E412 | Juliet Bailin, General Catalyst: VC behavior and why venture needs a self-awareness reset

0:00Welcome back everyone to the European VC podcast. Today I have Julie Bailey from General Catalyst with me. We are talking about general catalysts in Europe, trying to just give you all a big overview of what GC does here. But then we dive into their values and their big rebrand that they've just done, at least remake of their website and definition of their core values. I think it's incredibly important because GC is truly one of the great VC firms in our industry. So trying to really listen to what she says and reflect on the smaller, finer points of those values I think can be incredibly valuable.

0:35And then after that, we do a long, deep dive into the self-awareness reset that Julie believes is important and imminently needed in European venture or venture in general. Thank you so much, everyone, for tuning in as always. I really appreciate you.

1:03Let's stop acting, acting, acting. This show is not investment advice, and the hosts of this episode may be invested in the funds and companies featured. Juliet, welcome to the European Easy Podcast. Thank you for having me. So, I just told you, I've been sick all weekend, and now we're doing it. And I said to you, we should have done this last week when we first had it planned, but something came up, so we had to move it. But definitely my voice would have been sexier and maybe my questions more thoughtful. Your questions are incredibly thoughtful anytime, but thank you for the flexibility. And we're going to start your week off well, even if you are feeling less than well.

1:46Thank you. Thank you for the help here. Juliet, I just want to run through the quick stats on you and General Catalyst, just for you to then add a bit of context to it and say where I'm wrong or where I'm right. You're Juliet Balin, your partner at General Catalyst. You have$8 billion under management, and the AUM in euros in total is$30 billion. You're headquartered in the U.S., as everyone would know. And you're targeting specifically Precedent Seed and some Series A's once in a while. You're focused globally. And you as well, or maybe you can comment on that because I think you individually are focused on Europe.

2:26And you're multi-sector, but for you specifically, it's infrastructure and applied AI. And to those that think applied AI, what is that? We're going to talk a bit about it, but I also dove into that together with Paula Wehmeyer from Down Catalyst in another episode. And the firm has invested in companies like Stripes, Amsara, Livongo, and Juliet. You specifically have invested in Physics X, Goodstack, Charm Therapeutics, and Lottie. Did I get some of that right? Some of it's great. No, you got most of it, of course. I just want to clarify that the current fund we're investing out of is an$8 billion fund with$4.5 billion for our venture strategies.

3:06And I know that there are a couple of strategies within General Catalyst, but that's the full scope. And I do collaborate with my partners in the US all the time and am pulled into to work with founders in the US when there are specific areas that I know well. But I spend the vast majority of my time and certainly all of my proactive time in Europe. You're exactly right on that point. We're going to dive into GC in Europe and do the big deep dive there. But I want to start with a question that is naturally born out of you. It's that$4 billion specifically for early stage, and you're in Europe, and everyone then thinks, how much of that$4 million flows to Europe?

3:46We want to make sure we have real skin in the game for the companies that we're supporting. So for Europe, we're very careful because our fund strategy is to invest into founders as early as we can build conviction in them, no matter where they are, no matter where they want to build. And that includes America, that includes Latin America, that includes India, that includes Europe, that includes the UK, obviously. And so while we have goals to have not an equal distribution across geos, but an equitable one given sort of the density of founders, we don't have a hard and fast, after you hit this number of dollars in a particular geography, you're done.

4:28so we don't have very specific budgets i think it's something that we constantly talk about as a team globally but if we want to invest in the best founders anywhere we should have the ability to invest in the best founders anywhere as opposed to setting some arbitrary boundary i'm always super curious when i talk to global funds about how you it's also interesting with every other fund but if you're three guys covering europe you know and you have a hundred million or whatever it's it's oftentimes well it's decided in an IC, we're not that many, we just kind of look each other in the eye and we agree whether we do the investment or not.

