YouSaid · the spoken record

Arjun Sethi

lines on the record: 87
first: 2022-03-14
most recent: 2022-03-14
sittings or episodes: 1
sources: podcast

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“I think it always goes back to units of time. How much time do I have and how do I want to spend it? And then the people that are around. So my mom says this. I think it's maybe much more Asian than it is American. But anyone who wants to spend time with you is there. It's like heaven at your door. So I think we probably taken a very similar perspective. My wife probably hates me for that or hated for me for that when I started. But an entrepreneur that comes to our house is welcome. They can stay here. Anyone who is wherever they're from, it just doesn't matter if it's friends of the firm, if it's people that we work with. I think our whole goal is to try to be as welcoming as possible. And if we can, if I can facilitate that, which I haven't done a very good job of always, because you prioritize things that are not as important, if we can facilitate that with our firm and the folks that are around us, then we're generally going in the right direction.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“So I have a tattoo on my arm. It's 86400, so that's how many seconds you have in a day. And I think the biggest mistake I made since I was younger was just taking too long to have the capacity to learn or care about it. How do I compound knowledge faster? I just didn't care. So when I go back and think, why didn't I do that? And so I just wish I had sort of felt or saw the calling easier because if you start telling up how many seconds you have in a day, how long you're awake, what type of time you spent with people, and the ones that are around you, it's not very long. Ted, you and I, we might meet each other or see each other or talk to each other like six or seven times for the rest of our life. And that's saying that's what I want or it's good or bad, but that's it. And so that's the relationship that we're trying to build. So you pull all those people. Again, it's maybe too quantitative. Where do you want to spend your time? How do you want to prioritize? Before the people that you want to deal with. And a large part of why we do what we do at Tribe is like we want to spend ideally as much of our time with each other as possible.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“Do the dishes be janitorial, folks. I look at them and how they build out their company and I say, okay, I aspire to do something ideally similar to what we are working on here at Tribe. And can we change the game and can we think about it? And so they inspire me. So I think of them as like a persona that I can continue to learn from rather than like one individual that has impacted. They've all had massive impact. They're advisors to fund their LPs. I ask them for advice that's kind of the other way around sometimes around how I'm building out my firm.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“Investors that are in the ecosystem that I like to learn from. And I would say they have philosophies, right? So when you look at Peter Thiel and how he thinks about using his frameworks of mimesis and philosophical perspectives or Renee Gerard and how he kind of brings that into his investment philosophy, you can look at Mark at A16Z and what he's kind of built there and what his perspective, his end has changed over time. These are all folks that we've all been close with and partnered with in the past. Marx and LP. And I may not agree with a lot of these folks, but it's more about like, how do you take the best of what they've done and how do you interpret that and use it? The folks that I think from the persona that are the most important are the founders. So steward at Slack when we invested Carnet cover Ryan at Bolt recently, Doquana, Terra, Henrietta Carta, Sam at FTX. These are folks that I look at. They're building high velocity machines. They're building out products and companies that we've never seen in our lives. These companies will probably at some point, if they continue to grow at the pace they're growing, could be worth hundreds of billions of dollars. And we are passengers on the way. We help once in a while.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“So I'll start off with my father. Again, I watched him succeed. I watched him fail. I watched him succeed. I watched him fail. And then I watched him continue to try again and again and again in areas that he wasn't an expert in. So he was in network gigabits, switch stack. He went to security from the startup ecosystem. He went to the medical industry and started building out ultrasound devices and he started selling it in India and China. Like he just tried things that he felt were interesting. And he started going in deep. It didn't mean that it always worked. It just means that it continued to try. And then he would use those collections of experiences and work on the next thing. Now he's like a real estate developer in his 70s. This is passion. It's one house after the next. And then he wants to do bigger projects, commercial properties, et cetera. He just likes it. And so you watch that and you say as crazy as that sounds, he enjoys it. He's doing well. And that's kind of admirable. I wouldn't say I have like a second person that I would say embodies like my biggest impact. I would say it's like a multitude of people, but you can say it's a persona. So it's a persona of other.