coasta Noah come from? So the Coast Sinowans are the Native American tribe that occupied from Big Sir all the way

to the tip of the San Francisco Peninsula. And so it's a way of uh sort of situating both in place and also I think recognizing that, uh, the development of Silicon Valley is has layers and is built on the shoulders of giants. So we try to on are the old school craft of the past as well as having some ways in which we're uh modern and innovating. So one of the things we always hear about early mover advantages it's the second mass that gets the cheese.

How accurate is that? Is there a big advantage to being first or is timing more important? So the answer, as in most things that involve investing, is it depends but I and so there are many examples of each. I do think it's the case that, you know, one of the things, you know, we in investing companies that change the way the world does business, but we are trying to focus on things that have platform capabilities that

can build ecosystems. And I do think it is the case that when you're talking about platforms, it is often the case that the first mover to be in market and start attracting users and the data that comes with it and the applications that get built on top of it really does have a significant advantage. So you say you want to invest in companies that can change the world's of business, in what way? How can a startup or an early venture funded entity really have an impact

on the giant world of business. It's amazing, actually the impact that they can have. So, for example, all companies that sell the businesses use a form of account based marketing. You sell the companies, not to individuals. And on the other hand, there wasn't really any way to do that

in the context of online or digital advertising. So demand Base, which is a portfolio company, basically identified a way of matching those two pieces of data together and by the time they got distributed to hundreds of companies using it, it is a self refreshing data advantage. And it is now the platform for account based marketing. And there you know, Google isn't doing it, Facebook isn't doing it, Salesforce isn't doing it, Adobe isn't doing it, Oracle isn't doing it.

And so it really is the case that you can sometimes take this kernel of an insight and turn it into something really special. Would would we call that middlewhere how would you describe what they all know? I would call it a I would call it a business to business marketing application for account based marketing. That that's quite fascinating. Tell us about some other types of companies that you

invest in. Well, so there's another one. We're here at Bloomberg and Elation is an enterprise data catalog for data driven companies. And the problem is that end users, people who are analytic in nature, spend hours, dozens of hours, sometimes a third of their time looking for the right data and trying to understand what it means before they

can do any analysis. And so Elation is a company that we incubated from scratch, and it basically helps those end users find what they're looking for and understand what it means. And this is an example of something that comes out of ten years of research of looking at a field called master data management that I would argue

fundamentally doesn't really work. Master data management, that's right, which is where the idea was, the human are going to document all the data and write down what it means. And it turns out that this is a place where the dawn of artificial intelligence combined with humans is able

to do something that humans alone couldn't do. And as a result, it's incredibly useful for companies like eBay and uh and other large enterprises who have masses of data that the end user can't possibly get their arms around. That's interesting. So let's talk a little bit about not the investing aspect of it, but the business of venture capital investing. You've just raised is it the third fund?

Third fund? Right? So first to the lay person, why do we keep rolling out different funds if it's the same group of people investing in the same types of technology, What what's the thinking behind this vintage, that vintage and the following So it really is a result of the fact that limited partners so investors, which are often endowed ments are large financial institutions want to ensure alignment of interests and no conflict of interests, so they generally tend

to say, hey, we'll make an investment decision up front, and then you invest in a group of companies and support those group of companies all out of one pool of capital, and five years later, when you're investing in another group of companies, keep those companies together so that you don't use somebody else's money to bail out a bad investment earlier. Vintage makes sense, makes a lot of sense. So you're running three funds um simultaneously. Some are fully invested.

How how long does it take? So here it is let's let's say a new fund launch is January one? How long and it's a hundred million dollars? How long will it take to deploy that hundred million dollars? And you're fully invested. So the way it works is typically in the next three years, will make all the new

commitments to companies three years three years. So over that period of time we will invest in something like seventeen or eighteen companies, and of that maybe of the capital will be called and already invested in those companies, but six will be reserved for follow on rounds in those companies. Let me take apart those let's unpack those numbers a little bit. So eighteen companies over thirty six months. That means essentially you're deciding on a company every other month.

