YouSaid · the spoken record

Drew Oetting

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20
first
2017-09-27
most recent
2017-09-27
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1
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podcast

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  1. “My most recent investment, which has not yet been announced, was made for the same reason of all of my investments, which was a few things. One, I believed in the integrity and honesty of the founders. That's requisite, number one. Number two, I believed that the market was incredibly compelling and large enough to support a business that could do hundreds and hundreds of millions of revenue over a short time scale. And lastly, I saw an incredible amount of iteration in both the thought process and the business model and the product over a very short period of time, always moving forward towards the honeypot that existed in the industry. Drew, it's been such a pleasure having you on the show. As I said, I had so many great things, but thank you so much for joining me today. Harry, thank you so much. I really appreciate it.”

    2017-09-27 · The Twenty Minute VC · 20VC: Why VCs Have Forgotten Their Job To Invest In Entrepreneurs not Technologists, How To Know When Growth Creates Value and When It Destroys It & How To Bootstrap Learning Most People Acquire Over Decades with 8VC Founding Partner, Drew Oetting · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “But I read Axios. Yeah, it's always my must read. What are you most scared of right now? I'm most scared right now of a complete lack of understanding between the elites in the United States and the average everyday American. And I'm very scared about the lack of data that is used in our media. And instead, we focus on fun anecdote-based reporting of what's going on in our world, because on both the left and the right, people are not talking about the real issues. Real issues being income inequality. That being one of them, but for instance, you know, on the left, there's very little talk in the mainstream media about the fact that the real prejudice and racism, in my opinion, that exists the United States exists in the court system, not necessarily as much in other parts of the world. And on the right, there's obviously a number of things that are being said by leaders that are not attached to reality. And then let's finish on your most recent publicly announced investment. And why you said yes?”

    2017-09-27 · The Twenty Minute VC · 20VC: Why VCs Have Forgotten Their Job To Invest In Entrepreneurs not Technologists, How To Know When Growth Creates Value and When It Destroys It & How To Bootstrap Learning Most People Acquire Over Decades with 8VC Founding Partner, Drew Oetting · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “AI, you've said it before. What do you mean? When you talk about AI, you're talking about one or two things, either talking about generalized AI that is a spiritual or theology problem that we should grapple with. The second is functional AI. In order for functional AI to exist in applications, especially in the business world, we need there to be data in software systems, which means we need enterprise software with highly complex and vertically focused data structures before AI can have very much value. What's your favorite book and why? What should I be reading on the plane? Two books. One is Barbarians at the Gate. That's the book that introduced me to investing. It's the story of KKR and one of their most famous buyouts. The second is fooled by randomness, which is the first book that taught me to think about the asymmetry that exists in the world. Cannot wait to read Barberians at the gate. I've never read that before. What about you got to read it? What about your favorite blog or newsletter? Rainy Day, what does Drew sit down to? Very, very little blog or newsletters.”

    2017-09-27 · The Twenty Minute VC · 20VC: Why VCs Have Forgotten Their Job To Invest In Entrepreneurs not Technologists, How To Know When Growth Creates Value and When It Destroys It & How To Bootstrap Learning Most People Acquire Over Decades with 8VC Founding Partner, Drew Oetting · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “That I do think is overlooked in today's environment. It's not overlooked by many businesses that operate outside of Silicon Valley, LA, and New York. If you're starting a business in the Midwest, you probably had to think a lot about this because it was very expensive for you to raise money. And so you probably thought a lot more about it. That being said, I think it's becoming more ubiquitous to worry about these things. I would love to dive into a So I say a short statement and then you give me your immediate thought. Does that sound about 60 seconds per Okay, I'll try. So what do you know now? Known when you started in VC, that is. The idea means nothing, that people mean everything. The misn”

    2017-09-27 · The Twenty Minute VC · 20VC: Why VCs Have Forgotten Their Job To Invest In Entrepreneurs not Technologists, How To Know When Growth Creates Value and When It Destroys It & How To Bootstrap Learning Most People Acquire Over Decades with 8VC Founding Partner, Drew Oetting · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “Highly growing revenue, but the home base costs don't grow. And so I think what you see a lot of times is an ignorance around unit economics. So if I sell one good, how much profit comes from that one good? How much cost is there to sell that one good? And there's a lot of fudging that happens. Should I include customer support costs? Should I, you know, my distribution is going to, as I scale the marginal cost of logistics is going to go down. So that's okay. We'll just budget that in. Those types of mental shortcuts are very scary, I think. I think what you want to see is a firm understanding of if I deliver one product or one service, how much do I make? How much does it cost me to run the home base that manufactures those products or services? And then how much do I need to spend to sell or market those products and services? And that's really the math that you want to be doing around that. And I do think companies lost sight of that two years ago. And I think that the companies that are still around or they're being started now, I think, have a better handle on it. But it's something.”

