YouSaid · the spoken record

Steve Papa

lines on the record: 51
first: 2022-04-04
most recent: 2022-04-04
sittings or episodes: 1
sources: podcast

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“The one thing which growing up I failed to appreciate was the premium on being a great communicator. I was fortunate in my twenties that I finally took that to heart. And this is something as simple as vocabulary and writing skills, et cetera. I grew up in an environment where those weren't highly prized and it dawned on me someday that I can have the best ideas in the world, but if I can't communicate them effectively, they might as well not exist. And I made a concerted effort to do that. It would have been nice to have embraced that when I was in single digits of age versus later in life.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“Being resourceful and entrepreneurial, that is a big one. Character being an important one, those are the sorts of things that I'd say are the important foundation to what I've done since then.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“There are many that choose from. The general idea where you back someone that really you shouldn't have backed, I've certainly made those mistakes, but it's also the failure of imagination to reframe problems in ways that unlock value. So it's really those categories. Those are the ones that we're always trying to do better at, but we're going to repeatedly make those mistakes.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“The person that recruited me for that job at AT&T NCR Teradata, his name was Rob Diocomo, unfortunately he passed relatively young. I literally went to him at a job fair because no one was talking to him on campus. We had a good conversation and he recruited me for a summer internship and the rest happened from there. And the other would be Felda Hardyman, who was my professor at Harvard who went on the back end Deca and we still work on projects today. So I think those two are probably the biggest with the longest horizon of impact.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“Not generally my outlook on the world to think of pet peeves, but as we transition in COVID from this relative stay at home to out and about world, you see this dichotomy between the introverts and the extroverts, right? The introverts were quite happy during COVID. The normal environment was dominated by the extroverts. And I'm kind of in the middle of those worlds, but there are a lot of implicit things that happen around us day to day that are driven by those dichotomies in life. That's probably my pet peeve.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“I like building things, so whether it's building a company, I'm in the process of building a greenhouse and looking at how technology can change the way I do things like that. I'm a builder. That's what I like to do. Outside of that, I do like to read. I like history, all the usual things”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“I get regularly asked by existing investors to be a reference, to talk to a allocator. What surprises me is I have yet to have an allocator reach out as a backdoor reference. It's never happened. They basically take the references that the firm offers, and that's who they call. If you're allocating capital and you want to be involved in the future of that fund, there's probably a different style of diligence that could be done to see what's their reputation today, not the cherry-picked references. That's probably the number one thing I would suggest.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“The number one tip is it's always the individual, not the firm. It's that individual that you'll be dealing with. Make sure they also are well positioned to be there through the life cycle of your investment that they matter. Ideally find someone who's got some expertise in your area, especially if it's B2B, because you're going to waste a lot of time with folks who they'll only invest if they see someone with knowledge in that sector that's already involved. Perhaps early on getting a credible investor that knows the space will save you a lot of heartache and pain down the road. The other bit of advice I always give the entrepreneur is when people give you advice, remember you're the only one that can contextualize it to your business. When people give advice, they're typically contextualizing it to what made them successful, which may not be your particular context.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“Are some of the big trends that we're struggling with right now, supply chain given all the geopolitics and labor shortages. So things that automate and allow us to do things locally that we couldn't cost effectively do before is a massive theme. Arguably, that builds on the toast theme. Toast is enabling restaurants to do things with fewer staff.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's a tough question because my first criteria is going to be the people, right? And to give you an example of the range of things that will interest me if there are great people, I've recently gone involved in another virtualization company. Virtualization software still got a long runway. I've got involved in people leveraging hard tech to change business models. So I'm on the board of desktop metal 3D printing company doing amazing things. Like they've got this portfolio of call options around transforming manufacturing that is going to be important for the next decade. There's a company I'm working with that's able to use one of their new capabilities to change the supply chain from manufacturing in Asia to here in the US. And there's all these implications that come with it. I'm not yet ready to reveal exactly the products they're building, but it's a supply chain transformation thing. There's another one which I'm involved in, which is automation.