Nina Achadjian on What It Takes to Win in VC Right Now

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1:19Hello and welcome to another episode of the Odd Lots podcast. I'm Jill Weisenthal. And I'm Tracy Alloway. Tracy, I love being out on the West Coast. I love being in San Francisco. We did a live episode last night. I love coming out here. It's been fun. We also had some really good Chinese food afterwards. We had really good Chinese food. And I woke up to the dulcet tones of the San Francisco parakeets this morning. That was fun. There's big protests happening. I don't know. So I've been waking up to the sound of protests. Seems fitting. I think I've mentioned it in a million tweets and on another episode.

1:53I've taken a few Waymo rides, which is amazing. I love that. But, you know, we talk to a lot of, I guess, traditional normie investors most of the time. And when we're out on the West Coast, we have to talk to VCs because that's certainly in San Francisco. Are VCs not normies? Well, they're a different class of humans. They're like different, you know, their offices feel different. They invest in sort of wildly uncertain markets in the way that, say, someone investing in the treasury market is not. It's fun. It's different. It's always eye-opening from my perspective. The interesting thing is I think like 10 or 20 years ago, I think a lot of people would have expected the VC world to move more towards the traditional investment world.

2:37And instead, it feels like the traditional investment world has moved more towards VC. Yeah, I think that's completely right, actually. I mean, I think like all of culture has kind of become VC-ified because everyone is just looking for, you know. The lottery ticket. The lottery ticket in various ways, big high conviction bets. And you sort of hope that one of them, whether it's a bet on a presidential election, a sports game, a cryptocurrency, one's career, etc. You want to find that right tail outlier, which has been the VC mentality since the beginning of the industry. Right. Everyone is a VC now.

3:12So we should talk more about the industry. If everyone is a VC, we should talk about what a VC actually is and doing now in the year 2024. I'm very excited. We do have the perfect guest. We are here in the offices of Index Ventures, and we're going to be speaking to Index Ventures partner, Nina Ishadian. Nina, thank you so much for coming on the podcast. Thank you so much for having me. I'm excited to chat with you guys today. What does a partner at Index Ventures do? Well, our job is to find exceptional entrepreneurs, really build trust with them, and be part of their journey in building a generational company.

3:49Setting aside what a partner does or investor, you know, there's a lot of VC firms. Does Index Ventures have like a specific sort of differentiator or mission or raison d 'etre that's different than anyone else? Yeah, well, I think to answer that, it's helpful to know a little bit about the history of Index. So Index started in Europe almost 30 years ago and was one of the first VC funds to really believe that entrepreneurship could come from anywhere, not just Stanford, Silicon Valley. And we've really had a global mindset. And so today we have offices in New York, San Francisco, and in London.

4:23And the way that we think about investing is first and foremost, it is truly all about the people. So when we hear a pitch, we actually spend a ton of time diligencing the entrepreneur and trying to build a foundation of trust to understand what motivates this person. What is truly this person's spike? And we try to see them in many different settings, in our office, in their office, in a comfortable situation, in an uncomfortable situation, in a professional setting, or having dinner at a restaurant. And so we spend a lot of time really getting to know the individual because at the end of the day, when you're investing in venture capital, you're really taking a bet on the trajectory of someone, which oftentimes is really hard to see when you're talking to a very young first-time founder.

5:09This gets into something that I've always wanted to ask a VC person, but what are you doing for founders besides writing checks? Because I hear a lot about the relationship and the pitch is always, well, we have great relationships with our founders and we really build them up as both people and businesses. What does that actually mean? Yeah, well, I can tell you at Index, we don't pride ourselves on being the cheerleader for a founder. Oh, that's cool. No, many VCs, they show up to board meetings and they're the cheerleaders, which is an important role, right? You want to have that positive energy in the board meeting.

