Ravi Mhatre co-founded Lightspeed Venture Partners just before the technology industry unraveled in the dot-com bust. Lightspeed weathered the dot-com crash and became one of Silicon Valley’s top venture capital firms, known particularly for many of its enterprise software investments.
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Over his two decades at Lightspeed, Mhatre has invested in Nutanix, MuleSoft, AppDynamics, Zscaler, and Rubrik to name a few.
On the Newcomer podcast, Mhatre and I talked about Silicon Valley in the wake of the collapse of Silicon Valley Bank. We discussed how the gravitation physics of the startup business has changed.
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Hey, it's Eric newcomer author of newcomer this week, I have a
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great guest for the top behind the scenes venture capitalist.
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Robbie Matra, who co-founded light speed in 1999, ravi's
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invested in new tannic Smule soft app Dynamic, Z, scalar
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Aurora, and blend labs to name a few.
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He's perhaps the key partner at light speed, which is raised
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seven billion dollars an ounce seven billion dollars in 2022
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and we Talk about the Silicon Valley Bank debacle, how the
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laws of gravity and Venture Capital world may or may not be
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changing and generally talks about what it's like to run a
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venture capital firm and invest at the same time.
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Ravi great to have you on the podcast.
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Thanks for coming on. Yeah, thanks for having me.
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Are happy to be here. I feel like you don't do a ton
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of podcast. I've had a couple behind Find
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the scenes players now and I was very happy to get you on the
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podcast. I wanted to start off just like,
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you know, really zooming out because you're someone who
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understands sort of the Venture landscape, you know, built light
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speed U Co founded in 1999. Is that right?
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Yeah. So that's pretty.
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That's just as the.com is unwinding.
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What was that? Like, founding our firm, right?
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Ahead of.com. In 1999 and what inspired you to
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start light speed at the time? Well, I guess the first sort
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Observation with hindsight and you know it's the same with
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founders of our companies. Sometimes it's better that you
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don't know what you don't know. Had we known there was going to
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be sort of an existential downturn that affected every
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corner of Technology, you know, 9 to 12 months, after we started
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the firm I'm certain we would have done some things
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differently. Certainly we started the firm we
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raised a relatively large fund wine, even by today's standards,
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it was in the high hundreds of millions, you know, and our
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Focus This was at the time, there's a high velocity Market,
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but was to work with early-stage Founders and really be high
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conviction. And if you feel like you might
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not make it through like the chasm, when we really realized
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how severe the trough was going to be, we probably had deployed
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about a third of a fund already and you know with hindsight when
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you get into sort of downturns that big it's like the rules of
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gravity. Just somebody made that, you
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know, change them and the rules of gravity that you were
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penciling out all your ass. Sue just don't apply anymore.
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So you're in the state of a little bit of vertigo and
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weightlessness where you've invested money in companies,
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their premise of how they're going to spend that money to
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build a product and frankly, even who's gonna have a sort of
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money in the market to buy your product, everything from the
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root assumptions up and the top assumptions down have changed
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and so you're in a position where you're sort of staring at
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it and saying hey we did all the things, you know, we think Kaya,
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right. But when the kind of fundamental
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laws of physics change, You have to reorient our way and frankly,
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some of the things you've done, you just can't get the math to
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compile in a new unit. In a new environment, we are
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weightless and floating. And before you knew that there
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was some, you know, kind of pulling Force to keep you
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grounded. That is like the perfect
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metaphor for the question of this podcast, like the rules of
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gravity changing, the rules of physic changing.
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Does it feel like we're in that type of world?
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Now, where the rules of gravity have changed?
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I need to sketch it out. Briefly 2022 was sort of a
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brutal correction for tech stocks To me, it seemed like
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early 2023. We had hope and now we have this
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sort of SV B Silicon Valley Bank crisis and broader banking
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situation. Summing that all up is that
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rules of gravity have gone away level situation, to you, or not
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quite now. Having, you know, personally
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seen and at Lightspeed having experienced, you know, three
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major. I'd say, cyclical events for
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technology first, the 1999? Nine through 03.com burst, then
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the financial crisis in 08, 09 most recently covid.
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You know there's some things that are the same about
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companies having and I'll get to this fundamentally retool how
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they think about what they need to do to operate their
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businesses. So there are some laws of
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physics that have changed and they are going to be more or
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less painful you know to realign to depending on how much a
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business. It was optimized for the 2021
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and before environment. But what I would say is
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different at this point in, this is really more about the
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technology industry as a whole. When we started light speed in
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ninety, nine of the top ten most valuable companies in the world.
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One was a technology company was Microsoft is valued around 200
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billion I think today if even in the sort of depressed Market
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environment, if you looked at the 10 most valuable companies
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in the world, it's something like seven or eight our
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technology companies in this is As, you know, Google Facebook,
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Amazon Baidu, Tesla apple, and there's a couple, I'm probably
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forgetting. But these are companies that are
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valued in, you know, summer in the trillions and many are in
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the high hundreds of billions. So if you just do that math,
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it's an example or a barometric reading of how much broader and
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secular technology. You know is today it pervades
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every industry. It's not really a vertical
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industry anymore. So you know, when you say that
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and there is a downturn and there are things that come
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companies have to do to retool to the new physics on the other
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hand. If you are a technology
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innovator it is not a situation where every you know kind of
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potential buyer or consumer of what you do.
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You know, is essentially gone into a mode where they're in a
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defensive posture and that is good news because it means that,
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you know, it's not like somebody said you went from having
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gravity to being weightless. It's more saying, hey, we went
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from an environment where We were at, you know, kind of five
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gravity's in terms of a pool in the market in 2021, and you
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didn't have to worry about, you know, whether you were making a
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profit because with low interest rates, and the ability literally
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for Capital to be available on demand at a higher price at a
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very, you know, non diluted basis.