Is it that spread out or is it a little more bunched together? What's the process like to manage? All Right, we're making this decision, we're ending this company. How do

you paste that? How do you source that? First? We've got a team of five person investment team and we basically work as a team to attack our most important opportunities and talk to customers and prospects, talk to technologists to do technical due diligence, spend lots of time talking to founders to see how they think because so much is unknown that you're fundamentally investing in people and products. And I've heard that repeatedly. Is we're not buying technologies,

We're buying a founder. We're investing in a founder and their vision. Is that a fair descriptor? Or are you buying technology? Are you investing in new technologies? I would say we're investing in the founder's vision. And ability to think. And that's the part that I think people don't really talk about because there are all of these. To me, the thing that people think of founders as I want Steve Jobs, and he's going to be right a hundred percent of the time over the next twenty years. And

I'm just back in his vision. And what we look at is I want Steve Jobs who doesn't have reality distortion field. I want Steve Jobs who is completely immersed in reality, who has situational awareness, who knows what is possible, who knows what market needs and can navigate assemble to pieces and get themselves to the right spot. You mentioned when you were at Sutter Hill you did nine investments right away. One of them was really successful, paid for

the other eight ones not so successful. In general, what do the statistics look like of a hundred investments um that are made. How many of your losers, how many break events, how many of your minor winners, and how many are the you know, unfathomable home runs that pay for the previous nine nine and then some Well, so I can only talk about my experience, which I think is frankly different than the industry as a whole, which is another question why, but we'll get to that. Yeah.

So in my experience, I'd say one out of ten are great winners, meaning ten times your money or better ten x wow. Yeah, so on one out of ten, and then it really is the case that about uh, I'd say, uh, two thirds end up being winners of some you know, of some material variety meaning you know, yes, you two x to you know, four or five x, which doesn't make a venture capital, but it's better than

a stick in the eye. And uh. And then out of you know, out of ten, you'll have to where you get your money back and one where you write it off. And that is very different than the industry is. I was gonna say, mine, you tell me if my understanding is wrong. That or outright money losers, and the next or break evens, and then some more do one x, two x, three x, and then there's that one home run that pays for everything, and then some that that a fair assessment of the industry as a whole. I

think that's right. The reasons are one that the consumer business, which we don't really do, is much more volatile, is not only a hits business, but it's also a luck business that you know, a great team assembled on a validated problem in the business to business world can usually figure something out right, So so that's certainly one I think. The second is we're as early stage investors were all former product managers. We think like product people, so we're

used to doing Uh. It isn't just a hey, let's take a flyer on this. We're asking the same questions that the founder should be asking his or herself, which is what the customers care about. Is this a big enough problem to be worth addressing? Do the set of technologies that are available at this time can we actually solve this problem in a meaningful way. If so, how much is it worth to a customer? And you know so because we both make that set of assessments in

a really nuanced way up front. And then we've got an operating team that helps these typically product oriented founders build the sales and marketing and commercial infrastructure that they need for their product, their customer, their price point, their market. We think that we have higher ods of success. That's really fascinating. We have been speaking with Greg Stands of

cost to Noah Ventures. If you enjoy this conversation, be sure and check out the podcast extras where we keep the tape rolling and continue discussing all things venture capital investing. You can find all the podcast extras wherever fine podcasts are sold Apple iTunes, Overcast, SoundCloud, or Bloomberg dot com. Be sure and check out my daily column on Bloomberg View dot com. You can follow me on Twitter at

rit Halts. We love your comments, feedback and suggestions right to us at m IB podcast at Bloomberg dot net. I'm Barry rid Holts. You're listening to Masters in Business on Bloomberg Radio. Welcome to the podcast. I don't know why I do that every week. I just it's I like this part of stuff. Greg. Thank you so much for doing this. I've been I've been looking forward to

doing this. And you know what I forgot to say earlier, I'll say it here just for um completing its completeness is say um, my disclosure is we have a mutual friends who is a senior executive at Dimensional Fund Advisors, And my disclosure is I'm an investor in d f A funds. My client clients over healths wealth management investing their funds. And I probably should have said that during broadcast. I don't know if I want to move that back