    2017-09-27 · The Twenty Minute VC · 20VC: Why VCs Have Forgotten Their Job To Invest In Entrepreneurs not Technologists, How To Know When Growth Creates Value and When It Destroys It & How To Bootstrap Learning Most People Acquire Over Decades with 8VC Founding Partner, Drew Oetting · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “What extent do you think you've seen this? And this is really a problem today? Yeah, I think that there is a massive misunderstanding over when growth creates value and when it destroys value. Growth creates value when there's an argument or there is evidence of operating leverage because it then creates more profitability. If I set up a website and I sold dollar bills for 50 cents, I would grow infinitely fast. Everyone would want to buy dollar bills for 50 cents, but it would be a terrible business. I could do a trillion dollars in top line and I would lose $500 billion. It would not be a great business. So top line in itself is not a great metric. Top line most of the time is attached to a better business model than just losing 50 cents. And so it becomes more confusing than that. But fundamentally, what you want to see is that businesses lose money for a finite period of time as they set up an operational platform, a home base, and they use that home base to continue to generate.”

    2017-09-27 · The Twenty Minute VC · 20VC: Why VCs Have Forgotten Their Job To Invest In Entrepreneurs not Technologists, How To Know When Growth Creates Value and When It Destroys It & How To Bootstrap Learning Most People Acquire Over Decades with 8VC Founding Partner, Drew Oetting · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “Basically, steady state, I think, businesses are valued on really three fundamental things how quickly can they grow? How much margin do they extract? So how profitable can they be? And how defensible and reoccurring are revenue streams that they generate? And it turns out that software sensors, AI, ML, all these things are really valuable towards satisfying those three conditions. But there are other businesses that satisfy those conditions that don't leverage those things. So when I look at a business, I'm looking at the technology.”

    2017-09-27 · The Twenty Minute VC · 20VC: Why VCs Have Forgotten Their Job To Invest In Entrepreneurs not Technologists, How To Know When Growth Creates Value and When It Destroys It & How To Bootstrap Learning Most People Acquire Over Decades with 8VC Founding Partner, Drew Oetting · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “Yeah, totally. So, venture capital fundamentally is about supporting entrepreneurs. It's about investing in ideas that don't yet exist and the implementation of those ideas. It turns out that many of those ideas are technology-oriented today. And Silicon Valley is full of them. But the reason venture capital exists is not to just support technologies. It's to support new businesses. It just happens that in today's environment, those new businesses 90% of the time leverage technology. So there are certain things I think people get caught up in, especially in the Silicon Valley Venture community, where they talk about things like do you invest in data? Do you invest in AI? Do you invest in XYZ? And that shows, one potentially lazy language, but two, I think it shows more. It shows an intention to invest in a technology versus a business. Do I invest in big data? Now I invest in companies that leverage the technology that's available today in order to complete a business solution and solve a problem. What I look for are businesses that”

    2017-09-27 · The Twenty Minute VC · 20VC: Why VCs Have Forgotten Their Job To Invest In Entrepreneurs not Technologists, How To Know When Growth Creates Value and When It Destroys It & How To Bootstrap Learning Most People Acquire Over Decades with 8VC Founding Partner, Drew Oetting · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “Time is the one thing you have an advantage over everyone else. And so if you focus for one, two, three, four, five years on something and it ends up not working out, most of the time, the worst case scenario for you is not very bad. So if you try to do something and you've committed to it and it ends up not working out, you might just end up in business school, which most people might end up in anyway, which is really not that bad. But there's a huge cultural pressure for optionality. You hear it all the time, especially, again, I'm speaking people who may have the privilege of being at lead institutions, have gone to good schools, done well. Maybe they've even worked at fancy companies afterwards, but you have this huge demand to say, I want to do something that creates, opens up a ton of different doors later. The reality is doubling into something, especially early on in career, you get exponential return to your time. So focusing on one thing, you're going to get exponential return on that. And two, if it doesn't work out, you're still in a pretty good place.”

    2017-09-27 · The Twenty Minute VC · 20VC: Why VCs Have Forgotten Their Job To Invest In Entrepreneurs not Technologists, How To Know When Growth Creates Value and When It Destroys It & How To Bootstrap Learning Most People Acquire Over Decades with 8VC Founding Partner, Drew Oetting · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “I think there's two major things. The first is no fundamentally what motivates you. And I don't mean this in some sort of rainbows and unicorns kind of way. I mean it is there are things that you might be uncomfortable to admit publicly about things that motivate you because it may not be socially acceptable to say I'm motivated by money. But if you go into a career where and you are that doesn't pay you, you might be upset. If you want to feel like a hero every day, you may not get as much benefit from being in a career that has meta impact like investing versus one that has very direct impact, like being a surgeon. So you have to really know what it is that motivates you and don't use your career as a method of therapy. So if you don't like what motivates you and you think that that's wrong, deal with that with your therapist, with your mom, in your place of worship, don't deal with that out in the job market. So that's the first part. Know your motivating factors. The second part is focus. And we've talked about this before. You know, when you're young, you always have nothing but time, right?”

