YouSaid · the spoken record

Derek Zanutto

lines on the record: 31
first: 2020-11-09
most recent: 2020-11-09
sittings or episodes: 1
sources: podcast

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“Yeah, the most recent public one I could talk about would be Armis, which is the leading IoT security company. And we invested because we saw an enormous market opportunity in protecting enterprises against cybersecurity threats stemming from unagentable devices. And so as IoT devices continue to proliferate, every enterprise will need a crowdstrike for their agentable devices and an armist for all unagentable devices. And so that's a huge market opportunity. And equally importantly, we are huge fans of the ARMIS team, Yevgeny and Adir are two of the most passionate, hungry entrepreneurs I've ever met”
2020-11-09 · The Twenty Minute VC · 20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, I'd like to see the industry chatter be less about individuals and more about teams, to be honest. You know, I'd say no one investor is the be all and end-all for any given company's board. No one individual can build a world-beating business all on their own. And I think the media around startups and venture often defaults to the story of the individual because it's frankly an easier than it is to tell the story of how a team came together to solve a really tough problem. So for me, I think like opening the aperture for who's driving success and value creation at these world-class businesses would be a good thing as opposed to only focusing on one person at the top.”
2020-11-09 · The Twenty Minute VC · 20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, for me, it's finding unique opportunities to help entrepreneurs and CEOs achieve their goals faster and more efficiently. For me, there's no greater rush than being able to find that perfect resource or advisor or new customer or new employee for one of my portfolio companies. Those are the things that make the job of investing kind of fun and rewarding and making returns and all the rest of it will follow if we do that part well.”
2020-11-09 · The Twenty Minute VC · 20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Time management. I'd say time management across every dimension of the role. How much time can you afford every month investing into portfolio company work versus thematic development and research versus pursuing active fundraises for new companies versus networking versus coaching the team at Capital G? None of it feels imbalanced. It always feels like you're not quite getting it right.”
2020-11-09 · The Twenty Minute VC · 20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“So, my favorite book is sapiens by Uval Harari. I think it's a popular choice. I think in Silicon Valley particularly, but for me, it combined elements of history and science to present a new narrative for how humankind evolved and how we've collaborated together over a very long period of time to pursue big, audacious goals as a society. And so for me, I was a history major in college, but I found it to be a very fascinating read, a very fresh perspective that I'd never come across before.”
2020-11-09 · The Twenty Minute VC · 20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, you know, I always thought there was one right way to do things early on in my career because it felt like, okay, once I learn enough from one person, I'll have landed and I'll know how to do this job perfectly.”
2020-11-09 · The Twenty Minute VC · 20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, it's a good question. I view myself as really just someone who's there to be a supporter and a collaborator with the team, full stop. And that is, I view myself as in the customer service business. The CEOs and executive teams of my portfolio companies are my customers. And I need to work hard every day and be available on-call 24-7 for whenever they need help from me or from Alphabet more broadly. And so that's my mindset. And I think that's one that has served me well. And I think it's a way that frankly all investors should treat their entrepreneurs and teams with their backing because we as the operators out there are doing all the hard work and trying to scale companies. They have so much on their plate. And what they really need is somebody who's there on call 24-7 to help them on their journey.”
2020-11-09 · The Twenty Minute VC · 20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, it's a good question. I've had a pretty consistent framework over my time in investing, one that I heard from one of my mentors at TBG that I thought was quite helpful. And, you know, his framework for any given investment was this, which is would you invest your own money in the deal proportionate to your own personal net worth? So if you are evaluating an investment for the fund that would account for 5% of the fund's capital, would you invest 5% of your own net worth in that given investment? Would you go write that check? Take money out of that savings account and go do that. And I hold myself to that standard for every investment I have to write because it really helps make it tangible for me and very personal. And it reminds me of the responsibility that I have to the LPs in a very tangible way with every check that I write as an investor. And if I can't look myself in the mirror and say yes to that question, then I know I need to move on. And it's a bad use of time.”
