Are the Best CEOs the Best Fundraisers

No. Very excited to be here.

You know, in some ways, I haven’t actually either progressed or changed that much from high school. I was running student organizations. I was head of the student council. I did a lot of sports. I was very interested in public policy. And frankly, today, those are still a lot of my interests. You know, I have always been a CEO from a very early age. I was president of my fifth grade class and my sixth grade class. People wanted thought I’d I should be elected to do these things, and I love doing them.

I love managing people. I love working with people. I’m still very interested in in sports and athletics, and and very interested in public policy. So, yeah, I haven’t changed at all.

So we have to define exceptionalism, and we have to think about also not just the job. I think people make a mistake in only looking at the extreme. Oh, Mark Zuckerberg at age 19, you know, dropped out of Harvard, was entrepreneurial. The vast majority of successful CEOs are people who went to good colleges, may have done two years at McKinsey, but were truly interesting. They weren’t necessarily crazy entrepreneurial. I’ll give you an example. I was the first investor in Voila, which is a mobile bank Argentina, and there’s a guy named Pierpaolo Barbieri.

People thought a bank in Argentina is an insane idea. This is six, seven years ago. It’s currently worth about $2,000,000,000. I’ve been on the board since then. He is was five beta kappa at Harvard, did work at McKinsey, was truly exceptional, and then now is managing a 500 people. I I wouldn’t use the McKinsey example that you used. I would say that no one just, you know, is a surfer for five years, and then at 26, all of a sudden launches a billion dollar company. That doesn’t happen as much.

They they showed drive and focus and success before.

It look. It definitely plays a role, you know, because there are things that are out of your control. And the reason you know that’s true is that, you know, if you have people like me who’ve started 20 companies, no one has 20 successes. They may have more successes than your average person, but there are some things out of your control. If you remember a long time ago, I started a company called Gilt. Gilt, after four years, was doing $500,000,000 in revenue. Crazy success. We did a $175,000,000 in revenue in our second year, which I don’t think anyone in New York City’s ever done.

So you’d say, oh god. You’re killing it. What happened? Then everyone in the industry started discounting their merchandise online. So Marc Jacobs started selling discounted merchandise on their site. Macy’s did. Farfetch did. Everyone did. It became very difficult out of our control to make money, and so it ended up being less successful than you would have thought. And I didn’t like the industry dynamics, and so I sold the company.

Yeah. Yeah. Because after four years, we’re worth a billion dollars. And at the time, you know, everyone invested at a billion because they thought it was gonna be worth 2 to 3,000,000,000, and we ended up selling it for $250,000,000 despite having an incredible product, fantastic people. I’m I’ve funded many people who came out of there. Zola is all ex Gilt people. Security Scorecard is my ex, head of security. So many good things came out of it, but it it definitely hurt. I put a lot of work into that and got less than I thought.

Unfortunately, there’s a couple different dimensions. The the monetary, answer is Mongo by far. Mongo’s worth $25,000,000,000. There’s only two companies started in the last thirty years in New York that are worth $25,000,000,000. So that is a big, big success and still growing, and I think we’ll be a $50,000,000,000 company someday. DoubleClick was the most impactful for me. I was 32. I had never managed more than 40 people. Four years after the beginning, I was managing 2,000 people in 25 countries. We went public twenty four months after we started.

We did 10 acquisitions during that time. I learned a tremendous amount. So that was the most impactful in setting up my entire career. Actually, Insider was probably the product I enjoyed the most because I just love business news. I love media, and I love that challenge of if I said to you, I’ll give you a million dollars. You have two people. I want you to start a media company. You can never advertise. You can never spend $1 in advertising, but my ideally, you’ll end up with 300,000,000 uniques.

Go. I think you’d say, that’s awfully hard, and that’s exactly what we did. That was very fulfilling. And then the final answer is guilt was the most fun. I didn’t know anything about fashion, and all of a sudden, my wife can’t believe that three years later, I’m in the front row of the fashion shows in Milan seeming like a super cool person when I’m really not.

So this doesn’t apply to every company, but we move faster than everyone else. And so we started at the same time as some other people, but we were able to raise more money. People believed in what we were doing. We spent the money. We took the chance. But to open offices in 25 countries before your first country is profitable, in retrospect, is a bold move. Now what was the result of that? If you were Procter and Gamble or Microsoft and you have operations in 50 countries, we at least had offices in your 25 biggest countries, and my competitor was only in six.

Who are you gonna work with? You’re gonna work with us. The reason today, which is literally more than twenty five years later that DoubleClick, which is part of Google, dominates the world in ad technology is because we won the battle of the first five years by moving faster, more aggressively, took chances, made some mistakes, and have never given up that position ever since.

It’s true that sometimes the the early bird gets the worm, but the second mouse gets the cheese. That can happen. Unfortunately, you never know. There are many, many examples where the first player who moves very quickly and gets critical mass, is the winner. Now you have to see, is that a business where it matters? So in things like Uber, being five times bigger than Lyft ultimately does make the difference. And so it was worth it for them to just go, we’re gonna be number one or we’re gonna die.

