Why Market Always Wins Over the Founder & Why I Do Not Do Market Sizing

Oh, it’s a pleasure to be here. It’s always fun to do this with you.

It’s always an accident. Right? Everything in life is a pleasant accident, and I found my way into venture after, you know, almost more than ten years at Google. I built some of Google’s most interesting and well known products. I started Google Analytics, helped build the ad system, helped build Google Voice, and helped bring in a lot of the tech into Android. After ten years, Google had ballooned to some large number of people. Right? I think there were hundreds of people when I went there. And when I left, there were somewhere around 50,000.

When I was thinking about leaving and in 2009, I basically went to Larry and Sergey, and said, I love you guys, but I’ve been ten years here. And I miss the old days of being part of a very, very small team. You know, my best work on Google Analytics or on Google Voice was done when the team was less than 20 people. Right? You could feed it with one or two pizzas. And it was like a Navy SEAL mission. Everybody believed in in accomplishing the impossible, and we built something that the world needed and the world appreciated.

When I told Larry I was gonna leave and do a startup, it was my dream, was to go be a CEO and build a startup, and I found something to build great products. Larry just looked at me and said, like, Wesley, look. I had to buy toilet paper when I started Google. I had to go and shop for paper towels and cleaning supplies and everything else. He looked at me and said, you know, that might not be your calling. So why don’t you go and think about doing investing?

You were great at buying some of the Google’s most interesting acquisitions with, Urchin for Google Analytics, with, Grand Central for Google Voice. It helps with, Android and YouTube. And he said, if you’re good at picking companies for us to buy and and they turn in some Google’s most iconic products and services, you might wanna try your hand at investing, and we’re starting Google Ventures. Corporate venture capital has been a utter distaste and a success, and founders hate it because the interest of the company that’s investing and the interest of the founders diverge.

And I want you to go build the venture fund that I would take money from. I helped build and start Google Ventures with David Crane with Bill Myers with Rich Miner and that original group of four or five GPs and built Google Ventures and spent five years there learning the craft of investing from some of the world’s best venture capitalists, Mike Maritz and John Doerr, Bill Campbell, Brook Byers. These guys were legends in the business. And then Google Ventures got way too big, and so I left and joined a really good friend and partner, Aydin Senkut, at Felicis Ventures, Ventures, who built one of the most amazing seed funds, helped them build that as Aydin built up Felicis.

You know, got to a size where I said, I I love you guys, but it’s time for me to go back to my roots of being on a Navy Seal sized team where I can go and make decisions quickly and work with amazing founders in a way that’s authentic and legit to me, and that’s how we wound up, starting FPV Ventures. It’s Peg and myself and a couple folks. We’re five people. We move really fast. We can decide on things in less than twelve hours sometimes.

Sometimes we meet a founder, we say, you’re amazing. You check all the boxes. We wanna back you. Your mission’s just nothing short of incredible. We’ll give them a term sheet on the same day and sign it that night. We’re that type of nimble fund. And like I said, I’ve worked best on Navy Seal mission driven sized teams where I can feed them with one or two pizzas. When you have that, you can just accomplish very impossible things.

It was really interesting. I still remember pitching Google Analytics and working on the ad system early on, and they just look at me and say, why are you wasting your time on this? They always would push me and say, Wesley, you gotta go work on something that changes the world. Life is too short. This is not big enough. And, you know, when you’re 21 and you sort of hear this, your heart just breaks. Right? You’re sitting there going, I just spent the last, like, two weeks coming up with this proposal.

We’re doing all this research, and you’re, like, at this executive meeting with Larry and Sergey, the founders of of the company, and they just poo poo the whole idea and say it’s not big enough. And that was the most amazing experience. It’s stung in the moment, but it’s one of the most defining moments where I look at this and go, is this big enough to go change the world? Is this something worthy of Google and worthy of my time at Google? Right? It was one of those things where every time I would bring them a product or I work with or mentor other product managers or mentor other engineers that would, you know, sort of say, I wanna go build this.

I just look at this. I’m like, you know, Larry’s been Sergey’s gonna rip you apart and ask the question, is this big enough for the world? And if you can’t answer that question with a straight face, then you’re not gonna get this through. Like, no chance he’s gonna fund it or approve it or let you go do this. It’s one of those things where, you know, it affects my investing. I look at things like Canva or, like, Plaid or Gusto, companies that have done well but were not obvious when I did the investment.

And I said, alright. I look at founders in the eyes. Are you doing this, and is it worth your time? And is it big enough for the world? And if they could answer yes with a straight face, I’d be like, I’ll back up the truck. Of course, I’ll back you. I was able to write the first check-in the companies like Robinhood or Plaid or or Gusto or or Flexport because the founders had this dream of building something that would go change the world. And so that is probably one of the most unique product insights that I had at Google was build something the world wants and that’s big enough for the world.

I still remember I was helping out my friend, Rakowski, who was the product manager at Gmail before it launched. Right? And I still remember sitting in on the product meeting with Larry and Sergey, and the whole team comes up to to Larry and Sergey and says, we’re gonna change all of how people do email. And you remember back in the days, there was Hotmail and Yahoo, and they would give you 25 megabytes. Right? And so they had written on their deck that we were to give every 200 megabytes.

