YouSaid · the spoken record

Jeff Bussgang

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27
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2016-07-18
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2016-07-18
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1
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  1. “The most recent public investment was Centenai, which is a machine learning-based data engineering startup. I thought that the technical founder was incredibly compelling and had a great vision for how the world was going to play out in the machine learning world and the tool set required to make machine learning successful. And he had a business partner who was also very capable and very compelling. But the thing that I love are these picks and shovels investments. So you pick a trend, machine learning, and you say, okay, if the world moves towards that trend, what are the tools and picks and shovels?”

    2016-07-18 · The Twenty Minute VC · 20VC: Flybridge's Jeff Bussgang on Why It Is Not All About Unit Economics & Why VCs Are Big Data Decision Makers · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “The economist is a must read for me, and then Mattermark is the other must read. In full disclosure, they are a Flybridge portfolio company.”

    2016-07-18 · The Twenty Minute VC · 20VC: Flybridge's Jeff Bussgang on Why It Is Not All About Unit Economics & Why VCs Are Big Data Decision Makers · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “A lot of transparency with respect to the key issues and a lot of transparency with respect to the timing and a lot of transparency with respect to how high a priority this is an individual investment partner can only focus on two or three new investment opportunities at any given time in a truly deep and proactive fashion. And if you're not one of those two or three, then you're not really in the investment process.”

    2016-07-18 · The Twenty Minute VC · 20VC: Flybridge's Jeff Bussgang on Why It Is Not All About Unit Economics & Why VCs Are Big Data Decision Makers · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “That's buffet. How's that? Can I make an additional point on that? Of course. VCs are big data decision makers. Think about us as pattern recognizers and machine learning deep learning algorithms that feed on data and the more data we take every data point and make decisions and judgment based on those data points and signaling risk is a huge data point in that algorithm.”

    2016-07-18 · The Twenty Minute VC · 20VC: Flybridge's Jeff Bussgang on Why It Is Not All About Unit Economics & Why VCs Are Big Data Decision Makers · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “Size of fund, size of typical investment, profile of the investments made, and due reference checking with CEOs and entrepreneurs that have worked with that fund before to get their likes and dislikes.”

    2016-07-18 · The Twenty Minute VC · 20VC: Flybridge's Jeff Bussgang on Why It Is Not All About Unit Economics & Why VCs Are Big Data Decision Makers · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “Victor Frankl Man's Search for Meaning. My dad survived the Holocaust in pre-war Poland as a refugee and soldier in the war. Victor Frankl was a survivor in the camps and later invented a method of psychology around positive thinking and seeking meaning in the world. And I just found it to be an incredibly compelling book in world philosophy and moral view.”

    2016-07-18 · The Twenty Minute VC · 20VC: Flybridge's Jeff Bussgang on Why It Is Not All About Unit Economics & Why VCs Are Big Data Decision Makers · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “You're at an early stage in the investment process, it is worth your time because if they can be a champion for you and get you credibility with the partner, it's worth it.”

    2016-07-18 · The Twenty Minute VC · 20VC: Flybridge's Jeff Bussgang on Why It Is Not All About Unit Economics & Why VCs Are Big Data Decision Makers · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “I think one of the best pitches I've seen was Mike Baker from DataZoo, which is now a multi-hundred million dollar programmatic advertising company in our portfolio and a leader in that space. Because Mike had a vision for how the future would unfold, and he was incredibly articulate about describing that vision to us and laying out the steps that would lead to his company being a market leader if that vision played out and that vision, which is big data coming to advertising and programmatic buying becoming the standard for large advertisers has exactly played out. And I think it was the fact that Mike was so, had such domain knowledge, such a vision that ability to see around the corner, but yet to explain it to us as late people very clearly was incredibly compelling.”

    2016-07-18 · The Twenty Minute VC · 20VC: Flybridge's Jeff Bussgang on Why It Is Not All About Unit Economics & Why VCs Are Big Data Decision Makers · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “It's a common feature of the best pitches and the most confident founders. There's something about confidence that comes through very quickly in a pitch, and I don't mean bravado, because that also comes through and is very unappealing to investors, but there's something about that quiet, steady confidence and an ability to be vulnerable and an ability to admit mistakes that comes through very strongly with the best pitches.”