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“Back in the day, you had spotted things like silicone and hard tech as areas that the venture community wasn't interested in backing. As you look out today, what are some of the things you're interested in?”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“One of the things I was trying to do differently was to be much more active in helping build the companies, which has certainly been the case. When I look at the next wave of things I will do, that doesn't scale. So I'm going to have to dial back on that and sit somewhere between traditional venture capital and what I did before. But in the end, it's portfolio theory that has to dominate. The thing about venture capital is you have folks that are wrong more than half the time. yet claim they're geniuses that they knew exactly the right companies to pick. It's really portfolio theory, that's their friend. They're getting lucky. It'd be much more honest to just embrace that. Just like I talk about in DECA getting backed in 2001. A lot of other good companies didn't get lucky like we did. Luck was necessary, not sufficient, but it was necessary to get funding. That's the case with a venture portfolio. It's how do you cultivate luck with great people and help them?”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“These capital cycles, I would always prefer steady versus boom and bust. It collapses under its own weight as you go through the boom cycle. Everything gets more expensive and starts to get foolish. Capital efficiency goes way down. But that's just the risk on, risk off of large pools of capital moving earlier in the capital cycle. There are different schools of thought. There's the school of thought that those booms fund a lot of stuff that wouldn't have gotten funded, like the infrastructure we needed of fiber in the 90s, which led to the boom of the following 20 years. On the other hand, a more measured pace of investment would have accelerated more efficient ways to build out that infrastructure out of necessity. I would prefer a world where it was steady and we didn't go through those cycles, but that's not the world we've got. You adapt your strategy to be different when things are booming. I'm all for getting back to the whiteboard and starting things from there and catching the next cycle.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“Fences versus hitting lots of doubles and triples. That's probably the best way to characterize it. That said, there are notable examples of companies failing to get funding on the West Coast and coming to Boston. My favorite example is Kiva Systems, the robot company that Amazon bought.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“Before I do that, let's go back to my point about people. One of the reasons you're always going to have some regional nature in the earlier stages of these is if you're back in great people, it tends to be someone you already know. You're going to have more confidence. You're going to stretch more. You're going to stick your neck out more. As companies scale and it becomes a spreadsheet exercise, that matters less. Still important, but it's in a different way. There's a good reason you get some regional nature, to be clear. Historically, Boston was more conservative and they wouldn't swing for the fences. The Boston Venture Scene was very much we're going to put in place a hired gun CEO. When that person's done vesting, they're going to want to flip the company and go to their next one. It was much more common in Boston to see that than we want to back founders and have them take it all the way. That's changing. Boston culture very much is changing, but historically Silicon Valley was much more back of founder. You're swinging for.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“We used in June of 2015. I shared that with the Bessemer partner the day of their IPO as a reminder of the deal that he got. And he said, yeah, if you were raising funding today with that deck, you would have gotten four times the valuation.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“In June of 2015 is when they finally started talking to outside investors. I had backed them up to that point. I won't name the firm, but there's a West Coast firm that likes to insist on being involved in the most important deals of every year. They had their call, pitched what they were doing, and the response was largely, I don't feel like getting on a plane to Boston. Went through a lot of other venture firms that summer. People saying, I don't understand why you have this payments thing in here. Makes no sense. In fact, the only two firms that were competing to back it at a reasonable valuation were my two lead investors at Indeca that fall. So it was the relationship more than the business fundamentals as late as then. Maybe 12 months after that, 15 months after that, other firms started to take note. And then generation and lead edge very aggressively led their next round of financing, and it was off to the races. One last thing.