YouSaid · the spoken record

Jay Hoag

lines on the record
70
first
2021-09-28
most recent
2021-09-28
sittings or episodes
1
sources
podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

  1. “His late 20s, CEO of a company called Pure Software, which at that era was quite successful, then led us to the Netflix involvement where we've been invested for over two decades. My partner, Woody Marshall, met Daniel Eck of Spotify probably a decade ago, and we've gotten close to having a decade of involvement there. John Foley and other incredible visionary who the entire world turned Peloton down as an investment. We're only three or four years in a relationship, but hopefully if I'm divided back here, 10 years that will have played out these are exceptional folks who, again, are seeing something that others can't. And it's just remarkable to be along for that journey and see as their vision starts to play out.”

    2021-09-28 · Invest Like the Best · Jay Hoag - Calibrating Market Adoption - [Invest Like the Best, EP. 244] · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “Yeah, and again, going back to the folks I've had the great fortune of investing behind and in cases for a very long period of time, actually folks like Rich Barden, who I know has been on podcasts and Reid Hastings enrich's case, I met him back in the late 90s and so have been met a company called Vacation Spot where he was on the board. We invested at TCB. I describe it as, in a sense, Airbnb, but 20 years too early, but we ended up selling it to Expedia. We invested in Expedia went on the board. And then also an early investor in Zillow, where he obviously is founder and CEO. The five variables are all key, but the fifth one in particular, and again, it's really hard to know ahead of time, but we've been investing with Rich for two decades now. I was fortunate to meet Reith Hastings when we were, I'm a little older, sort of early 30s, and I think he was.”

    2021-09-28 · Invest Like the Best · Jay Hoag - Calibrating Market Adoption - [Invest Like the Best, EP. 244] · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “Really playing for the long term as opposed to short term and allowing, you know, and in a sense allowing those that exec team to execute like hell back to the fourth point. After almost 40 years of investing, I have lots of different truisms, but one of my favorite lines is the line between visionary genius and bad shit crazy is not always clear.”

    2021-09-28 · Invest Like the Best · Jay Hoag - Calibrating Market Adoption - [Invest Like the Best, EP. 244] · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “From, I think, when we invested, it was a little bit billion and a half of revenues in 2010 to $86 billion last year, pretty staggering growth, and achieve a market cap of a trillion dollars. And Twitter has been successful. I'm not quite as close to the user stats, but build a company worth tens of billions. So 15 to 20 X difference in market cap due to superior execution. As we look at new investments, it's really hard to know, but that's an area where we try to get a good sense of the speed of execution because the best companies are constantly innovating and executing at very rapid speed. And then the last, the fifth is, is this an exceptional visionary CEO who probably is a little crazy? Are they hiring great team members?”

    2021-09-28 · Invest Like the Best · Jay Hoag - Calibrating Market Adoption - [Invest Like the Best, EP. 244] · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “And also to then forward invest and build competitive moats to sustain that rapid growth. The fourth, which is really hard to get at ahead of time, is tremendous execution. The example I use, both companies are successful, one extraordinarily so and one somewhat so are Facebook, which we were fortunate to be a private investor in, and Twitter. I'm going to take a little literary license here. Both companies, in a sense, were addressing a similar sized opportunity. And of course, Twitter had a different approach, but both companies obviously were building engaged audiences and then monetizing it primarily through advertising. There was superior execution at Facebook, and I know Twitter started later than Facebook did, that has allowed them to grow.”

    2021-09-28 · Invest Like the Best · Jay Hoag - Calibrating Market Adoption - [Invest Like the Best, EP. 244] · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “Center very much in on that. A lot of companies have some of the three or portions of the three or may have the three down the road as they build a business, but it's not often you see all three. The second is on the consumer side is tremendous engagement. And something about the product engages consumers. And again, this may seem obvious, but if you think about it today, the average Netflix user is estimated to watch two hours per day, the average Spotify premium user is over an hour a day. Gaming, folks of Electronic Arts and others have tremendously engaged audiences. And there's lots of obviously business benefits from having high engagement. So that's the second. The third, and that's fantastic about a lot, but is there a virtuous cycle to the business? Is there some network effect that will both allow the company to accelerate?”