there or not. But there's the disclosure. Although I make no um that that's fairly well known and fairly public. But we met through someone from dimensional and I always feel better disclosing more rather than less. Let's let's keep talking about venture investing because some of the questions we didn't get to I think are really interesting. Starting with you reference luck on the consumer side, the question I have is how important is luck across the board the

board when it comes to technology or venture investing. Is serendipity all that important? Or is it more rigorous? And here's our process and here's the outcome and randomness doesn't matter. Uh, You're both are true. I mean, look, look place a huge role. It would be completely disingenuous to say that

it doesn't. I do think that it has a uh that there's an element of you put yourself in lucky places, right, and so you navigate to those and you think you way through them, and you work with the best people that you can so you can increase your odds of getting lucky. Is that what it's probability plus randomness that that's really interested? And I wanted to ask you about, um, some of the companies. We talked about the success ratio.

I want to ask you about some of the companies that got away and what you learned about that, and some of the companies that maybe this wasn't a great investment. So so let's start with the first one. And the reason this question came to mind is a number of venture firms have a page on their site where, hey, we missed this opportunity to invest in Uber. We could have been an early investor in Amazon. We said no, it's almost like a badge of honor that hey, here's

our process. It doesn't lead us here, but we stick to the process, and and here's how it didn't work out. Any stories along those lines, anybody, Yeah, well, this is this This is a inauspicious time to note that Fred Wilson introduced me to Mango dB for its Series A financing. Mango dB went public yesterday. I think Dwight Merriment is an extraordinary founder and technologist. Uh. It was based in New York. Uh, there was no sort of business partner

or commercial partner with him at that time. And it's an and and it's an open source company, and it is you know, open source doesn't monetize as well as what you would think of, as you know, proprietary software, and so it has the category has to take off and be incredibly important, which no sequel has, and you

have to win. You can't be number two. And so in the end, I you know, for me, the thing that I that I learned from that is when you have a uh an anchor founder who is a great technologist and a pied piper for other technical talent, that those can be really interesting opportunities. There will be a question over time of how you graft the sales and marketing and business leadership into the company, but that can

be a very good formula. And that's one that I missed and I would have imagined that you know, between Oracle and Microsoft, isn't that like a giant, and then you throw in salesforce. Beyond that is then the of the database market or am I naive about that? Oracle itself is the database market. So so you're running into a monopoly. But that is sequel, which is basically a very heavy weight UH database. I nine, I I don't even know what we're up to, probably eleven and right.

But then in the in the world of no sequel, and then loop, which is cloud Era and her works and the like. There's been an explosion of lighter weight databases to manage less structured data and so that that has been a really important megatrend and they were on the front edge of it, and that was So the question is what was the takeaway? Was anytime there's a fail, I always want to say personally or anyone else, So what was the lesson from that? What? What did you

take away from that? One got away? I think it is this idea that, particularly in the infrastructure category, that that building the entire company around a great technologist as a is a can be a really important way to

build those companies. So I think the model that I grew up in is you build company around great CEO, and so I think the the the idea that you can build around great technologists and graft on that business leadership over time because in an incredible technology infrastructure categories tend to be driven more by technology than by uh than by you know, relationship to to customer. I may be quoting and reason I'm not sure where this came from.

Actually it is injuries and it's you could possibly teach a technologist the CEO and related business skills. But it's all but impossible to teach a CEO that technology visionary insight, that that is something that you have and can't learn. But hey, many good technologists can learn the business side

of it. And I'm slightly mangling that, but but absolutely Mark Mark is absolutely on record on that, and I would I would actually, uh for for my purposes and our purposes, i'd actually so there are a few Jensen Wongs from Nvidia, but there aren't that many either. And ultimately, you know, a technologist to remain CEO needs to go a boot camp on sales, boot camp on marketing, needs to own those and off and so ultimately the you know, this is what I talk when I talk about grafting

those on. They need to know who to hire and how to manage them, and so they can, Yes, they can often learn it, but they've got to be a learning machine like Mark himself was, or like Mark Starberg was, and some will end up, uh, you know, some will end up doing that, and some will end up, you know, not succeeding in learning all of all of those skills