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“Colleagues do the same thing or the same mistakes that I might have made without the frameworks, then it's an area that I think we can all improve on and it's a focus of our firm, given it's the ethos of what we do. It's an area that we have to make sure that doesn't happen”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“Not doing the work, right? Like we just, again, we regress to the mean, we make quick judgments, and someone made a statement or they didn't present well, or they don't have the background. When I hear those words from my team members, I just think back to like, A, did we do the work? B, do we have the data set to be able to say that? Are they at the bottom threshold? And vice versa, right? Like we really like this company because of the way in which they presented it. To me, that's a, again, it's hard to swallow from the beginning. And part of this also is just my own story. Maybe I haven't even been good articulating on this podcast. My companies was never able to articulate it, but the data was extremely clear that we were winning and it was working and we were scaling at high velocity. And my hope was that people would see through the surface level and say like, okay, this works. And this is good. The culture of the way in which this company is being built is built that way, right? So I tend to do more writing than talking. And then when I do talking, I have to kind of slow down to think about how to articulate the hundreds of things that are in my mind. And so when I see my”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“An entrepreneur, and so from the moment I started building companies, regression to the mean is just hard to swallow, right? Like when someone's not working hard enough and we're not putting in their weight for their title or what they do and the incentives are not aligned, it's really hard for me to swallow that. And I think part of what I do and I work on is to forgive pieces of that. But that's probably something that I try to work on and try to forgive.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, like while we're talking here, I'm drawing and I'm writing stuff on a piece of paper, you can have back to back meetings, your context switching, you're going from thing to thing. Part of what I like to focus on is like, what are the dreams in North Star that I have for the firm? And so I try to write down all of these things on a piece of paper. I guess it helps clarify my mind. And it's not something I get to do as often as I used to. But if you were to look at my desk right now, it looked like a madman is just writing a bunch of stuff down and nothing makes sense. But it's a part of me to synthesize everything that I'm thinking through and how to prioritize my day and time.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“So I grew up playing video games, so I play that with my son. That's probably the number one de facto thing I go to. For me, it's a little bit of meditation. StarCraft 2 is something I play, or I try to at a higher frequency with my son. I play Roblox in Fortnite, and I'm not very good at it, so I'll get it. So I guess I'm getting to the old stage. I shoot guns. It's a passion of mine. Not because I'm some sort of freedom person that guns are necessary for defense, but I'm really impressed with the way they're built. I'd spent a lot of my time thinking about mechanical engineering when I was younger. Tried to do it. And so just the process of honing in on that craft for better or for worse. And I'd say lastly, and I've only recently gotten into it, and there might be a California thing is”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“So you have to be willing to do it. You have to be able to spend your time with these companies. And there's a set of us on the team, my partners with 38 people. So we keep a low key, but we're extremely large across all of these asset classes early, mid, and late. And we have a set of partners that are really good for each of those stages that love being with the founders really early, getting their hands dirty. There's some that want to be more passive and figure out how to be more governance in public markets related. There's some folks that are a little more breathy. And so if we can, we trade. We'll trade spots sometimes to say like this company's now at a stage where we think this is the right person or vice versa. I'll come in at different stages or I'll let go. I think a part of it is we don't care about board seats. At least again, aspirationally. We have some of us have a ton, some of us have none. And the goal there is doesn't make sense for us to have an entry point into the company from a relationship perspective to start value add. I wouldn't say it's easy, but it's a part of the journey. It's what we get excited about.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“Alice's paralysis, you get used to very good companies, you get spoiled, and you want all your companies to do the same thing. It's very hard. When you're going back investing in an early stage company, it's going back to teaching your kids how to crawl, walk and run. You're going back to kindergarten. The same things are happening.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“How do you think about balancing all this information you're able to gather for your own, as you said, kind of internal use in deploying capital versus the broader potential to make companies a lot better?”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“Add to the value of returning to the fund with a lower loss ratio rate and will they sort of hit these metrics that we think they will. And then we'll let the market decide at a certain point. And then hopefully we'll be good stewards of it with possibility of secondaries, et cetera. But again, we're investing with a 10-year horizon, those are sort of the timeline of our funds. It's usually 10 plus 2 plus 2. That's a long time, up to 14 years that you're managing a portfolio. So you are partnering with these companies. You're working hard for them, concentrating your time and capital. And that's how we think we can do our best job.