    2016-07-18 · The Twenty Minute VC · 20VC: Flybridge's Jeff Bussgang on Why It Is Not All About Unit Economics & Why VCs Are Big Data Decision Makers · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “This is a great question, and it's not well understood by founders and entrepreneurs because a lot of founders will try to hide risk as opposed to make it super visible and transparent and then articulate their risk mitigation plan. I think the most compelling pitches are when the founder articulates more risks than I can think of and then lays out really thoughtful risk mitigation plans and also articulates those plans in the context of the financing. So, for example, they say, hey, we know that adoption is a huge risk and over the next 12 months we're going to run a bunch of adoption experiments and with the seed money at the end of 12 months, we will have achieved the following learnings about adoption and milestones related to adoption. And then the next round of capital will be to drive adoption more aggressively based on the lessons. Like that's a really thoughtful response as opposed to my saying, hey guys, isn't adoption a real risk here? How are you thinking about it? And what's your plan for that? And suddenly they're on their heels.”

    2016-07-18 · The Twenty Minute VC · 20VC: Flybridge's Jeff Bussgang on Why It Is Not All About Unit Economics & Why VCs Are Big Data Decision Makers · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “All of those things, it's having the bar in some ways be too high, the free product may be too good, and the quality and value proposition of the paid products may not be good enough. And if you lower the bar on the free product, then sometimes you lose conversion rates and suddenly your adoption, you have a lot of attrition and your adoption strategy goes away. I think Evernote, I don't know Evernote's numbers, but I know that they've recently changed their product to lower the bar on the free product. And as a customer, I kind of find that annoying. You know, I'm sure it's good business for them and they're focused on profitability and time will tell how it plays out for them. But you see that behavior at times, and that can be sometimes to the detriment of the overall equity value creation.”

    2016-07-18 · The Twenty Minute VC · 20VC: Flybridge's Jeff Bussgang on Why It Is Not All About Unit Economics & Why VCs Are Big Data Decision Makers · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “I totally disagree with that VC, and I'll give you an example. So, and the reason I disagree is that there are cases where equity value creation is achieved through adoption focused strategies. And I'll give you two examples. One is in our portfolio, one is MongoDB, and the other is Code Academy. Both companies focused on adoption over monetization in their early years. Both companies pursued monetization after years five or six or seven and got very focused on unit economics, but they did it at a time when they had become the standard, when Mongo had become the standard NoSQL database.”

    2016-07-18 · The Twenty Minute VC · 20VC: Flybridge's Jeff Bussgang on Why It Is Not All About Unit Economics & Why VCs Are Big Data Decision Makers · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “Those windows are closed, you have to build real businesses. And if you build real businesses, you can generate great returns. So I don't think it's a risk of the return profile being degraded. I think it's just a risk of a different way of getting there.”

    2016-07-18 · The Twenty Minute VC · 20VC: Flybridge's Jeff Bussgang on Why It Is Not All About Unit Economics & Why VCs Are Big Data Decision Makers · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “Across all the boards that I sit on, and Flybridge, we have 80 investments that we've made over our 13-year history. We've got about 40 or 50 active portfolio companies. I can't think of a single one where we're not being aggressive enough and not thinking enough about growth balanced with profitability. And the reason I say that is because we're all focused on equity value creation, both the entrepreneur and the VC. We're incredibly aligned in that regard. When the pendulum swings, it usually swings for a reason. It's not because of joke about irrational exuberance, but it's usually not irrational. It's usually because the capital markets are behaving in such a way that you think you can create a lot of equity value through behavior that is detached from real business models. And then the capital markets shift and suddenly you have to demonstrate real business models again. And when those windows are open, if you're able to hit those windows with an exit, M&A or IPO, and you can sustain that IPO price, you're going to generate great returns.”

    2016-07-18 · The Twenty Minute VC · 20VC: Flybridge's Jeff Bussgang on Why It Is Not All About Unit Economics & Why VCs Are Big Data Decision Makers · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “I am pleased when founders are realistic. I think that there is this weird dichotomy you have to have of having your head in the clouds but your feet on the ground. As a founder, you've got to be optimistic. You're trying to create something amazing from nothings. So how can you not be optimistic? But you also have to focus on real results and building a real business and creating real value. And when the pendulum swings too far one way or the other, I think it's a bad thing. And in our industry typically, the pendulum does not swing too far in the realism category. It typically does swing too far into irrational exuberance, to quote Alan Greenspan and founder is getting very market's getting frothy and founders and VCs feeding that fraught. And so I think it's great that people are now being more realistic about profitability and good businesses, not just exciting and sexy businesses.”

