Index Ventures' Danny Rimer Talks Figma's IPO and VC Bets

0:00Hey, everybody. It's Tom Doton here. Welcome to this week's episode of the Newcomer podcast, shortly known as Newcomer. I'm joined here by Eric Newcomer, Madeline Renbarger, and our special guest, Danny Reimer of Index Ventures. Welcome to the show, Danny. Thank you very much. Nice to be here. Are you, by the way, in the San Francisco Index Ventures office? Are you, where are we right now? Thank you for asking. I'm actually in our New York office. Oh, that makes sense. That makes sense. What is happening this week? Figma is going public and you are on the board, so I imagine it's a good week to be in New York.

0:34Indeed. It is a good week. It's always a good week to be in New York, but definitely this is a momentous week. Is it New York Stock Exchange or is it NASDAQ? New York Stock Exchange. Nice. So you get to go in person. You get to go do the whole place. Exactly. Do a little ringing. Exactly right. Yeah. I mean, we'll go deeply into Figma in a second here, but this is not your first IPO here. Have you done the bell ringing before? Have you been on the floor as one of your companies was out there? I've been to the NYCN NASDAQ for my companies. I'm very privileged. But my policy is actually not to ring the bell because I feel like, you know, it's really about the team and the founders and their family.

1:20And so it's not something that I think makes sense for us to do. Skulk in the background. Exactly. Admire from the sidelines. Happy to be there. That's right. The floor is dangerous, though, because reporters hang out there. I know the one time I ever did a stock exchange debut thing, I was like really snaking around the floor trying to find the investors in that company. So that's very bold of you to hang out there. Yeah. Thank you. Yeah. I'm used to it. I did the Uber one and I'll always remember, you know, Travis Kalanick was up in the balcony. He sort of like couldn't be in the fray with Dara and everybody.

1:57So it was a sort of funny dynamic. Like that one, I mean, you know, Uber's done well, but that was a reminder like, oh, the day itself can be painful because I think the markets are just not good. And so it was a hard one. Yeah. Anyway, we are recording this on a Wednesday and this will come out on Friday after Figma has gone public. So, well, you get to safely sidestep the how do you think the IPO went because of the timing. We can't get your assessment of was the pop too big? Was money left on the table? Exactly. Exactly. Exactly. So tell us the Figma story for you guys. I mean, you were one of the first, maybe the first VC investor in Figma.

2:36So you and Dylan Fields go way back. What's the origin story? Yeah, we were indeed. So the origin story is quite a long one. I mean, it's sort of interesting, right, in this industry. I was just reflecting, you know, for other investments that we've made, that I've made, that have gone public, and also that have had liquidity events. It's not always a long journey. But this has been 13 years. You know, he was 19 when I when I first invested or when when index first invested. So it's definitely been a journey with ups and downs and with chapters. And so there's something really gratifying of being able to remember and reflect on on this journey.

3:17Sorry, that was a long winded, even preamble to your question, Tom. But I was just, you know, I was I was getting a little philosophical about it. Well, the length, I think, is key to this. Both that Figma raises sort of pre-traction and some of your bet is like before they really had sort of the viral takeoff. And then obviously - Before they had a URL, I think, right? Yeah. They didn't even have a website yet. It was before the URL. That's right. And then down the line, there's the acquisition that wasn't of Adobe trying to buy it for$20 billion. Yeah. There's pre-seed and then there's pre-URL.

3:49Yeah. Exactly. To answer your question, so first met Dylan when he was an intern at another company that I was on the board of called Flipboard, which was this really sensational company in its time where Mike McHugh, who was the founder of Tell Me, which was another company that we had invested in. And actually, I wrote his first check ever in that one that sold to Microsoft. And Dylan was an intern. And at the time, just really remember his enthusiasm and his amazing ability to communicate information with enthusiasm, but also with detail. And then lost touch with him because he was an intern.

4:34I've taken a note that I should do a better job on tracking interns. And then resurfaced after I was having a conversation with Jeff Wiener from LinkedIn, who's a good friend. And I was telling him about this thesis that we had on who's going to inherit the mantle of the most important business franchises out there like Microsoft Office and Adobe Studio. and he said, well, you should talk to this intern that I can't get to stay at LinkedIn called Dylan Fields because he wants to do something around the area of design. And I think you'll really enjoy the conversation. So that was how I met him again.