In other businesses, though, that’s not true. You don’t have to be scale isn’t quite as important. Quality is important. And, also, you have to adjust all of this to the capital available. It’s all fine and good when people will give you a billion dollars. You know, MongoDB, we lost a billion dollars before we had a profitable quarter over 10. That’s, you know, a scary number.

did. 2000. It would have existed, and we would not have been able to invest as much and not been able to grow as much. Today, I don’t know that many companies outside of AI, where people will give you a billion dollars to lose. But today, that exists in AI. It doesn’t exist in a lot of other areas.

you from that that you took? When when two years ago people were complaining about it’s hard to get money and things like that, I really felt like your your grandfather talking about the depression where, like, you just don’t understand we had no food in the depression. Because in 2001, 2002, there was just no money. And when I mean no money, no money. There were companies that went under that shouldn’t have. Everyone pulled back. Two years ago or last year, you know, things were tighter, but the vast majority of our companies raised rounds.

It was okay. So, yeah, it was brutal. We did by the way, we did seven rounds of layoffs. We went from 2,000 people back down to a thousand doing layoff after layoff. Seventy percent of our clients went bankrupt. If anyone’s taking notes, don’t do that. It’s not helpful for your business. The seven layoffs? No. The seventy percent of your clients going under.

No. Like And also, that’s you have to do that when seventy percent of your clients go away, and they don’t even pay their last bill as well. So you eat tens and tens of millions of dollars of revenue you thought you had and then have to write off.

I do. I mean, right now, the economy is very good. If we look over thirty years, on average, if the stock market’s at an all time high and unemployment is at an all time low, if you said, are the odds that things are gonna get better or worse, By definition, there’s a reversion to the mean at some point. I don’t plan for that. Things right now look pretty good, pretty stable. There’s another characteristic in our business is there’s actually a lot of VC money. Tons of cash sitting on the sidelines.

That money is not gonna be given back. That money is going to be spent. We’re only debating whether people are gonna spend it over two and a half years, which they were doing four years ago, or over five years, which they’re probably gonna do now. But there’s a lot of money out there that is gonna keep this industry going. And the second thing that independent of any macro factors you’re talking about or thinking about, most things happen at a micro level. So we started a company in assisted fertility.

Assisted fertility is gonna grow. I can guarantee you that ten years from now, more women will have egg freezing, more women will be doing IVF than they do it today. That’s just going to grow regardless of the economy. And so there’s a lot of things like that that are going to happen and are gonna be fine.

I don’t. I’ll tell you why I don’t. First of all, we’re doing very early stage work. So the bet we are making is that and when we have an off-site, we think about we put up the the number twenty thirty four, ten years from now. So all of the conversations we’re having are about trends that we believe are ten year trends. And the reason is I know that, unfortunately, you have to assume it takes ten years to build a really successful company. Sure. And I can almost guarantee you that there’s gonna be recession during that time, and I have no idea when it’s gonna be.

I don’t worry about that. What I worry about is you know, we’re big investors, for example, in the psychedelic industry. Is the psychedelic industry gonna be 20 times larger ten years somehow than today? Absolutely. We have to create the right products, navigate our way, and get there. But if I get that assumption right, you have a much, much better chance of having success.

They’re both really important. And if I said to you if someone comes to you tomorrow and says they’re gonna start a new department store selling clothes online, I don’t care how good that person is. It’s not gonna work. Not a single one of those has worked in ten years. So the market is is a factor.

No. Because yeah. There are examples where that happens, and you assume a good founder will do that. But if you are going into an industry that ends up just not happening, you know, you can’t pivot, and you won’t be able to get the money to do that. If you’re gonna pivot into something that’s slightly different, that’s okay. But you’re not gonna start a lab grown meat company and then decide to go to solar energy. That’s just not gonna happen. So you’ve just got the industry right or wrong, and that will happen.

Ecommerce, there’s been no value created in five years. Same with media. You know, with the exception of actually podcasts, hardly anything has worked in the last five years in media. So that’s why it’s not as simple to say just back good people. You’re looking for a combination of a very good person and a thesis that you believe in, ideally a sector growing or an opportunity to create a better product.

I’m not sure that we do or I do or anyone does, and I see it all the time when we have a company going out and we approach 10 DCs. And three of them will say, I invested in this sector eight years ago, and I lost all my money. I’m out. They haven’t even read the deck yet, but I’m not saying I don’t do that as well. I mean, when I’ve had a bad experience, I think it sometimes does influence my thinking. I try intellectually to not let it happen, and I think I let it happen sometimes.

You have a sense of two things ahead of time. One, you know whatever fundamental numbers how they’re doing, which that helps. I mean, you know, I don’t have any companies going out that have quadrupled the revenues in the last year that don’t get funded. The second thing you know is you’re have a sense of how your CEO does in fundraising. You know, I’ve had examples of CEOs who are incredible CEOs, great managers, visionary, but just don’t present that well, aren’t as confident, and, you know, are worse at fundraising than they are at running the business.