5:03It gets a bit more complex when you're a large organization. There tend to be more structured rules about how do you actually make these calls about where to invest and who kind of keeps a balance, so to say, in terms of because as you said, well, it's kind of, it flows with the volume of the entrepreneurial activity in the different regions, but there's always someone who keeps an extra eye to that. How is that structured? Can you talk a bit about that, how it works? Yeah, of course. So I realize it can sound like it would be quite complicated, but I've worked at multiple venture funds, and what I will say is general catalysts, when we say collaboration is one of our core values, it really is.

5:43We work very, very closely together. And so, yes, that means we're constantly playing time zone tag, and right now our India team is the most generous on Monday by far. And it doesn't actually surprise me because venture is so different whether you're doing growth or you're doing early stage or you're doing deep tech or you're doing SaaS. The profiles that excel in each, I think, are quite different typically. Great point. Okay, so I want to ask you something else, and that is you said in any initial check, you have two managing directors that need to vouch for it, so to say. How do you do when you continue into the follow-all rounds?

6:25Because sometimes that dynamic is a bit different. So let's say, for example, that we lead or co-lead a seed investment. that's our sort of standards play because we want to make sure that we are very actively supporting our portfolio companies ensuring that they can have a successful teacher rounds if we look later on at a growth round which we've done i mean if you think about all the companies we're known for you mentioned a few of them like stripe or samsara these are early stage bets that we then invested in constantly over the course of their growth so then we usually do have growth investors or investors with late-stage investing experience evaluate the business anew.

7:02And especially if we cross funds or are investing in an existing portfolio company out of a new fund, say many years later, then we have a rigorous process to ensure that we are evaluating the business. Yeah, because they oftentimes transition into the growth fund, of course. Correct. Right. Exactly. And then, Juliet, I'm super curious because Deanna Catalyst have really become one of the you know, marquee firms in venture. I'd love to ask you, what are the key characteristics, the key factors that you think underpin the success of General Catalyst? It's such an interesting question, especially right now, because I mentioned we have a new website, but that was actually part of a broader refresh, both of our brand and of our internal values and mission to make sure that we are clearly communicating not only how we spend our time, but why we spend our time to ourselves internally across the, you know, the company that we are and of course more broadly to any of the stakeholders that we work with.

8:01And I do think they are really reflective of why we've been able to perform at such a high level. So I can share those with you if you're curious, those sort of five core values and they all relate to very specific behaviors. Would that be? Yeah, absolutely. Great. So the first one is expand possibilities. The idea for this is we want to be able to dream big both together internally and constantly think about new ways that our business can work and how we can engage with founders. And then of course, with founders themselves, I think if any founder has met with us, they'll have heard the same question, which is, you know, five, 10 years from now, dream with us.

8:36Like, how are people going to talk about your business and what does the world look like? And I know it can feel a little odd to paint what could sound like a utopian or even dystopian future to us. And then how your product is or platform or businesses is going to transform that particular utopian or dystopian future. But we really do want that level of engagement. And the only way that we can build enduring businesses that will return a fund like General Catalyst is to think that way. And so we try to think that way both for ourselves and with our founders. It's actually really cool because when we spoke last time, we spoke a bit about your history background and you said exactly that question resonates so much with you because that's a bit the length with which you watch the world.

9:19Yes, that's exactly right. I mean, we can talk about this ad nauseum, but I genuinely believe that the history education I had is the most applicable education that I had for my work. I'm constant. I mean, think about the AI moment that we are in. One of the greatest parallels can be the industrial revolution and even how people are responding to AI in the public and the debate that we have about AI is extremely similar to the debates that were had that time. Yeah, yes, that too. So anyway, so that's our first. The second is that we're playing the long game. And you have to adventure, right? These are at least 10 year journeys if they go super well.

10:06So the goal is for this to take time. The trick with playing the long game is to be able to press on patiently with companies and with our own strategies as they develop over time, but act with urgency in the near term. So playing the long game doesn't mean we can sit and twiddle our thumbs and say, oh, we'll figure it out. We'll see what happens in three to five years. But every single day we're acting with urgency. And yet the underlying commitment is to patience over the long term. So that's, and that's something that we're attention we grapple with very comfortably. But we really do act with that urgency.