and will need a partner in another form. And what we try to be is is a UM is a great long term partner that helps them understand where they are and understand where they need to be in order to lead the company. I guess I have to go to boot camp myself. Then, UM, let's talk a little bit about the space. Venture capital and private equity both seem to be pretty competitive, attracting a lot of UM new and expanded UH players in the space. How competitive

is venture investing these days? Well, it's highly competitive, but honestly, it's always been highly competitive. So people will say, oh, there's too much money slashing around and then like and my my view is everybody always thinks there's too much money in their own asset class. Welcome to life in perfect competition, right, So that that kind of leads to my next question. You guys really are an early a or seed investor, meaning you're looking at technologies when they're

still very new, when the companies are still very new. UM, there may or may not be any sort of revenue yet why that space and does that provide you guys with any sort of advantage over some of your peers? Absolutely? The I mean the two reasons to be an early stage investor from a sort of financial or strategy point of view, are fundamentally about ownership, you know, being able to buy you know, big chunks of companies, and about

multiples of capital. And so it isn't a category where you can invest very much money, where you can raise really big funds, where you can have enormous fee income, but it is the place where you can earn the biggest multiples of the capital. Now, I will also point out that personally, the reason why I'm an early stage investor is because that's what I love doing. That's the time in the company's life that I'm most interested in.

That it's the time where you build the foundational relationship with partners, that helping them navigate through this process of launching first product and great use old three of them. Now, who do we hire? Who else can possibly sell this? And what does that person look like? And how do we go do it? That's the most fun that there is in business. So how intimately are you involved with the companies once you found them? It's not here's a check,

we'll we'll follow up with you every quarter. You're much

more hands on. So yes, unequivocally, founders and management teams are running companies, you know, Just to be clear, but I'll use the example of Elation where they incubated in our office for a year, so they were up to fifteen or sixteen people by the time they left, and so there was an almost daily interaction and a debrief after they came back from customer meetings and strategy conversations and you know, all of these team building conversations on

a highly regular basis. And that both is great fun, but I think it it really helps because it is lonely at the top. It's lonely being a founder. It's lonely being a CEO and having someone who is there but frankly whom you trust and who you're willing to be open with and you know, even vulnerable with. I don't know the answer to X. Can you help me

think about why? Is I think a huge asset? So what about the macro environments of the economy, the stock market when you're when you're looking at a company a founder of technology, does that come into the calculation or is it, Hey, the next five years are gonna elapse regardless of where we are with the market cycle. It

really is more the ladder we are are. Fundamental discipline is micro and bottoms up the way I like to say that to our team is the company is the unit of analysis here, right, and so we go do those fundamentals. Let me repeat that the company is the unit of analysis here as opposed to what as opposed to, uh,

the market. So there are thematic investors who I think sometimes do a very good job at saying we're gonna go invest in this category and we're gonna interview every company and we're gonna pick one because we're smart enough to know that this is the one important thing. So it's top down. Hey, the social networking thing is big,

Let's go find a social company that's right. And so I think the what I refer to as the bulge brack adventure firms tend to think, hey, there's you know, there's something moving in this category, and we've got to have one, and they so they do this top down process. And so ultimately, as I as I said, products and people, the only way that macro really comes into it is UH one, we have to be sure that we can

finance the company. Right, so there'll be other capital available and meaning you work with other vcs, well you'll co invest with and I assume you have relationships with people all over. We have relationships with people all over who will lead a B in, a C and a D round. So that's one, and then the second is as we work with companies, the question is this is actually where the macro environment plays a stronger role. Is ah, how willing are you to get over your skis in pursuing

growth at any price? And I would say that the Bulish bracket firms who have big funds, they gotta return four billion dollars if you've got a one and a half billion dollar fund. And they tell companies your job is to strap on the rocket boosters, and you may go into the side of the cliff, or you may get into orbit, but job is to maximize the number