2020-11-09 · The Twenty Minute VC · 20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“To help you scale because I do think it's important that if I were an entrepreneur, I think hard about those questions as well, both incentives and also time allocation, to really understand who's going to be the kind of partner you'd want on your team.”
2020-11-09 · The Twenty Minute VC · 20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I think it's one of the best things about working at Capital G is the fact that we have 1LP and that LP happens to be alphabet. It is a huge benefit to us because the capital we have is incredibly patient. We're not on this, hey, we need to raise a fund every two to three years to get another 2% management fee stack onto the pile of fees we're raking in. It is, hey, let's just go out and make very good investments into the best companies we can where there's a real strong case to be made that alphabet could be a really value added partner to the team as they scale. And so there is a bit In my view, there's a lot more purities to that model. And it's different than just playing the AUM game and trying to rack up management fees. And so I think it's also the case that if you're an entrepreneur too, think about the economic incentives and what the fund is doing and where they are in their own journey. But then also the partners you're interacting with, think hard about how many boards they sit on, how many companies they oversee, and what that means for how much time and attention you're likely to get from that fund.”
2020-11-09 · The Twenty Minute VC · 20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Make money from two primary sources, right? A two percent management fee charged annly on all the capital that's been raised from investors for the entire life of that fund, call it 10 years, and then at a 20% share of the profits on successful investments that carry. And investment firms tend to raise new funds every three, four, or five years, and each of those new funds will bring a new 2% annual management fee on top of it. And so as investment firms get older and stack more funds on top of one another, the income generated from management fees generates a greater share of the firm's economic. Conversely, the carry generated from underlying investment performance can become a smaller portion of overall fund economics for those GPUs of that fund. And so all us being equal, you know, a younger fund's partners will make nearly all of their money based on how well their underlying portfolio companies perform, while older funds will be less sensitive to underlying investment performance given the steady stream of stacked management fees that they're clipping every year.”
2020-11-09 · The Twenty Minute VC · 20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, you know, I think it's a smart thing strategically for the early stage funds to do in the sense that it allows them to expand the amount of capital they can manage and it allows them to double down on their best early stage investments. And so I think I completely understand and appreciate strategic moves for them in that direction. And I think you'll see some of those early stage funds will hire entirely separate teams and some of them will use the exact same early stage team to prosecute those growth rounds of their portfolio. But I think it makes a ton of sense from the GP's perspective for why they'd want to double down and do that with their best investments in the growth rounds. You know, I'd say it's a little bit more complicated when viewing that evolution from the entrepreneur's perspective because as an entrepreneur, just going back to something I said earlier, it really is important to think carefully about what really motivates the fund and the partner that you're interacting with and why they're going to help you in your business in the growth phase. And so if you think about how all these funds make their money, and you'll know this, Harry, but investment firms tend to”
2020-11-09 · The Twenty Minute VC · 20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah. You know, I wouldn't jump to, yes, absolutely take it. I think it's, you know, I've spent enough time with some really thoughtful entrepreneurs who've had a lot of success and also some failures along the way. And I'd say one learning that I've come away with from those conversations and experiences is if you take the money and it's at a very high price and it's easy money, there is a risk to that because if you take it at too high of a price, you get over your skis and then you misexecute or you don't hit the plan you set out for for investors, then you have a whole host of problems to think through when you need to raise the next round of financing, both in terms of, hey, you've hired employees now who are looking at a bunch of options that aren't worth as much as they thought they'd be. You're looking at investors who are frustrated and not being the kind of supportive investors you thought they'd be. And so, you know, does taking money at the high price just because it's there may not always be the right answer for the company. I think it's a very case-by-case decision and one I think hard about if I were an entrepreneur.”
2020-11-09 · The Twenty Minute VC · 20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Have that choice, but I do agree with you, Harry, that it's worth thinking carefully about as an entrepreneur for where you're taking your capital from because you're going to get very different things from different funds, really rooted in the fact that each fund has its own set of economic incentives for what motivates them and why they're investing in your business. And so it's just really important for you as an entrepreneur to think carefully about what's truly motivating the partner or fund you're interacting with and what that means for how they're likely to help you in your business as it scales.”