And they’ll they get penalized often in the market for that, especially in the beginning when it’s less about numbers and more about the vision. So those two things you know, and then sometimes you’re you’re surprised. I mean, I have one example of a company that just couldn’t raise money, and I thought it was gonna be easier for them than than it turned out to be.

Generally, yes. Because if you if you can raise a lot of money, it increases your odds of doing well dramatically and allows you to make some mistakes. In the long run, every round that goes along, it’s more about the business and a little bit less about the CEO. Because, obviously, one guy shows up right now with a PowerPoint. There’s just a person in a PowerPoint. You know, that’s it. If we’re in the around b, we’re the investor’s looking at unit economics, turnover, churn. There’s a lot of things that are gonna help that fund raise.

It’s gonna be a more in the middle there. So I would say that a lot of the people we back are first time founders, almost never back someone who comes from Procter and Gamble, a large company, and seems like a smart person, but they don’t know startups. I once looked through the top 100 consumer Internet companies, and the one pattern was that most of the people who are very successful had actually not come from that vertical, but they had come from another startup. In the same way that, Henry and I had not been in media, thought we could do media different.

When I went out to ask people at The Wall Street Journal about my idea, they all said it was a terrible idea because they were too close to And so, you know, the guys from Airbnb, did they come from the hotel industry? No. They didn’t. They came from outside and as a consumer thought, hey. Why can’t we do it better? I will tell you that in the b to b space, there aren’t that many people that come into enterprise software and weren’t in enterprise software. So it’s a little bit harder there.

And, when we started Mongo, the reason we had trouble, raising money, even though we had already had a very successful company, was because people said, you’ve never done a database before. The three of you have ad tech backgrounds. It’s not the same thing. You’ve never done true enterprise software that you sold to a bank. We’re not gonna back you.

Dave’s done a great job at Mongo. When he took over, we had fifty to a hundred million dollars in revenue. And today, there’s 2,000,000,000 in revenue. Just enormous. It’s scale. And he has really scaled.

I’m not focused.

Yeah.

No.

I think it’s less about incumbent advantage than it is that it’s just an extraordinarily mature business. So unless there is a step function, you know, where consumer businesses came in was an all of sudden mobile came and Uber made sense. You know, when the Internet came, that made sense. We’re gonna have some consumer businesses in AI. We don’t know five years from now if Google’s gonna be the number one search engine. I just think that media and ecommerce are both sexy and accessible industries, so 50,000 entrepreneurs have gone after them.

The next guy right now just probably isn’t gonna come up with a good idea. Whereas in the b to b that you’re talking about, there are some things that have changed fundamentally either because they’re science driven, there are breakthroughs in regulation or in science allowing, I don’t know, gene editing or psychedelics or something else. And so that’s different than just another consumer application.

So I completely agree, and I but I’d use the example a better example for me is that’s at the consumer level is more like Salesforce. So we’ve seen 20 companies saying we’re gonna build a new product that uses AI that allows you to contact potential contacts. But the the truth is that Salesforce is gonna incorporate that in. Mhmm. And, you know, a large company with a thousand person Salesforce is not gonna easily switch off to a start up company. And so I have confidence that Salesforce will incorporate AI into their product.

Maybe it’s six months late. Maybe it’s a year late, but they’re gonna do it, the switching costs are so high. And that’s true of the pharma industry. That’s true of the banking industry. That’s true of others. So I I agree with that.

You want a big market. You’d like to have as little competition as possible. It’s very hard to find that. You know, you know, Pierre Paulo starting a mobile bank in Argentina. Guess what? We didn’t have as much competition, but there was geopolitical risk, you know, all kinds of risk. And he’s been remarkably successful, but that’s why it’s gonna be a $10,000,000,000 company. He’s went after a big market, and there wasn’t a lot of competition. Has your

I’m not sure it’s changed dramatically. The one thing I’ve changed you know, when I was had a small team, we weren’t industry focused. So now that we have a 24 person team, I am a big believer in having more industry focus. So for example, we have, you know, five or six full time people in health care, and so we’re really seeing everything. We have relationships with payers. We have relationships with hospitals. There’s a whole bunch of things that make us a more valuable investor. In 2021, we did not focus on robotics.

We saw probably 20 robotics deals just randomly. Then I brought on now a two person full time team on robotics. They have visited Stanford and MIT and Georgia Tech and Carnegie Mellon, then the robotics conferences. We saw a thousand robotics deals last year. That makes you a better investor. If I show you the fifth company that is making salads, That just makes you a better investor than seeing one and having to figure out how it works. What is the salad industry like? So seeing everything is helpful.

Easily 90% of the value of a company comes from the CEO and the team. Having said that, making sure you have the right CEO, which is the board slash investor’s responsibility, is the single biggest decision. I mean, if you said, why is Mongo a very successful company? You could say, well, because Dave’s been running it for the last seven years. I let the previous CEO go and hire Dave because we’re getting to a new phase and the and the and the board as well. And I think that single decision, you know, was extremely important and well executed even though Dave has done, obviously, 99% of the work.