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You could make those assumptions about the fuel, you are going to
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have and you could build product and you could grow and I'd say
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that the laws of physics that have changed now are hey, maybe
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we're in a half gravitational, pull environment and know your
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Like based on the way you ran your company before your feet
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are slipping a little bit on the ground but if you take a
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hard-nosed look at what you need to do, there are still buyers
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there. But one needs to look at how you
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operate a business in a way that is fundamentally more operating
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efficient that, you know what people are buying allows you as
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a company to extract value back from your customer.
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And then in terms of how you operate, your business flow that
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through to something that can generate, if not profit, only
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sort of a much smaller. Arjun of loss.
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And so that can be a pretty traumatic exercise in terms of
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the DNA of the company organism. But it is a doable transition,
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it is, it is not as much of a binary transition.
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Where I really feel like in the 99 downturn.
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There were just many companies where, you know, the rules of
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gravity have changed so much. There was never going to be a
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scenario where what they were proposing a value would make
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sense in the new world post the downturn.
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I mean, you know, specifically you've invent what you'll soft
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appdynamics Amex, you 10x like sort of software and software as
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a service business is, you know, you get this world.
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One of my favorite stories that I wrote was like November 20 21.
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I had this list of like seven companies that had raised at a
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billion dollar valuations with less than 10 million dollars in
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AR are. Right?
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I mean when this SAS multiples just like went to the Moon, it
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felt like anything was possible. I mean if somebody raised, I
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don't know a series C round. You know 2021 late 2021 like is
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that recoverable or how are you helping these sort of South if
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you just happen to have a good company, but raised sort of at
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the wrong time or you you thought it was a great time.
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You raised it, wonderful prices but now looking back you raised
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it super high prices. Are you seeing those companies
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find a way to sort of, get on the right footing?
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Yeah, I think, essentially, what you're asking is we went through
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a period of cheap Capital availability for all kinds of
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companies. And then in 2022 that
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availability of capital on an inexpensive, basis went away,
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right? And so you're sitting here with
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a lots of companies that had, you know near-term, you know,
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pre fat balance sheets and what 2022.
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And now in your 2023 has become is a period where nobody wants
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to raise money, because the immediate spot market for
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raising money, the prices are just much lower, it's like the
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real estate market. The first thing that happens in
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a For real estate market is when prices go down, everybody takes
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their home off the market because nobody wants to sell if
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they're going to get a lower price and there's some analog to
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the private company, you know, funded in Market
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revenue-generating, you know, technology startup or Growth
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Company. Essentially, everybody took
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their took their company off the market and in the ensuing year
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and a half, you see a wedding or separating process that happens
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sort of naturally where the companies that have Have
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arguably stronger product value. Propositions the companies that
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can retool and get their models closer to being operating
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efficient, so they burn less cash, they're creating more time
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to run the experiment of, hey, as I let time pass and I'm able
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to get more customers. Am I able to kind of grow my
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revenue and grow my business in a way that looks operating
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efficient relative to the new Norms?
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How far can I get to catch up to that valuation?
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I raised in 2021 which again, As the laws of physics changed now
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say was too high, relative to the maturity, my business, and
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some are making it. I think it's probably not the
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majority. I think there are a lot more
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companies that in the 2021 environment.
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When was either raise money was probably frankly easier to sell
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the product, even if it wasn't at the very top of the, you
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know, the food chain in terms of value the customer.
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But they're able to grow somewhat, they maybe have made
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some improvements in their operating model, but there are
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not getting to the point where the state of the business today
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in the new physics. Environment means that you've
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crossed over the valuation where you last raise money.
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And I think we see that those situations are now starting to
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happen. And I think companies are
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basically good news for the companies that have strong
00:11:17
businesses is. I think in today's environment
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there was so much, investor Capital raised.
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Those companies are still able to raise money at, you know,
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sort of flat, or many cases up rounds.
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Again, the aperture for Tech Innovation is still broad the
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Technology Innovation Cycles, they really are decoupled from,
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you know, the kind of macro economic Innovation cycle so
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that March forward is happening and you're seeing good examples
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of company and arose One Life speed invested.
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But I mean, it's a very interesting company again, where
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you just look at the kind of adoption of the product set that
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they have and they were able to raise a large up around, there
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are others, but you see that in some cases.
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But I think you see many other companies where the Reckoning is
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hey we have a business, it feels like Like one that is creating
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in value but we have to accept that the Norms of this macro.
00:12:03
Environment are such that whatever.
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You know the pricing was we did in 2021 or before, you know,
00:12:08
it's like my home, maybe I will, you know, decide to sell it for
00:12:11
a lower price. So how does that manifest?
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You're seeing a lot more speed of these converts which are
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really an ability for money to come into a business that has
00:12:20
value. But nobody wants to try to
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pinpoint. The value of the business today
00:12:24
is too hard to do, the founders and management.
00:12:27
Don't want to take it down round.
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Investors you know aren't ready to commit to an up round.
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So you kick the can down the road and say I'll give you money
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and I wanted to turn to Silicon Valley Bank.
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Depositors have been protected now.
00:12:40
Well do you think a lot has been lost?
00:12:42
Are you worried about sort of just the absence of I mean I'm
00:12:45
you know they're trying to run as usual.
00:12:47
Now I'm just curious from what you can see at the moment.
00:12:51
Yeah. How much is Silicon Valley?
00:12:53
Going to be disrupted by the troubles Silicon Valley Bank?
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Yeah there's absolutely Something that's been lost at
00:13:00
this point that I don't think can be regained.