10:40If you meet the average human from General Catalyst, I think you'd be pleasantly surprised with how that entrepreneurial intensity from our origins when David and Jill started the firm really haven't left. I think we all really still feel that underdog energy. The third one is that we're aiming to seek truth. I don't say that with a question mark. We're aiming to seek truth. That involves two things. It means being curious and finding areas that people aren't spending time with and thinking about things from first principles and developing a point of view and really doing the work to understand the opportunity in front of us.

11:26I think just to comment on that, I think seeking, Truth-seeking, true truth-seeking is something that everyone in society are almost taught, especially in corporate life, are taught not to do. It's not a simple exercise. There's not a lot of people that are good at it because it's so oftentimes in other parts of life actually more beneficial to be optimizing for what's politically true or what is the more easy path forward than the actual truth. And I had a long talk with Eric Schleisinger from 201 about this. He's great, yeah. Yeah, and former CIA agent, right? And he spoke about the importance of truth and he taught this truth-seeking in the CIA.

12:14And that's exactly what I think is so different for VC than many other things, that truth is so central to all of us. And I think that if you don't come from a background or have some good way to show that you know how to find truth and distill truth. I think it's a hard bet to make as an LP that you'll be a good investor. Sure. I mean, that's a beautiful way of putting it. And to your point, we're constantly helping each other to find truth, right? And pushing on each other and challenging each other to make sure that our own biases or assumptions aren't clouding our judgments. Because at the end of the day, right, when we make investments, it's our judgment on the block.

12:53So that's a huge piece of it. And it goes into one of our other values, which is serve others. I mean, I don't want people to think of this as some sort of pithy value. Serve others is core to our day to day. To our conversation we just had about our investment strategy, if we didn't serve others, then we wouldn't constantly be thinking about how to help each other make sure that we could back the best founders. And that also means helping each other seek truth and doing that in a way where we trust each other to push back. And it works more broadly. One of Jeanette's, she's our head of Europe and used to run La Familia.

13:31One thing that she has done a brilliant job of reminding us is that we're not focused on building or cultivating a network. These are all relationships. Networks can seem transactional. Relationships are enduring. and when we think about serving others, we want to make sure that we're serving our LPs, the ecosystem at large, our co-investors, angels that we work with, of course our founders, our former founders, and our own team, it goes without saying. The last of the five values that I really do believe impact our success to date is shape the ambiguity. Embrace the ambiguity or shape the ambiguity?

14:10Shape the ambiguity. And this is two components. One is something we have to do internally and one is something we have to do externally. The thing we have to do internally is overcome our own fear of uncertainty. All of us fear the unknown. We fear how people will react to things. We fear how a particular outcome will impact that of the whole fund, but we have to overcome that. If we're going to shape the ambiguity, which can be the future of technology, it can be the future of AI specifically, can be the future of venture capital, if we're going to shape that ambiguity, we have to overcome that fear internally.

14:45And then the last piece, which is more external, is that we need to be able to iterate with excellence in our day-to-day work. And I know people love the phrase, you know, strong opinions loosely held. That relates to this, right? If you're iterating with excellence, then when new facts appear to you that change how you should be moving forward, then you move and you change. And it's certain that if you follow general catalyst history all over the last 25 years, certainly in the last three to five, you'll know that changes are constants. So if we're not iterating and we're not overcoming that fear, we're, you know, we won't be able to be successful.

15:26So hope you don't mind me walking through all of those. But I genuinely believe that each of them and them as a whole contribute to the success that you're referring to. So in the audience, if anyone has thought, okay, why are you talking fucking values? Come on. I actually think that we do not have many large VC firms like GC. We all observe the very large firms from the outside. And we've all seen, you know, big rebrands and stuff like that. But it's a bit privy to the people inside to get the deep dive on what do these, so why do this type of rebrand? And why these values? And I do think that anyone building their own firm, who are the people we're trying to service with this podcast, should get a lot out of hearing the deduction of those five core values.