It’s almost 10 times more than Yahoo or Hotmail was giving at that point. Right? And this was, like, long ago when storage was really, really expensive and hard drives, you know, cost, like, thousand dollars a gigabyte or something crazy like that. Right? Larry just walks up to the whiteboard, writes on 200 megabytes. He said, this is what you guys wanna give to people. Right? And he everybody in the room nods and says, that’s that’s amazing. Like, we know it’s gonna cost a lot of money. It’s gonna be amazing, but we have these amazing algorithms that compress data and everything else.

And he crosses it up and writes two gigabytes. And back then, two gigabytes was insane. Right? If you look at cost of storage, it would bankrupt the whole company. And everybody just, like, in the room just gasped loud and says, oh my god. Two gigabytes. How the hell are we gonna pull that off? Right? And Larry’s like, I don’t want you coming back to me until you figured a way to do two gigabytes of storage on their email for everybody. That’s massive order of magnitude difference.

And he goes, that’s the product feature that people will go towards. And everybody just freaks out and says, oh, they’re gonna store the porn and their m p threes, and they’re gonna store the video files on Gmail. Larry just like, you can solve that problem by just blocking the file types. He’s not letting people do that. And he says that the other non obvious insight is that people are not gonna fill up two gigabytes that quickly. Right? It’s gonna be only, like, you know, point 1% of the users that are gonna fill it up and, like, use it as a storage system, and you can block that too.

And he goes, by the time people fill two gigabytes, like, this cost of storage with Moore’s Law will have dropped massively. And I’m sitting there going like, holy cow. We we could actually pull this off. Right? And, you know, Brian and the team went back and, like, we’re down two gigabytes and figured a way to do this in such a way that that was the offer. And remember, everybody freaked out, like, know, when they launched it, like, invites only if they were selling on eBay for thousands of dollars to get access to Gmail.

It’s And one of those things where I just kinda looked at that and went like, boy, like, this is an order of magnitude difference. And, like, watching that firsthand and live in that room of, like, you know, creating what is today the most used email system in the world and watching that sort of origin story sort of happen in that room when they decided between two gigabytes 200 megabytes. Was sitting there going like, holy cow. What if founders could pull this off? Right? And that informs my investing.

I asked founders and I tell the story, what’s your two gigabyte moment? Like, know, you’re telling me something that’s incremental. And I’m looking for the two gigabyte when everybody else has 25 megabyte moment. That was Canva. Right? Like, you look at Photoshop, you look at Office, and look at these other companies. Mel and Cliff, the founders of Canva, figured out how to pull it off by building something that wasn’t just incremental. It was revolutionary. Right? You look at Plaid in the same way people were looking at logging in the bank accounts and having to do those stupid direct deposits and, like, you know, write down the 16¢ and the 42¢ that people would have to deposit.

It would take two weeks to go figure out to, like, create a bank account. They reimagine that and did it instantly by building a product that allowed people to sort of sign on and onboard quickly. I mean, these are revolutionary changes for a lot of the products that happen. Those are the ones that I invest in and the ones that have served both the world, the founders, and my investing track record pretty damn well. So, you know, I look for those things that are the two gigabyte moments.

So, I mean, the wedge on Gmail was that they limited the invites. That was the magic. Right? Like, it wasn’t open to the world, and everybody used got two gigabytes. They had an invite only service for, you know, north of almost six plus months. Right? But the team knew what they were building and what they were going after. Right? There was no questions about two gigabytes was possible. That was the launch offer, and that was what eventually, you know, it was open to the world everybody got.

The difference between founders who build the features rather than products, you this know, is something Bill Campbell used to say, Wesley, you should be building something that’s a product and not a feature. And I always look at the engineers that I had the privilege of working with. I’m like, guys, are we building a feature? Are we building a product? If it’s a feature, it’s not worth our time. Are you building a feature? Are you building a product? Let’s go make sure we’re building products, right, that people want.

This goes back to the to answer your question. The founders know that they’re building a product. The product may not be what it looks like at the beginning when they launch, but I’m pretty sure Elon knew what his vision of conquering the world of electric cars was when he built Tesla. It wasn’t like this thing where, like, you know, he started and said, like, oh, I’m only gonna stop at the Roadster and just build that piece for rich people and, like, charge, you know, $500 per car.

He was gonna go and build the electric car for the masses. That was, like, $30,000, and that’s what he did with the model three. It just took him, like, ten plus years. Right? So the founders clearly understand the vision. They understand timing. You know, Canva did not start up as what it is today. Like, it is amazing today. It’s gonna get even more amazing as, you know, they execute on their hundred year plan. Right? But every founder that invested in that are building products have the hundred year plan where they’re gonna go change the world.

Right? You know, Flexport didn’t just start out as a import export piece of software. Stopped there. They had a, you know, right, had a hundred year plan. So it’s one of those things where I’ve told this to my team as we invest. What the hell is a hundred year plan that the founder’s articulating? If the founder comes to me and doesn’t have a hundred year plan, I don’t wanna I don’t care. I don’t wanna be involved.

It’s true for my life. I don’t plan more than three years in advance. I don’t even plan more than three days in advance. Like, half the time people ask me to, like, commit to these vacations or dinner parties, and I have no idea what the future will hold for me. But the truly visionary founders, Larry and Sergey, Cliff and Mel at Canva, Brian Peterson at Flexport, they have hundred year plans. It may not work out the way they envisioned it to, but they know what the world looks like in a hundred years, and they plan to go build a company.