00:13:03
And, you know, Southern Valley Bank, their impact extends,
00:13:05
well, past Silicon Valley, they've been obviously a
00:13:07
critical part of the Innovation, you know, ecosystem and economy
00:13:11
for, you know, nearly 40 years. You know, we have a strongly
00:13:16
held view that in light of what they have done for the
00:13:20
Innovation economy, Silicon Valley remaining in some form.
00:13:25
You know whether it's as an independent spun-out entity or
00:13:28
as a Independently operating subsidiary of a larger financial
00:13:32
institution, you know, we think that would be really good for
00:13:36
technology. Ecosystem, technology, startups
00:13:39
going forward. You know what a Silicon Valley
00:13:41
Bank do. I mean, some of it is
00:13:42
qualitative when you have an institution that is focused very
00:13:47
specifically on the needs of Founders who are building Tech
00:13:51
forward or Tech Innovative companies, they develop some
00:13:54
level of expertise around understanding not just sort of
00:13:58
Simply had a bank, those companies but what the financial
00:14:02
needs and you know, potentially you know, how to underwrite, how
00:14:05
to whether it's Venture loans, whether it's providing, you
00:14:09
know, extensions of credit, whether it's introductions to
00:14:12
other investors, they understand by seeing a very large
00:14:16
cross-section of those companies who are banking clients,
00:14:20
something about how to help those types of companies evolve
00:14:23
that larger financial institutions, that are Hiding,
00:14:27
you know, pure financial banking services will not understand two
00:14:30
and that is helpful in which more expensive for startups.
00:14:32
Is that one thing I dead will be more expensive or frankly not
00:14:35
available. Yeah, and that again will just
00:14:39
create a little bit more of a chill on the vibrancy of the
00:14:45
tech ecosystem because if you Capital look is, the reality is
00:14:49
part of how you fund The Innovation economy because the
00:14:54
vast majority almost all Tech startups.
00:14:57
Going to run on profitable for some period of time while they
00:14:59
build product and figure out what their businesses.
00:15:01
And so if you take a platform that is fundamentally focused on
00:15:07
providing Capital to that ecosystem, its risk Capital at
00:15:11
some level and you eliminate it and you take bigger institutions
00:15:15
who don't focus and have the expertise on.
00:15:18
Hey, you know, maybe this is a company building a really
00:15:22
Innovative product back by, you know, three or four really well,
00:15:25
known and established. VCS, and some really smart
00:15:28
Partners. If your Silicon Valley Bank,
00:15:30
you'd understand that, that company May deserve the
00:15:33
opportunity to have more Capital so it can really lean into what
00:15:36
is building. But a larger institution just
00:15:38
would have difficulty getting to that granular level of
00:15:41
expertise. So I think it will put some kind
00:15:43
of a chill. I don't know how much but on the
00:15:45
ability for this ecosystem to be vibrant and you know more
00:15:49
importantly I think Silicon Valley Bank just they understood
00:15:51
that you know what their role was in this ecosystem.
00:15:55
Some of it is when your bank it's like Like a community
00:15:57
Banker Co-Op part of your job is to be a connector and it's to
00:16:01
have events for the community. I mean they would, you know
00:16:04
their sponsor of my upcoming cop.
00:16:06
That's what there's some element level sponsor.
00:16:09
I know. I was like begging them like
00:16:10
Silicon Valley Bank sponsors everything I can't.
00:16:13
I can't get you guys. And then literally I mean I feel
00:16:16
like I must be one of the last things they sponsor before.
00:16:19
You know they went under because my game was quick to do that to
00:16:23
understand. That's right for an event that
00:16:24
brings people together in the ecosystem is It may not result
00:16:28
in Direct business for them. Maybe The Branding is helpful
00:16:30
but also that's really valuable. I mean they're great, they
00:16:32
understand the ecosystem, it at a pretty horizontal level and
00:16:35
their agenda is not necessarily that of anyone investment
00:16:39
institution and so there's just some lubricant and some notion
00:16:43
of creating a sense of identity and Community around technology
00:16:47
startups that is it's absolutely valuable.
00:16:49
You know what? I also think they've been great
00:16:51
at following, you know, the kind of innovation curve globally.
00:16:54
You know, they understood that Tech innovation.
00:16:56
Happening. You know, in Silicon Valley in
00:16:59
Boston and in a lot of important parts of the US but then also in
00:17:02
India, you know, in China in Israel, you know, I just look at
00:17:07
what they have done is an institution.
00:17:09
And I mean, if we're, you know, believe that Tech forward and
00:17:14
Tech Innovative companies are important to how, you know, the
00:17:19
world economy functions and where we go in the future.
00:17:22
I think they've been an instrumental part, and there's
00:17:25
something about the collective institutions.
00:17:26
To tional. Wisdom of that firm that it
00:17:29
would be a shame. If it goes away, we did you have
00:17:31
a strong point of view on the VC Bank?
00:17:34
Run like both whether I don't know how advice-giving was
00:17:38
handled and whether yeah you know, the actual fear was a
00:17:42
primary driver here. I don't actually know what
00:17:45
you're, you're probably. Yeah, I don't know exactly how
00:17:49
to comment on that other than to say, You know, some of it, I
00:17:56
think VCS who were, you know, vocal and I'm not saying they
00:18:01
were wrong, but vocal about their fears and anxiety.
00:18:03
It's like, any kind of bank run. If you, if you have someone yell
00:18:07
fire in the middle of a crowded movie theater, you've created a
00:18:10
crisis of confidence where everybody makes for the exit.
00:18:13
So, I think we've got to own as a venture industry, Venture
00:18:18
community that some of that happened for sure.