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“Stay in the burn. We had the cash in the bank, but if it gets burned because we can't grow, and that was in the peak uncertainty of April of 2020. But then an interesting thing happened in May of 2020. The way restaurants were going to survive COVID was they had to go digital takeout delivery and toast was an amazing platform for that. They accelerated all of that. So by the time they got to late May, they were seeing green shoots already. It was a crazy time for them. They ended up having one of their best years. And that's after they made huge concessions for their customers. They really became a hero to the restaurant industry. They were forgiving all their fees. They were out there trying to champion the industry as part of the various government programs. It really is a remarkable story. And again, no one wanted to back it.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“And as one of the founders likes to remind me when he brought up the idea, I said, you know what? You might actually have a business now. They kept the pedal down. They signed up the first 150 accounts. And I'm like, okay, guys, we're going to make this a big business. They built that where they grew steadily, where they went public this fall with 30, 40,000 restaurants is what's in their prospectus. Obviously, it was right at the tail end of the growth market multiples where they were valued as high as 40 billion in as recently as five months ago. But the other notable part of that company's story was they sell the restaurants. And you could imagine what happened to them in 2020. They just closed the financing in February. They were gearing up to double the size of the company, double the team. And by the end of March, probably eight weeks after that close, instead we were announcing we had to let go half the company because we couldn't.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of sale, so they show up. We want to build this thing like NCR. And I'm like, well, how hard is that? They show the manuals for these products. And there's just pages upon pages of features and capability. I'm like, guys, this can't be easy. And then the next thing you learned is like 500 different point of sale companies out there. It's just the wasteland. They went to investors and the investors would say things like, it's too hard to sell to restaurants and it's a crowded market. And they were like, Steve, we really want to do this. Basically, they had played such a key role in my success. I'm like, fine, this will probably be in AquaHire. I'll commit the first 500K. If you pay me that back in the next few years, you'll get most of the equity back. Pretty aggressive terms because it was going to be an Aquire and I should get some return if it is. 250K into that. They started to display the industry leaders, their first 10 prospects. I was like, hmm, maybe there is something more here. And so I committed more capital. Pretty shortly after the first few customers were alive, they saw the path to embroider.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“Published and they wanted to go create a business around that. We worked out that they should do it inside NECA. That was a big success. Company gets acquired. And the day we announce it, they're like, we should resign and start a business. They didn't even know what they wanted to start. Like, guys, sit tight. Learn a bit about working inside Oracle and then figure out what you're going to do. There were 20 somethings, so they wanted to solve typically a 20-somethings problem. They wanted to split the bill at a restaurant using their mobile phones. They thought that was the thing to build. And I said, look, that's not my thing. That's consumer, but I'm committed to helping you guys meet every potential investor. So I took him around. Nobody was interested. While that was happening, they pivoted their business from the split-to-bill app to a point of sale system. And the way they did that is they would talk to restaurants and the restaurants would not care about their split-to-bill thing. But if they asked them about their point of sale, they would spend hours talking about how unhappy they are with the status quo. So these guys decided they wanted to build a point.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“Going back to NDECO, as we were growing, we were actually located across the street from MIT. And by the time we got to about 200 people, I think 50 people on a team were from MIT. It was getting harder. The students would be like, oh, all the hard problems are solved. We want to go somewhere else. So we created a team called Special Operations, which I would use to recruit top talent, reported to me, and we give them hard problems. Several of these folks were very instrumental when we pivoted the company in the financial crisis into two business units. I'll spare you the technical details, but there was a product capability that they materialized at a thin air that basically enabled us to reposition the company for success. So I got pretty close with several of them. Two of them were also moonlighting, building mobile apps for e-commerce. In fact, they were the second mobile app in the Apple App Store for commerce after Amazon. They had their”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“Easiest as if it's someone you worked with before. But even then, you can make mistakes on that. That is the number one thing to focus on, is to really get to know someone, get to know people that have worked with them. And I've had folks that I've put money behind that they couldn't get any of their former co-workers to invest behind them. Pretty big red flag. Pretty big mistake on my part. Now, with COVID, it's been harder to do that sort of diligence, but that's what's most important from a whiteboard. Hands down. Need to spend a lot more time on that.