They’ll, you know, adapt it and make that happen. Right? That is the big difference. They know.

Yeah. The market always wins. I hate to say it, but it is also true that the founder is equally as important. I watch founders who don’t have a good sense of the market, but they’re brilliant founders. They launch a product that the market isn’t ready for, and then it goes to zero. It’s money loss. Right? A market will beat out a great founder, but the best founders understand how to adapt to the market and find the bigger piece. Right? It’s sort how Cliff and Mel were misunderstood.

Oh, a lot of people pass on them because they said, oh, I don’t get the market. Right? You’re a Photoshop competitor. They’re more funded. You know? Only so many people are using Photoshop. In the market back then, people who use Photoshop were, like, professional designers or, like, people who were, like, advanced and would were willing to take a class. Mills’ actually unique insight because she was, like, a yearbook teacher in her high school was that, like, you know, people shouldn’t be taking four years of yearbook class so that they can, like, you know, learn how to use Adobe products so that they can build a yearbook in the last and final year of high school.

And she said, like, there’s gotta be something easy where, like, you could get started just by, like, logging in and not having to, like, take a class and learn all these advanced features of, like, how to layout and edit photos and whatnot. But everybody misunderstood her market as a tiny market because there was competition. It was Photoshop. And in fact, she created a whole new market of people that wanted and cared about design. That was the genius that, you know, Cliff and Mel had was the market’s bigger than anyone ever imagines.

So, yes, the market always wins, but the truly visionary and incredible founder are the ones that understand that there’s a new market to be created, and they go create it. Right? There wasn’t much of a market for electric cars when Elon started Tesla. In fact, the company almost bankrupted twice because his timing was off, and he was selling, you know, $500,000 cars with the Roadster. But he truly understand that everybody wanted one and created the model three. Look at the market Right? Same with Larry and Sergey at Google, the divisionary founders truly understood the market.

Back then, every investor nearly passed on them because they said, oh, we have 15 other search engines. You don’t need another sixteenth one. And by the way, what the hell are you guys doing? It’s a blank page with two buttons and a colorful logo. I don’t get it. There’s no market here for this. Everybody else is doing sports scores. How can you compete? And look at Google today. Right? They created their own market. And in fact, they had such a unique insight that the market did not appreciate the punched monkey ads and the horoscopes of the sports scores because all of those were designed to keep you on the damn site.

And Larry and Sergey wanted to get you off Google as quickly as possible, and then they won out the market because they had the unique insight. Yes. Market always wins, but the truly visionary founders know how to create it or adapt it or, like, figure out the right market to go into. Right? It’s the ones that don’t know how to figure it out that, like, have problems. So you’re equally right that both of those are important.

I love all three of them, but where I’ve done the best is when founders come to me and say, oh, this market doesn’t exist yet, and we’re gonna make it happen. That’s the goal. Right? Like, need a founder that has a unique insight and says, like, I can create this. The time is right. The technology’s right. I have the people on my back to go make this happen, and then go create the market. Right? That’s where the upside is. The companies that I’ve had the privilege of working with are ones that create new markets.

Now that said, I’ve got quite a few companies that have done well on what you call the market theft. Right? Like, look at Gusto. Look at the incumbents that they were working against. It was terrible. Payroll was hideous. And they said, like, we’re gonna create a better experience, you know, $4 a month per user. So it’s one of those things where there’s ways to win in all three, but the ones that I’ve had the best success in are are ones where we create new markets.

I don’t do it. I don’t actually, you know, look at the say, is the market big enough? I just say, does the founder have a unique insight on a market that hasn’t been created yet or they’re about expand into? And if the answer is yes, that’s where we back up the truck. Most founders come up and give me this crazy slide. Oh, here’s the TAM. Here’s, like, you know, some Gartner report that does it. And I just look at this and go, I’m like, I don’t believe this.

The best companies are ones where the founder says, there’s no Gartner report. There’s no McKinsey estimate on what the market sizing is. We’re creating it. Those are the ones where I sit there and like, oh, I’m let me let me get involved.

is the ones where you can truly convince yourself that you’re creating the product and not the feature. The challenge for many founders that I’ve heard pitching, this is not a knock on them. It’s just something that folks maybe are taught in business school, or I have no idea where they get this from. But they come and they say the market sizing for cars is $3. And then they come and they show me a pitch for air conditioning knobs. I’m like, the air conditioning knob market is not $3,000,000,000,000.

And then they go and they sort of, like, conflate those two things and go like, oh, like, come invest in my air conditioning knob company. The market size for cars are 3,000,000,000,000, and then they conflate those two markets, and then they convince themselves that, like, you know, they’re going after a $3,000,000,000,000 market, and then they do this crazy math in the head. It’s like, if we only get 1% of the market, we’re a $3,000,000,000 company. And I’m like, oh, that’s a lot of jumps in your head for, like, you know, turning an air conditioning knob into a car company.