2020-11-09 · The Twenty Minute VC · 20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I agree with you. I mean, I think there's a reason that over the history of the capital markets, there's tended to be different investors for different stages of companies. The early stage companies, the types of problems and help they need are quite different than what a late stage public company needs. And so I agree with you in the sense that finding that fit between investor and company is crucial if you want to maximize your odds of success as an entrepreneur. So if you're very early on, like having access to world-class venture capitalists and growth funds who can help you with land new employees who are super talented to grow your business, to help you land marquee logos, to help grow your book of business can help you think through product strategy and geographic expansion, like those sorts of strategic questions, getting that knowledge and advice from investors who've done that and helped other companies along the way. I think is hugely valuable. And, you know, but I think the reality is there are certain entrepreneurs who may prefer in this market environment to take very fast money at a very high valuation. And so I think it'll kind of depend. It's good in the sense entrepreneurs.”
2020-11-09 · The Twenty Minute VC · 20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“For them, writing a $25 or $50 million check into an A or a B round is a rounding error. So for them, they can afford to write bigger checks into earlier stage companies and very high valuations and they can afford to have that be a bit of a loss leader for them as sort of a feeder to the later stage kind of pre-IPO allocations that they really want.”
2020-11-09 · The Twenty Minute VC · 20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, you know, it's a really noisy, complicated time for entrepreneurs to navigate, given that dynamic, right? To your point, you have all these late stage funds moving super early. You've got a lot of the early stage funds moving later. And so if you're an entrepreneur, it's both good and bad, right? You've got more choice than ever in terms of who you could partner with at the growth phase as an example to get capital to scale your business. But it's bad in the sense that with all those options, it's harder than ever to decipher which firm and which partner would be best for your business. To answer your question directly, obviously I think the later stage, hedge funds as an example are going super early because they're trying to get as much pre-IPO allocation as they possibly can. And instead of doing that with the investment banks during the IPO roadshow, they're working, they're going upstream and saying, hey, let's get, we can spend the same amount of money and get a ton more ownership points and pre-IPO allocation in these stocks. Well in advance of that by scouting stuff at the A round. And frankly, a lot of these hedge funds manage such enormous pools of capital relative to the size of the traditional VC fund.”
2020-11-09 · The Twenty Minute VC · 20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Disruptors, so that while you had informatica in the old world for data integration, now you've got folks like Matillian, Aluma, Stitch, Talon, Fivetran, all the rest of it. Within data storage, what had been a Teradata Plaza monopoly, you've now got all the data warehouses that folks are all familiar with and you have a lot of data lakes out there that are trying to do something in a different fashion. And then within data analytics, while you had SAS, now you've got a whole host of data analyst platforms from a looker, Alterix, Lotspot, Tableau to data science platforms like a Data IQ, a Databricks, Data Robot and all the rest of it. And so you've seen this consolidation to fragmentation. And then I think rolling the clock forward, like what happens next. And I think there's a case to be made that you're likely to see a bit more consolidation down the road as CIOs and CDOs look to rationalize all the vendors are using to solve common pain points throughout the enterprise.”
2020-11-09 · The Twenty Minute VC · 20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“I think about it a lot actually. I think it's a really good observation. And I say that what you said around bundling unbundling is true, not just in more consumer-oriented applications and services, but also within the enterprise. I mean, think about, I spent a lot of time in the data stack and you think about where the world was 20 years ago, it was quite consolidated, right, in terms of you'd have a platform like an IBM, an SAP, an Oracle, Microsoft holding storing data. You'd have data pipelines from Informatica or data storage solutions from Teradata or data analytics from SAS. There's sort of big organizations that kind of own those work streams. And then so that was sort of, in my view, a consolidated stack within the enterprise environment. And then roll it forward and then cloud arrives and then workloads get fragmented across hybrid environments. You have a whole host of new SaaS solutions generating a whole lot of new data and you have a whole lot of new users with any enterprise wanting access to that data. And that's led to dramatic fragmentation of that stack. So now you've got all these next.”