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“This is an area that I am always trying to get better at. So I won't claim to have it solved. One of my lessons is to do more background checks and reference checks on anyone I get involved with. On my own worst enemy and necessarily following up with that, I almost need to hire someone who that's their job. So it forces me to always do it. But there are people that can reinvent themselves every six months, which is what you need to do if you're going to be a success in an entrepreneurial company from a whiteboard. What you have to do for that first six months is very different than the next than the next than the next. And at some point it becomes hard and you bring in someone else to complement a team. But there's some folks who just don't reinvent themselves. They stay that same person. When they have a weakness, instead of trying to overcome the weakness, they want to be defensive and pretend it doesn't exist. How you figure that out when you start working with someone on a whiteboard is very challenging.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“I would be doing historical revisionism if I came up with some big theme. There were certainly undercurrents of themes, energy efficiency was an important one. Great people. If you were to see how things have evolved today, I care less about the investment theme in terms of category, et cetera, than that there are amazing people that will figure out how to turn something into a success. That turns out to be far more important than the market itself at the stage of a whiteboard. In general, my themes were infrastructure at that time of 2012. The venture community was fixated on consumer. If you remember at the app store and these overnight success companies, things where they could see the trends in credit card data and invest in them, that wasn't what I was going to do because I didn't understand that stuff. I focused on harder technical problems where if we just solve the technical problem, we have a base asset versus you have to get to a bunch of eyeballs before.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“If I look at wireless, what happened in the data center in the 90s? I was convinced it's going to happen to the wireless network. It's as important and it needs to happen. I wouldn't say I launched these things as much as I found entrepreneurs interested in these spaces and I was willing to be a partner and do everything I could to will these companies to success.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“After selling the company to Oracle, I always viewed as the financial success that comes from that are just resources to build other things. So in a sense, I was sitting on a sizable venture capital fund. My view was it's sitting in the bank wasn't going to do much. And within a year, I effectively got involved launching six companies from a whiteboard. And they tended to be the things that the venture capitalists wouldn't touch for whatever reason because I wasn't going to compete with them chasing after whatever the hot topic of the day was. An example was silicon. No one wanted to touch silicon. And my view was that means they're going to be really valuable in a decade because there's going to be a scarcity of assets that are being created. And sure enough, I spun a silicon company out of a university in Europe in 2012. And they're on track to go public next year. They're now up over a million a week. I think it's going to be a hugely valuable asset because there was a dearth of innovation out there. So that was the general philosophy. I felt the same.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“As e commerce sooner, we probably would have had a much longer runway as an independent company. We would have at least had a chance to enter the world of Shopify. But we didn't. There's a lot of what-ifs there, but it's more our imagination was constrained. We were in the middle of e-commerce, yet we didn't see the transformation that was about to happen.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“And the reason why this detail is funny is on the Tuesday, Oracle announced they finally closed their acquisition of BEA Systems, which was our original inspiration for information access servers. Part of the deal with the street was the synergies, and amongst those synergies was the Corp dev person at Oracle who had visited us. We maintained a relationship from there with the senior person, and that's what opened the door years later for the ultimate acquisition. Worth noting, not only was fast a fraud, where their CEO went to jail, but autonomy. They're trying to extradite the former CEO of autonomy to the U.S. for that fraud. So that's who I had to compete with in the OTS. So persistence, keep the relationships. The reason why we could have a fast exit was we had the relationships with the companies that could acquire us to the extent that they mattered. This idea of challenging how you frame the world, if I had framed the world,”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“One persistence certainly is always key on these things. You got to keep going. There are two other moments we could have exited the business. One was around 2005 where Amazon was very attracted to what we were doing. Another was, interestingly, the way I got to know the Oracle Corp dev team was in January 2008, Microsoft acquired a company called Fast, which was a Norwegian search company. There were three search leaders in the aughts. There was Fast, Autonomy, and Endeca. Fast had just disclosed they faked a third of their revenue, basically frauds. Microsoft wanted an answer to Google's domination of search. So Bomber insisted on acquiring Fast. And when they did that, obviously Oracle was like, we got to understand what's going on here. And so they literally sat with us probably the second week of January 2008, had a great meeting on a Monday. On the Wednesday, supposed to do a call with the head of Corp Dev and the person that had been out with it.