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“If you don't have that issue, if you are doing a reasonable job about thinking about what your loss ratio will look like, then you can focus on your mid-tier to high-tier companies and say, okay, great, should I just concentrate? If on average, let's just say I have a $100 million fund we had, I think it was roughly 15 companies, but probably concentrated to about seven fund two, same thing, it's about 12 companies. And you're not as ownership sensitive. So an example I would give you is that someone says they want to raise that $600 million post and we came in with an entry point of $450. Do we really care about coming in at $600 million posts if we think and we've seen from a quantitative approach that this company is going to continue to grow in high velocity? And we think it's going to be three, five, or 10x from here over a certain timeframe. Again, pure metrics, not valuation. Are we willing to make that bet? And the answer is more often yes than no. And so we'll be less ownership sensitive to the companies that we invest in. So when you think about portfolio construction, we think of it that way. Is this another company that's going to add?”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“So it depends on the stage of the company. Data can change. But one thing that never changes, and we've seen that across every company, we've been a part of Uber, Facebook, Airbnb, Lyft, et cetera. The list goes on where we built a lot of these growth and data science frameworks, is that their product market fit and how they interact with their customer network changes. That doesn't mean pricing doesn't change. It doesn't mean the way in which you can monetize on top of that product market. It may or may not change. It just means the interactions of how you work with the customer never changes. It's almost exactly the same. In fact, it never gets better. It gets worse. In the rare cases, it gets better. You should put all your money to that company. We rarely see it that way. So when we think about pacing or portfolio construction, a lot of the reasons why people focus on ownership, it's a hard thing to say is that they're just bad pickers. So if you say, I can focus on 20, I want 10, 15, 20% ownership in this company, it's because they believe that if they make failure somewhere else, we need this company to at least return the fund and get to a higher multiple.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm curious how you size positions. You mentioned 12 names, billion dollars, pretty concentrated portfolio, and you might see the data today, but of course in a trajectory of many of these companies, the data can change going forward. So how do you go through that thought process of deploying capital?”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“I go back to the basics that we had mentioned before. You tend to make mistakes because you're So you either actually have absence of data in the opportunity or you're not looking at it. So when someone pitches to you and you say like, I just want to partner with these people. I really like them or where you have an excess of data, as I mentioned before, where you are trying to price to perfection and you're looking at the macro and capital markets and trying to be a crossover investor. And I think there's some people that do that well. There's some people that don't. I think historically what you can see is that the loss ratios were pretty high for the really early stage folks, rightfully so.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“Benchmark off of. And the goal is to get to 10%. So it's monopolistic in terms of the data sets that we can have and what we can build off of. So we're very transparent that we're doing that. We're very transparent about the value proposition. We're very transparent about our point of view with this data set, but we're extremely secretive about our process, our trade secrets and how we do that. The output of the data sets and the reports are transparent. But our software, the way in which we do it, how we built out the infrastructure, those are our trade secrets. And we never talk about those.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, this is a hard one because I actually think we are very poor at understanding markets in the future and our whole job is to see trends that have worked over, let's call it the last eight to five to three years. We tend to think that we just don't know anything. Let's not assume. And if someone comes in with an idea and they have certain metrics, we can build our point of view of that ecosystem and that product from the bottoms up and think first principles. And our hope is once we see one company, then we should be able to benchmark that against some of their own competitors. And should we spend time on that company or another one? And how should we think about it? Luckily, we've seen so many companies in so many reasons. We usually have a point of view that we can dive into pretty quickly. I wouldn't say that was the case four years ago. I think the number for us is that we have roughly about 2% of almost all of the venture-backed companies' private data sets that sit within our coffers.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, when you see what you do through the data of all these companies, I imagine you probably get a sense of views of what is kind of the new thing and we're seeing growth opportunities in this ecosystem. And I'd just love to hear your sense of what you're seeing today.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“They are could be executives that companies could be angel investors, it could be strategic folks at some of these Fortune 500 companies. Could you get them or their institutions to get the same context and be the same type of value add? So I mentioned those two examples, but if I was to count the revenue uptake for our whole portfolio just through the first loop program of just getting customers, it's probably over $100 million in annual revenue or ARR, depending on the company.