    2017-09-27 · The Twenty Minute VC · 20VC: Why VCs Have Forgotten Their Job To Invest In Entrepreneurs not Technologists, How To Know When Growth Creates Value and When It Destroys It & How To Bootstrap Learning Most People Acquire Over Decades with 8VC Founding Partner, Drew Oetting · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “You've experienced this is that people are really willing to help you. Partially, that's because they probably don't see you as that competitive. And so they don't see you as threatening, which is probably true, at least early on. And the second part is that I think generally when you're younger, there's just more appetite to sort of help. And I think that's a huge advantage. So the biggest challenge I've had is just how do you learn these things about the way people act, the people interact, the way that boards interact, the right time to use a carrot, the right time to use a stick in a world where you don't get to just see the reps play out. You have to simulate them through the learnings of other people.”

    2017-09-27 · The Twenty Minute VC · 20VC: Why VCs Have Forgotten Their Job To Invest In Entrepreneurs not Technologists, How To Know When Growth Creates Value and When It Destroys It & How To Bootstrap Learning Most People Acquire Over Decades with 8VC Founding Partner, Drew Oetting · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “I think the biggest challenge ultimately is trying to identify all the things you don't know and learning. It's how to learn efficiently. I mean, most of the mechanical parts of venture are relatively easy to pick up. Or honestly, you can outsource them and hire people that are much smarter than you and more efficient to do those things. But the things that you can't are sort of the lessons learned through years and years of experience, a lot of those have to deal with basically interpersonal things. So the stuff that I've found most challenging is how do you bootstrap learning that most people accumulate over decades of experience and examples and really it comes down to one, I think, enforcing humility upon yourself. So even like the concept of saying, oh, I'm a managing partner at 26, what does that mean? It doesn't mean anything, right? There's been no success associated with that other than basically a lot of good fortune and being in the right place at the right time and having a lot of people trust you. So you have to have that humility. Opens up the ability to learn very quickly. And the real benefit of being young, and I'm sure that you”

    2017-09-27 · The Twenty Minute VC · 20VC: Why VCs Have Forgotten Their Job To Invest In Entrepreneurs not Technologists, How To Know When Growth Creates Value and When It Destroys It & How To Bootstrap Learning Most People Acquire Over Decades with 8VC Founding Partner, Drew Oetting · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “I think I do because there's a big thing about venture, which is that 90% of the time or a majority of the time you are selling primary equity. So you care who holds it the same way that companies care a lot about how their employees sell their equity and they can control it. They care about who their investors are that own their equity. And they have control over it. So because of that, there is fundamentally an opportunity for proprietary deal flow. Secondly, I do agree that as you get later and later stage, the opportunities are relatively understood. But at the seed in series A and even sometimes series B, these companies may not even have been written about in TechRunch. They not even know who they are. So I very strongly believe in proprietary deal flow at the earlier stages of the stack.”

    2017-09-27 · The Twenty Minute VC · 20VC: Why VCs Have Forgotten Their Job To Invest In Entrepreneurs not Technologists, How To Know When Growth Creates Value and When It Destroys It & How To Bootstrap Learning Most People Acquire Over Decades with 8VC Founding Partner, Drew Oetting · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “Yeah, it's funny because venture investors spend so much of their time critiquing the management styles of their portfolio. And I think most of them are incredibly under-optimized with the way they manage themselves. So the two big areas that I see, or first, I don't think that they do a great job of developing talent or even valuing talently appropriately. There's many, many incredibly smart people that work in venture funds relatively early on in their careers, and I don't know that most venture funds are very well equipped to really develop that talent and or to keep it. Now, you can build a”

    2017-09-27 · The Twenty Minute VC · 20VC: Why VCs Have Forgotten Their Job To Invest In Entrepreneurs not Technologists, How To Know When Growth Creates Value and When It Destroys It & How To Bootstrap Learning Most People Acquire Over Decades with 8VC Founding Partner, Drew Oetting · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “It's interesting. I think they are, but just barely. And I'm not sure that on the sort of for the best companies they will be set up. Most funds are sort of 10-year funds with one to four year discretionary extension periods. And I think that's probably just enough. But when you look at some of the most successful private companies, some of them have surpassed that before having a sort of a major liquidity event. So I do think that may get turned around a bit, but I do think that success is usually very quickly figured out within the sort of time cycle of a normal fund. And because of that, I don't think very many people are going to be concerned with waiting a couple extra years or figuring out how to do that on companies that have become worth tens of billions of dollars.”