that get into orbit. And I think one of the advantages of a boutique firm like us is that we can work with founders and say, look, we can, uh, let's build on a solid foundation, let's prepare ourselves for explosive motion, but let's um be thoughtful about how much to invest in growth and and and when to when to accelerate, and when to tap on the brakes. And I think we're oftentimes a better partner to companies than even the biggest names in the business. So you mentioned

earlier the fee versus the performance side. So with a hedge fund it's two and twenty. Venture capital is not all that different now it's typically two and two and twenties. So if you're on a hundred times less money, well, if you're a one of the bulge firms that have billions and billions of dollars, that two percent is not insubstantial. When I'm hearing from you as an early investor, A, there isn't enough capacity to put billions of dollars to work.

It's that's why these are a hundred and fifty and two hundred million dollar UM funds. And be the upside to you is to be right more than wrong, and it's the performance side. So if they're looking at three x on the performance side, you guys are looking at a bigger numbers. That Am I catching that? Right? Yeah? I think it's it is right that A we are

striving for higher multiples of capital. And you know, I think any of the LPs who actually look at the numbers say that people who are raising multi billion dollar funds have a hard time return in Uh, you know, reacts right, but but yeah, we're you know, we're we are striving for uh, you know for four and five and six and seven X. Doing ten X on a fund is extraordinary. It has been done. But it's an and you know, and peoples on or a Facebook or

a Google or something that's just that's absolutely off the chain. Um, what's the process like raising money? Who are the venture investors? I don't mean by name, but academic endowmonds, pension funds.

Who who are your LPs? Yeah? So I started out five years ago and I never raised a dime in my life really and so and so I really went to co investors who had worked with on boards other venture capitalists, and a couple of them, people like Fred Wilson and Bradfeld, introduced me to some of their LPs. And then I just anytime someone would refer me, I just kept talking. And it turns out that the university endowments and hospital endowments are a big group that there

are uh for small funds. The pension funds really show up in the form of fund of funds that effectively our wholesalers they disaggregate pension funds just because they have too much money. Pension fund needs to write a hundred million dollar check, not a ten million dollar check. UH and fund of funds also aggregate money from family offices, and sometimes family offices come direct. So those are really the three main categories endowments, fund of funds, and family offices.

So you said you never raised money before five years ago. I'm in the exact same situation. What are your experiences like speaking to investors and prospective investors? How how does that go? And how you obviously have been very successful? How did you learn how to pet that animal? I honestly trial and air. I didn't know what I was doing. I was young and stupid, naive, and I just marched into it. And I do think that there's a look, there's a great lesson there that you can, you know,

just learned by doing. I did work with UH, a lawyer who was also council that Sutter Hill, so I'd had twenty years of trust in history and working with him, who could be a little bit of a river guide

to that. We didn't use any you know, external consultants, and I think over time I've been able to incorporate advice from other venture capitalists, from people on our team who have helped improve our storytelling around that, because I really started out saying I've got a point of view of what we want to do and who we are, and all I wanna do is authentically represent that and people for whom that's good enough, great, and where it's not good enough, so be it. It becomes a sort

of self selecting group of people. That's right, it's a it's a mutual fit um. And you referenced machine learning and artificial intelligence earlier. I would really not be doing my job if I didn't ask you. Lots of people seem to be concerned about the upcoming singularity and eventual robot revolution. Is are these fears overblown? Have we been watching too many sci fi movies? Well? I think those

beers are overblown. But I do think that it's right to say that the the Cambrian explosion in AI, which it really is right. People have been working on it for decades, but that's you know it really you know, the proliferation of data, the availability of huge amounts of compute in the cloud, and modest improvement in the algorithms have really led us to be able to do a different set of things. And so every business application, for example, will have AI fully infused, and I do think that

that has employment implications. Were coming off a period where wage stignation has been a problem for forty years one time, that's right, and I think that will there will continue to be the elimination of certain job categories. At the same time, there are extraordinary new opportunities. I'll give you

one example. We've got a company called bug Crowd, which is bug crowd bug Crowd which helps companies orchestrate a bug bounty program so that so in other words, they want users to identify issues with their software so they could fix them more or less in real time and so right, so that the good guys can find them before the bad guys find them. Is this security specific

or is it everything? It is security specific. And they have over forty security researchers on the platform who are working with companies like Visa and Fiat Chrysler and PayPal to identify those kinds of vulnerabilities. And there are people

really making a living really as security researchers. In other words, they're trying to hack a company, and when they identify the hack, they let so really, had had one of the credit companies um actually right, had Equifax done this, they could have saved themselves a lot of time and headachain. That's right, And so this is an example of a job that didn't exist five years ago. But people can make.