Now there are truly visionary founders like Elon Musk who can go and sort of say, I’m gonna start with the air conditioning knob and eventually build the whole car after it, but those are rare. That’s the fallacy of market sizing. Right? Is that people conflate the feature part of their thing and the market size for that feature for that of the product. Right? And that’s a fallacy where founders get screwed on their dream because they don’t truly understand how to migrate from the feature to the product or they were never out creating a product in the first place.

So it’s not so much market sizing. It’s like, are you really treating a product and not a feature?

We do a back of the napkin planning. Right? So, look, I can only do maybe 20 at most core positions in my fund. Before $150,000,000 fund we raised, a lot of our LPs are charities and foundations. I think, like, 80% plus are charities and foundations and, you know, the rest of our friends, kids, college funds. Right? One of the nice things about having companies like Canva that I’ve invested in previously allows me to to be picky about who our investors are. Right? And I have to make the money.

So I have to look at every investment that I do and sort of say, like, what has to come true for this company to return the fund, if not more? Sometimes I don’t even know what the steps are, but I have to, like, at least convince myself and look every one of my charities and foundations whose endowments that I manage in the straight face going like, I think this company has a chance of returning the fund. And then if you get, like, four or five of them, you return five x the fund.

Right? My hit rates are around 30%. Right? So, you know, 100 and you know, three or four companies I’ve hit, you know, are a billion dollar plus, and I’ve been an early investor. You know, you do 20 plus companies, and you do have, like, a 30% hit rate. That’s, six companies. That’s a, you know, success fund returner if, like, you know, you do the math. My point is that for that to come true, I have to convince myself that the company can return the fund. And so that’s where we have to go.

And instead of doing scenario planning, outcome planning, we sort of say, what has to come true for the world to say this company is highly valued? And sometimes I predict that I’m way off. Right? Like, in fact, that’s where companies like Google, like, one expected it to be worth 12 and plus. Like, I still remember in the early days when it was a couple 100 people, we said we were happy if the company was worth over a billion dollars. Right? And, you know, it’s trillion dollars now.

You know, two, it’s one of those things where we go through just to convince ourselves that there’s a chance that it can happen. And that’s the case, you know, we’ll do the investment. Now there are companies that very, very, very, very hard to do that. Right? And that’s why we don’t invest in them. I’ll give you an example, like a restaurant. Do the math. Like, you know, there’s just very few restaurants. They’re usually changed or, you know, private equity firms where they’re valued north of a building.

So there’s some sectors or markets or areas where, like, we just can’t you know, when we even look at the math and sort of do this through the whether you you call it outcome planning or, like, you know, sort of, you know, understanding what the possibility of returns are, like, just don’t return the fund. So we tend to wish the founder much luck and give them a big hug, and this is not something I can go back to my children’s hospitals and and whatnot and say that we can we can make them a lot of money on this.

Yeah. 10 to 20. That’s what we look for.

I actually look at it slightly differently, and this is something I learned from my dear friend Aydin at Felicis, which is we like more shots on goal. Like, if you’re in some company like Canva, right, you’ll return 10 x plus the fund, but you have to be in a company like Canva. So the more you concentrate, the less chance you have of finding company like Canva. That’s my strategy. Right? Like, I helped to start the seed fund at GV. So Aydin also started Felicis as a seed fund, and so he and I have this preference for having more great companies in the fund, and we can always concentrate capital later on through through other vehicles.

Right? You’re quite an expert at understanding some of those strategies in place. But, like, we’d rather have more core positions that we get more shots on goal than to sort of say, like, I’ll do three companies and, like, you know, pray that one of the three companies works. Right? If you do the odds in this business, you have to have just enough to get a high confidence of returning. You know, I studied electrical engineering when I was at MIT. Like, you know, when you study statistics, you know, you want a high confidence score.

I wanna be able to to my LPs. And, like, the way I’ve constructed this portfolio, have a pretty high confidence returning the fund multiple times over on these checks. So that’s why I prefer doing more companies than less.

Well, if Series A rounds were done at 5 to $7,000,000, I would totally do it. But most of them aren’t. We have a $450,000,000 fund so we can write and back founders all the way. The capital that we have is designed for us to sort of go to the founder and say, if you’re raising 50,000,000, we’re here to back you for 50. If you wanna raise 5, we’ll do 5. Right? There’s no hard and fast rule that I subscribe to. Another thing I learned about Felicis, like, we get into the best companies, and we do what we can to get in the best companies.

We don’t go and have dogma. I did not have 20% ownership of Canva when I led the Series A. I did not have a board seat. In fact, so many people said no to them because they said, we’re not giving you a board seat, or they said, we’re not giving you 20% ownership, or they said, we’re not gonna do x, y, and z. And remember the dogma back then in 2014 when we were discussing the deal was 20% ownership in a company located close to you, run by a romantically involved team an abort seat.

Basically, we didn’t get any of that from Canva. I was one of the few people that said, in fact, the only person that said, yes. We’ll write the check for you because we really believe in what you’re doing. Fine. We’ll waive all these things that every other VC is saying we have to have with the ownership requirements and everything else, and Canva’s sort of the lifetime achievement award. Right? Like, it’s gonna return so much of the fund for Felicis. It’s one of our investments in in my new fund, one of the first that we did because it’s such a an amazing company that continues to scale and build products that people want.

That’s the thing where if, like, you know, I had to subscribe to some dogma about ownership or subscribe to some dogma about board seats or whatever else, I would not have gotten in or I would have said no. Could you imagine me missing out on this company because I had some dogma?