    2021-09-28 · Invest Like the Best · Jay Hoag - Calibrating Market Adoption - [Invest Like the Best, EP. 244] · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “Companies. And I think of it as having five criterion, some of which are hard to know ahead of time. The easy ones are, is there a unique value prop? Is this company providing a three-headed combination of value, convenience, and selection? And so if you go way back in time using Netflix as an example, back in the DVD days, once we rolled out the subscription offering, they had that in spades. It was great value. unlimited rentals per month. It was very convenient. Once you figured out what to queue up, what you wanted to watch, you would get sent those DVDs, you return via the mail when you had watched them, et cetera. So you didn't have to leave the comforts of your couch. And then selection in the DVD world, Netflix literally had every DVD ever made. That's unique value prop. So as I look at new businesses,”

    2021-09-28 · Invest Like the Best · Jay Hoag - Calibrating Market Adoption - [Invest Like the Best, EP. 244] · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “I spend most of my time these days on the consumer side of the world. And so I'm going to mostly address the comments there way back in history, one of the benefits of being fairly early was originally focusing on software. And then over time, semiconductors and then semiconductors of capital equipment. This is pre-internet. Everything across the technology landscape because there was nobody else covering it. But over the years, as the industry has grown, I think it has forced specialization. in the entrepreneur's eyes. And so we at TCB and we have a very large team investing across the board ended up individually specializing. So my comments on the consumer side. I have generally described what we're trying to do, and this may sound generic. And obviously the proof is in the pudding and it's easy to align what we're looking for. But basically looking for magical”

    2021-09-28 · Invest Like the Best · Jay Hoag - Calibrating Market Adoption - [Invest Like the Best, EP. 244] · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “Really trying to discern which ones will be able to maintain very rapid growth over a long period of time and generate those returns. In some cases, they can return the fund by itself and which aren't. And I would point out that technology has historically been about a small number of enormous winners. And I used to say, and lots of losers, I think in the last 10, 15 years, it's really been about a small number of absolutely enormous winners. And then a pretty good set of other companies that have done well. That's sort of the portfolio lens we try to take. And so when we have been fortunate enough to be involved in going way back in time, Expedia, Netflix, Pelotime more recently, Spotify, et cetera, the secular outlook there is very robust. And as long as the strategic vision of the company is rolling out as in”

    2021-09-28 · Invest Like the Best · Jay Hoag - Calibrating Market Adoption - [Invest Like the Best, EP. 244] · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “Thinking a lot about current jargon is product market fit way back when we started, we talked about were the dogs eating the dog food, which is not a very elegant way to say it, but in a sense the art of what we do is really try to calibrate that market adoption. And is this company on a growth path that is going to allow them to achieve scale? And with scale comes all sorts of benefits and create significant competitive modes, et cetera, et cetera. Dog food is a much less sophisticated term than product market fit, but it basically is effectively the same thing. So inherently, I think at the gross stage, there should be lower loss rates. All that said, I also think that part of the art is as we invest across a wide swath of technology companies.”

    2021-09-28 · Invest Like the Best · Jay Hoag - Calibrating Market Adoption - [Invest Like the Best, EP. 244] · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “Go up to 40,000 feet to start within the investment world, and you host all sorts of interesting individuals. I would say across the spectrum, there are many, many, many ways to generate returns. Deep value, buyouts with clever use of leverage, cost cutting, and many more. Early stage ventures typically have a higher loss rate. What we've always done is grow stage. And in the original tenant, we sold to investors was we're investing, at least in theory, when a technology risk has been eliminated. And what we're really trying to do is calibrate market adoption. That inherently should be a lower risk approach. Sure, you may not get the same multiples on the winners as early stage, but with a lower loss ratio when you put that mix all together. Ironically, I was...”

    2021-09-28 · Invest Like the Best · Jay Hoag - Calibrating Market Adoption - [Invest Like the Best, EP. 244] · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “It's a delight to be involved in the journey to help in any way, shape, or form, but to really take a long term perspective and not worry about quarters and years. Those visions can play out over decades.”

    2021-09-28 · Invest Like the Best · Jay Hoag - Calibrating Market Adoption - [Invest Like the Best, EP. 244] · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “At these great long term growth vehicles, entities within technology would provide tremendous returns. And so being patient and let that play out was critically important. So fortunately I had enough of a track record to consider starting TCB. Found my colleague Rick and off we went in early 95 on the fundraising trail. But those three tenants remain true today and I'd love to talk through examples of technology that proved to be a good one grow stage and crossover because crossover investing has existed since the late 60s. And I talked about that. It was not clearly mainstream at the time. And then the long-term orientation, when you come across these unbelievable entrepreneurs who can see something about the future that others can't, folks in my experience like Rich Barton and Reed Hastings and John Foley.”

    2021-09-28 · Invest Like the Best · Jay Hoag - Calibrating Market Adoption - [Invest Like the Best, EP. 244] · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “Portion of the direct investing and the small cap public. So the founding tenets of TCV were really three. The view that technology was going to be huge over time, Moore's law and the drivers of better, faster, cheaper devices combined with great entrepreneurs was going to result in big investment opportunities. Secondly, that the combination of growth stage and crossover investing, and I'll get back to that in a moment, was a great way to play it. And at the time, we talked a lot about risk reward. I think we should have probably just focused on reward since it's been pretty hard to not have strong returns in technology given the tailwinds. And then thirdly, the observation that a long-term approach would really pay off and that may seem obvious, but the insight or the view that”

    2021-09-28 · Invest Like the Best · Jay Hoag - Calibrating Market Adoption - [Invest Like the Best, EP. 244] · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “So, to set the stage a little bit, I have only had two jobs. One was, as I mentioned, I started as a research analyst. It was a division of Citicorp, and it was the Citic Investment Management, which was a combination of both institutional money management as well as private high net worth clients. And I started three years as an analyst and then joined the venture group that was part of that entity in 1985 and was there for another nine years. And the venture group really did three things. We invested in funds. So the prominent venture funds of that era, we invested directly into companies. Much of that deal flow came from those venture funds. And then we also managed small cap public funds. And the last five years at City Corp. It went through a number of ownership changes, became Chancellor Capital Management. I was running the tech.”