People can make really good incomes and six figures, seven figures, six figures and uh, you know high five figures and six figures, and people can do it at their convenience, and they can do it wherever they are, and there are examples. Uh, there was a story recently about a thirteen year old kid in Bangladesh working out of internet cafes who taught himself to hack with YouTube videos and he is supporting his family. That's amazing. That's totally amazing.

So it sounds like you are really focused at a very interesting stage of technology. And it also sounds like you really enjoy what you do. I love what I do. So on that note, let's jump to our uh standard questions we ask all our guests. UM, let's start with tell us the most important thing that people don't know

about your background. So I didn't know what I wanted to do out of college, and so while I was figuring that out, my very first job was as the receptionist at the Houghton Mifflin publishing company that I got through a temp agency. Okay, Holton Mifflin was a huge publisher. Yeah, so you know, textbook publisher. And to me, the point of that is, career is long, and your job is to navigate and to learn and to put yourself on a path and go on a journey. And your first

job isn't the destination? Very interesting? Tell us about some of your early mentors who helped guide your path. Well, I would say coming out of my first real professional job, which was at a management consulting company now known as Mercer, so one Adaran sly Watsky, who is author of The Profit Zone and a handful of other books, really taught me to think and understand business. I was a political science major, so that to me was a real opening

and I learned a ton. Now. The thing that's also interesting is that my uh, the other person I'd put on that list is Steve Leavitt, author of fre Economics. So he was my uh classmate and my colleague on that case. And I jokingly say I did some of my best work when I was teamed up with Steve Lovett. You know, I also did some of my best work at an escape when I was teamed up with Ben Horowitz.

It turns out, you know, working with Steve taught me how to work with people who are smarter than I am and to still contribute and and collaborate in a way that is really highly productive. And that's ultimately, I think, a really important skill that that's really very interesting. Um

venture capitalists. Who who influenced your approach to VC investment? Well, I I've mentioned Fred Wilson before, but he Fred, Fred Wilson is in Union Square Ventures and is pointed by the way, I'm literally pointing square, that's right, and and notably the early investor in Twitter, which I also passed on. But you know, Fred, there are lots of great business opportunities. But Fred helped really teach me the value of platforms,

platforms and ecosystems. And that's how you take the ten x opportunity and turned it into the fifty or opportunity. Ecosystems and platforms. Yes, that's really interesting, and I'm gonna do something I never do. Fred. You keep saying, no, I've had Mark on, I've had Greg on, come on, step up, let's let's let's get you out of downtown and up to midtown for an hour or two. Um,

this is everybody's favorite question. Tell us about some of your favorite books, fiction, nonfiction, technology, venture, investing, or what have you. So you know, to me, the book that basically every educated adults should read is Sapiens. The predecessor of that fifteen years earlier was guns, germs, and steel. But to me, those explain who we are as you know,

as a people and how we got here. And to me, in the context of something like Sapiens, it's fascinating to look at uh, language and money as early API s right, application programming interfaces, ways of exchanging information or exchanging goods, and so I love having that sort of universal and historical perspective. Have you gotten to Homodaeus yet? This is follow up? So I found Sapiens to be a little dark. Um,

agriculture leads to disease. It was a little, But Homodaeus is just a little dystopia view of the future of mankind. He's a fascinating writer. I love the way he contextualizes of physics, biology, and chemistry, the way he puts that into a broader context. In the beginning of Sapiens, I found that really to be a fascinating thing. Give us a guns, germs and steel sapiens. How we got to now, which is Steven Johnson, So it basically the second person