00:18:20
And, you know, we don't Matt and be at some level accountable or,
00:18:25
you know, just sort of understand how we do better next
00:18:27
time. On the other hand, I think that
00:18:31
was not the only thing that precipitated the crisis reality
00:18:34
was that there was a balance sheet hole that has Phoebe, you
00:18:37
know, tempted to fill. I'm not an expert.
00:18:39
But I think there was a unsuccessful attempt to
00:18:42
initially fill that, you know, that was spearheaded by the
00:18:45
large large financial institution.
00:18:47
So there were other compounding factors.
00:18:49
But once the crisis of confidence, Happened.
00:18:52
I think my perception is from Venture firms, we know I believe
00:18:58
Lightspeed our peers, you know, acted in a fiduciary responsible
00:19:02
way, which is, if, you know that an institution where you know, a
00:19:06
undiversified, all of your funds are all of a company's funds are
00:19:10
deposited and they may not have access to it, you have a
00:19:13
fiduciary obligation to, you know, do anything, you can to
00:19:17
help these companies to move some of their funds or have a
00:19:20
way that they can have confidence to.
00:19:22
Remember, these are all companies that are By definition
00:19:24
most are losing money. The capital is not money that
00:19:28
they're trying to invest. It is the lifeblood of how they
00:19:30
are going to operate their businesses, how they make
00:19:32
payroll. And so I think it and it
00:19:34
happened very quickly. So it did you feel real real
00:19:37
fear like was it a scary moment or you thought it would?
00:19:41
Let's just say I mean this crisis unfolded over a Thursday
00:19:44
and Friday and over the weekend by the weekend, you know and I'm
00:19:48
sure I wasn't the only one but you know most of the partners at
00:19:51
Lightspeed worked. Round the Clock over the
00:19:53
weekend. I'm sure other firms did too to
00:19:55
really understand where, you know, we were going to have our
00:19:59
company's. We're going to have payroll
00:20:00
issues. And we were, you know,
00:20:02
frantically trying to find Solutions zooming out to sort
00:20:05
of, you know, the Venture landscape.
00:20:07
Basically, you know, as somebody who co-founded, the top Venture
00:20:10
firm and is managed in seen, you probably could tell the story of
00:20:14
Silicon Valley through Venture firms, better than I could.
00:20:16
But, you know, you had sort of like the old guard firms and
00:20:20
then, you know, light speed Exxon and certainly by the time
00:20:24
I started covering Silicon Valley and like the 2010s, you
00:20:27
were sort of a super established firm by then then we have sort
00:20:32
of, you know, and driessen sort of flooding in and the market,
00:20:36
sort of the pricing competition. And then I think into the late,
00:20:40
you know, to the end of this cycle, we had the sort of solo
00:20:44
capitalists and just lots of different sources of money,
00:20:47
like, individuals and new funds. I'm curious where you think into
00:20:52
Two years or four years like where we'll be I mean especially
00:20:56
with the Silicon Valley Bank situation, you sort of saw the
00:20:59
lack of control. There wasn't like oh there's a
00:21:02
limited set of venture firms that can sort of come together
00:21:05
and decide what happens. It felt very diffuse, do you
00:21:08
think that's where we were remain?
00:21:10
So calm valleys just grown up like private Equity.
00:21:12
There going to be a ton of different firms competing or do
00:21:15
you think we're going to see more of a retrenchment from LPS
00:21:18
and they'll be sort of a smaller group of venture funding.
00:21:22
One's going forward, you know, it's a good question.
00:21:25
I mean, the Venture fund model allows for fun formation and
00:21:30
then Capital commitments and flow through to happen, over a
00:21:34
10-year period usually with a couple of extensions.
00:21:36
So when you're really talking about Venture funds and
00:21:39
therefore Venture firms that have become established, their
00:21:42
Capital bases, aren't going to go away overnight, that overhang
00:21:47
will exist the money. They got raised on the other
00:21:49
hand. I do think there's.
00:21:53
The roots of consolidation are going to start to you know form
00:21:56
and I think there will be that cross current Dynamic.
00:22:00
And what I mean by that is it's just that in this environment.
00:22:05
If you raise the fund and you let me put it this way in this
00:22:10
environment. Companies are going to have to
00:22:14
take a much longer view that idea that if you are a more
00:22:18
recent firm whether it's a small, you know, Angel oriented
00:22:22
firm or a larger firm if your investment experience has always
00:22:27
been about. I am going to deploy capital in
00:22:30
a growth environment where there's always an assumption of
00:22:33
more Capital available at higher prices.
00:22:35
And frankly, the companies in the ideas and the founders, I
00:22:37
back, I am very focused on their ability to Simply Lee raise more
00:22:44
money and and grow faster but not necessarily have the
00:22:47
expertise around how you ultimately create a
00:22:50
mathematically operating efficient organization around
00:22:53
their business around that that compiles if that's essentially
00:22:56
the totality of your experience. And frankly a lot of friends, I
00:22:59
won't say all but you know we've been in an upmarket environment.
00:23:02
I've been on record about this before largely since 2008 9 and
00:23:06
that's a long period of time. And so if all your institutional
00:23:08
wisdom is is about sort of growth with Out the notion of
00:23:14
operating discipline in whatever entity you create, I think it
00:23:19
becomes tough. You may have Capital that
00:23:21
overhang exists, but your understanding of how to take the
00:23:24
Investments you've had and help them evolve to the new laws of
00:23:28
physics or gravity. I think it's more limited than
00:23:30
firms. And people who understand this
00:23:33
sort of cyclical transition, and these are literally are a lot of
00:23:37
things that need to change. That's both in how you think
00:23:40
about, you know, how you work with your A couple days inside
00:23:43
all of these companies, it's sort of some tough transitions.