2020-11-09 · The Twenty Minute VC · 20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Saying and had used it to some extent, but COVA was a nice accelerant to driving that trend forward in a material way. But a whole host of other startups thriving now in the COVID economy where they're offering services that didn't really exist a whole lot pre-COVID. And in my mind, those are much more challenging to underwrite and assess as an investor today because then you don't have a pre-COVID state of the world to kind of base your judgments on for what post-COVID will look. And so that's where when I spent time with investors who are thinking through some of those theses and trends, there's a lot of split opinions and healthy debate, which is always fun.”
2020-11-09 · The Twenty Minute VC · 20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, it's a good question. You know, I think the why now is a key question and one of the most important ones we ask ourselves when we're underwriting investments. Because to your point, many good ideas were well ahead of their time and created a graveyard of foreign investments. And so, you know, I feel that that's why I focus a lot on talking to customers first and talking to a lot of potential customers to see what is their big pain point, what's top of mind for them, what's the burning need in their platform today that needs solving. And kind of focus there first and then let that lead you to what companies are best positioned to benefit from that. And so I think you can talk a lot about COVID today too, right? That's creating a whole new set of issues for companies around the world. And it's a very interesting time to think hard about what's a one-off behavioral change versus a longer term secular shift in terms of creating new opportunities for new companies to attack. And so I think for, you know, in that COVID economy, for some categories it seems easier to answer. I'd say Zoom is a great example there, right? Pretty obvious example where prior to COVID, people were well aware of video conference.”
2020-11-09 · The Twenty Minute VC · 20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Here's sort of the number one pain point that CIOs or CDOs are feeling today that needs to get solved. Therefore, what companies are best positioned to attack those pain points? And then let's go meet those companies and see if their strategy and execution against those pain points maps to what we're hearing from the customers that we're talking to. So for us, it's very much like primary research driven. Let's talk to the customers first, figure out what the theses are, figure out”
2020-11-09 · The Twenty Minute VC · 20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, it's a good question. The way we approach it is we'll spend a lot of time just talking to as many smart people as we possibly can to start. Without presupposing we have the answer already, we'll kind of spend time. So for Clibra as an example, that initial idea around data intelligence and data management came from spending time with a number of Google engineers who had regular conversations with folks throughout Google and outside Google who were combating these challenges around data governance and intelligence. And they said, look, there's a real pain point here among the Fortune 2000. It's a growing trend. And so you should spend some time thinking about it. And so then we spent the better part of six months going deep on this problem, talking to practitioners, talking to CDOs, CIOs within these Fortune 500 accounts, understanding what was top of mind for them as I thought about the next 12, 24, 36 months and where they needed to spend time and money to improve their own internal processes. And going to them and just listening intently to what was top of mind for them and then piecing it together across many, many conversations to say, okay,”
2020-11-09 · The Twenty Minute VC · 20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Market environment, there will always be others in the market chasing a given theme or a given category. They'll have the amount of conviction against that theme or that category, and they're going to be willing to pay a very high price to make a bet and pick their spots in the market. And so for me, with pricing as high as it is, it's sort of very much about focus and figuring out where the areas of opportunity within the market that you want to go deep, spend time to build conviction so that you can have a shot at investing in the best businesses within that category. What I worry most about, and I think what's most challenging, is if in markets like this where prices are incredibly high, going for breadth and trying to chase everything, I think is a losing strategy because then you're going to not have enough time in the day to really build a conviction against your theses that could allow you to lean in and pay the market clearing price for the best businesses.”