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“Another one is we have a company called Invenia, Super Stealth almost make about a billion a year in revenue, 60 people. We've never heard of them, but they're completely stealth. Probably hear about them by next month. And they're in a very regulated space. They work with independent system operators in the United States. They work on making the grids more efficient. So from power production to distribution to the customers, and they're a software company, but they work within the highly regulated space within the United States. It's highly regulated in Europe, in Asia, et cetera. And so when you get other strategic partners, so folks that are focused on climate change initiatives, government institutions, lobby firms, et cetera, when you give them this report on how the company operates and you give them that context, they go in a new direction around, okay, what can I do to help this company with the context and the scale sets that I have? And you bridge that gap between strategic partnerships, the Delta closes if you can find the right type of folks. And that was the goal of the First Look program, which is could we get investors of all shapes and sizes no matter where?”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“So the whole firm again is predicated on these quantitative models and approaches. So you build that and then you ask yourself, okay, great. I can build value and derive value from it. Now imagine I can get that report assuming our founders want it, and that's what the first Look program is built on. Imagine taking that to a strategic partner or a firm or a company or advisors or individuals that have that same context. The question you will ask is, can they help because they have that context now more because they can see what's happening at the company and they can think through the business a lot more clearly? So a good example actually, I'm probably making this more public than it needs to be. There's two companies that are in the regulated space. So in crypto, we have a company called Terra building an ecosystem and an economy. So these reports really matter. And the co-investors around the table could be application developers, other folks that are thinking about moving from web two to web three, what they call today, and build on top of the Terra blockchain.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“You mentioned first look, and I know this question for co-investors, how do you assess through a lot of potential opportunities where you don't have expertise sort of seems like it's a consistent application of that? I'd love you to talk through what that is.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“We just made public an announcement, a company called Othellus, so it's in the healthcare space, is quite an interesting one. We are not healthcare experts. And in our latest fund, we just did three healthcare deals. And so if you were to ask me, am I an expert in healthcare? My answer is no. Am I an expert in the nuances of these businesses and what they build? The answer is no. But we used a couple of frameworks that we've”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'd love you to walk through an example of one of the companies you invested with, and maybe it's through stages, but from the data work you did and what you saw to the deal dynamic and then your work with them afterwards.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think you have to have enough of the market to believe you have a unique value proposition. I think there's a few folks that think that way, which is tribe invested. They must have seen something that we don't, or they're sizing up, whatever it might be. It's hard for me to tell. I actually don't spend too much time with venture capitalists, so I can't say how they feel. I think what we've seen from market reactions is that when we first started, it sounded crazy as things were working out for one or two portfolio. You kind of shake your head and say, hmm, maybe that worked and these guys are smart. And now that I think you kind of just see like company after company that we've invested in, it's not one or two drivers. It's not three or four. It's not five or ten within four short years. It's almost 20 companies that hit the same paradigm. I think you just kind of pay attention and say, okay, great. I can't copy them. I tried it didn't work. So what are ways in which I can partner with them is that investing with them, investing in them, co-investing alongside them. That's kind of what we've seen. And it depends region to region.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“Curious when the success rates that you've had, maybe it's starting from the data or so high, how you think about signaling effects that that creates and the potential for just competition of people understand that you're interested and involved, that you just may have differential information over other people and be willing to bid up prices as”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“beat them enough or get to a founder and impress them with the way our approach is enough for our model to work. That's what I'm looking to do. From a pure business greed level, you can say that we do a very good job at just that and making sure that we can not be extremely sharp out, but I guess is the right way to put it at a certain time. But that's why we lead, we co-lead, we participate, we do secondaries to be a part of the company. And the firm is predicated on understanding a company and its lifecycle, a product market fit, no matter if they're early, mid, and late, and we use these frameworks. And so then we have a financial product to invest. So across my three funds, my co-investments, we have a program called First, all of these are made to be able to size up and invest in an opportunity no matter where we may see it.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“I want to be fair, there are many venture capitalists out there that are very good, and we partner with them, and that's our goal. I think our approach has always been much more Switzerland than zero-sum. If there are some partners that deep dive into a company, they can move at that speed. I think it's possible. They might not be able to move the exact same speed in context as we do, but they might have enough expertise in an industry because they spend all their time there. I don't want to devalue that. But I think if you look at it on average, can they get up to speed? The answer is no. I think a lot of the wedge is can you get up to speed with a multitude of companies across multiple stages to be able to, again, have a unique value proposition of getting in and having the conversation with the founder and having the opportunity or the privilege to invest no matter what the industry is. So the competitive landscape, I think of that way. Am I going to beat the top tier funds every time? No. Am I going to beat a specialized fund every single time? No. But are we a part of a round or?”