16:23So I actually think it's incredibly valuable. I also used to study strategy and culture. I completely agree. And if that was boring to anyone, please tell your friends to fast forward. But hopefully it was useful and does give a bit more of a detailed and colorful picture to what we at GC care about. I want to ask you one thing, and I'm going to ask you on the air now. And this is going to be fun. Excellent. So, you know, we're doing our EUVC Summit. It's not yet announced, actually, but I'm talking a bit about it for the small group of people listening to the podcast. And I just thought this morning, maybe I should call it the mega summit.

17:02Make Europe Great Again Summit. You with a historical lens and also a branding lens and marketing. Is that absolutely crazy? Or is that actually a fun pun? And we know it'll work for four years, but how long? What's your initial reaction, Julia? My initial reaction is actually, and I know you talked about this with Paul on another episode, but the sentiment, let's put politics aside for a moment. The sentiment that you're expressing is that we need to focus on what makes Europe great. And I actually do think that's an incredibly important conversation to be having. It relates to our broader global resilient thesis around countries and nations and groups of nations that can be self-reliant and resilient and thrive.

17:51and it underpins our investments in companies like Mastral and in companies like Helsing. And so to host a gathering in Europe in this moment and talk about what makes us great and how we can be continuously great is appropriate. But the branding element, MAGA? I am not a branding expert. If you've asked, I've actually said this to my founders. One of my companies is rebranding right now themselves. and they asked me, they were going through new names and they were like, what do you think of this one? And, and does this one resonate with you? And I said to them, I said, guys, I am here to help you with hiring.

18:33I'll help you build your sales team. I'll help you think about go to market strategy. I'll make endless enterprise introductions for you, but you should absolutely not seek my opinion around branding and marketing. That is not my area of expertise. And I'll defer all questions on that to our chief marketing officer, Ariel, who is much more qualified and frankly much more talented to be able to craft those kinds of messages. I'll take that intro on my mega question then. But Julie, this is actually the perfect transition into the deep dive that I want to do with you because that's about self-awareness reset in venture.

19:14Yes, self-awareness. We had a very honest conversation and I thought this is what we should talk about. So tell me first, it's obviously not a unique view to kind of go out and say that we need a self-awareness reset, but I do think that it's exceedingly rare that someone says it and then dives deep and talks bluntly. So with that, I want to give you the stage to talk about the self-awareness reset that's needed. I'm so glad that you wanted to talk about this too. So like you said, this isn't a unique view. I've even said it before. I've shared thoughts on LinkedIn, which is that there is an information asymmetry between VCs and founders.

19:56And it should come as no surprise that the best VCs are specifically those that aim to dismantle that as much as possible and make sure that there is no decision or conversation where a founder doesn't know as much as the VC or even the VC's intentions. And even in my own negotiations, maybe this is a tactic, I don't know, but I'm always very transparent about why there are certain terms I really care about or why I'm really pushing back on a particular topic so that there's clarity in that kind of understanding. Founders, the best founders in particular, have endless choice. And so it behooves us as investors to be self-aware and to behave with integrity and to serve others, right, as the JC value says, because these founders are going to choose you as an individual, you as a human being, or ideally most of the investors as humans.

20:47The best investors can get capital anywhere. It's somewhat of a commodity. And so at the end of the day, we're putting ourselves forward as partners, ideally for the long term. I understand that venture capital as a group historically has had somewhat of a mixed reputation in terms of the behavior of the investor group. And so I do hope this conversation validates the experience that founders have had and also serves as a bit of a wake up call for all of us investors that as an industry we should and we really can do much better and that we should hold ourselves to a higher bar. What's the minimum response standard that you think is fair?

21:30If we talk about it from stages of the investment process, so to say, if it's cold email, what's the minimum required email that's required there, the minimum response standard? What is it after the first meeting? What is it after a couple of meetings? And then in the end, what is it if it's during DD or IC that actually ends up? Yeah, I think that's a great point. So this is specifically when you've met with the founder. whether you've spoken to them on the phone or on Zoom or you've met with them in person. I try to respond to as much cold emails as possible. I would say my advice to founders who send cold emails, which you absolutely should still do.