2020-11-09 · The Twenty Minute VC · 20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, you know, I think for me it really comes down to conviction level, right? So the higher prices are for any given business, it just for me increases the bar for the amount of conviction I need to have as an investor to lean in and make the bet. And so I view it as the higher the prices go, the even more work that needs to get done in diligence to really form a perspective that's unique and differentiated that'll let you as an investor pay the market clearing price for that business. And so it's kind of related a bit to, in my mind, what we're seeing in the market today with not just pricing levels reaching all-time highs, but also fundraising timelines compressing dramatically. As I'm sure you know, Harry, companies today can raise capital at very high prices in very compressed time frames. And I think what that means in reality is that for investors to make informed judgments on underwriting risks and making investments, you really need to have been doing your research and your work and developing your thesis on a category well in advance of a capital event to be competitive. Because in this”
2020-11-09 · The Twenty Minute VC · 20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Environment to lose a bit of steam. I think many people I spend time with think a lot about inflation and where industry is likely to go down the road, but fully appreciating it's impossible to predict. And it's hard to point to a specific catalyst for if and when that'll happen.”
2020-11-09 · The Twenty Minute VC · 20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I think the worry would be that if inflation starts to tick up, then the Federal Reserve may have to take action on interest rates and start to raise them from zero to combat that. Sort of what they did, what Volcker would have done at the Fed back in the 70s and 80s. And if that were to happen, if interest rates were to increase, then that would have a big impact on the valuations that I think the public market investors would be ascribing to equities, right? Because all of a sudden now you'd have interest rates that are yielding higher on fixed income assets. And it also by increasing interest rates, you would be increasing the cost of capital, sort of the discount rate, so to speak, that folks use to discount back cash flows. And so as interest rates increase in discount rate increase, then the valuation multiples decrease, right? And so I think what the worry would be that if interest rates increase, valuation multiples could take a hit in the public markets and therefore that could filter back into the private markets as well down the road. So I think as people think about what could cause the current”
2020-11-09 · The Twenty Minute VC · 20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“No, I would agree with that sentiment, Harry, for sure. I mean, I think it's hard to see a catalyst that will drive interest rates up and therefore ease a bit of the oversupply of capital that we see today, really crowding every corner of the capital markets. I mean, it's funny, I talked to investors who do early stage investing in Series A seed rounds, and they are complaining about valuations. You talk to people who do C and D rounds. They're complaining about valuations being at all-time highs. You talk to late stage private equity players. They're all complaining about valuations being at all time highs. I talk to friends who do credit and they're complaining about how hard it is to make money and credit right now. And so I think every corner of the capital markets are facing this issue of just a lot of supply and there's no real alternative to put money anywhere to earn a rate, earn a yield. And so I think this will be with us for a while. I think if there's anything to worry about, I worry a lot about if inflation does pick up down the road, what that'll do to interest rates and how that might impact evaluations we're seeing in the growth equity space particularly. But it's hard to kind of put your finger on if and when that'll happen.”
2020-11-09 · The Twenty Minute VC · 20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, you know, I do. I might add one modifier to make it undisciplined capital, but yeah, it's a huge challenge. But the reality is that I think there's been an oversupply of capital for the better part of 10 years now, at least 10 years, really since the Fed took interest rates down to zero, coming out of the GFC in 2008, 2009. And so I don't know that it's a particularly new trend. I think investors of every vintage year over the past 10 years have been bemoaning the fact that there's too much capital and the investing community is too frenzied and competitive, et cetera. So I don't know that it's all that new. I think it gets, it just feels a bit tiring each year that goes by, more and more tiring. And so I don't know that it's a new phenomenon, but I do agree with him that it's a huge challenge in the market today and it makes it difficult for entrepreneurs to really make sense of all the different players and all the different funds out there that are offering them capital and their own version of value add that goes with it.”
2020-11-09 · The Twenty Minute VC · 20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“An investment into Uber's Ground Time felt like a Price And at the time, the company Burning a ton of cash. It was operating. Market, but we Love the team.”
2020-11-09 · The Twenty Minute VC · 20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“And a capital G. I was Major in college During my undergraduate years, I Hobbies. One was playing. With my band around campus. And the other was working 30 hours a week in a”
2020-11-09 · The Twenty Minute VC · 20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital · IDENTIFIED FROM THE TRANSCRIPT · source