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“The exact opposite of what everyone would assume, Oracle realized how this was going to instantly catapult them to the leading commerce stack. And a commerce stack has a huge amount of drag along for the rest of their business. And from first email to announcement with Oracle was six weeks, a testament to how fast Oracle can align their teams and make something happen. Then we were part of Oracle, and I think we played an important role. They basically overnight went from competing for every deal with IBM to suddenly being the dominant on-prem e-commerce company.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“Oriented to sell this umbrella information access servers. So, what happened in 2008, the financial crisis forced us to transform the business from an information access platform to two verticals, e-commerce and agile analytics. Investors were not hugely supportive because it was a change in the story, but they were supportive of that change, not supportive of us acquiring an asset that would have turned our e-commerce business into being the dominant platform. With that split into those two verticals, we start emerging from the financial crisis, putting up good numbers again, growing again. And in the summer of 2011, we're back to thinking, okay, are we going to gear up for an IPO? At the time, a very large technology company wanted to acquire us. They put in an offer in June of 2011.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's a very good point because one of the ways we raised capital in 2001, we had to reposition the company as an information access platform. We went from being focused on e-commerce navigation, the venture capitalists of 2001 said, there's no future in e-commerce. No one's going to make any money. That's what many of them said. So I couldn't be an e-commerce software company. And it turned out the only publicly traded company that still had a good multiple in 2001 was BEA Systems. They made application servers. So we came up with these ideas we're going to enable information access servers that bring together structured and unstructured information. And that's what the investors invested in. Turned out that ended up being a liability because we frame the world that way. That's the way we executed. By the time we got to 2008, we wanted to buy an e-commerce platform company. And our board and investors didn't understand it because it didn't make sense through the lenses of an information access service. Another way it was a liability is our sales force was organized.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“In about five weeks from first meeting to close. And thank goodness we did because once the global financial crisis hit, we were back to 2001. Fortunately, this time we had some cash in the bank that we were able to manage through that and come out the other side.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“We were very concerned the e commerce market wasn't large enough, which was a failure of our imagination for sure when you look at companies like Shopify today. But at the time, that's what it looked like. We had half of the top 100 e-commerce sites. These long-tailed small e-commerce shops hadn't materialized yet. We tried to expand our market into what I would call Agile Analytics, which is another use of the database technology we had developed. In fact, one of our largest customer ever was IBM. They spent $20 million on us over the years and were using us for very important internal applications that they could not power with their own software. So we were scaling up nicely, got to the $105 million in 07. We're gearing up for a public offering. And then, of course, the Global Financial Crisis hits. The recession started late 07, if you remember. We were very fortunate to have raised $25 million in December of 2007 with Intel leading.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“First thing to note is the world was just starting to embrace the idea of software as a service. Salesforce.com was out there, but not for mission-critical things. So we were kind of this in betweener between perpetual software licensing and SaaS business. But we progressed from a $2 million 2001, $10 million the next year, $15 million the next year. And it was largely on the back of our e-commerce business, even though there were no budgets for IT, as I mentioned before, year-over-year declines, we could show a typical e-commerce site increasing their revenue by 30%. A budget would be manufactured because we could increase their revenue so much. And it might seem obvious today, but you make it easier for people to find stuff on a site. They buy more. It's that simple. The mantra today would be site performance. You improve site performance a percent or two. You're going to sell 10% more. Believe it or not. We had a very nice progression scaling that up. At the time,”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“Swung all the way back hard. All investors wanted to see is that you have people who've already done this. Fortunately, I had been exposed to that and very methodically built a leadership team with folks who had done their roles before in interesting software companies. And that played a huge role in our ability to get backed in that very difficult environment. And then it's all the other largely true things, which is work very hard to get great talent on a team, and they will bring on other great talent. And we did that at NDECA. Not only did we have to get through 2001, we had to get through 2008 and other challenges along the way. And because we had a relentless focus on great talent, we were able to get to where there was a very successful outcome. And a lot of that talent has gone on to do other amazing things.