5:44For us, we really want to be business builders along with the founder. So what does that mean exactly? Number one, we try to be a mirror to the entrepreneur. So that could mean in a board meeting, if they have a blind spot on, let's say, like an executive that they've had around that has been incredibly loyal to them for years, it's often hard to see, you know, because we are going to all of these board meetings in the quarter. We can kind of calibrate, hey, this CRO is excellent. Or, hey, maybe you've outgrown this particular person and you need to think about, you know, augmenting them or putting them into a different role.

6:16So being a mirror is difficult because oftentimes you have to share with the entrepreneur something that they don't want to hear or maybe they don't see yet. And so that's one thing that we definitely think about. Second, you know, I think being able to know exactly what is going on at a company and not feeling like a lot of founders, I didn't appreciate this for a long time, they would have so much anxiety preparing for a board meeting. You know, they would tell me like the night before they wouldn't sleep. They'd be all worried about what's going to come up in a board meeting. A lot of founders have a fear of getting fired by their board that I never really thought about or appreciated because for us, we're like, it's all about the founder.

6:55We're here to back you and your vision. And so I think being able to have a conversation that kind of transcends the board meeting where, for example, on the first company that I took a board seat of, I would actually fly down the day before the board meeting and spend a ton of time with everyone who was going to speak in the board meeting. plus their like minus ones to really get a good sense of what's going on in the company. What are they worried about? What are some topics? And then before the board meeting, I talked to the CEO and say like, hey, these are some of the things that are on my mind, just so they didn't feel like they were blindsided.

7:27So taking that extra effort to feel like an extension of the company, not just like I show up, I grill you at the board meeting, and then I go away. Like a sort of neutral Greek chorus almost, right? That can spot the blind spots that the founders might not necessarily see and be like, hey guys, this is happening. Yeah. You really want to be that mirror. It's interesting because in my mind, when I think about public company boards, I always think of them as, well, there's a cliche, there's a stereotype that many of them are rubber stamps for the chairman or the rubber stamps for the CEO, particularly on questions like compensation.

8:04And there's a lot of criticism of governance of public company boards. My dream job is to have 16 board memberships for which I'm paid an enormous amount of money. Yeah, or you don't even need enormous if you have 16. You just rack them up. What is it? Actually, I've never asked this. What happens in a private company board meeting typically? What's the agenda? Yeah, so typically if it's a well-run board meeting, the materials will get out, be sent out 24 hours in advance. And usually it's in a memo format. Actually, a lot of our founders write a CEO letter where they say, here's what's on my mind.

8:36And it's like stream of consciousness. Like what went well, what didn't go well, what they're struggling with, things that they want the board's view on. And then the ideal board meeting is you come in, everybody has looked at what happened in the past quarter. What are the open questions? We collect some data to help the entrepreneur if they're like, hey, I'm thinking about changing my usage from seat base or my pricing from seat base to more like usage base. How has that gone? What other companies have done this? You know, what should I be thinking about? And it's more of a discussion versus like a report.

9:05Those are the best meetings in boards. So one other thing I always wanted to ask a VC person is how much technical expertise do you actually need in this job? Does it get as granular as you're looking at someone's like source code and saying, this looks really elegant? Or is it more about the business case and sort of refining the business model itself? Well, it probably depends on what you're investing in. Generally, we would do a lot of that technical diligence at the time of investing. to make sure that what the founder is saying is built the way that they're presenting it and that there's no loopholes and that we feel really good about the engineering team.

9:44So we will often bring in also deeply technical experts to help with that diligence. But in general, I'd say going forward, it's much more on the business building and also giving feedback on the team. Like, at the end of the day, because these companies start so small, the people that they are bringing around the table and what the bar of excellence is for the entrepreneur is really important because that's the foundation of who's going to build that next source code or that next product or that next go to market motion. And so that's where we spend the majority of the time, the business and the talent.

10:17How much of your success would be attributable to perhaps going out into the world and identifying promising founders or promising companies that are going to be the next big thing? And how much would it be there's a promising founder and a promising company that's the next big thing, and they want to call you. You were one of the first calls that they placed. This actually came up in another conversation we did recently about wanting to be a first call, which strikes me as slightly different than you being the one to call that. That, by the way, that was with a credit guy, but Nina also has a background in credit.

