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Rahul Mehta

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25
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2017-07-24
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2017-07-24
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  1. “Eric was great. He said great things about US well, and Harry, this has been a lot of fun. So thank you so much for having me on the show.”

    2017-07-24 · The Twenty Minute VC · 20VC: Investing $200m In Facebook, The 3 Stages of Founder Development & Why Creating A New User Behaviour Can Be Unit Economics Inefficient with Rahul Mehta, Managing Partner @ DST · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “Two more recent ones. One was a follow on wish in the US and a new one about a year ago was Gojek in Indonesia and both have very strong founders and teams targeting large markets with an innovative product and business approach.”

    2017-07-24 · The Twenty Minute VC · 20VC: Investing $200m In Facebook, The 3 Stages of Founder Development & Why Creating A New User Behaviour Can Be Unit Economics Inefficient with Rahul Mehta, Managing Partner @ DST · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “Founders want supportive long term oriented investors, like passionate about the business, who've seen other businesses scale up and go public, who can be a sounding board and a friend of theirs, and ideally low maintenance.”

    2017-07-24 · The Twenty Minute VC · 20VC: Investing $200m In Facebook, The 3 Stages of Founder Development & Why Creating A New User Behaviour Can Be Unit Economics Inefficient with Rahul Mehta, Managing Partner @ DST · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “I think most investments that you make in the space, they look expensive on the day you're investing because you're investing so much for the projected growth. For the outside world, which is not in the investing domain, for them, this looks like an easy job. But it is not that straightforward to make the right calls. And I think it's also a very lonely business. It's just like being in posts, being in entertainment, or being a founder. It's not easy, but I think what keeps one driving is the time you spent with the smartest people around actually taking on the world and building some amazing products.”

    2017-07-24 · The Twenty Minute VC · 20VC: Investing $200m In Facebook, The 3 Stages of Founder Development & Why Creating A New User Behaviour Can Be Unit Economics Inefficient with Rahul Mehta, Managing Partner @ DST · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “Successful investing is not easy. So it looks very obvious from the outside, but it is not easy. I think investing overall is a...”

    2017-07-24 · The Twenty Minute VC · 20VC: Investing $200m In Facebook, The 3 Stages of Founder Development & Why Creating A New User Behaviour Can Be Unit Economics Inefficient with Rahul Mehta, Managing Partner @ DST · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “I wouldn't say mistakes, I'd rather say what CEOs have to be mindful of because I think I'm not qualified to be saying what mistakes they are making. I think they have to think of hiring aggressively and investing a lot of time into it because that's your operational infrastructure. As a large company, you cannot have blind spots and corrective course of action becomes tougher as you become bigger. So you're better off basically investing in the team ahead of time. And second, I would say investing time in building a relationship with the ecosystem, which would depend upon the industry you are in. Could be your business partners, could be policymakers, because some of these things cannot be delegated by a founder, CEO.”

    2017-07-24 · The Twenty Minute VC · 20VC: Investing $200m In Facebook, The 3 Stages of Founder Development & Why Creating A New User Behaviour Can Be Unit Economics Inefficient with Rahul Mehta, Managing Partner @ DST · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “So, I like reading autobiographies. I'm reading right now the book called Open by Andrea Agase. I really find this pretty inspiring.”

    2017-07-24 · The Twenty Minute VC · 20VC: Investing $200m In Facebook, The 3 Stages of Founder Development & Why Creating A New User Behaviour Can Be Unit Economics Inefficient with Rahul Mehta, Managing Partner @ DST · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “Early stage being local is a competitive advantage as you're actually involved in building the product, hiring the engineers, et cetera. The later stage, global becomes a competitive advantage as well.”

    2017-07-24 · The Twenty Minute VC · 20VC: Investing $200m In Facebook, The 3 Stages of Founder Development & Why Creating A New User Behaviour Can Be Unit Economics Inefficient with Rahul Mehta, Managing Partner @ DST · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “Absolutely. So being global has been very useful for us in pattern recognition. And we've also been fairly thematic in our approach overall. So we saw what was happening at mail and we invested in Facebook and then followed that with WhatsApp, Twitter, and Snapchat. So social was the early theme that we had. The other theme that we worked on starting 2011 was e-commerce. So we invested in Alibaba and JD in 2011, then got involved in Zalando in Europe, Flipkart in India, wish and house in the US. A similar story with on-demand transport as well, we got involved first by DD and then are involved in Ola and Gojek in Indonesia. So it's been a pretty important element of our sourcing and also our founders love to know what's going on around the world because they're interested in learning what they can learn from their peers outside that they could apply and this being global really helps us to share our view or also connect them to our network.”