The other thing I would say is in the early stages of a a company, the investors play a much bigger role. You know, we start so many companies. We’re early stage. Often, you have a a CEO that has literally never raised money before. So when we get them in front of 50 venture capital firms, that is adding value. When they are hiring a CFO for the first time because they were head of business development, they never actually managed a CFO before. Having a perspective on that is important.

The other thing I would say, I had incredible investors at DoubleClick. When you are a CEO, you are too close to the business. That is your job. And so some distance is often helpful because they would come to a board meeting and, you know, they’ve worked with 20 CFOs or seen 20 sales plans. And so they just had a slightly better perspective. And once in a while, I’ll be like, you know, that’s a good point. I had not factored that in. I was too close to it.

But my point remains, 90% of it is having the right CEO and the right team.

do you think about that? Again, if we look back at consumer businesses, out of the top 25 companies, how many were serial entrepreneurs? Almost zero. By the way, you’ll see an enterprise software, more of a pattern of repeat entrepreneurs. Also, on average, slightly older. 24 year olds have trouble starting a database company and building up an enterprise Salesforce, meeting with the CEO of of or the CTO of Goldman Sachs to close that deal. Really doesn’t happen that often. So industries are different. It depends whether the industry knowledge, experience, and credibility is extremely important to success.

And in consumer, it isn’t. Because I just go look at your app, and I like it. I don’t really care whether you’re 10 years old or 50 years old.

No. I don’t think that speed is the most important thing. You do need to get out your product, you know, pretty quickly, but it has to be pretty good. So for example, we had no revenues after three years at Mongo, which is not great because we had to go slower. It had to work. It had to scale. It had to be secure. Whereas for consumer apps, it can be you can you can make mistakes.

So nine years in, yeah, I knew it was working. There was no problem. Three years in, we were nervous. We couldn’t charge for it yet. It was getting better and better. We knew the industry is very big. We knew there was an opportunity. We knew Oracle was too expensive, and we knew that a nonrelational database was a good idea. But, you know, you can also just run out of money at some point. We didn’t have incredibly successful fundraisers during that time. But what you could see is that if I showed you one chart, which is how many people are downloading the MongoDB database, that was just a straight line going up to the right all over the world.

And as long as that kept happening, we thought we were on to something.

definition, companies only die because they run out of cash. The question is why do they run out of cash? They run out of cash because they don’t have product market fit, because investors are looking at the numbers, looking at the team, and saying, I’m not gonna put money in here.

Sure. You know, we’ve been investing really my money in a in a different structure for the last decade. We have a 120 companies in the portfolio, have made many investments, started over 20 companies. But we just announced that we it’s the first outside fund with outside investors. So we’ve raised a $250,000,000 fund to continue doing what we’re doing and continue to both start companies and invest in companies largely on the East Coast Of New York, but not only heavily health care, heavily tech, robotics, and social impact.

So super excited. It’s a great time.

Yep. So what I like is being industry focused. So the team in health care is doing both. I’ll give you a good example. We decided to look at a vertical because we’re doing deep research all the time. We’re much more research driven than other firms. A person on our team started being interested in the shipping industry. So shipping industry is a enormous industry that needs a lot more technology. So she spends two months, interviews 50 people in that industry. What does she come away with? One, a new idea because realizes that there’s a lack of a procurement marketplace, and so we started a company in that space called Porkchop.

And because she was at multiple shipping conferences, which most of us have not been at, she ran across a company that people were saying great things about called Box Hub, which is a marketplace for containers based in Toronto, which we never would have known about, and we invested in that as well. So it stems from if you know the industry and know the players and know the opportunities and know the holes, you both can start companies and invest in companies.

Well, let let’s not forget the data, which is that Business Insider was one the most successful media companies ever started. MongoDB, one of the most successful databases companies ever started. Exactly under the formula you just said can’t work, where we started it and brought in a CEO. The question is, are you bringing in a great quality CEO? And the answer is yes. And then are you incenting them correctly and making sure that it works? We’ve never had a CEO resign. My psychedelic company, think, is one of the most valuable psychedelic companies started in the last four years in The United States, Transcend.

So many I mean, Gilt was a big success. These are all examples where we have done that very, very successfully.

one, in some cases, they’ve tried to do too many companies and just try to crank it out. Second is a level of execution. You know, you’ve got to have money and expertise and credibility. You know, that CEO comes in is gonna be sitting there thinking, yeah. I could maybe start my own company. One, I have to love this idea. Two, I have to feel like you’ve done a lot of research on our way up to speed. Three, I’ve gotta feel like you’re gonna add value. And so, hopefully, some of these people are like, you know what?

Kevin and the team have a lot of experience, have had a lot of success, can help me and increase the odds of of my company working. The vast majority of companies that people start don’t work. Our hit ratio is much higher than your average entrepreneurs, and we give people plenty of equity so that they are incented. But it’s still not easy. I mean, we don’t have a 100% success

So it’s bottoms up, but we historically, last couple of years, we’re doing somewhere between six and eight companies a year, but we have multiple industry groups and multiple people. So at any one time, people here, one person can be working on one idea or one research project.