    2017-09-27 · The Twenty Minute VC · 20VC: Why VCs Have Forgotten Their Job To Invest In Entrepreneurs not Technologists, How To Know When Growth Creates Value and When It Destroys It & How To Bootstrap Learning Most People Acquire Over Decades with 8VC Founding Partner, Drew Oetting · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “An Uber. Obviously, other investors around the table there. But if venture capitalists want to be involved in businesses much later, I think they need to be thinking more holistically with what they mean and also not using founder-friendly as a marketing ploy, but instead being very upfront with entrepreneurs and founders about how their relationships will change over time.”

    2017-09-27 · The Twenty Minute VC · 20VC: Why VCs Have Forgotten Their Job To Invest In Entrepreneurs not Technologists, How To Know When Growth Creates Value and When It Destroys It & How To Bootstrap Learning Most People Acquire Over Decades with 8VC Founding Partner, Drew Oetting · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “I think really they are what's appropriate is very tied to the stage of the business. As an investor, you are legally, if you're on a board, you are legally responsible for being company friendly. You are violating your obligations if you are founder friendly or if you are investor friendly. You're supposed to be company friendly to all stakeholders. And I think that early on in a business, the company is really the founders. So if you're not founder-friendly at the beginning in the seed series A series B stage, then you're not really being company friendly because most of what the company is, is the founders, the founding team, and that sort of vision and inertia that's been created. But as companies stay private longer and longer, I think that that's going to change. I think what you're going to see is investors become more company-friendly. And what that manifests itself in is looking at all shareholders, not just the founders. And there's obviously a pretty high profile example of this going on right now with benchmarks.”

    2017-09-27 · The Twenty Minute VC · 20VC: Why VCs Have Forgotten Their Job To Invest In Entrepreneurs not Technologists, How To Know When Growth Creates Value and When It Destroys It & How To Bootstrap Learning Most People Acquire Over Decades with 8VC Founding Partner, Drew Oetting · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “You know, I think it's interesting that venture capital is so distinct, at least culturally and in the media from private equity, because fundamentally they are very similar. And really, their identical business is just done at different scale and at different times in a company's life cycle. But I do think that the way that we think of venture capital today will shift. Venture capital investors tend to think of themselves as being very sort of operationally deep and entrepreneurial, and we tend to think of private equity investors being very finance oriented and buy the book. In reality is that that private equity actually has been incredibly entrepreneurial for a long period of time and really actually much more operationally focused than venture capital. And I think that maybe the one distinction sticks out is the sort of founder friendly nature of venture capital. But I think that even that is probably going to change as well in what we mean by that and how it's represented over the next few years.”

    2017-09-27 · The Twenty Minute VC · 20VC: Why VCs Have Forgotten Their Job To Invest In Entrepreneurs not Technologists, How To Know When Growth Creates Value and When It Destroys It & How To Bootstrap Learning Most People Acquire Over Decades with 8VC Founding Partner, Drew Oetting · IDENTIFIED FROM THE TRANSCRIPT · source

  19. “And in that role, I spent a lot of time on the investing side of things and also working with the companies that he was involved in. We ended up starting some companies as well. And so really that was my foray into it. And then 2015, we started 8VC. So I've been doing it really ever since, just through fortunate introduction.”

    2017-09-27 · The Twenty Minute VC · 20VC: Why VCs Have Forgotten Their Job To Invest In Entrepreneurs not Technologists, How To Know When Growth Creates Value and When It Destroys It & How To Bootstrap Learning Most People Acquire Over Decades with 8VC Founding Partner, Drew Oetting · IDENTIFIED FROM THE TRANSCRIPT · source

  20. “Yeah, for sure. So I'll give you a little bit of my life story, which dovetails into that. So I was born in Iowa City, Iowa, and I was obsessed with two things when I was there. First thing was golf. And the second thing was investing. So I ended up going to a school called Clara McKenna, where George Roberts and Henry Kravis went and read their book about their career as many times. And also I was recruited to play golf there. While I was there, I had a bunch of different opportunities and sort of in private investing that spanned everything from going to Mongolia to work in private equity to working for the Bill and Melinda Gates Foundation's asset management form. And I became obsessed with the idea of both being entrepreneurial in the way that investing works and also in doing private investing where I sort of felt I could have the most advantage. And I was very lucky to be introduced by a friend from Clarent McKenna named Clint Paulis. I was introduced to my current partner, Joe Lonsdale, who was one of the founders of Palenteer Technologies and Atapar. And I joined him as his chief of staff.”

    2017-09-27 · The Twenty Minute VC · 20VC: Why VCs Have Forgotten Their Job To Invest In Entrepreneurs not Technologists, How To Know When Growth Creates Value and When It Destroys It & How To Bootstrap Learning Most People Acquire Over Decades with 8VC Founding Partner, Drew Oetting · IDENTIFIED FROM THE TRANSCRIPT · source