    2017-07-24 · The Twenty Minute VC · 20VC: Investing $200m In Facebook, The 3 Stages of Founder Development & Why Creating A New User Behaviour Can Be Unit Economics Inefficient with Rahul Mehta, Managing Partner @ DST · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “I think it's kind of a combination of both, right? Because you would not be able to pick the best company unless you have access to it. So you need to have access first. And if you've made a lot of type one, type 2 errors in picking, then you wouldn't have the same access to high quality founders in the future either. And being part of the club of successful founders like we have in the portfolio is an attraction for a lot of other founders. So a lot of the credit for our sourcing would go to the existing founders in the network and like what they have managed to build. But I would say it's kind of like a combination. It's a combination of both in a way of access and also making the right calls.”

    2017-07-24 · The Twenty Minute VC · 20VC: Investing $200m In Facebook, The 3 Stages of Founder Development & Why Creating A New User Behaviour Can Be Unit Economics Inefficient with Rahul Mehta, Managing Partner @ DST · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “Sure, I think it's become proactive in a way around the sourcing side because you have to build the relationship with the founder before they reach the late stage or whichever stage you're investing at. And so that's kind of like being helpful even when they are still not at the stage at which we would be investing. And you can get a much more informed view as he was speaking earlier as well about the founder to spend more and more time with him. So I would say proactive definitely helps. You can have early access to one of the smartest ideas around. And so what I would say I would be doing is, you know, we're constantly thinking about which companies have the potential to be, say, $5, $10 billion in GMB scale if they're a transactional platform or which have the potential to have a million orders a day. And both these sets are very small on a global scale. There are only 10 internet companies globally, public or private, which have 10 billion GMV and they're less than 15 companies globally with a million orders a day. It's quite a”

    2017-07-24 · The Twenty Minute VC · 20VC: Investing $200m In Facebook, The 3 Stages of Founder Development & Why Creating A New User Behaviour Can Be Unit Economics Inefficient with Rahul Mehta, Managing Partner @ DST · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “Think different industries have different modes. Like in the social world, your network is your mode already. It's very difficult for people to have 50 different networks in the social world. You have Facebook, Snapchat, Instagram, WhatsApp. You already have those in the US, right? So it's not that straightforward to create new networks. So network effects becomes an important mode in some sense as well. If you have exclusive supplier arrangements, that's an extremely important mode. So I think every industry is going to be different. A transactional platform will have different competitive nodes compared to a social platform. Every industry has to, it has to have the right, the more structure as well in a way.”

    2017-07-24 · The Twenty Minute VC · 20VC: Investing $200m In Facebook, The 3 Stages of Founder Development & Why Creating A New User Behaviour Can Be Unit Economics Inefficient with Rahul Mehta, Managing Partner @ DST · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “Stealth can be pretty useful, so one should, you know, it's always good to make funding announcement, but it has to, it also has to come with the business logic around it.”

    2017-07-24 · The Twenty Minute VC · 20VC: Investing $200m In Facebook, The 3 Stages of Founder Development & Why Creating A New User Behaviour Can Be Unit Economics Inefficient with Rahul Mehta, Managing Partner @ DST · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “Is always very useful. So if you have access to capital and the product idea fundamentally makes sense, then I would say it overall is the right thing to do to be pretty aggressive early on and try and take as much market share as possible. At the same time, one has to be investing in the competitive modes as well. It's not just about burning capital and gaining market share because then somebody else can come in with a higher degree of capital and burn more. It's about what have you created from an infrastructure standpoint or ecosystem standpoint, which is actually as important as the early market share that you have. We really think about market share quite a bit. It's something which a lot of people would be focused on and hence some companies prefer to stay stealth. And we like that. And we have a few companies in the portfolio which were even as late stage investments. We never announced them for a long time. So founders wanted that to basically never have competition or even like other players have a sense of how big they've become.”

    2017-07-24 · The Twenty Minute VC · 20VC: Investing $200m In Facebook, The 3 Stages of Founder Development & Why Creating A New User Behaviour Can Be Unit Economics Inefficient with Rahul Mehta, Managing Partner @ DST · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “Also, the guidelines can be slightly different for different markets. So emerging markets can take longer for unit economics to be fully proven out as there is significant investment that goes into building the infrastructure. Like you see what happened in Chinese e-commerce or Chinese right sharing. Or there could be significant competition as well, which can impact near-term unit economics. So there is no one size fits all approach and everything has to be taken into account, but it's definitely a very important element of the analysis as a late stage investor or even for the early stage or growth stage where they still have to believe whether the business fundamentally will have profitability or not.”