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“One thing that was very fortunate is when I was in grad school, I spent the summer working at Venrock back when it was really an extension of the Rockefeller family in Thirty Rock. So I had a chance to see behind the scenes at kind of the inventors of venture capital in the country. They had frameworks that they developed over 40 years that helped them make investment decisions. And that framework was largely market opportunity. What's different about this company pursuing it team and finances? And it's all got to fit on one page. And the team you could largely frame as why are these people the right ones to make this happen? The reason why that's interesting is it was in direct contrast to what everyone believed in 99. In 99, the temporal wisdom was back folks without experience because they'll see new ways of solving problems. So it became an asset to be inexperienced. Once we got through 2000, the pension”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“They're going to get skittish. At least that's what I thought at the time. They already were skittish. I was deluding myself. But anyway. Was an investment firm. I gave three of these prospects to. As it turned out, they had a backyard barbecue, one of the partners in August. Their next-door neighbor was our champion at one of the other accounts. That was just luck. The other thing to note here is we went from having no revenue all year, or virtually none, because we had one customer from the year before, to doing a $2 million quarter in Q4, which was a very strong quarter. So we went from nothing to a $2 million quarter and was building from there because all of those interested prospects, most of them were ready to go once they saw the backing.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“And the world of IT spend froze in 2001. It was the first year over year decline. So it was impossible to get customer number two. And so we talked to every venture firm under the sun, and most of them were reserving their capital for their own portfolio. They weren't looking to do anything new. It was a big challenge. The next thing that happened is customers, even though they were interested, did not want to buy because they didn't see the backing of the company. It was a chicken and egg problem. By the time we got to August 2001, we had less than two months cash left. The insiders were forced to lead a financing. That catalyzed an outsider to come in. But there's an interesting twist here. We had about 10 very interested prospects in the business, but we were talking to far more investment firms, and they all wanted references. And all I had was these prospects. So I'd have to very carefully allocate those references because you don't want a prospect to talk to 10 investors.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“Think the fundamentals are a bit different today than they were back then in terms of where the inflation in the cycle was happening. Back in 99, 2000, pre-revenue companies were way overvalued. More recently, the multiple reductions was more in very high growth, high revenue companies. But anyway, to give you the sequence of events, in 99 could literally have one meeting and be getting a term sheet. We did have that. I'll unname the various folks. We had term sheets from. In fact, the way Bessemer became our lead investor is I went to seek advice from a former professor. And he said, well, send me a few slides and I'll participate in your convertible debt financing. And that led to them leading our, what we would call today a series A financing. And so we have a really good 2000. We were looking to raise funding in 2001. Challenge being we only had one customer in 2000. We're trying to get customer number two.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“Two thousand was an interesting inflection point, maybe not too dissimilar to today in terms of the flow of capital in the venture community. And I'm curious your perspective of what that fundraise was like and then what your work with the venture capitalists was like in that business.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“When nine people showed up and most of them were meeting each other for the first time in an apartment we had rented in Cambridge, Massachusetts. Thus we begun. When retrospect, we were really a research lab trying to find a way to implement an idea and then commercialize it. That's how it got going.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“You assume you've got a hundred million things in one place. And if you built a taxonomy to navigate that space, if you allowed for, say, 25 options per level and you allowed each item to exist in, say, three places, you'd need to be 30 levels deep, and the probability of getting to the right place would be near zero. And at that moment, there was an epiphany, which is when I type in Sinatra, I don't want a Sinatra list, I want a Sinatra store. I want the world of Sinatra organized around that concept. And that was the birth of guided navigation or faceted search, which is everywhere on the internet today. You use it all the time and you don't even realize it. I knew enough to know the technical areas that were required to solve this problem. And I went and sought out a team with certain types of expertise, said to that team, if this is the team and I have funding, are you in? I went to investors and if this is the team, do you want to back it? And this all converged Labor Day weekend of 1990.