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“Spending all your time looking at this data of the company itself. And then you go out into the marketplace in a very competitive environment for the venture capitalists who clearly, as you say, don't have that depth of understanding of what's happening on the product side of companies. What's your sense of the competitive landscape for venture when you take your lens into these companies that you do?”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“And we do the exact same work. We build out the framework. We show them what that looks like. And then we work with them. I don't think we do this perfect. I think we have enough folks around the table where it's value add for our companies. And that's the feedback we get. We'll just continue to get better there. But that's how we help. Now, a big part of this is, again, we're stewards of capital. We're deciding how we're going to reinvest or deploy capital into these companies. And so when you have more and more asymmetric information, you have more and more data. And I think this is key. We don't rely on the last board meeting didn't feel good. So I don't want to do my pro rata or I didn't have a good conversation with the founder. We look very, very purely at the metrics and say, okay, great. If we were to upsize, what do we need to see? Where do we need to concentrate our time and capital from here in? And do we have the frameworks to continue to help the company? And so as I mentioned before, again, rare that roughly out of the billion that we deployed, it's into like 12 companies.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's a good question. I think we're getting better at this. Our whole approach has been if we have better context into the company, we can be better stewards and conciliaries around the table. So that could be strategic, could be product, it could be helping to build out their growth and data science team if they need that or their marketing team, whatever it might be, because we have those frameworks. The most privileged position that you can be in is to be a pure conciliary and strategic. And I think that's the goal of where we try to take our companies. The earlier we invest, the more hands-on work, the later we invest, the less there's more governance. But the much more later the company becomes in their life cycle. Let's call it 5, 10, 15 billion these days that you see for a lot of our companies. They actually need a lot more help. So what's funny is our earliest companies need a lot of help and our latest companies need a lot of help. And the reason why that's the case is that they're looking at their narrative from there. What are the data points that I need to see? I need to think through that I need to build around to speak to the capital markets that are these late stage investors or I'm going public.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“Same time as me. I don't have to bring my partners along and convince them. They see all of the same basic frameworks that I'm seeing and we're now going back and forth just like we were at a company building our products, going back and forth on like, what about this? What about this? Should we ask that? So what happens is that when this entrepreneur is having an experience with us, we're not always perfect, but this is the aspiration, is that every partner they talk to, they do not have to start the story from scratch. They are starting the story from all the data that we've already gathered until that point. And so that means every person is up to speed. So an entrepreneur walking through the door or a founding team or a management team, no matter how big this company is, you can talk to 16 people. They all come away with, wow, those guys really know our company. And we do and we don't. We know the guts of how their company works, but we're still getting up to speed of what the macro environment may look like for that company, what the nuances of how that product works. We're still getting up to speed on that, but we have a framework to work off of.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“What it allows you to do no matter what industry it's in so energy or infrastructure or healthcare. It doesn't matter for us. We don't have these top-down frameworks we need to invest in a certain sector. If we see a good company no matter what it's in, we start digging in as fast as possible. And the frameworks help us do that quickly. So what it allows you to do is either weed that company out very quickly, give that feedback. Again, this value exchange is extremely high. If I'm giving you a 50 to 100 page report and I'm passing on you, I'm passing on you with a 50 to 100 page report. No one does that. If I think about having a conversation with you and say, here's the way in which I think about your company or building a relationship, you have that artifact again. And then if I really want to partner with you, you have something to work off of. I'm now digging into the business, getting context faster than anyone else. Any of my team members and partners around the table are doing the same thing. And we're able to get up to speed quickly. Now, the other piece is that all of my partners around the table are getting up to speed at the exact same.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“Look at their deck. I don't care about any of them. The moment I get it, on average, if we prioritize it, let's call it a P0 at the firm, it's 20 minutes to get a 50 to 100 page report. That's super, super fast. In their minds as a founder, they think that you've spent all your time on it. And we have. We spent all of our time building it.