    2017-07-24 · The Twenty Minute VC · 20VC: Investing $200m In Facebook, The 3 Stages of Founder Development & Why Creating A New User Behaviour Can Be Unit Economics Inefficient with Rahul Mehta, Managing Partner @ DST · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “Sure, no great question. So, unit economics is definitely a very important element in our evaluation, along with other metrics on growth, retention, engagement, market share, et cetera. However, one has to be cognizant that if you're creating a new user behavior, it can be unit economics inefficient for some time. So we are also focused on understanding whether the industry structure would fundamentally support long-term profitability or not. And what can happen is a company can be operating in multiple geographies, multiple cities, multiple categories of products. So you also have to see whether they have positive economics in its more mature markets or categories. And if so, what does the growth look at that time frame? So companies could be investing in their developing markets, could be profitable already in their mature markets. So if you overlay the growth at that stage, then you get the real picture. So it is an extremely important element, but has to be looked at in conjunction with a number of different”

    2017-07-24 · The Twenty Minute VC · 20VC: Investing $200m In Facebook, The 3 Stages of Founder Development & Why Creating A New User Behaviour Can Be Unit Economics Inefficient with Rahul Mehta, Managing Partner @ DST · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “Would like to know them as early as possible to build a relationship because that's an extremely important part of our sourcing where we would have the edge as well. But ideally, call it 12 to 18 months before. And then you've had like a few interactions with them. They hopefully started to like you and you kind of like believe in what they are doing. And then you along the way help them as well in whatever small way you can so that they see the value of having you as partner. But there's no fixed timeframe, but you want to meet if you tell me today there is an amazingly smart founder who's just done a seed. I would still love to meet him because it might not take him like only a couple of years before he's running a significant meaningful business. So knowing them as early as possible is important. So I think the core of founder view comes from spending as much time as possible with them.”

    2017-07-24 · The Twenty Minute VC · 20VC: Investing $200m In Facebook, The 3 Stages of Founder Development & Why Creating A New User Behaviour Can Be Unit Economics Inefficient with Rahul Mehta, Managing Partner @ DST · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “I think there will be three stages, right? One is the stage in the CED or series A. Second is the stage as a growth slash late stage kind of a founder. And third is more of a public company founder. So when we would be investing, they are already in that process or have actually truly become very mature leaders as well. And even if they have a couple of areas that they have to improve, the path is pretty clear. And a lot of them obviously have to learn on the way along the way in terms of like being a public company CEO because her demands of that could be different. So I think you're right in saying that we would have observed them grow, but what we would do is we would be building relationships as founders much before we would actually invest. So we would have chance to actually observe them even before we have made the investment. So that is the process when you see them grow as managers. And then when they are there as leaders and managers, then you know then.”

    2017-07-24 · The Twenty Minute VC · 20VC: Investing $200m In Facebook, The 3 Stages of Founder Development & Why Creating A New User Behaviour Can Be Unit Economics Inefficient with Rahul Mehta, Managing Partner @ DST · IDENTIFIED FROM THE TRANSCRIPT · source

  19. “They pick up amazing ideas from that on how they have to groom themselves and grow. So it's, you know, they kind of like find mentors themselves through that process and they observe what the traits or the most successful founders has been and they would imbibe them. It's a really, it's a process through which a founder goes. I think it's very difficult to have a founder who has all the skill sets on day zero, but the smartest ones of them.”

    2017-07-24 · The Twenty Minute VC · 20VC: Investing $200m In Facebook, The 3 Stages of Founder Development & Why Creating A New User Behaviour Can Be Unit Economics Inefficient with Rahul Mehta, Managing Partner @ DST · IDENTIFIED FROM THE TRANSCRIPT · source

  20. “Like, what is this a person who could manage a company which is 10, 20, 30 times bigger than when we are investing? Will they be able to attract the talent? Will they be able to work with a larger group of people? Can they motivate and inspire other leaders to be born in the company, et cetera? And can they retain the smartest talent? So that is an extremely important aspect, and which is why we spend so much time with the founders, with the management teams to understand their personality and their working style. And you see actually a lot of founders grow over time as well. So, you know, not everybody's a bond leader, but the smartest founders, and this is kind of like where we help them in a small way as well. You put them in touch with the other most successful founders and they spend like an hour or two together.”