00:23:46
That Founders who may not have ever been through a layoff
00:23:48
before. The founders need to do a lot of
00:23:50
different things now, and they'll need to get out of their
00:23:53
comfort zone and some will be able to do that.
00:23:55
Some won't, and for the ones that won't, it's going to be
00:23:57
helping them figure out who they can bring in as partners to help
00:24:00
do these things. So, I just look at the Venture
00:24:04
landscape and I think you'll see it's a time of separating
00:24:07
function. Some of the people with that
00:24:11
type of experience to store I think, you know, have seen it
00:24:14
before, it'll be more a natural adaptation.
00:24:16
They'll be able to do the things that allow their companies as an
00:24:20
investment firms, their portfolios to feel like they
00:24:24
continued to be interesting vibrant portfolios that are
00:24:28
going to create value in The New Normal environment.
00:24:30
And I think some of the firm's that are newer who don't have
00:24:33
that Priory investment experience.
00:24:35
If they don't figure out how to adapt, I think what will happen
00:24:38
is, they'll look like they have Capital, but they're going to
00:24:40
have portfolios that don't look like they They have adjusted to
00:24:44
the new environments and so, you know, nothing will have changed
00:24:46
about the companies they back, but if he was, were all like,
00:24:49
kind of growth at all cost, they're not going to look as
00:24:51
interesting as firms to LPS going forward and that won't
00:24:56
play out in 12 to 24 months, but as we get into new fundraising
00:24:59
Cycles, you know you'll see that drift start to happen where you
00:25:03
know, firms it really are, you know, transitioned and then, you
00:25:07
know, by association. They've really influence their
00:25:09
companies to transition to this new environment are more Later
00:25:12
raise more capital and you'll see a trail off in firms or you
00:25:16
know, frankly sometimes early stage investors where they
00:25:19
didn't really think about getting into the investment
00:25:22
business to sort of have a Long View and and think about how
00:25:26
they're working with Founders, through all parts of these sort
00:25:29
of economic cycle, they were really more just backing people
00:25:31
where they assumed other money was available and things would
00:25:34
grow. And you could kind of get in low
00:25:36
and maybe get out higher. I think for those kinds of
00:25:39
platforms, there will be a pull back and they'll be less Capital
00:25:41
available. It'll take time to play out.
00:25:43
It's hard starting not to hear Andreessen, Horowitz a lot in
00:25:46
some of the behavior. You're saying firm that is I'll
00:25:50
tell you this and I don't, you know, I think they built a
00:25:53
really great firm. That's had a lot of success.
00:25:55
I do think that the firm started, you know, posts the
00:25:58
last major economic downturn. And so they built a firm that
00:26:01
has had a strategy where it is had to succeed and grow value in
00:26:06
kind of a macro up environment and Technology up environment.
00:26:09
But I will say about Ben and Mark, you know, I know them a
00:26:11
little not that well You know, I know the journey they went
00:26:14
through at cloud, cloud that became opsware and I think that
00:26:18
the two of them had to endure as kind of operators and Founders.
00:26:23
One of the most severe, you know, kind of downturns that
00:26:27
this was, it was partly that, you know, 99, throw 3 downturn,
00:26:31
that killed most businesses trying to do what they were
00:26:33
doing and they were doing and they found a path through that
00:26:37
again. If you go look and look back at
00:26:39
the sort of hard decisions, they have to make, I have an enormous
00:26:41
amount of respect. They did and the hard thing
00:26:43
about hard things. You know, actually have been
00:26:45
wrote that book. I think that, you know, I would
00:26:48
just sort of sense that from that experience, you know, they
00:26:51
understand a lot of the hard lessons and they may have to
00:26:53
make the adaptation to the Venture firm they built.
00:26:56
But they are not without experience and I say some track
00:26:58
record of knowing how to make very, you know, I just say
00:27:02
significant and acute transitions to the business,
00:27:05
they're in to sort of survive and then ultimately go on to
00:27:07
thrive Lightspeed, you know, announced I think it was like,
00:27:10
more than seven billion dollars in Ones.
00:27:12
I think July 20, 22 you referenced earlier.
00:27:16
The.com, you know, a third of it deployed and how you sort of
00:27:21
navigated that similarly. Now like how do you think about
00:27:25
sort of the pace of deployment with the 7 billion?
00:27:27
I mean, I think Founders fund said they were going to if not
00:27:31
give back to their LPS like shift some of the money I think
00:27:35
too like future funds. Like that.
00:27:36
Certainly set a ripple through. I think VC world.
00:27:40
I'm curious. Yeah how your Thinking about
00:27:43
sort of the big set of funds that you raised and how you're
00:27:46
deploying them and your strategy in this down.
00:27:48
Yeah, I think the pacing of deployment generally whereas
00:27:53
funds in over the past five years have been on more of a to
00:27:58
two-and-a-half year cycle, we are moving back to a deployment
00:28:02
cycle. It looks frankly, more like it
00:28:04
did historically of three to three and a half years /, fun
00:28:07
generation and I think We are thinking a lot, you know, we
00:28:11
were very deliberate about the amount of capital.
00:28:13
We raise across our early stage, our mid growth, and our
00:28:17
crossover funds. And in the new environment we
00:28:21
have been really Bottoms Up and saying, hey, if we wanted to
00:28:24
deploy this Capital, how would we do it in light of the new
00:28:27
circumstances in companies that we think are, you know, able to
00:28:31
get operating efficiency and what is all that kind of
00:28:33
compiled to in terms of a length of deployment?