Yeah. If Canva came to me and said, well, you leave the series a for a 100 k and have, like, point 001% ownership. That would probably would not work. I mean, this is the market. Right? There’s some market efficiency that will work out between the founders and myself, and we say, like, look. Let’s make a deal that you wanna say yes to, but at the end of the day, like, you know, I don’t need 50% or 20% or whatever the other funds are requiring for the model to work.

We have a very flexible model to be able to win. That is something, again, that I learned from my wonderful colleagues at Felicis, and it’s near and dear to my heart today to build a a set of terms that make

I didn’t get a board seat. I’m on the board of Canva today, but, you know, they said, we love this. We don’t know you well enough yet to give you a board seat. I was like, fine. I don’t need one. In fact, if I like, you know, we’ve got IPO of a board seat. I’m fine. But they said, Wesley, we trust you, so we want you on the board now, and we can let the Series C at Canva. So it’s one of those things where I’m not dogmatic on this.

My preference is to only take the board seat if the founder wants it. Right? Like, it has to be something the founder wants, not what I want.

Again, that’s a founder’s decision. Right? If my being on the board adds value to the founder, he wants it or she wants it, I’ll totally do it. There are founders who are like, I don’t want you. I don’t need you on my board. That’d be great.

It depends on the board. Right? Like, the one on Canva adds lots of value. It’s a small board with me and Rick Baker and the two founders. And we have lovely discussions about how they wanna move forward and what their hundred year plans are. If it was a 20 person board, we would not have those discussions. Then I’m on some boards that have, like, ten, fifteen people on there. I just, like, sort of go to the board meeting. I’m like, oh, like, I’d rather not be here because there’s not much value that the board has.

And everybody has a different opinion, and the founder spends more time managing it. This is really up to the founder. For me, like, I’m only willing to do it if founder wants it. Right?

It depends. Right? On Canva, we’re able to concentrate more capital. And by way, Sequoia came in on that round too with us. It really depends on that. Look. This business is an art. Right? There isn’t a hard and fast rule of let’s go do x, y, and z, and that’s a pattern. In fact, the VCs that subscribe to hard and fast rules that have dogma are usually the ones that get knocked out very quickly. It’s the art of the deal. Right? Like, everyone’s a custom unique boutique deal.

That’s what we spend time doing. Right? And we just make it easy for the founder to say yes.

Yeah. You know, I had a lot of founders say, I wanna raise now. It would be great to to go out. And I sort of said, like, look. The market’s just completely changed. A lot of VCs don’t wanna be pricing a falling knife. Right? Could you imagine, like, doing a deal in your fund and then, like, three months later, it’s, like, worth half as much and you have go to your LPs and explain that? Everybody’s sort of thinking about, you know, what the new market sort of is and what the new reality is.

You know, my counsel to founders was like, look. If you don’t need the capital, don’t go out there with everybody else desperate to get capital right now because everybody’s out in the market flooding the market going, like, give me money. The one data point I had was when we announced a fund. Right? Like, I’ve announced a bunch of funds before from my previous firms that I worked for. Right? Like, you know, I’d get a couple 100 people saying, oh, it’d be great to talk to you about raising money.

And then, you know, this time around, you know, my inbox and my LinkedIn messages and whatnot was flooded by over like five or 6,000 people saying, I need money from some companies. You may have heard of that you read about in tech wrench. And I just would ask people, how much cash runway do you have? And everybody knows, like, four months or less. So the people out raising half had at that point to be out raising.

And you don’t wanna be lumped into the system where, like, you know, if you have the cash, you’re out with a bunch of other people that are knocking down and banging down every door because they might earn the cash because a lot of people aren’t doing as many deals as they were a year ago. So I just said, like, hold on. Let the market reset, then figure out what the right strategy is. And if you have quiet investors where you can raise some more money quietly and do it at terms that you’re excited about and that they’re excited about, then go do it and shore up your capital pool, but don’t be out publicly raising.

Because everybody that was out there had a bit of desperation in there. And so that was the impetus for it, and we’ve got a lot of people who said, oh, I totally hear you. How do I find quiet capital that’s willing to do it or go to folks that know me? That, you know, that served some of the founders well that had access to that. Right? Like, Guild was able to raise a great round from investors they knew without being on the market, and they were one of the big success stories of being able to get up rounds even when everything was falling.

to have a fund. It’s not the best time to be investing. Right? There’s a lot of treacherous deals out there. I don’t know when there’s these market corrections. What winds up happening is the credit and capital market seize up a little bit. Right? And so the challenge is you have no idea who’s gonna write another check into your company. And so you might be the last check into that company. And so it’s very treacherous. Like, you imagine finding, like, some company that has four months of cash left.

Right? And you have a 25 or $30,000,000 fund. And you say, oh, I love what you’re doing. Let me go write a $4,000,000 check-in your company or went on concentrate capital in there. And then, you know, from the last twelve months and, you know, the markets are still seized up then because who knows how long this last money policy isn’t funding more capital into the markets. So, you know, VCs are still sort of skittish and waiting for the markets to reprice. So a lot of them aren’t doing deals.