    2021-09-28 · Invest Like the Best · Jay Hoag - Calibrating Market Adoption - [Invest Like the Best, EP. 244] · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “Well before software started taking a big chunk of the market cap. In 1990 there were only 31 publicly traded technology companies that had north of a billion dollars in market cap. And then if you went down one tier, there were another 13 that were valued between $500 million and a billion. So a really small, small, small set of public companies and not many in the software world. Those two data points hopefully give you a sense of just what's changed. Everything's changed. The scale is enormous. The investment pace across the industry. The number of industries that have been impacted, exploded. And the sort of markets are several orders of magnitude bigger than they were back then.”

    2021-09-28 · Invest Like the Best · Jay Hoag - Calibrating Market Adoption - [Invest Like the Best, EP. 244] · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “Would you say has changed from whenever the first click of understanding was for you that the software business model early on was so powerful through to today? Is it many of the same features? Those kinds of technology businesses that excite you today, or has it changed a lot over that period? I'd say for software and for everything in technology, the scale is just changed dramatically. I'll fast forward to the mid-90s, which is when myself, an individual named Rick Kimball started TCB. If you go back to the early 90s, just prior to founding, the entire venture industry in 1991 raised under $2 billion so think about that for a moment. That was the scale of the entire industry. And TCV's first fund in 1995 was $100 million. And we actually, ironically assume we would stay small forever and we were terribly wrong there. And then the other lens to look at is what was the public technology landscape in 1990? What did it look like? And it was actually dominated at the time by hardware companies.”

    2021-09-28 · Invest Like the Best · Jay Hoag - Calibrating Market Adoption - [Invest Like the Best, EP. 244] · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “It was the era of ADP. Microsoft was not yet public, Oracle was not yet public. Those now may be viewed as legacy software companies, but that was the second. Then I guess the third important formation, my boss at the time, an individual named Mark Tessler, who was running the tech group, indicated that I would be of no value to him until I had lost money on a recommendation. Just frustrating me to no end. I couldn't believe that was true. But lo and behold, I think it was valuable because one has to step up to the plate and take a number of swings in the investment business, but it is a batting average business. It's not a situation where you are always going to be right and bat a thousand.”

    2021-09-28 · Invest Like the Best · Jay Hoag - Calibrating Market Adoption - [Invest Like the Best, EP. 244] · IDENTIFIED FROM THE TRANSCRIPT · source

  19. “And that was a really small industry, but that played a huge role in terms of my professional formation. I actually pulled out an old research report, my first one, which I did, I hate to say pedermiculous typewriter, but it very much might have been, laying out the case for software and how the value in the technology industry was shifting from hardware to software. And that became pretty well known in the 80s, but that also was a pretty important moment where it was a bit fortuitous. And I chuckle a little bit because today a lot of people talk about software eating the world and with all due respect to the author of that. That's not exactly new news. And so if you go back to the 80s, software is actually viewed as at the time it's called computer services. And there was a very well-known Alex Brown conference where you got to see a lot of companies.”

    2021-09-28 · Invest Like the Best · Jay Hoag - Calibrating Market Adoption - [Invest Like the Best, EP. 244] · IDENTIFIED FROM THE TRANSCRIPT · source

  20. “Have been doing this for a very aligned period of time. So going back to the kind of when dinosaurs roamed the earth in terms of technology, quick background, I started as a research analyst. For a division of Citic Corp on July 1st of 1982, I started not knowing anything about anything school and was given a choice to cover paper forest products, publishing, or technology. And I think if you were to ask most people the time at the time, I made the wrong choice by saying, well, this technology thing seems interesting. I don't really know anything about it. Luck played a huge role. And so that was one of the key early formations that helped as I stumbled into the business. Expanding on that, technology then was really pretty much in the early days. The PC was getting to go mainstream. It was actually, if you remember, way back in time, the onset of the mini computer cycle, industry moved from mainframes to minis to personal computers. As a junior analyst, I was assigned to software. And at the time,”

    2021-09-28 · Invest Like the Best · Jay Hoag - Calibrating Market Adoption - [Invest Like the Best, EP. 244] · IDENTIFIED FROM THE TRANSCRIPT · source