00:28:35
We think three and a half years is realistic for us and You
00:28:39
know, again, I think we feel really good about, you know,
00:28:42
this time around unlike in, you know, they're the late 90s, we
00:28:46
really have built in some sense what we think of as a platform
00:28:50
where to make these changes to the environment.
00:28:52
There's a lot of telemetry about our companies about how we think
00:28:56
about even what is, you know, required.
00:28:58
If we are going to make an investment that can flow through
00:29:01
pretty quickly. So if we need to adjust, it's
00:29:04
not a seat-of-the-pants adjustment.
00:29:06
It's more like a you know, like our company's we're being very
00:29:09
Livid about saying, hey what do we need to change about, you
00:29:11
know, our behaviors, what do we need to change about when we
00:29:14
talked for our Founders? What they need to achieve and
00:29:16
therefore from that what it is going to take for them to unlock
00:29:19
more Capital, whether it's from us or others and you know that
00:29:22
ultimately ripples through. But we don't feel like again
00:29:26
from what we raised before it was done in a pretty deliberate
00:29:28
way with a lot of, you know, I'd say planning underneath.
00:29:32
So we're feeling we're feeling like it's very manageable again.
00:29:36
I think there's still the tech Innovation cycle and a lot are
00:29:39
Is still very healthy, right? You know, Investments,
00:29:43
particularly the early stage are there.
00:29:45
Absolutely. All out of things.
00:29:46
We continue to be excited about where it's very smart.
00:29:49
People who have pretty ambitious views of how, yeah, whatever new
00:29:53
product or architecture. They want to deliver could be
00:29:55
transformational. We're not seeing a shortage of
00:29:57
those ideas either across our different, you know, kind of
00:30:00
global Gio's where we play or, you know, a lot of the different
00:30:03
sectors were light speed as expertise now.
00:30:05
So I think we feel good about that but I think the pace of
00:30:08
deployment will be long. Or than it was, you know, kind
00:30:10
of a circuit, 20 morning, 20, 21.
00:30:12
And before you know, we went through this period of crypto.
00:30:16
Hi now, for any period of AI hype that, you know, I guess I'm
00:30:21
personally a little more enthusiastic about the AI than
00:30:24
crypto. Hi.
00:30:24
I don't know. I'm curious.
00:30:26
I mean Tech investing in Venture sort of just clearly goes
00:30:30
through moments when something super hot.
00:30:33
How do you think about sort of like investing through these
00:30:37
hype cycles? And then in particular, I like,
00:30:39
What do you make of like all the enthusiasm around generative?
00:30:44
AI companies at the moment? Yeah, it's the old saying that
00:30:49
if something seems too good to be true, and I would
00:30:53
characterize any technology Trend where we're at the peak of
00:30:56
the high point in the life cycle of these things?
00:30:59
We then go through the, I don't know, the trough of Despair and
00:31:01
then back up to real deployment. But if something in terms of how
00:31:04
people are narrating, it seems too good to be true.
00:31:07
It probably is that doesn't mean there aren't Aren't core, you
00:31:11
know, fundamentally interesting things happening and I feel like
00:31:15
that just sort of phenomenon of how new technologies become
00:31:18
absorbed and ultimately deliver you know kind of existential
00:31:21
value is happened again and again and again.
00:31:24
And so you know my view on generative AI is just we're at
00:31:29
the peak of the hype cycle where there is absolute, I think
00:31:33
promise. And you know there's a
00:31:34
fundamental and we can talk about it set of breakthroughs
00:31:37
that are going to enable. I A lot of productive benefit to
00:31:41
the world broadly society, as we know it.
00:31:43
But I think the kind of the conversations about how this
00:31:47
will play out right now, are a little bit hyperbolic and, you
00:31:51
know, some of the kind of endpoints people are talking
00:31:53
about. I think our I know if it's too
00:31:55
good to be true, some people are talking about AGI which is a
00:31:58
little dystopian, may be too bad to be true.
00:32:00
I just feel that you have to kind of be able to Discount that
00:32:04
you need to be able to invest now because there is a lot of
00:32:06
the Innovation happening but you need to really Have a calibrated
00:32:10
view of, hey, 7 to 10 years from now.
00:32:12
What do we think is a more measured through line and how do
00:32:15
we take that kind of a view if we're going to invest now, and
00:32:18
not kind of get on the ride at the peak of the hike cycle,
00:32:21
where we buying all the assumptions.
00:32:23
And then I think the reality is we're going to have like a, you
00:32:25
know, the carts going to go down a pretty steep drop off before
00:32:28
it then kind of in Flex back up. And I think crypto looked script
00:32:32
has been through many cycles I continue to believe and we have,
00:32:35
you know, people who are continuing to, you know, look at
00:32:37
an actively invest in crypto. Light speed in it, you know the
00:32:40
joint venture we establish called faction.
00:32:43
If you look at the fundamentals again about developer activity,
00:32:46
user activity on, you know, some of the more notable blockchains,
00:32:50
whether it's aetherium or polygon, you know, there's
00:32:54
absolutely a steady March of increase in the amount of
00:32:57
activity there. And yes, some of the
00:32:59
applications that got built in the hype cycle.
00:33:01
Are, you know, they no longer work the laws of gravity do no
00:33:04
longer apply and you're seeing fall out, but I do think that
00:33:08
there are fundamental Reasons why again this sort of trust
00:33:11
Lewis distributed Ledger where people can anonymously exchange,
00:33:15
things of value, or exchange digital things that are truly
00:33:18
unique that has a place in the world.
00:33:21
And it is, you know, something that is going to take awhile to
00:33:25
be absorbed because consumers need to understand it, you know,
00:33:28
these chains even they just need to get to the point where
00:33:30
they're reliable and secure and scalable and a billion people
00:33:33
can you know orchestrate a transaction on it at one time.