    2017-07-24 · The Twenty Minute VC · 20VC: Investing $200m In Facebook, The 3 Stages of Founder Development & Why Creating A New User Behaviour Can Be Unit Economics Inefficient with Rahul Mehta, Managing Partner @ DST · IDENTIFIED FROM THE TRANSCRIPT · source

  21. “The market, the potential, how big the company could be, etc. So there's different elements that go into it as well. But the founder is at the center stage of that decision-making process. So this is like my view from a consumer internet lens. And I'm sure, you know, someone who does more enterprise might have a slightly different view, but in consumer, we've just seen founders play the most important role in transitioning the business or expanding the various verticals that they're attacking. Can I ask how important do you think is it for the founder to make the transition from founder to manager? I think that is actually something very important as you go through the growth stage because when you start, you know, it could be a genius at product or tech or if you have a sales orientation, you could be amazing at that. But it's extremely important to transition from like a founder to a true CEO. And that is something that we have to judge as well when we are investing.”

    2017-07-24 · The Twenty Minute VC · 20VC: Investing $200m In Facebook, The 3 Stages of Founder Development & Why Creating A New User Behaviour Can Be Unit Economics Inefficient with Rahul Mehta, Managing Partner @ DST · IDENTIFIED FROM THE TRANSCRIPT · source

  22. “Down the funnel. Sure. So I think obviously respect everybody's view here, but I have a slightly different view. I think strongest founders create disproportionate value. And the pace at which the tech industry is moving, long-term vision has become an extremely important part of the success of these businesses. And you have to invest five, ten years out rather than managing the business on a quarterly basis. So you look at what Facebook, Amazon, Netflix have all managed to do as public companies. A big portion of their success goes to the ability to manage the business pretty much like a private company. And strong founders attract amazing talent, right? So it's their vision that gets people attracted and excited about what they are building. So our investment thesis has always revolved a lot around the founder and we've only invested in founder-led companies from the very beginning. At the same time, obviously, we combine the founder view with the view around the product, you know, competition, category leadership.”

    2017-07-24 · The Twenty Minute VC · 20VC: Investing $200m In Facebook, The 3 Stages of Founder Development & Why Creating A New User Behaviour Can Be Unit Economics Inefficient with Rahul Mehta, Managing Partner @ DST · IDENTIFIED FROM THE TRANSCRIPT · source

  23. “early structure of DST like? The first investment in Facebook actually happened from the mail balance sheet and then when this was the first $200 million round that we did in May 2009 that all came from the mail balance sheet and then after that we had like a rofer to go and buy more secondary in Facebook as well and that is when we started with DST so it was more of a company structure more of a company SPV structure in a way rather than like a typical fund and the typical fund started more like in late 2010 once mail went public. I do want to start today with something that we've discussed slightly before and it's with a statement that VCs often say to me and it's all about the founder Harry and I recently had the likes of Rory O'Draskill at scale on the show and he said actually at gross stage markets make outcomes and the team and founders less important. I'm intrigued here. What's your take on founder importance as we move?”

    2017-07-24 · The Twenty Minute VC · 20VC: Investing $200m In Facebook, The 3 Stages of Founder Development & Why Creating A New User Behaviour Can Be Unit Economics Inefficient with Rahul Mehta, Managing Partner @ DST · IDENTIFIED FROM THE TRANSCRIPT · source

  24. “Interesting opportunity, and I was very keen to be part of a startup. And the growth potential of mail was quite attractive. Coincidentally, what happened was the day I accepted the job, that was the day when Lehman happened. So most of my friends, if not all, thought I had either lost my job or lost my mind that I was leaving Goldman for a Russian company. And at that time, when even before I had joined, Yuri already had the vision of being, of being global, which was a crazy idea at the time. And so we got started with DST only in like mid-2009 or so with the Facebook investment. And then we truly went global, I would say in 2011, when we first invested in China and Europe with JD and Spotify. Was Facebook the first investment first?”

    2017-07-24 · The Twenty Minute VC · 20VC: Investing $200m In Facebook, The 3 Stages of Founder Development & Why Creating A New User Behaviour Can Be Unit Economics Inefficient with Rahul Mehta, Managing Partner @ DST · IDENTIFIED FROM THE TRANSCRIPT · source

  25. “Sure, so actually, there was no DST when I joined. I was at Goldman in London and Tech Banking and Mail was a client of ours. So I joined mail back in late 2008. And the idea was to basically help them consolidate the various companies we had and also work on taking it public over time.”

    2017-07-24 · The Twenty Minute VC · 20VC: Investing $200m In Facebook, The 3 Stages of Founder Development & Why Creating A New User Behaviour Can Be Unit Economics Inefficient with Rahul Mehta, Managing Partner @ DST · IDENTIFIED FROM THE TRANSCRIPT · source