Look. That’s just a judgment call because you’re, you know, looking at very different ideas. Sometimes we do we just did two or three months on a fintech idea and just didn’t get conviction. And so, you know, we’re not gonna do it. But that’s a judgment call at the end of the day. You just get to the point where you’re like, I know this is gonna work, and I wanna devote the next five years of my life to doing this. And sometimes you get it right, and sometimes you don’t.

When we start a company, we don’t bail out on the company. But we put a million million and $0.5 in. We hire a CEO if we’ve made the decision to go forward. Now then the market decides because nine months later, they’re gonna go out to raise money. And I would say four out of five times, they go out and successfully raise a round and someone has an outside lead investor. And once in a while, the market’s like, no. We hate your company. So that’s what determines it.

I can think of one time where what we’ll do sometimes is do a bridge round, and we’ll say, you know, we just need six more months because we’ll have a launch, we’ll have customers, things like that. We have more confidence in the market. And then sometimes there, we were right, and then sometimes there, we were wrong.

Yeah. 250,000,000.

You’re fine. No. Look. I, you know, I’ve devoted my career to this sector, and so our returns have been been extraordinary. Things have worked. There’s nothing more fun in life than going after a new area, psychedelics being an example. Super interesting, ahead of the curve, starting companies, investing in companies, and then and seeing it work. And I’ve done that for a long time and really, really enjoy it.

Roughly, the team and CEO are probably gonna get around 45% of the company. We will have the rest because we came up with the idea, put in the money, did all the work, and everyone gets paid from day one. So order of magnitude is gonna be that.

It is because, one, as I said earlier, the the time you spend learning an industry gives you an advantage in investing. Secondly, you actually can’t invest that much money in incubations. If you and I start a company tomorrow and we build a seven person team to build this, I mean, that that’s a million and $0.5. And I don’t have enough ideas. I wouldn’t be able to come up with 30 ideas a year. So you’ve already done the work in a sector. You find out about incredible opportunities.

You’re seeing deal flow. I mean

Yeah. And then at that point, depending on the company, often we’re able to raise money outside, but often we put in another million and buy ourselves another six months or nine months. Ideally, the product is out. Some companies are using it. You can sense that it works. You’ve got a sense for pricing. Now we’re just gonna debate how big a opportunity is it.

Here’s the thing that I don’t think about, which is our ownership. Meaning, if you were gonna buy a piece of an apartment and you said, I really wanna own 10% of this apartment, does that mean and you have a certain amount of money? That means you’re just never gonna buy a really good apartment because the price is higher. So if I see three startups that just started six months ago, one of them has an incredible team going after an incredible market, that company is worth more than the other ones.

And if I put a million dollars in, I’m gonna get less of that company, but that doesn’t mean it’s a worse investment. At the end of the day, you’re just trying to figure out, is this gonna work or not? You know, sometimes we’re paying a big price, and we’re paying a big price because it’s an incredible team and an incredible opportunity.

No. But that’s just another factor. You should factor in how much dilution you’re gonna take, what are the gross margins gonna be. Super capital intensive businesses are gonna be worse investments than ones that take very little cap. On the other hand, if you do present a to continue my example, a great founder in a big business in a very capital efficient industry, yes, that’s actually worth more than the opposite. I

the non sexy areas, we just invested in a company that is creating software to manage the food, the meals in a hospital. So there’s a thousand different people in the hospital staying overnight. One has a peanut allergy. One is kosher. It’s super complicated. You have to have a piece of software to manage that. They’re very, very old systems. This is the sort of thing you and I would never think about. These entrepreneurs came in. They had created a much better product, starting to close hospital deals.

It’s a huge sector. Hospitals pay a $150,000 for software, and we’re like, that’s a great

team, good market.

Oh, yeah. You know, we don’t do any health care outside of The United States because The US health care market is both enormous and terrible, which is what you want when you’re an entrepreneur. Totally.

miss is in if I knew now what I knew then, I would have been much more aggressive early on in starting more companies, building up more of a team. Sometimes it takes five to seven years to know that things are going really well. If we had sat here, you know, six years ago, I’m an investor in this crazy company, you know, in Argentina and this company called Zola, which I started, but who knows what’s gonna work. Turns out a lot of these worked, and I would have actually doubled down that that was a golden age for the last decade.

aren’t that concentrated. So we continue to invest in our companies until probably a 100 or $200,000,000 valuation. We generally don’t put more than 10,000,000, might go to 15,000,000 in any one company. And sometimes we’ll leave some money on the table, and and other people will will take it. We want the highest return investments, and that’s why we’ve had, you know, very good results. Because, you know, when our companies are worth a billion, we’re just not investing in them at that point. And sometimes that would have been a good idea, but, you know, sometimes it’s not.

Look. The biggest challenge in the last three years is that there is no liquidity. There are very few sales. But when you have an opportunity, you should take it. But, again, that that’s company specific. Like, we’re never open to selling Mongo no matter what because we really thought we were building a 10 or $20,000,000,000 company. We we had confidence. We had conviction. I sold Business Insider not because I wanted to, because we were doing 40,000,000 in revenue, and someone offered me $450,000,000 for a media company.