00:33:36
The maturity just is in there yet and so but at that end state
00:33:39
I absolutely believe based on 25 years experiences as an investor
00:33:44
and doing a lot of things in kind of core, Enterprise
00:33:48
infrastructure and distributed systems that will create value
00:33:50
in a set of applications that are faster better cheaper or
00:33:54
enable new things that are very hard to do today.
00:33:56
And so I would say that with AI, we are, you know, at the point
00:34:00
where the Euphoria and yeah them is Amar, you know, they're kind
00:34:04
of fun to see or you know maybe the dystopian worried, you know,
00:34:07
less fun to see. But I think these things Things.
00:34:09
They kind of overshadow. The fact that underlying, that
00:34:12
there is fundamentally, I think a major technology on log around
00:34:15
generative a. I right, I think it's the idea
00:34:18
that really you've created a much better natural language
00:34:22
interface where people who, you know, are not technically at all
00:34:26
knowledge workers or people who don't have technical,
00:34:28
education's are going to be able to have a massively more
00:34:32
productive way to engage, with computers and machines at its
00:34:35
core. And that's the thing that we
00:34:36
can. All I hope optimistically use
00:34:39
Imaginations for. You know, I was a huge Star Trek
00:34:42
junkie when I was in my teens and, you know, I guess the more
00:34:45
recent analog Iron Man with Jarvis but where you really can
00:34:48
anyone speak to a machine and it can reflect back to you things
00:34:52
emotive lie that you know they're going to make you the
00:34:54
human feel better. It can have at it's sort of
00:34:58
fingertips the world's knowledge in a way that it is you know
00:35:01
sort of curate Apple for you. It's just there things that
00:35:04
allow people to take advantage of the best of what computers
00:35:08
and machines. Machines, and, you know, kind of
00:35:10
infinite memory have to offer in a way that is natural to a
00:35:14
person to feel that they want to engage with these machines and
00:35:17
that doesn't exist today. Now, the reality of how that
00:35:21
ultimately, I think manifests in terms of value and Society is
00:35:24
going to be that we, you know, there's a long learning curve
00:35:28
of, how do we take that new language so to speak?
00:35:31
That's just a better more fluent language that computer speak.
00:35:34
And how do we attach that to all of the existing things in the
00:35:37
world that are already built? Lot of like technology
00:35:40
scaffolding, you know, a lot of things that our systems, you
00:35:44
know, physicals used tubes that exist.
00:35:46
I mean, corbet's in the, you all are trying to make or have you
00:35:51
seen the, those sort of manifesting companies yet?
00:35:54
It's very early days, but I think the core again Longview
00:35:58
premise, we have again Lightspeed were always trying to
00:36:01
think about. Hey, who are people who have a
00:36:03
view past the hype cycle of something that really could have
00:36:06
you no NE value and meaning in the world, I guess.
00:36:08
So. You know, some of those are it's
00:36:10
very early but you can start to see, you know breadcrumbs you
00:36:15
know in Enterprise were light speed at, it has traditionally
00:36:17
been strong, it's the again core idea that you know of hey if I
00:36:23
had this better interface and somebody is a designer or
00:36:27
somebody you know as a copywriter how do I allow that
00:36:30
person to do the things that they would do today in a
00:36:34
business Enterprise? But just in a way that's more
00:36:37
natural and I do think with generative a You know, they
00:36:40
could kind of have 10x the capability.
00:36:42
Maybe it's 10x the ability to write 10x, more copy or to
00:36:45
generate 10x more derivative images of the Coke brand on a
00:36:49
bottle because that helps the business connect with users in a
00:36:53
more personalized way. It turns out as an example, we
00:36:56
back to company called typeface or not, don't want to show for
00:36:59
them, but it's I think it is a very clear example.
00:37:01
Of if you said, hey generative, AI is this just amazing
00:37:05
technology. If you look at how in a company
00:37:08
context, You know, designers and copywriters and brand
00:37:11
ambassadors. Think about connecting with
00:37:13
consumers. They are limited by the ability
00:37:17
of when they have a new idea. It's a pretty needy greedy
00:37:19
process to take that idea in their head and go to somebody
00:37:23
who can create a new concept or, you know, maybe take that idea.
00:37:27
And if it's needs to be normalized for a campaign,
00:37:30
that's going to happen in India because it's Diwali.
00:37:32
Just there, all kinds of things in just the rollout of that.
00:37:36
New idea, it requires collaboration it.
00:37:39
Price data, sharing, generative AI, if you could create a new
00:37:43
application, where generative, AI sits at the court, it could
00:37:47
allow people and we've seen this is what typeface really
00:37:49
understood, you know. Could I mean, literally 10x
00:37:54
faster or, you know, 10x more of the iterations.
00:37:57
You know, they could in a company context, allow
00:37:59
generative AI to. It's not take the human totally
00:38:03
out of the loop, but it is allow the people who are doing, you
00:38:05
know, the kind of ideation in the creation and the
00:38:08
collaboration around. Around how to make this happen
00:38:10
for consumers to move much more quickly and have something
00:38:14
that's going to feel a lot more, you know, attractive and unique
00:38:17
to Consumer Venture funds are always Coy about talking about,
00:38:20
you know, who's in charge, but you're sort of in charge and I
00:38:25
see, I would say no. I would say though to your
00:38:27
earlier question, do I? If you ask me about the
00:38:30
portfolio, which is now large it is, you know, I think I have to
00:38:34
come active companies in, you know, the 400-plus range and we
00:38:37
have seeds. And I would see that I could
00:38:41
give you sort of a short form on, you know, I mean I remember
00:38:44
all the names but on the founders on the core product or
00:38:48
sort of, you know, kind of Technology idea on why we
00:38:51
aligned with that founder of want to invest in probably 80%
00:38:54
or more of the company's. Yeah.