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of wine with Frank Sinatra's picture on it. So I went searching for that and stumbled upon what we later called the million or none problem. If you type in Sinatra, you got thousands and thousands of results. And if you tried to look for something too specifically, you would get nothing. Three of these identical bottles were trading on eBay, and they were all at different prices. At the time, we were thinking, that's not a very efficient market. Imagine a stock market where you couldn't find the ticker and you didn't know what the last trade was would not be efficient. And that's what eBay was. So our idea at the time was what if we could take all the expiring auctions and turn them into tickers? So every product in the world would have an established commodity price. That's not easy to do, but to be clear, but it's a thought experiment. We were also aware enough that the only way you could monetize such a database is if someone could find something within three clicks. If they had to spend a lot of time looking for that pricing information, they weren't going to use it. So you start doing the math.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“We were in grad school in 97, 98, 99, which was a crazy time. I don't need to rehash that. Let's just say in the spring of'99, I was committed to starting something, had a few different ideas. One of my good friends from undergrad crashed in my room at Harvard, and he brought up an idea that we started hashing. The story of it is worth hearing. He had been trading on eBay. He wanted to get an alumni memorabilia beer can that had the Princeton logo on it, believe it or not. He's searching for it. combing through these piles of results. And next thing you know, he sees an alumni magazine for sale, which is getting a lot of bids. He sees he has a copy at home, has David Ducovani from the X files on the cover. He posts it and sells it for $50. A few weeks later, he finds an Abercrombie and Fitch catalog that he has sitting there. He posts that and sells it for seventy five dollars to someone in Australia. And I was like at those prices, I want to sell everything I own, and I had a bottle.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“Having worked in both large companies and then small companies, it's obviously very different. I don't think I have new ideas to add to the world here, but in general, a company tends to look at their options through the lens of their success, where they're strong. That has been an enabler, but also incredibly restrictive. In these smaller companies, you don't have a lot of success yet to constrain you. So you can be much more open-ended in exploring white spaces. You'll get a few people together and think nothing exists there. We can get going. Five years later, you might need a thousand person team to make that same decision. That's how fast it can change.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“I actually suggested to AT&T at the time that they should build a parallel search engine because we had the parallel platform at places like Walmart, and that's the only way you could scale the internet. And this was before there was a Google. When AT&T didn't really understand what I was talking about, a company called IncTome on the West Coast announced their parallel search engine, and I went to join them as the 14th person. The way Ink to me got going with a parallel search engine was a grad student at Berkeley, was interning at Xerox Park. He was trying to present an alternative to Altavista. So all these things converged. I ended up there and got involved not on the search side, but creating a new category of software called internet caching to drive the efficiency of the internet back when a country like Australia would have had a slower connection than the average homeowner does today. That was a big success. And then I got involved turning that into a SaaS business at Akamai in their early days.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“I started there as a product manager 18 months, I believe I had seven different bosses. Was a company and a lot of turmoil, and I ended up being a product manager for all of their high-end compute systems. Whether it's that Walmart system or a million dollar system running payroll at a global 2000 company, notably halfway through my time there, the internet started to really emerge commercially. Companies like Altavista started to emerge. Altavista was really a marketing vehicle for the digital equipment corporation, arguably the largest enterprise computing company at the time. They had $17 billion in revenue in 1997. And they used Altavista as a marketing vehicle to say, we've got the biggest”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source
“First stop in my career was a company that people will know of as ATT, but it was the ATT of 1993 where they had bought Teradata. They had bought one of the largest computer companies in the world called NCR. It seems like eons ago, but at the time they were powering the world's largest data warehouse. So when we talk about big data, big data back in nineteen ninety three was the ten terabyte Walmart data warehouse that cost eighty million dollars. That's how far things have come. That system had close to 10,000 hard disks to make it go, just to give you a sense for scale.”
2022-04-04 · Capital Allocators · Steve Papa – Entrepreneur's Perspective on Venture, Venture is Eating the Investment World 13 (Capital Allocators, EP.244) · IDENTIFIED FROM THE TRANSCRIPT · source