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, the reason I said that we operate within these zones, so between a plethora of data and the absence of data where the evaluations are extreme, you'd be surprised that there's not a lot of folks that come to the table at the same pace and come to conviction at the same pace that we do in that middle ground. And the reason why that's the case is that it's a traditional approach, as I'd mentioned, right? You have a tribunal, those folks are getting their data room ready. The speed at which we move is pretty, I'm quite proud that we were able to do it. There were some days that I was skeptical that we would actually get there. But if I met a company today, like you pitched to me today and I liked the overall directionality of what you had mentioned about your company, I'd say, look, I really like this and I want to do our work. And so here's our process. You give us a raw data dump. We'll ingest that. We'll build out a report and we'll send it to you. And that'll be the beginning of our discussion. Now what happens is that the moment they give us that raw data dump, which is easier than building out a data room, right? Like I'm not looking at a data room window.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“So once you've dove into that and you feel like you have a pretty good sense that you're interested in working with a company, how did you find the deal dynamics around that relative to a very competitive world for capital?”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“Frameworks, it's more about how do we build these quantitative frameworks to think about intrinsic value versus option value and then within the option value, what's the extrinsic value and how to think about what that premium may or may not look like at any given time and how should we think about it over a three to five or ten year horizon. But you have to build frameworks for that so you can help answer those questions.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“Earlier, less so, later more so. And the reason I say that is if you look at a traditional approach to investing, where do you have valuations that are the highest or inflated? It's really, really early at the seed stage. You have maybe a product, a team, or an idea, maybe you have a demo, but you're mainly going off of a narrative that people get excited about. And so people bid that. And that's the market price that you pay. So it becomes very high. At the really, really late stage where you have more data, it becomes much more obvious. Then you have inflated valuations again, right? Because there's enough people that do the same thing, the same measurements. It's usually lagging financial metrics. And then you bid it up. You pay the market price. So we live everywhere in between. I don't wouldn't call it the gray, but all the areas where there are aspects of identifying product market fit and the growth at high velocity that other people might not be seeing. I talk a lot about this internally. We don't do too many podcasts anymore, but as we build out these.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“Now, when I say this, it's not to over index on the qualitative aspects, it's just to see how they think. And sometimes you may not agree. I mean, there's many companies that we've invested in where they just hit the top 10 to 5% of our benchmarks that we've ever seen. I don't agree with how they think about building their product because I was a former entrepreneur, so you always think you know better, but you let them do it. It's more about just have a perspective of how they think and what they're trying to do. And a lot of them are successful. If you ask me about any of our top 12 concentrated positions where we spent upwards of a billion dollars just in like a very concentrated way, there's probably 20 to 30 percent of companies I say, I think they could do it better, they could do it faster. All I can tell them is, hey, look, I'm measuring what you're doing. I'm doing the same thing I've done for 20 years in my past with my team, and I'm giving you a perspective on how you should think. It's up to you to execute from here.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“I always go back to this sort of thinking intrinsic value. Traditional way of thinking about intrinsic value is like, what's the value of the company? I also think of it as like, what is everything that they've done to get to where they are today? What does that product actually do? Who are the people that built it? And so when you can see the guts of the frameworks and see how there was oscillations in the product, changes at any given time on a day-to-day week-to-week basis, you can start drilling down and asking. So what happened during this time frame? And sometimes the answer is simple as we lost somebody and momentum went down or we messed up marketing at this date. And so these are the things that we learn. You start getting deeper into deeper how they think. And so I actually think you can have much more informed discussions around like, okay, well, talk to me how you built your company during this time frame. Walk me through what you are thinking about next. And so now you're watching qualitatively how they answer these questions and do you think they can be resilient?”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, when you've done all this work and you have a very good sense, probably far more than others, of what's actually happening with these products, what goes into the qualitative side of your decisions to invest?”