5:12He came to pitch what was not Figma at the time, but to pitch his idea with Evan, his co-founder. Well, and so much about Figma, You mentioned it's about design, but essentially the customers for it are UX designers, people that are trying to mock up what a product is going to look like, what a digital experience is going to look like. That industry has changed a lot in the 13 years or so since you first made that investment. I mean, can you kind of situate to us like a bit in time, like how Figma has evolved to a point where, you know, they are a company that's going public, but also one that probably is facing more competition and threats than they have, you know, well, a very different kind of competition and threat than they did, you know, in their earliest days.

6:02I mean, how have they evolved? Yeah, I mean, you know, just to give you context, when we invested in Figma, the concept that we were interested in is at the time, most of the startups that we were working with use Sketch and Dropbox. So Sketch for design internally and Dropbox for transferring those files between people because - No, so you were an investor in Dropbox. In Dropbox and reached out to Sketch, but Sketch did not want to take investment at the time. And so it was quite, you know, Sketch was a good product, but it was quite complicated for versioning reasons and for sharing reasons.

6:44And then Figma came up with this concept of multiplayer from the get-go. And so that felt like all of these headaches around designing and sharing were going to go away by this new means of designing and sharing immediately. That's really what led to the interest that we had in Figma. It's like there was this thing called cloud and they could start the designs. It's amazing what a different era it was. I was like, oh, there's new careers that were being created in the types of designers. There are new ways of file storage. There are new types of software that can be developed. And then I think, you know, jumping to today, you know, there's the this sort of will designers and product managers be coders.

7:33And, you know, Figma has come out with four new products this year. I mean, some are targeted marketers. And so there are lots of categories they're trying to go after. But I'm curious, like specifically on this, like design is the beginning of code. Do you see that as like it's more just sort of like the mockup or do you think designers will be like real coders or what sort of your sense of how these sort of like make tools are going to develop? Yeah, it feels as though, you know, fundamentally, the relevance and the core of design has only become more significant since our investment. I mean, it already was becoming slightly more significant.

8:16Like I remember that Facebook at the time would offer more money if you were an employee at Facebook and had given a reference that was hired and it came from you. So you'd get paid more as a reference check for a designer than for an engineer at Facebook. That was back then in the day and sort of highlighted the fact that the importance of designers is increasing. just merely from what the market was going to command. And I think that that design relevance has only increased over time and that the lines between who's a developer, who's a product manager, who's a designer has really blurred. And with all of this AI technology that is enabling, you know, with vibe coding and the notion of being able to instantaneously create software.

9:13The role of design as the primary differentiator seems to me more relevant than it ever has been. Are you bullish on vibe coding as being sort of an essential way that stuff gets created? You know, that's a really good question. I think that the notion of ease in actually manifesting something, whether it's through being in a mode, in a vibe mode, or being very deliberate on what you want to code, irrespective, that's happening. That trend is more core. Now the question is, you know, what is the result of that mode that you're in? And design is going to be central in whatever mode that you're in.

10:02So I don't know if that's helpful. I think it's premature to know whether there is indeed this mode. You know, the way that I'm thinking about it, Eric, and maybe this is not a good parallel, is if you think of jazz, I'm a huge fan of jazz. You know, jazz is a vibe concept, like the vibe of improvisation is what creates the genius of jazz. Whether that translates to something like coding, I don't know. I think the jury's out. Irrespective, the layer of design is going to be critical. The jazz parallel is an interesting one because it's also, you know, the improvisational aspect. I understand the parallel there, but jazz is also highly technical.

10:47You have to be like a very skilled musician to be able to really have the fundamentals to, you know, mess around in the way that people do in jazz. Whereas vibe coding to me sort of lowers the bar of entry. Yeah. People who are not typically software developers can at least, you know, put together a website rather than, you know, having an expert need to do it. We're talking about a lot of worlds that I'm an amateur and an aficionado of. Isn't that a VC job? Yeah, exactly. You cover it all. Exactly. No, yeah. But, you know, there are some musicians who can read and write and are really technical.