And then the founder comes back to you twelve months from now. It’s like, I’m of cash again. You just put four. I need another four. What are you gonna do? Nobody else is knocking and returning any phone calls to that founder. It’s treacherous. It is a great time to be in great companies, but it is not a great time to invest because it’s so easy to make a mistake because you might be the investor of last resort for that founder and then have to either shut down the company or keep writing checks in that company until the capital markets free up a little bit.

And so there’s some treacherous behavior that one has to be careful about as you’re looking into this market.

No. That’s what we’re doing. We’ve done at least seven deals so far, right, since, you know, our fund is, like, two months launched. So we’re being very aggressive, and we’re being very thoughtful in terms of what we’re putting capital into. But and most of them are companies that I’ve known well, the founders that know me well and that have no need for more capital. It was a wonderful time to be into those companies. But would I be doing a company that sums to me and says that two months of cash?

If you write us a check and it’ll last us twelve months, it’s a great market. Like, we great founder and, like, you know, two months of cash, I probably wouldn’t do that deal.

One of my big misses was Twilio. You know, Jeff Lawson, I was the founder of Google Voice and, you know, had built that for multiple years and knew a lot about telecom. And he kinda said, he’s like, oh, I’d love to have the Google Voice founder on my cap table. Would you invest? And this was at the Seagram, right, like, when I was at GV. And he’s like, had some, you know and I passed on it because, you know, I looked at it and, you know, talked to my team at Google Voice, and everybody looked at it.

It’s like, oh, this is easy to do. Like, you know, once the company gets big enough, they don’t need Twilio anymore. I didn’t understand how much he would evolve the product, how much he would change. That was a big miss. My lesson learned on that one and many of my other misses is that when you’re an expert in the area, you know too much and everything becomes hard as a not invented here syndrome, especially if you’re a classically trained engineer. You know, my best investment like Canva or some of my life science investments.

Right? Orka Bio or or Zillus or these amazing life science companies I’ve had the chance to to be part of. Like, if you know just enough to be dangerous where you can believe the founder instead of having all the skepticism going, no. It can’t happen. That’s where you do the best. I try not to take any pitches in x areas I know too much about because I have a natural bias has passed on it and say say no. And I’d rather have one of my colleagues or partners who don’t know enough about it take the pitch and then, like, be really excited about it, I’ll go sit there and poo poo it afterwards.

Then it survives that, then the deal gets done, to have me go and, like, have a natural bias. That is literally my biggest set of misses, ones that I knew too much about.

much. I like these tools. I’m too used to it. Like, you just hate you hate everything you know too much about.

My comfort level on getting over that is you really have to truly understand. This goes back to that thing about building products and not features. Right? The founder’s vision and the hundred year plan. My biggest lesson learned on investing is that what you see today is not what if the founder’s truly vision, it will not be what the company is a year or two years or five or ten years from then. So you have to really believe that the founder’s capable of morphing the company and the set of products into something that’s truly incredible.

That’s the piece that I spend most time doing. I don’t ask them about what the product is today or all the problems or issues that customers have. In fact, like, a lot of time, well, I’ll do customer references just to understand what the limitations are, but, like, know, my early lessons of investing were the you know, and I missed out on quite a few companies because I listened to customer references and listened to them bag or hype the product. And I was like, oh, we can’t invest in this.

Customers hate it. It really this goes back to the founders. This is a founder truly one of those incredible product visionaries that’s capable of morphing both the company and the product into something that’s truly visionary. Now can you imagine meeting Elon Musk and thinking about Tesla when he only had the Roadster and you, you know, everybody’s thinking, oh, he’s only gonna build these $500,000 cars for rich people that are electrically driven. And you sort of sit there and go, oh, I’m not gonna do the deal because I don’t think Elon can morph the company into something where the model three and these other great cars that you can create at $30,000 price point is possible.

The company changed. Right? Like, so you have to truly believe, listen, and hear if the founder is capable or has a plan to change the company, what the real, you know, vision of the company is versus, like, what the company might be today. That was the piece and my biggest learning lesson in doing this business for ten plus years. This is

You don’t ask that. A lot of people tell you what you wanna hear versus what your your good questions seem to ask it 10 different ways in ways that make sense. And, you know, again, that’s of one the things I wanna give away the trade secret and how I do it. But, like, you have to ask it 10 different ways and listen carefully. And if the answers are consistent, you can truly differentiate those that are product visionaries than those that aren’t. You have to do it in ways that people can game.

Right? Like, you know, if you ask what your product planning, you know, people can game it. They create a road map or they have a friend works who at Google create some product road map and you look at the road map and all looks really legitimate. Right? But it may not indicate their ability to really truly understand what the company needs to morph into. That’s the piece that, you know, is the art in this business. And that’s one of those things where, like, you know, you sit there and, you know, having been at Google where I got to build and work on and dream up some of the best products, you know, that the world uses today.

Like, you know, you just have to listen to that and say, is this founder capable of that?

Simple. You we’re an investment firm where at the end of the journey, the founder says, you’re one of my first phone calls. That’s it. Whether you IPO the company and we make billions of dollars for, you know, some of the children’s hospitals we whose money we manage or whether you, you know, we shut off the lights. At the end of the day, the product is simple. You know, you have a relationship with me where you’re willing to say I’m still one of your first phone calls.