who's recommended that it's fabulous. And so this idea that things that we just take for granted were fundamental innovations and have had as big and implication implications for uh, for for the human race as things like transistors that are not that that we acknowledge have had. So an example would be glass, right, right, you don't even think twice about it, that's right, and not not only glass, but safety glass. Think about what that did for automobiles

and who even thinks twice about that? Exactly right? So but but you know before glass, you were you either had light or you were cold. It was one of the one. Right, Um, how about not? How about fiction? All of us read nonfiction because we can rationalize the time as well, it's work related. But how often do you step back and read something that's just fiction? I

would say about what I read is fiction? I basically pick about one out of five from my wife's book clubs, and there are the person that I so, by the way, I'll read anything that Michael Lewis writes, I'll read UM, but I really love Michael Sabone, And for me, that started with Cavalier and Clay. Michael Sabone, Cavalier and Clay I am not familiar with. So it is a so

it actually is a New York story. But it's two kids who start out in Eastern Europe, you know, who migrate to New York and then they basically start a comic book company and they and they, you know, I think they end up on the on the Lower East Side, and they navigate their way through and it's uh. But he has an amazing human insight and turn of a phrase.

And so for me, when I'm reading a book UH with a truly great author, I find myself periodically I just laugh out loud where they just capture humanity in a in a way that I had never thought of, and it gives unique insight. But it also is just funny. It makes my wife crazy when we're we're coming. I read Ready Player one on a flight back from Europe. I pretty much killed the whole book on a flight, and parts of it are really funny and I start laughing out loud and she just gets embarrassed. By by

my Hyena. Like before, in the middle of a of a room, I watched her I get an elbow and then she turns red and it's actually pretty funny. I'm gonna have to check that book out. That sounds really fascinating. Um the venture capital industry, tell us about what's changed since you've become a VC. What what are the big

shifts that have taken place. Well, I think twenty years ago it felt much more like an ivory tower where people came to pay homage to venture capitalists, and venture capitalists made pronouncements about whether or not they were going

to fund. And I would say that there's been a huge so some of there's been a proliferation of seed funds and incubators, so there are many more sources of capital, and there's a transparency and so there are reputation effects and the like which you see in a bunch of um you know uh that I think ultimately holds venture capitals and and their firms accountable for being truly good partners.

So certainly that's one. The other is, you know, there are two and a half billion cell phones in the world right so the markets that we can address are much bigger, and I would say twenty years ago the only venture capital was really only proven in Silicon Valley Boston. At that point, it kind of fallen off the map. And there really is there is innovation everywhere, and there is and so both in a lot of pockets in the US outside of Silicon Valley, but also in you know,

we found some really interesting investments in Australia. There's obviously a ton of work being done in London and Estonia and parts of Scandinavia, obviously Estonian Scandinavia. I don't think a lot of people bowl would think that's obvious. I mean New York, Chicago, Boston, Austin, San Francisco, Seattle, Shore, Estonia.

What is happening in Estonia? Well, I think so, the the Russian Soviet Empire had a long history of computer science and so but there are you know, starting with Skype and some and some other companies, there have been uh, some really impressive companies and even more really impressive technologists that have come out of those places. So often they will set up end up setting setting up headquarters in Silicon Valley or elsewhere, but that kernel of innovation is

coming from all over the world. So Silicon Valley is infamous for having the full critical mass of people, capital, technology, access to universities, access to great companies. It's all right there in one place. How essential is that? Do you get that in a New York or Seattle or or in Essotonia or do you have to have ties to Silicon Valley as as the motherland? Well, I'd say Silicon Valley in its in sort of the breadth and depth of its market is really unique in the world. I mean,

it is a very very unique place. That said, you can build really interesting companies plenty of other places, and you know, we do have companies all over the country. I think for companies that are even farther away, you know, so outside the US, it ends up being very important to have some connection to two Silicon Valley and the ability to do that. Sometimes that's opening up a sales and marketing office. Sometimes it's having headquarters there and keeping

product development where the company was started. But I think even in Europe, the most successful venture capital firms are ones that have significant Silicon Valley ties, so they can help the companies translate back and forth. Very very interesting. We briefly touched on this before but I want to revisit it in this context. Tell us about a time you failed personally, I don't mean a failed venture investment, a time you failed, and what you learned from the experience.