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“customers to engage and you want them to stay with you as long as possible, retain and be sticky. And so you can benchmark all of these things. You can benchmark how people interact in these products. That was our goal. And so when you come back with a perspective of, hey, your product is working, but you're not growing, then you can think about if I was to give you five or ten or fifteen or 25 million dollars, what are the ways in which you can grow at high velocity? And you can look at, you can benchmark. If someone says in their deck, I have this roadmap to grow, but you see that they're at the top 10% of that, that they don't actually need to focus on it, then you can walk that back with them and say, look, if you were to do these use of proceeds, maybe it's better for you to focus on XYZ in your organization rather than focus on the same thing that you heard from other decks or your other allies around the table ask you to do. You can really sort of drill down. It's not always as perfect as that, but you get a very good directional idea of where they should spend their time.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“Companies data sets in raw form, which is what we do, that we have a better view of the world, we have a better point of view, and we can You can't benchmark one company at a time in your brain. You can only do it if you can put that into a system and build frameworks off of it. So since the day we started our firm, we've been ingesting data from every company that we meet. They know that because we share back their data and their format, these reports. You're walking through, is it working? 90% of the time companies do not have product market fit. That's a really hard statement. Even companies that have raised upwards of 25, 50, $100 million, sometimes they don't have product market fit. That doesn't necessarily mean it's a bad thing. There are companies that, if they build a product, they will have product market fit. So like enterprise infrastructure companies sometimes where you just need to spend a lot of time building the product, but you have a framework because you have customers that are giving you a roadmap to build off of. But your typical bottoms-up SaaS or consumer product or any software product where you're trying to build something to sell from a workflow or even lending, you're trying to figure out a way to get.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“Growth, it's simple. How do you measure growth, growth at high velocity? What are the aspects of what growth could be built off of? What's the foundation? So when we say a quantitative approach to product market fit, we really just say, does the product work? Do customers engage? Are they using it? Is it a certain amount of integrations for open source all the way to a B2B company, to an API-driven company, a B2C, B2B2C? It doesn't matter. All of these frameworks, you really think about it, you're engaging with the customer and you're looking at the holistic view of how it interacts with each other. So some people say I focus on marketplaces. Okay, great. Well, technically anything can be a marketplace depending on how you measure it. But what you're really looking for is as a business from your software metrics down to your financial metrics and you put it together if you have financial metrics yet. What is the product market look like? And in order to identify a product market fit, a lot of people make up qualitative judgments. Our whole goal has been if you have thousands of”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“30% loss ratio, but on average, even it's publicly available data, you can have up to 60% loss ratio, but you can be a top 5% firm. But a lot of that is like you have these two to three companies that will be your drivers. Our process was, why don't we find every company possible that would be a fund driver, any company that fits the quantitative approach to product market fit, let's focus on those. And so historically and up until this day, if I fast forward four or five years since we started, our loss ratios have always been sub 5%.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“With each other, you would spend millions and millions of dollars if you were running a company to build out this infrastructure with a team specifically for your company. And so for us to come and say, hey, even if we don't invest, we'll give you a value exchange. Was our wedge into building those relationships? So it's less about identifying at that time, I think at that time we were more about, let's take the sniper shots with companies that we know well enough that are within that range of what it would make sense for us to invest and let's deploy capital that way while in parallel we were raising our first one which is roughly around 100 million and again a hundred million dollar fund people say fund sizes or strategy we took the opposite approach we took the approach of look we're very very good at identifying product market fit we're very good at helping to grow these when we work with them so what that means is that the theory or the thesis should be that we should have a low loss ratio right so typical firms across early and mid would have up to let's say a really really good firm”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we had a network, so we were privileged to know folks in the industry, and we were privileged that they already knew our capacity for helping companies grow. We were consulting, we were advising. So we basically said, okay, great, why don't we go to those same companies that we've known for a while, or ones that we had identified in the first place, go and do the same data work, present it back to them, so the value exchange. And again, today, when we do the data work, when we meet a company, just to kind of give you the scale, the sheer size of how we do it, we see like 2,000 companies that are at the top of the funnel per year roughly, give or take. We do this analysis between, I would say at the low end, 500 times a year, the high end up to 800. These reports are like 50 to 100 pages at a minimum for a company at the early stage, right? Like a series A. And then all the way up to series B, C, D, or E, it gets even deeper and deeper. And these are modules and quantitative frameworks on how we view the whole business and all of your products and how they interact.”
2022-03-14 · Capital Allocators · Arjun Sethi – A Technology Company that Deploys Capital at Tribe, Venture is Eating the Investment World 10 (Capital Allocators, EP. 240) · IDENTIFIED FROM THE TRANSCRIPT · source