11:26And there are some musicians who never learn. Go all by ear, yeah. Yeah. So they don't compose anything, but it's off ear. And then they're phenomenal musicians. I don't know what's going to happen there. But what's clear is that, again, this notion of there are all these tools at your disposal. it's probably never been as easy to create music as today. But at the end of the day, there is this layer that happens where you have to take whatever your output is and really work on it to make it resonate. I mean, you know, I interviewed Dylan at Cerebral Valley AI Summit London not too long ago, and we had a great conversation.

12:08Obviously, I played with a lot of Figma's products before that. But, you know, I'm pretty bullish on Figma, like the design tool. I get the story of like extending it to sort of like different categories. Like you're doing a business plan, you're a marketer or whatever. To me, the make and the sort of like vibe coding thing is, I don't think it's like existential necessarily to lovable. I mean, sorry. Well, lovable. Existential to Figma and the threat of lovable is clearly there. there. But like, I do think there's like, is make sort of quintessentially Figma or not to me is like this sort of interesting question, because in some ways, like design and Figma are so like intentional and you have like these rules and you're like, okay, these are our design principles and we like stick to them.

12:55And in some ways, like these vibe coding efforts are so like hacky, you know, and obviously we're going to try to sort of bring those two worlds together. And I, I guess I can't tell yet whether I really think they meld well or not. Yeah, I mean, we'll have to see. I mean, I'm super excited about Figma Make, obviously, because I think that the notion of having all these tools at your disposal to mean that the entry point for you to start making things is lowered. And then there are all these tools at your disposal to make the output much more sophisticated. That whole journey is really enabled through Figma Make.

13:43And I suspect that that's going to mean that what we're going to see out there, AI and the trend of AI is undeniable, right? Like as bearish as we were about crypto is as bullish as we are about AI. So Index was bearish on crypto. Yeah, I didn't know that. You kind of dropped that one in there, Danny. What's that about? Oh, no, no. We were just, you know, like not Bitcoin, but like the whole, you know, the Web3 concept of crypto. You know, this is fundamentally Web3, right? Like AI is Web3 for sure. And so the concept of what Figma make can do in terms of getting more and more people to actually create things and then have all of these tools at your disposal to really refine what your output is going to be.

14:32It's super exciting. I mean, Eric's sort of maybe in a Freudian sense dropped lovable in there. It's the elephant. It's the tiny elephant in the room, though high valuation. But yeah, what's your take on them? And the reason I want to ask you specifically beyond just the Figma side of things is that when I think index, I really think you guys are maybe the most, you know, one of the largest, most aggressive players in the European tech market. And lovable is if they can really, you know, hit their numbers and achieve what a lot of people are expecting. Could be one of the bigger breakout hits from Europe in a while.

15:06I mean, have you had a chance to look at them? You know, not a ton. I mean, the reality is, I mean, as you know, we do focus on few geos, right? Like we focus on the U.S., on Europe, on Israel. and that really is our core, like across the board, that's our core. I mean, Figma is 85 % of its users are international. So we see it as a global phenomenon. There are a number of really exciting new players, Lovable being one of them. But, you know, beyond that, don't have much of an opinion. You're saying you can't hammer us about one European startup. We want to hit all the best all over the world?

15:42Or I'm trying to understand the global point. No, so in other words, you know, the global point is, When we look at companies, we look at the geos that we think we have a good enough understanding in picking what we think will be the best teams to go after. So we don't sort of view ourselves as primarily European or primarily U.S. or primarily Israel. And then we try to find global winners. So my point is, you know, if it has global appeal, as it does with Figma, that ticks the box of what we're looking for. Oh, I see. But not because like, oh, Europe is our turf and we need to. Yeah, I see. No, no, no, no, no.

16:23So, you know, like so for instance, we looked at Stripe and Audien and we thought, you know, for a lot of reasons, Audien made enormous sense for us. Jan, my partner who who was behind that, you know, looked at the space and thought Audien was a phenomenal opportunity, which it ended up to be. Right. I covered Adobe when I was at the Wall Street Journal and I had the blessed experience of writing about the Adobe Figma deal falling apart. My predecessor on the beat was the one who wrote the story about the Adobe Figma deal happening. It's a weird situation where I imagine when the acquisition first gets announced, that comes off as like a big victory.