00:38:55
I mean, it's more that is my passion point and I think it is
00:38:58
one but not, you know, the only thing that is allowed Lightspeed
00:39:01
notwithstanding Federation to kind of scale in the way that
00:39:05
we, I think our approach to investing and, as you know,
00:39:08
anyone, Who's you know, a Lightspeed investor, how they
00:39:11
show up that. It's consistent because you
00:39:13
know, you need some people who kind of are Keeping the Faith
00:39:16
and are able to if we get, you know, really too far out of
00:39:19
position grunting. Hey, is this really what we do?
00:39:20
And I'd say, you know, that's probably a strength I have, but
00:39:23
there are definitely. I'm, I don't know when you
00:39:24
define in charge. We are not a hierarchy as an
00:39:27
example. I'm not on the comp Committee of
00:39:29
the firm. There is a set of senior leaders
00:39:30
in The Firm who, you know, we Federated that who are
00:39:33
responsible for compensation. There's a separate set of people
00:39:36
who, you know, are committee that are responsible for I don't
00:39:40
know marketing and other functions that in the business.
00:39:43
But, yes, you know, I am a Founder at the firm, right?
00:39:46
I'm one of, you know, a smaller number of people who are most
00:39:50
tenured at the firm obviously, given that I started in 99 and I
00:39:53
think, you know, with that. It's less of the theory X of
00:39:56
management. It's not really so much of a
00:39:59
top-down as it is, but more, it is sort of, we think about it,
00:40:02
is anyone who becomes senior here at service leadership and
00:40:05
it's the idea that, you know, yeah, we should be leading by.
00:40:09
Apple. And yes if there are times when
00:40:11
somebody needs to raise their hand and say, hey is that if
00:40:14
this is a decision that's important, if there's a conform
00:40:17
to our values that could be in terms of how the firm operates,
00:40:19
it could be in terms of an investment we make.
00:40:21
And yes, you know, there is needs to play that role and I'm
00:40:24
want a much smaller group of people who, you know, who does
00:40:27
play that role that's needed. But I'd say the idea is, it
00:40:29
shouldn't be needed. A lot.
00:40:30
Should Founders be chasing you down for New Deals or how much
00:40:33
are you focused externally versus internally?
00:40:37
Are you trying to do II? Definitely again.
00:40:39
And I'd say, you know, probably thing that has been more in my
00:40:43
wheelhouse is, you know, I'm going to just I love and I love
00:40:46
to learn and that's kind of a lifelong thing.
00:40:48
So I spent a lot of time trying to be engaged with new companies
00:40:53
that the firm is looking at. But my role now, I am not trying
00:40:57
to make investments individually in the sense of being an
00:41:00
individual full stack craft investor.
00:41:02
I am trying to combine the things I do as it relates to
00:41:06
Investments with working with other partners at the firm so I
00:41:09
can play. Say a mentorship role and
00:41:11
frankly for Founder's I tell them they are the best thing
00:41:13
they can get out of me is really you know maybe the benefit of my
00:41:17
experience and that's part of what a platform like Lightspeed
00:41:20
out to offer. But you know, the 80% of what
00:41:22
the, you know, if platforms really about access to the
00:41:25
network, if it's help with recruiting, it's great
00:41:27
connectivity. You know, there are other
00:41:29
partners who are much better suited to doing that on a, you
00:41:32
know, literally on a daily and weekly basis.
00:41:34
So I partner with other Founders and, you know, it has to be, it
00:41:39
has to A situation where the found where there really is
00:41:41
value of founder, really a pretty sees that there would be
00:41:43
value and I'll get involved with another partner, light speed in
00:41:46
a kind of more of a dual relationship but I'm I'm not
00:41:49
trying to be an investor individually and companies
00:41:52
anymore because I don't think that helps it founder get the
00:41:54
most out of the platform and and I don't you know, in terms of
00:41:57
the scale of things I have to do both.
00:41:58
Yeah as a leader of the firm and and kind of helping other people
00:42:01
in The Firm. It's not a you know a way that's
00:42:04
scalable for right. I'm one person I haven't, I
00:42:06
haven't figured out this sort of science that I give helping
00:42:08
myself. So, What's the last board you?
00:42:10
Stepped up. Yeah, the last sport I joined
00:42:12
was in partnership with one of my partner's name, Robbie
00:42:15
Rogers, Jane. So the founder has to
00:42:17
technically ravi's on his board from light speed.
00:42:19
But this was typeface. This was a company started by,
00:42:21
ah, be a person who was a chief product officer to do be who,
00:42:25
you know, is really trying to make a generative AI with the
00:42:28
next generation of how, you know, Enterprises do brand
00:42:32
design and, you know, brand localization to their customers.
00:42:36
So we thank you so much for coming.
00:42:39
The podcaster. Yeah, and thank you for having
00:42:43
me Eric. Yeah, it was a pleasure to do
00:42:44
it. And yeah, I'm looking forward to
00:42:47
spending more time together in the future.
00:42:49
That's our episode. I'm Eric.
00:42:50
Newcomer thanks for listening to newcomer shout-out to our
00:42:53
editor, Tommy Heron, my chief of staff Riley, kinsella Young,
00:42:56
Chop scheme, created. The theme music, like, comment,
00:42:59
subscribe on YouTube. Follow us along at newcomer
00:43:02
dotco And subscribe to the newsletter.
00:43:05
See you next Tuesday? Thanks for listening, goodbye.
00:43:08
Goodbye.