And so I said, yes. Is that an easy was that an easy decision? It it was. Yeah. I say to the to my CEOs, if someone makes you an offer you can’t refuse, don’t refuse it. Take it. Three years ago, I bought the company Meetup for 10,000,000 because WeWork was getting rid of it and had panicked, and COVID had just started. And I just sold it. It it was announced in January. Sold it for seven or eight times that amount because there was a buyer who wanted to buy it, and the company’s making now a lot of money where it had lost $20,000,000 the year before.

So both. It was a unique buying opportunity. No one would touch the company because COVID had just started, and you couldn’t meet the CEO. Who buys a company when you can’t meet the management team? No one. Except that the CEO, David Siegel, who’s incredible, worked for me at DoubleClick twenty years before. So I knew him. And he had been reaching out to me, asking about the business during the six months before just as a mentor. And finally, he said, god. They’re panicking. I don’t know. I think they’re gonna shut it down or give it away.

I said, wait a second. Why don’t why don’t I buy it? So I got one trailer investors, bought it. But we also went from a 130 people the day I bought it to 90 people a week later, which is the right amount. Today, it has probably 80 or when we sold, it had 82 people. And it went from a $20,000,000 loss on 32,000,000 in revenue when WeWork owned it the year before to now we’re making 5 or $6,000,000 in profits. It’s a great business. So David did a great job.

Team was good. We ran it well. That’s not the normal thing we do. It was just a one off situation. It was a brand I knew based in New York, and I knew David, so it made sense.

It’s not about losing so much money is that, you know, in in 2000, I had probably a $100,000,000 worth of DoubleClick stock on paper, which ended up being 10,000,000. We were a year away from going public at Gilt where Goldman Sachs said, Kevin, you’ve got about a $165,000,000. We’re feeling really good about this, and that ended up being 10,000,000. So things evaporated along the way, even if they were paper gains, but you think that they’re gonna exist. And so that happens. Could you have sold them?

No. No. The guilt, I couldn’t have. And I did sell all the shares I could at DoubleClick in 2000. So I couldn’t have, but still, it’s disappointing when you see 90% of the company you’re focused on, the the value evaporate. But, you know, in my week every day, we have a 130 companies. Something’s going wrong somewhere in the portfolio. I can think of another company that I thought I had a $50,000,000 position, and right now, my guess is I’m gonna, you know, end up getting very little or getting my money back.

But on the other hand, there are there are big gains. That’s the game we play. Do you care about loss ratio? I mean, the long term you do, but it is what it is.

Nothing else matters. So, you know, you should be doing this business because you love doing it, and you find it exciting. You like helping entrepreneurs. You like coming up with new ideas, creating new categories. That’s what’s fun about it. And then if you do it well, you’re probably financially in in our business gonna do very well. But I don’t think about that day to day, and we don’t talk about that internally. We talk about we are building companies. If we build good companies, everything will work out fine financially.

No. What is true is that when you are a late stage investor writing $50,000,000 checks, that you are what we used to call private equity. You’re competing on price. There’s already an established board. You’re not adding that much value. It’s just a different world. You know, it’s changed so much. When Apple went public when they went public, they raised $9,000,000 in the IPO. So it’s very different today. In the early stage business that Union Square Ventures does, that we do, you know, the first check-in, that’s not a commodity business.

You have huge wins. You have some you know, a bunch of losses. And, by the way, I was on the board of Yale and on the board of the Yale Endowment. So we were the lead investor in many of the best firms. And as you know, in VC, there’s a huge difference between returns that, let’s say, a benchmark and a gray lock have and 90% of the rest of the industry.

No. We don’t see in the last, you know, 20 seed deals. They’re not in there very often. They don’t have the coverage of the two, you know, $2,000,000 checks. And, also, a lot of entrepreneurs are very nervous about taking their money. On the West Coast, people just take their money regardless. But here’s the risk. If a huge fund puts a million dollars into your initial round, and if they don’t lead the next round, your company’s dead. Whereas if a seed investor invests in your first round, it’s understood that you’re gonna go out to someone else.

But the negative signaling that occurs and it’s happened to me. I had a big, big, big firm join in. Everyone was very excited, and then they lost faith partly because the guy who invested in our company left the firm. And they’re like, we don’t really we’re not really into it. We’re gonna pass. And then the company was dead.

I I think you’re being misled by the 10 supposed hottest deals who get preempted. That’s not where the industry is. The vast majority of things are not being preempted. They’re going out. They’re raising good rounds. They take a couple years to be really, really big. That’s the meat of the industry.

Yes. Look. The the reason one should be concerned about venture today is that there’s probably four times as much money in funds today as there was in 2017. And the question is, are there four times as many opportunities? And I don’t think there are. I think it’s shifted. There’s more opportunities in AI, but frankly far fewer opportunities in ecommerce and media as we discussed. I think there’s actually even fewer opportunities in straight enterprise software. You know, does Bank of America need new software products this year that they didn’t buy last year?