17:04It's an exit. It's one of the things you hope for when you back a company 10 years before that. But explain to me what was going through your mind when the deal first happened and whether you were optimistic it would actually go through. You know, the reality is we really look to invest in entrepreneurs who want to build a standalone business because it's just impossible to assume that a company is going to get acquired and that that's a really great exit strategy. Maybe things will change over time, but certainly it's proven to be a terrible idea. It also is a means of separating folks who are there for the economic return of starting a company versus those who are on a mission, like Dylan and Evan were, to democratize design through this platform.

17:55So really, we always assumed that Figma was going to be an independent company. In addition to that, in most of the cases, just from a return standpoint, as a VC, the returns are much greater if the company is an acquirer rather than a quiree, right? Like if you are a public company, you're much more likely to become the one that acquires rather than be acquired. So there are a lot of economic reasons why being a standalone company makes a lot more sense with a few exceptions. So if you go back there, the first point would be we were very happy for Figma to stay independent. Were you against the deal when it first was being discussed?

18:43What I was going to say, on the other hand, we always respect what the founders want to do. At the end of the day, we are privileged to be on this, Ryan, we'll be as helpful as possible. But they're running the show. So if the team thought that it made economic as well as structural sense to be acquired, then we weren't going to vote against it. I mean, it was clearly a huge valuation, right? I mean, it was$20 billion three years ago, right? I mean, analysts hated the deal. Adobe analysts thought it was completely overpriced. Yeah, exactly. So it's like clearly from a fiduciary point of view, it seemed like a good deal for FinBot.

19:22No, that's right. That's right. And just like Wiz is a good deal, you know, I mean, the Google Wiz acquisition makes a lot of sense. So if it makes economic sense, if it makes structural sense, if it's what the company wants to do, we're obviously going to play ball and be supportive of it. Then there's the question of like all the regulatory approvals that are necessary and how much of a hurdle that's going to be. And so we never high five ourselves when when a deal gets announced, because we know that the journey is going to be so long. Can you talk about the company resilience point of view?

20:00I mean, just being a tiny entrepreneur, I can imagine you think you have the exit. You're like, OK, we we've made it to a certain like, you know, goalpost and it's easy to lose steam. And certainly lots of companies sell and then do lose steam. you know, what did it take for Figma to stay strong to get to this point of going public after sort of seemingly almost hitting a sort of goalpost? Yeah, that's such a good question. And I actually must say that if I were, maybe that's part of the reason why I'm not an entrepreneur, right? Like, I would find just the morale issue, but also just the schizophrenia involved of thinking that you're going to be part of a company, thinking that you have to be independent.

20:50Now they're the great enemy. Adobe's our friend. We love them. Now they're our tribal. And this goes on in and out for 12 months. That is really challenging. Right. It was amazing to see how from one day to the next, I think, you know, having finality, having clarity, and also just like always having the drive to build a standalone business. Back to your point on value, like it's very clear this was not out of necessity from a Figma standpoint, right? Like they had a great business. But from one day to the next, they turned the page. They offer this awesome severance package for anyone, no harm, no foul, who wanted to leave.

21:35Less than 5%, I think 4 % of the employees decide to leave and take that huge package. And then the rest from one day to the next, like, we are just going to build the most awesome independent company. We're so excited about this. And they just went for it. And to your point, Eric, you know, I mean, they announced in the Bay Area and in London, you know, they came out with as many products in a year as they had in the whole history of Figma prior. So you can just imagine how much of a driving force it was to show the world, to show themselves what they could do. Yeah, my sense as a reporter covering them or met with them during that time was like extreme compartmentalization.

22:22on Figma's part. Like I went to their offices and obviously this was a regulatory matter, but they just couldn't talk about Adobe. It was as if the deal didn't exist, uh, as it went through and they were just trying to run things business as usual. And then, you know, when the deal eventually falls apart, there was an interesting kind of media push I saw from the company's part to sort of talk to the press and say like, things are good. You know, we all have it in line. This all worked out and Figma, you know, is in a good position, despite the fact that, you know, they've been in this purgatory for the last 12 months.