22:09I meet founders most weeks that have cold emailed me is send a second one 24 hours later because it's relatively easy for investors to miss a first one or frankly deprioritize a first one if there's no connection to you or what you're building. So that would be my advice to founders to send a second. Now, I personally try to include, even if I've only spoken with the founder once, at least one piece of meaningful and honest feedback about the conversation. Was I not compelled by how they articulated their defensibility? Did I believe they needed to flesh out the vision? Was it unclear to me even the complementarity of the founders?

22:47I've been very honest with founders about that because I want to give you, any founder, the greatest chance of success and to understand sort of maybe what they're going against in terms of the patterns that the average venture investor tends to follow. But I will put the bar at anything after a first conversation, truly anything, two sentences, please. And then of course, if you've spent meaningful time with the founder, once you've spoken with a founder or founders twice, you got to call them. Now, sometimes I understand that processes are happening super quickly, it's hard to get a founder on the phone.

23:21And so in those cases, what I do is I send a very thoughtful pass note and I always offer a phone call. And sometimes founders will take you up on that offer when the round is done and dusted so that they can learn from the experience. Some founders want to talk to you ASAP, some don't want to talk at all. And that's their prerogative. But that's usually what I offer. On a related note, what do you do if it's a portfolio company that you then decide not to follow on with? How do you best manage that? It's obviously a very different relationship than here. Of course. But how do you deal with that?

23:52What's your core guidance? I mean, talk about shape the ambiguity. When we make investments, one of the things that we aim to do with founders, in addition to sort of putting together a 30, 60, 90 day plan and setting them up with our founder toolkit and all the fun stuff, excuse me, is we talk about what success would need to look like in the future. And we talk about, and that's usually something that founders articulate. They say, you know, in, in around two years time, here's what we'd like to do. This is the sort of insight we'd like to have from our customers, or this is the number of customers we'd like to have, or we'd like to have commercialized if it's an open source company or something.

24:33Usually that's articulated by the founders in terms of their goals. And if, if you can set those upfront, when you make an investment, then when the next round comes along, if the founders have diverged onto a different path if they haven't met those milestones yet then it's a much more straightforward conversation regardless it has to be a candid one but then you can say you know when we made the investment we spoke and these were the expectations that we set for what success would look like for the next round we haven't met those yet and so we are not going to continue to invest in this particular follow-on round but we'd love to explore and continue to work together to see if there's an opportunity to double down at a later date Oh, that's an amazing point.

25:12Can you imagine if we invested, disappeared for two years, and then showed up and said, hmm. Yeah, not going to do it. Not looking great. Right. That would be insane. So, and we're very clear with founders. We're quite hands-on as a firm. We're quite hands-on. That's one of the reasons why we care about ownership is we're going to put a lot of our resources behind you, not only in the investment team's time, but our incredible marketing team, our talent team. We're going to think about strategies like leveraging our customer value funds as you grow. So we are quite hands on. This means that if you are raising around and we are not doubling down, there will have been many, many, many conversations, at least in our monthly checkups or check ins.

25:55Checkups sounds like you're going to see a doctor. Yeah, yeah, yeah. We're just catching up. Where we talk candidly about what's working in a business, what's not working in a business, and how we should move forward. And we disagree and commit as needed if a founder chooses to go down a certain path. But we're always very honest about what we think would put the company in the best position and what would set them up for success. That is an amazing point that by the time that conversation is happening, one of the reasons it can be so honest and candid is because it won't have been the first time we've broached the topic.

26:29It's very similar to the old saying that whenever someone is fired from a company, it shouldn't come as a surprise to anyone. And I think it's similar, right? Ideally, yes. All right. Another level one. Give me that. Another level one in my, and I should have clarified at the beginning, but I'll say it now. I am not a spokesperson for general catalyst. These are not general catalyst behaviors that we rail against, but they are from my experience spending nine and a half years in venture. So I should clarify that point. As I share this other level one, which is exploding term sheets. To me personally, this is lazy behavior.