They’ve already purchased a lot. I think there’s just a bubble of money. There’s more money than the industry needs. As we discussed later, they’ll spread it out. And unlike in the hedge fund industry, our money doesn’t leave very easily. It takes a long time. It’s sticky. Now you’ll see Tiger, which had a fund that was, whatever, a 100 and now is is now 50. So you’ll see new funds being smaller, but that takes time to work through the system.

Yeah. I do worry about it, and there’s nothing any of us can do about it. It makes no sense to me that you just can’t take a company public. Even though your numbers are 70 better than 70% of all publicly traded companies that are already public, and yet the banks and everyone will be like, yeah. Yeah. You can’t go public. There’s no opening for that. It just closed. It would be as if you’re selling your apartment in New York City, and everyone’s like, No. No. Sorry.

No apartments are gonna be sold for the next two years.

That is wrong. If your company’s growing at 60% and profitable, yes, you can always go public. But at the margin, it is not easy to take companies public. There’s not a lot of appetite. Many, many companies that’d be very happy to be public, and they’re not because they either can’t do it. Somehow, we just have not opened that up. For fifteen years, I’ve wanted to solve this problem that we need a way for companies that are, you know, a $100,000,000 and growing at 20% to be able to go public, and it doesn’t exist.

So one, if they’ve plateaued their growth, they’re not worth five 10 times revenue for a company that’s not growing that much is is not gonna fly in today’s market. That company’s worth 200 if they’re starting to be quite profitable. But that’s normal. You should expect that out of every 100 companies that start, 20 go out of business after two years, a certain percentage get to ten, twenty, 30,000,000, a smaller percentage get to 50, a smaller percentage get to a 100. It just keeps funneling down. That’s normal.

Not every market is a trillion dollar market, and not every product is gonna get 30% of its market.

So actually, you know, surprisingly little. I don’t focus it on that much. Five years ago, the only car I owned was a used minivan. I’m not that into stuff. I am into experiences, so great travel, things like that. I’m absolutely willing to spend money on. But no. I mean, it’s been a long time for me that I haven’t had to worry about money, but I also just don’t spend money to spend money. And so I don’t have any problem with it all. I have no concern about the relationship with money.

Some people are so focused on money that once they made money, they didn’t know what to do. For me, that changed nothing. I enjoy what I’m doing. When people ask me, sometimes, you know, I’m at a call a business school, they’ll say, why are you still doing this? And my answer is, does anyone ask a really good NBA player who’s 32 and who’s made a ton of money? Why are you still playing basketball? Why don’t you retire? Like, no one would ask that question. Right? Because he would say, yes.

They do pay me a lot of money, but I love what I’m doing, and I can’t think of anything else I’d rather do. So I’m gonna do it as long as I can, and then eventually it’ll end, and I’ll do something else. And that’s exactly how I feel.

So Europe so New York City has so outperformed the expectations, people have already forgotten it. So in 1996, the number one question I got running DoubleClick was, why aren’t you in Boston? Boston is the tech center. You’re giving me me a perplexed look because you can’t even remember that I I was born in ’96, Kevin. Now I can’t remember. That, you know, Deck and Wang had been in Boston, and so it was known as the tech city. And when we went public, we couldn’t even find a lawyer in New York City that had ever taken a company public.

And I said this at the time, but if you had said, wait a second, Kevin. What do you think that if twenty five years from now, is there a chance that there’ll be more tech jobs in New York than in San Francisco and that we are now some quarters competing for the amount of money, you would have said, so I’m sorry. That’s impossible to imagine. And so New York has grown faster than any other city. It still doesn’t have as many big wins as San Francisco, but don’t forget, the big wins are from fifteen years ago.

We talk about MongoDB and Datadog. They started in 2007. So what we’re trying to decide is right now, are more and more smart people starting companies in New York? Absolutely. Are there five times as many venture capital firms? We hardly had any VC money. When I went out to raise money in Silicon Valley in ’97, they said, we will not invest in you unless you move to San Francisco, which we weren’t willing to do. Today, every one of those firms that turned me down for that reason has an office in New York City.

So that’s the trend line. So, yeah, New York is killing it and will be the number one company clearly fifteen years ago.

So Etsy is in the same category. Give you some context. Five years ago, there was not one publicly traded company in New York City startup that was worth more than 3,000,000,000. Now we have two at 25 or 31 at 10 more on the way. So these things take time. But, yeah, I mean, mean, I was just in the Google office. They have 15,000 people in New York City. And I remember twenty years ago, people saying, oh, but there there’s no tech talent in New York. You can’t you can’t start an enterprise software company here.

But somehow they found 15,000 people.

No. I think San Francisco absolutely has an advantage in AI. It stems from the fact that, you know, I I I just started a company in material science AI, and the university that dominates that space is Berkeley. And so Berkeley and Stanford are stronger than New York than Columbia and NYU, and they’ve had companies and deep talent. So, absolutely, San Francisco has an advantage in that area. But we’re seeing, you know, 10 companies a week starting in New York. They’re starting all over this country. Many of the smartest people are doing AI, and it will distribute more.