We all fail multiple times in our lives, and I would say, um, the most dramatic one, even though it wasn't actually a failure, was what it felt like raising fund one for the first time. And you know, I talked about not having done it. I had not really

ever had a sales job. I hadn't been turned down that many times in my life, I believe, uh, you know, I had probably about a hit rate, but that means about turned down, right, And actually it was in its own way, it was kind of crushing, and it happened that it happened at a time when there were a couple of things going on in my family, including a you know, a young daughter at that time who tore ra c L and the like. And for me, the the ultimate lesson and the of going through that was

really adopting this idea of the growth mentality. So you know, Carol tax book is sort of a seminal piece on that that what's the name of that book. I think it's called I think it's just called mentality, but I could be wrong about that, but it basically summarizes this mindset. Mindset there you go that your job is just to learn. Your job isn't to win, your job isn't to be right, your job is just to learn. It comes back to what we talked about with Andreson and Zuckerberg. Your job

is to learn. And so when you basically take the pressure off because that I, hey, I have to succeed, I can't fail, ended up being a monkey on my back and breaking through to the other side to say, hey, look, we're just gonna do our best and we're gonna learn. And by the way, I'm gonna be better next year than I am now. And it was really um I would really recommend that, uh that people pick up Carol Drects mindset And it was a it. It really did

shift the way that I approached my work. Fascinating. Tell us what you do outside of the office to relax either mentally, you're feasibly Most importantly, I'm a cyclist, so I'm a road cyclist. We have, you know, incredible territory, so I can write up my front door for two to three hours and be you know, up in the Santa Cruz Mountains and uh, you know, surrounded by the redwoods, which I've decided are my spirit animal. And you know, and I do that most Saturday mornings with you know,

a couple of of really good friends. And that's just my way to decompress and put my life in context and have some fun. So we we hadn't touched on this earlier. If if a millennial or a recent college grad came up to you and said, Hey, I'm thinking about going into filling the blank technology venture investing, et cetera, what sort of advice would you of them? Uh? Number one, surround yourself with the best people that you can. And by the way, that doesn't mean the most famous people

or the people that other people think are great. Right, your value system your lens, because that's the only way that your lens will get better over time is to focus on on that. The second is work on things that you find interesting, because you're never going to be great at something that you don't love. It just takes too much time and energy. And then the third thing

I just layer back in is uh. And by the way, I was talking to a young woman at an event that we held last night on diversity in in Tech called Seat at the Table and the Life is Long beyond a journey learn. I like that philosophy and our final question what is it that you know about venture investing today that you wish you knew twenty years ago

when you were first starting. So I will point out that the thing that I was taught very early on that's foundational is people, people people, and you know that's what the sutter Hill orientation. The thing that I didn't fully understand that I wish I knew was platform, platform platform. I think that's the thing that again it takes the ten x opportunity and turns it into the hundred x opportunity. And so that is ultimately the thing that we are

most looking for in these early stage companies. You don't know, but you say, if we're successful, if A and B happen, can the next chapter be this extraordinary platform opportunity? Thank you, Greg, that that's really quite fascinating. Everybody makes fun of me for using that word, but it's fascinating. We have been speaking with Greg Sands of Coast to No A Ventures.

If you enjoy this conversation, be sure and looked up an inch or it down an inch on Apple, Itune or wherever fine podcasts are sold, and you can see any of the other hundred and fifty nine or so such conversations we've had previously. We love your comments, feedback and suggestions right to us at m IB podcast at Bloomberg dot net. I would be remiss if I did not thank my crack staff who helped me put together these podcasts. Medina Parwana is our audio producer and engineer.

Taylor Riggs is our booker. Michael Batnick is my head of research. I'm Barry Ritolts. You've been listening to Masters in Business on Bloomberg Radio