    2016-07-18 · The Twenty Minute VC · 20VC: Flybridge's Jeff Bussgang on Why It Is Not All About Unit Economics & Why VCs Are Big Data Decision Makers · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “Out the money and mitigate the risk over time. And so if I put in $500,000 into a firm, live with it for a year, and then I have another investment decision to make, that's going to be a better investment decision than if I had put in $3 million originally in the firm when I had less information.”

    2016-07-18 · The Twenty Minute VC · 20VC: Flybridge's Jeff Bussgang on Why It Is Not All About Unit Economics & Why VCs Are Big Data Decision Makers · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “Yeah, Fred's post was excellent, although I do wonder sometimes if all of this is totally irrelevant to entrepreneurs. I mean, when I was an entrepreneur, I'm not sure I really cared all that much. I only cared about me and my company and stepping back for people who do care about the macro system. Loss ratio is important. And there's a trend now, and this trend does impact entrepreneurs, which there's a trend where VCs are not only thinking about the number of portfolio companies that are going to lose money, but also how to be more careful about exposing too much capital to those companies and staging their investments. Because with the whole world of seed investments, seed investing exploding and what I would call the disaggregation of seed investing, where now there's the seed one, the seed two, the pre-seed, the post-seed, the A, the A plus, all these rounds now are getting different names because they're all disaggregated from how they used to be. What it net results in is that venture capitalists can do”

    2016-07-18 · The Twenty Minute VC · 20VC: Flybridge's Jeff Bussgang on Why It Is Not All About Unit Economics & Why VCs Are Big Data Decision Makers · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “U.S. Treasuries are basically returning zero and many other low risk vehicles are returning zero. So the premium becomes more attractive if a venture fund can return 15, 20% year over year.”

    2016-07-18 · The Twenty Minute VC · 20VC: Flybridge's Jeff Bussgang on Why It Is Not All About Unit Economics & Why VCs Are Big Data Decision Makers · IDENTIFIED FROM THE TRANSCRIPT · source

  19. “I'm not sure they have. I think that because the formula is so simple, as I said, money and money out, and it's a choice between one investment vehicle or another, it's a choice between one VC fund and another or a VC versus PE versus investing in ExxonMobil, the return metrics and the expectations are very consistent. I think one thing that arguably has changed is that the macro environment, the return environment with declining interest rates has been less appealing. And so there are fewer attractive places to earn high returns in the global capital system with low interest rates and poor performance in developing countries as of late. And so I think that makes venture returns if they can be achieved more interesting because the risk premium becomes worth it. In other words, the risk you take with a venture fund, which high risk, high reward, if the premium above a safe investment like U.S. treasuries is low, then you would always invest in U.S. treasuries. But right now,”

    2016-07-18 · The Twenty Minute VC · 20VC: Flybridge's Jeff Bussgang on Why It Is Not All About Unit Economics & Why VCs Are Big Data Decision Makers · IDENTIFIED FROM THE TRANSCRIPT · source

  20. “No, sure. So the metrics that LPs use to measure our performance are typically two. One is multiple on multiple cash on cash return. If I give you a dollar at some point, how much do you give me back if you give me back $2? Do you give me back $3? Or do you give me back 50 cents, irrespective of time? And the second is a factor of time, which is the IRR, the internal rate of return, which is some percentage of return on your money, which you would compare to, say, performance in the stock market or performance in the bond market. So most investors look for something on the order of 3x money on money return in a fund and a 15 to 20 percent IRR net to them, net of fees, net of carry, net of any compensation to the venture capitalist return to the investor. And if you can't achieve those metrics, then you're not viewed to be a successful fund.”

    2016-07-18 · The Twenty Minute VC · 20VC: Flybridge's Jeff Bussgang on Why It Is Not All About Unit Economics & Why VCs Are Big Data Decision Makers · IDENTIFIED FROM THE TRANSCRIPT · source

  21. “That's right. And look, Uber's an amazing company, but I don't know where in the preference stack and behind how much debt Chris's investment might be, but it could theoretically be worth zero or it could theoretically be worth an extraordinary return. And it's all theoretical.”

    2016-07-18 · The Twenty Minute VC · 20VC: Flybridge's Jeff Bussgang on Why It Is Not All About Unit Economics & Why VCs Are Big Data Decision Makers · IDENTIFIED FROM THE TRANSCRIPT · source

  22. “It's kind of funny because we all talk about stories and products in the blogs and in the books and in our conversations. It's all about innovation and technology. But to the minds of an LP, the money they invest in a venture fund is just like the money they might put into a vanguard or a Fidelity Mutual Fund or a Barclays bond fund. And it's really just about the return that you generate. It's money in, money out.”