Is it multistage? Is it multigeo? It’s multigeo, multistage. I mean, the only thing we’re not touching right now is crypto. My best company that I’ve had the privilege of working with is Canva, which is located in Sydney, and it was, you know, in a geo that wasn’t obvious when I led that deal at Felicis. Right? And so you never know where the world’s most amazing founders will come from or where they live or where they might be hiding or where that what they might be doing.

Like, you’re oh, this is a business of pleasant surprises. You just to keep an open mind. But when you find that and you spot that amazing founder, that’s gonna be the next Larry or Sergey or Cliff or Mellicamba, like, you you know, you kinda sit there and go, I wanna work with you. Let’s make it easy for you to say yes. Again, I’m not dogmatic. Right? I don’t say I have to own 20% ownership or, you know, be only in The US or be in places where I have to be able to drive to.

I’m willing to some of my best companies, like I said, are in sectors that, you know, people are like, I don’t understand why you’re in it. You know, there’s this joke that my old firms and that some of my colleagues would have that, you know, and in fact, Don calls it sometimes called the Wesley head scratcher. When I did Canva, it a Wesley head scratcher. I don’t get it. Australia company, romantically involved founders, they haven’t launched revenue yet. You know, $100,000,000 plus valuation. No one got it.

Right? Like, in fact, like, everybody’s like, that’s a head scratcher, Wesley. Why are you doing this? And it turns out to be the lifetime achievement award. Right? And so it’s one of these things where you just have to have an open mind and not be dogmatic about stuff. But, like, when you spot that product visionary and, that’s what I index on is product visionaries. Right? Then go and you back up the truck, and I’ll take the risk that most other people won’t. That’s how I invest.

I’m not saying it’s the right way of investing, but it’s what served me very well. You know, the lovely thing about VC is there’s hundreds of, if not thousands, of different ways to make money and be successful at this business.

the wilderness like a Canva right after, you know, eight years of doing that deal. Everybody looks at it and goes like, oh, I can’t believe I passed on that deal on the Series A. I’m like, but you did.

What a crazy story. Right? Like, I started fundraising, like, three days before, you know, the whole before Russia started invading Ukraine. I thought it’d be screwed. And, you know, it’s very terrible what’s happening there. There’s this irony. Like, I invest in boring money making businesses, right, or in life science companies that, like, you know, create new drugs to cure cancer or whatnot. And one of my LPs had this, you know, sort of ironic insight. Know, I raised the fund pretty quickly.

We were able to close in less than a couple months, and we were, you know, almost two, if not three x oversubscribed in the commitments that we were able to take room for when we capped it at $4.50, right, versus being able to be greedy and taking more money. And the reason we did this was we wanted to be very disciplined in our approach to investing in great money making businesses. There’s only so many of them. And we wanna be super picky and be disciplined in being limited in what we can invest in.

If you have unlimited capital, you start, you know, being loose with capital and invest in not high quality deals. So we decided to have the strategy of saying we’re gonna invest in boring businesses that make money and not fattish businesses, not crypto. In a year ago, I you know, one of my LPs had this interesting insight that said, like, you would have had more problems raising a year ago because everybody had these strategies like crypto and Web three and whatnot that, you know, are are not making money today.

And you would have been seen as, you know, just some traditional investor. And in fact, like, you know, with the market’s changing, with crypto crashing, all these scams where poor little ladies are being ripped off by, you know, these crypto so called banks that have lost all their money. Like, we look like safe harbor. Right? Like, we do traditional venture capital in businesses that have revenue, and we plan out exit scenarios that, you know, if these multiples hold, these companies are long term valuable. They’re critical.

The businesses are timeless. In fact, that’s, you know, sort of the pitch that we gave to LPs is that, like, we invest in timeless companies. It’s not for me to tell other managers what their strategy is or how they do it. They I’m sure they have authentic strategies, but the, you know, the one piece of advice I gave myself is just go back to your roots and do what’s authentic to you. Great businesses make money that we can get in at fair prices that the world will always value no matter, you know, there’s a recession or there’s a disaster or whether the times are good, and, you know, that’s certainly well.

I tried to hire a piano teacher, you know, I was a disaster. They you know, you have to learn the scales. You have learn the street music. And I said, I just wanna learn Chopin. Nobody would would teach me that. I basically learned using a YouTube. And so you learn that there’s two things that I sort of broke down the learning process into. One was the mechanics of it and the technicality. Where do I put my fingers and how do I and for how long? So you you learn that on YouTube.

You figure out the fingering for it. You, like, you know, practice one hand at a time. You get that right. And then the second piece of it is the mastery of it. Like, you know, some of the world’s best artists, Arthur Rubenstein, Gerrick Olsen, how do they play it? Right? And, like, what are the nuances that they do to master the piece? And so, like, know, we have all this stuff in Chopin, which is, you know, very emotive, Roboto, which is, you know, that’s the whole timing element where you robbed in the past to give to the future, you know, so the timing isn’t consistent, isn’t just like one, two, three, or mechanical.

And you listen to them play it, and then you duplicate as much as you can in their timing and in their emotive sense. And then you learn those two things together, and then you get the mastery. Right? Same with venture capital. There’s the mechanics of the of doing the deal. Anyone can be a venture capitalist. Anyone can issue a term sheet. Anyone can go find a great company. And then what’s the art? That’s the mastery of it? Where where you go from, you know, being just mediocre or you’re being average in in venture capital, having outlier returns in outlier companies like Canva and Gusto and and Plaid and whatnot.