22:57This is a benefit that that not all companies have, is that Figma truly has a community, right? Like, they they do not have sort of uninterested customers. I know when I was doing prep for the Dylan thing, I went on Reddit, Like you can read all the like everybody has strong opinions about what they should do. It's a very invested customer base. And not only that, they're an invested customer base that did not like the Adobe deal because they were worried that Adobe was going to fuck up the product. Exactly. I'm using this product. Right. Yeah. Yeah. I mean, I would have said I would have said it was sort of mixed.

23:33Like there were some there are definitely members of the community that could see the benefit of not of like having one suite where they would pay for everything, et cetera. But yeah, I mean, the reality is the community is vested in the company feels like and correctly feels as though, you know, it's thanks to them in a lot of ways that the company is successful, that they've given so much input and they've bought the subscription. And so I think that in the back of all the all the figmates minds was like, we got to deliver for our community here. Yeah. You obviously have really conflicted feelings about this since, as you were saying, you would have preferred them to remain an independent company.

24:17They did. The return will end up probably being better because of that over time. That's still to be seen. Yeah. Well, they have the opportunity, at least now. Money in the hand several years ago. But, you know, like you're saying, you want to be an acquirer. If they continue to grow, there's upside, you know. So, yeah. Well, but so, but here's, here's my question though. I mean, did you think the regulatory intervention here was good or bad? Was it overreach? I mean, was there a strong case that this was some anti-competitive move by Adobe? And, you know, like, where do you stand on that? Because it obviously has implications for your other companies, you know, whether regulators are going to be more accepting of deals.

24:56I mean, looking back on it, like, was this the right call? Like, is, are we in like an overly austere regulatory environment? Yeah, I was going to ask just to clarify, like, what do you have? Has this changed? Like, any perspective you give to your other portfolio companies about whether they should pursue, you know, MNAR IPO, even if IPO is always the goal? You know, there's only so much I'm going to say here, folks. I would say that regulatory bodies just need more fluency when they are going to come up against a potential acquisition. And that's what I wished had been the case in the Adobe Figma situation.

25:33And we'll see what happens with other situations. I can't really comment more on that. I wanted to talk about venture broadly and move beyond the Figma story. I'm curious, how much is every index deal right now an AI deal? Or how do you think about the pervasiveness of AI? I mean, what Anthropic is now, I guess, raising a$170 billion valuation. I feel like we're obsessed about vibe coding, clearly. I think people are worried about unit economics of some of these companies like Cursor. I don't know. Like, where are you on the sort of like everything needs to be AI right now in terms of like indexes focus?

26:15That's sort of what I was trying to allude to when I was saying bearish and bullish. I mean, so we have an equal partnership. Everyone's got to vote. And we really look forward to one of our partners having conviction behind something. because we want to back their enthusiasm. In the case of the last crypto wave or the first solar wave, like there was no one around the table who was excited about it. Right. In the case of AI, we're all super excited about it. And it does really feel like a monumental shift. You know, like there was the internet and there was mobile and there's AI. and it's undeniable and it's super exciting.

27:01And it has implications across the board, including how quickly companies get started, what the P &L looks like, what it looks like over time, what the characteristics of an entrepreneur are that are going to be well-equipped to go after it in this chapter of AI, what it will be in future chapters of AI, How much is business-to-business AI today? When will the business-to-consumer wave happen? What will it look like? You can answer all these questions. These are all great questions. I mean, Mark Zuckerberg literally this week. You're like, oh, I just asked questions. I don't have to answer them.

27:43No, I mean, Mark Zuckerberg was saying like this week, I think today when we're recording it, that they want to be sort of the consumer approach to AI, that I think there are a lot of people focused on productivity, but their teams can really figure out how can you use this to sort of self-actualize and get everything out of your life that you want. I mean, the question and the topic is sort of consumer in AI. And obviously, you've done consumer investing and thought about this a lot. I mean, there's a certain argument that consumer in AI is just like ChachyPT and that the great consumer investment, just like you needed to hit Facebook, you needed to hit OpenAI, and that's like the consumer investment.