What I always tell people when I’m traveling internationally and they used to ask me, which cities are gonna dominate in your country? It has nothing to do with tax policy. It has nothing to do with anything. I say, people who went to the top 20 universities in your country, where do they wanna live? Where are they gonna move? That’s gonna be your tech center. And guess what? That number one place those places people wanna move is New York City. San Francisco is still a great place and has history and many things going for it.

So it’s an amazing, incredible place. But I’m not seeing the tech talent in Miami, and I don’t think it’s gonna get there. I’m not seeing it in Chicago. Don’t forget fifteen years ago, the number one Internet company on the on the East Coast was AOL based in DC. Is DC the tech hub that New York City is? Not at all. The super smart people from Harvard, Yale, Princeton, MIT, they wanna live in New York

First of all, it’s putting the time in and the commitment. I’ve been married for thirty two years. You know, it’s friendship at the core and a common purpose of, you know, hopefully, if you’re doing it, raising kids. And we’ve been very lucky. I have three kids in our twenties. It’s a big part of our lives. It’s been amazing.

Yeah. You know, you have to install that from day one and understand and treat them that way too. I was, you know, with friends of mine, and they said, maybe I shouldn’t have given my 18 year old a $75,000 Porsche. And I’m like, yeah. Of course, you shouldn’t. My kids don’t have any of that. They graduate from college. They they have to make it on their own. They hopefully go to good schools. The you’re installing that from day one.

You know, I thought there was gonna be more tomorrow recession. Other than that, you know, my my opinions don’t change dramatically because I really have to have this ten year perspective, as I was saying earlier. So it doesn’t change day to day, my industry focus, things like that.

The combination of the the fiscal stimulus with the Biden administration has done, which doesn’t get credit for, combined with the Federal Reserve, has been remarkable management. You know, I read the French press, and they talk about Bidenomics and how do we compete with this compete with it because it’s so effective. And our French companies are setting up factories in The United States and creating jobs. I think it’s been remarkable management between those two. There’s not a single economist that thought this was gonna happen.

Either way, it’s gonna be fifty fifty. I think Biden’s gonna win, but it’s actually gonna end up being out of our hands. Either one of them has a huge health issue, that could do it. If there is a, something happening from a geopolitical point of view that goes horribly wrong, that could change it. I think that the substance and the success of the economy at the end of the day, combined with the fact that the Democrats are winning every single election that is occurring across this country and outperforming since the Roe v v Wade decisions, means that at the margin, the Democrats are gonna win.

You know, move fast, yes. But if your product sucks, that’s not good. So startups and business are a series of decisions and compromises that are situation specific. That’s where judgment is important, and that’s where I do think investors and good CEOs play the role.

Oh, by far, financially, it was working with two other cofounders and starting Mongo. Is that luck, though? Well, look. I had it was my CTO. I was the CEO of of DoubleClick, and the CTO and I wanted to start we started companies together. We had started one or two that didn’t work, and then we started Mongo. But the intellectual and execution of Mongo came more from them than from me. They built the product. I benefited even more than I deserved to.

You know, making the decision to get involved with the Internet in ’96, which, you know, I thought was gonna do well, but, you know, I I’ve had other thoughts over time that I thought were gonna do well and they didn’t, and that changed my life and my career.

The judgment of seeing many things work and not work is help it makes you more decisive on just feeling like, you know, I’m just not feeling it and trusting probably my gut feel a little bit more. If it just doesn’t feel right, it doesn’t feel right.

Trump. For me, the single thing I’m worried about I’m actually the world from a safety and security point of view is is actually okay. I’m obviously very biased on this. The single thing that I’m concerned about is Trump winning on multiple dimensions, giving away, Ukraine, Supreme Court justices, very, very, very poor execution of every aspect of government, a level of corruption that I think would follow. That’s the single thing that worries me the most.

So I don’t agree. I don’t think there’s a single example in the cabinet of Biden after four years that you can point to where we could point and say, think that’s actual corruption.

That’s I’m I’m sorry. I’m not commenting

Oh, that’s a whole another conversation, that we should talk about. But, you know, from a corruption point of view, with the benefit of hindsight, I you know, the Obama administration was extremely clean, and the Biden administration has been extremely clean. I’m not saying that they all did everything right in their policies. But from a corruption point of view, I don’t argue that either White House had a problem.

Well, I mean, there’s 15 people that have been convicted of crimes that work there. The national security adviser, was was convicted. So many people have been convicted in that administration and are serving time. There’s many people in shape.

what does that look like? The the business we’re in does not scale infinitely. We’re not trying to accumulate assets, so I don’t wanna be a $2,000,000,000 fund. I wanna continue doing what we’re doing. We may go bigger in some areas. Like, we have a deep tech practice. I would like that to get bigger over the next couple years. So next time we raise a fund, if we could, I might increase the size a little bit just to increase verticals. But we’re gonna continue doing what we’re doing.

And, look, I I lead my life because I wanna be enjoying it, having fun, you know, doing athletic pursuits, going to Burning Man, making great investments, helping entrepreneurs, spending a lot of time with my kids, you know, out there having fun.

Yeah. Was great to do this. It was a great conversation.