    2016-07-18 · The Twenty Minute VC · 20VC: Flybridge's Jeff Bussgang on Why It Is Not All About Unit Economics & Why VCs Are Big Data Decision Makers · IDENTIFIED FROM THE TRANSCRIPT · source

  23. “That's a great question. It really settles in on values and culture, you use the word. If you have a consistent set of values and culture and hopefully a consistent mission and a consistent purpose that you're trying to achieve with your startup, hopefully centered around a big problem and a particular customer or customer persona that you're trying to solve that problem for, if you can maintain that focus, then all the other pieces are more disposable. And that's really the key is not to dispose of the culture and the focus and the strategy and the mission. You want to keep that constant as best as possible, but to dispose of organizational structures and communication structures as quickly as possible, as quickly in anticipating their breakdown ahead of time.”

    2016-07-18 · The Twenty Minute VC · 20VC: Flybridge's Jeff Bussgang on Why It Is Not All About Unit Economics & Why VCs Are Big Data Decision Makers · IDENTIFIED FROM THE TRANSCRIPT · source

  24. “I don't. I never believe there's one path to the final journey. I think that there are plenty of great examples of VCs who never have any operating experience, and I have one of them sitting next to me in my office in Chip Hazard, who's incredibly successful investor with my co-founder here at Flybridge, previously at Greylock, and he came into the venture business right out of business school with no operating experience. So I still think people can do it. I do advise a lot of my students and young folks who are aspiring to get into VC that if you can, I think it is advantageous to get some operating experience to be more empathetic, to learn the lessons of going up and down and sideways and forth and of startup. But I think anybody really can do this business if they have a mindset that's the proper mindset for it.”

    2016-07-18 · The Twenty Minute VC · 20VC: Flybridge's Jeff Bussgang on Why It Is Not All About Unit Economics & Why VCs Are Big Data Decision Makers · IDENTIFIED FROM THE TRANSCRIPT · source

  25. “Yeah, the learnings I had from hypergrowth, and we went from 0 to 100 million revenue in a couple years and 600 employees and a couple billion dollar market cap over the course of my five-year tenure. And so we experienced quite a bit of growth. And my learnings were numerous, but one of the most important ones was that all the systems that you design when you're a certain size are completely wrong six months or 12 months later. And you have to keep designing systems, whether it's human capital systems, whether it's decision-making systems, whether it's communication systems. You have to keep reinventing yourself every six or 12 months when you're in hypergrowth mode, as opposed to getting comfortable and settling in to a certain way of doing things.”

    2016-07-18 · The Twenty Minute VC · 20VC: Flybridge's Jeff Bussgang on Why It Is Not All About Unit Economics & Why VCs Are Big Data Decision Makers · IDENTIFIED FROM THE TRANSCRIPT · source

  26. “Another company also backed by the same VC Greylock after three years of that I co founded Flybridge with a former Greylock partner. It was sort of a circuitous route through the path of entrepreneurship.”

    2016-07-18 · The Twenty Minute VC · 20VC: Flybridge's Jeff Bussgang on Why It Is Not All About Unit Economics & Why VCs Are Big Data Decision Makers · IDENTIFIED FROM THE TRANSCRIPT · source

  27. “Sure. The trajectory for me was first I was a computer science undergrad and son of an entrepreneur. So I had a great passion for technology and entrepreneurship and thought that I would embark on a career in that graduated from college. I took a couple years as a wayward management consultant at the Boston Consulting Group and then went to Harvard Business School with the intent of learning how to be a manager and focus on being an entrepreneurial manager. And I bumped into a bunch of VCs while I was at HBS and had never heard of the industry, didn't know anything about it, was recruited by one of them to join and turned it down because I wanted to be an entrepreneur, but it gave me that interesting exposure. And they put me in touch with one of their portfolio companies, which I then joined as an executive in the early days. But anyway, gave me entry into the startup world and the VC back startup world. I then, after five years of that, we went public and had a great run. After five years, I left to start.”

    2016-07-18 · The Twenty Minute VC · 20VC: Flybridge's Jeff Bussgang on Why It Is Not All About Unit Economics & Why VCs Are Big Data Decision Makers · IDENTIFIED FROM THE TRANSCRIPT · source