And what are the what what is that one edge that you can master that you can do it slightly different than everybody else so that you have an edge that people can notice and that, you know, pays off in the end that compounds. Right? And that’s the piece that, you know, on the piano is just, like, really truly understanding. And, you know, my edge there is just breaking it down into, you know, certain timing elements where I think mathematically about how long the plate note and sort of, like, you know, how much pressure to sort of apply to the key, and then you can sort of create something that, like, is a slightly different interpretation that people still think is good.

So that’s my lesson.

For me, my art and my edge is, again, indexing on the product visionary and finding that founder that says, get product and I get what this company can be in a hundred years. And when I hear that, I back up the truck. And when don’t hear that, I’m like, oh, let me do some more digging. And if I can’t unsurface it, and that’s a that’s a deal that I tend not to do. So it’s one of these things where that’s my edge, and everybody has a different way of doing this.

They have a different art, and they have a different way of succeeding. That’s what makes this business so exciting. Right? Like, because you learn from other people’s mastery of it, and you go, oh, I would not have thought of it that way. And they have this amazing sort of ability to have this edge that no one else has. And I look at it and go, is there something I can learn from that? Is there something you know, I don’t you to copy because that sounds completely unethnic.

But is there something I can adapt into my behavior change or my investing? And the answer is no. Then I just go, oh, I’m not gonna do that. Right? And if the answer is yes, then that’s another piece I add to add to my mastery of this business. So I think that that’s the pieces that I love getting to mastery. At the end of the day, that’s why I love meeting folks like you and everybody else who approaches venture capital in a slightly different way and go, like, what is the piece that you’ve mastered and what can I learn from it?

book? Liar’s Poker. Michael Lewis. Michael Lewis is one of the most amazing storytellers on the planet, and he tells the story of the mortgage crisis back in the eighties. It’s just amazing. Lot of interesting analogs to what’s happening today in in the markets in venture capital.

Biggest strengths as a MPG with founders, really truly understanding the part of the journey. Biggest weaknesses, I appear really awkward to folks just given my, like, sort of, engineering upbringing.

It’s really the empathy that they have with their employees. Right? You know, the best founders like Cliff and Mel have massive empathy with their employees, especially as you’re growing. Because you can just imagine, like, know, you’ve been walking in the company. I went through this firsthand, you know, when I was at Google where the company was doubling every two months. You know, you can just imagine how unfrazzled everybody gets, you know, in a business where, like, it just keeps growing. And you’re like, every day is different, and you walk in, and it’s uncertain.

And so you just have to have an empathy with your employees and truly understand that that they’re going through their own journey, and they’ve joined you on that journey. And if you can demonstrate, communicate, and understand have that empathy, like, you know, you can go to the moon and back.

boohoo crypto. You know, some of it’s done well, but like I said, like, I can’t be involved in a bunch of stuff where, like, I think more than three quarters of it is scammy. Like I said, I managed children’s hospital money. And last thing I wanna do is like, oh, I’m sorry. Lost your money in a scam, and we took advantage of a bunch of little old ladies. That’s contrary. And a lot of people thought it was crazy when they said that.

And, you know, some of us coming on the roost now as we see Celsius and Voyager and some of these other companies, like, really take a lot of retail investors and a lot of them, you know, folks that aren’t very wealthy or don’t have much money or they took their life savings and ran off with it. It’s terrible.

God, that’s an interesting question. I changed my mind, like, eight times a day on stuff. You know, Pega, my partner bought a deal to me that I thought was in an area, those payments that I thought was hard or terrible. You know? She basically said, no. Look at the, you know, founder’s vision on this. And I said, oh, well, in that case, I’ll change my mind on it, and, know, we would develop doing the deal. So there’s this famous saying when I would pitch stuff to Larry where he goes, Wesley, if you have the data, you’re right.

If you don’t have the data, then I’m right, and you don’t want me to be right because I’m often wrong. So bring the data. And so, you know, I think that that’s how we operate our partners, meaning is that people bring data. And, you know, when that happens, you know, we have a productive discussion or not. It’s a bunch of people yelling and opinions. And, you know, that usually causes people not to change their minds if it’s just random opinions.

Boy, I would probably take my iPad, but there’d be no communication. But, that’s that’s you know, there’s so much information reading that I love learning on.

You know, I always do this planning exercise with my founders, and I write down the things you wanna be true in five years, I wrote down, like, three things that I wanna be true. One, we remain a small team. Two, we have a family of founders who vehemently tell everybody else we’re their first phone call. And that, like, you know, anytime of a problem, whether it’s like a therapy issue or like a fundraising problem or a product issue, Wesley and Pega are my one of my first phone calls and, you know, I you guys need to work with them because they’ll be one of your first phone calls too.

And then the last thing that I sort of say is that everybody on our team continues learning, understanding truly, like, what brings them fulfillment. We started this firm so that everybody that works with us can be fulfilled on what they do, not because the money is always secondary. And, like, one of our core values is that we want people to be fulfilled and, you know, we want our founders to be fulfilled in what they do as well. The money is always secondary.