10:56Amazing. Used to be a high yield bond trader. Oh, amazing. But I'm curious about that dynamic, the importance of being a first call or a second call as opposed to an eighth call for certain types of deals and thinking about that ranking for potential opportunities. Yeah. So maybe it's taking a step back. So the job of a VC is number one, sourcing, which means being able to find interesting opportunities or having those entrepreneurs come to you. Number two is, of course, doing the diligence where you're making sure that the market thesis is right, the product is great, the team is excellent. Number three is winning, which I don't think a lot of people actually talk about.

11:34So people think that you sit in this room in San Francisco in this nice office and people just come to you and you say, oh yeah, this is a great idea. Where do I sign the check? But that's not actually the case. Usually when you identify a great entrepreneur, chances are somebody else has also recognized this person is spectacular. And so actually being able to convince the entrepreneur that you are the person in the firm that is going to work the hardest, be there for the founder, and also that you have a really specific investment vision and thesis that aligns with their vision, I think is really important.

12:10So the process of, you know, once you know you want to invest in this company, actually getting that founder to choose you is actually quite difficult and takes a lot of time. And then there's, of course, being a board member and then finally exiting the company IPO or acquisition. When it comes to winning, can you talk about the difference in 2024 versus 2021 when the perception was that there were a handful of really large firms that would write a check within an hour or maybe two hours or maybe a day? But I think in many cases, like, yep, this looks good. and we're going to write you a big check and then we're never going to talk to you again, but the check's there, et cetera.

12:49How real was that for you as a competitor? And what is that like in 2024, that competition? Also, sorry, just to tack onto it, but if you can't write the big check, what do you do instead? Do you send like red baskets and nicely written letters? What's your edge in that case? Okay. Happy to give you an example there. So in 2021, yes, absolutely. that's accurate. It was crazy. We'd meet a company at 9 a.m. and by 4 p.m. they would send us a text or an email saying, hey, we have four term sheets. What's your decision? And, you know, we sat a lot of those out for a couple of reasons. One, we didn't feel like we did our fiduciary duty by actually doing the diligence.

13:28And number two, it felt extremely transactional, you know, and I think that there were some players that had very large funds that could afford to do that kind of investing that have really exited the VC game today because they realize that, again, unless you are getting the real unfiltered view of what's going on in the company, it becomes very difficult to actually know, like in these private companies, you know, what are the challenges, what's going well, being able to have that authentic conversation with the entrepreneur. Now, you know, a lot of those people have exited, a lot of the smaller funds have not been able to raise, you know, a second time fund.

14:04I think that the players have consolidated back to a lot of these enduring platforms and institutions that have kind of gone through a lot of these cycles. And by the way, I think founders realized that those who took the money from those firms that were more like, I think someone else threw this phrase out, like ATM, like VC ATM. When times got tough, those players were not around because they weren't on the board. They had totally set expectation of that. And the founders realized they really needed someone to help them walk through how to do their first riff or how to restructure the company or what to do, take a down round or take debt.

14:39So I think less players now and then also founders have really re-centered on the original value proposition of venture capital, which is having someone along your side who can really help you build this business. And then how do you compete? Do you have any interesting instances of, I guess, being really creative when pitching to a potential founder? Yeah. Well, I don't want to share all my secrets. Share one. Okay. Okay. So look, I think winning is this incredible art where you have to really try to get as many data points about the entrepreneur as you can. So for example, even before I meet a founder, let's say that I'm really excited about and have a thesis about.

15:19I will watch every single podcast, video, Twitter, LinkedIn post to try to gauge like, what is this person like? Are they going to respond to a super aggressive, hey, I'm leaning, let's do this, let's go, which some founders love that. Or are they more like, I want to get to know you. Maybe I invite them over to my house, they get to meet my husband and my kids. Maybe we bond over our love for Formula One, or maybe they want to hear about my values as a board member. So I try to custom tailor the interaction with the founder based on the data that I can get outside in. And of course, that means talking to other people that know them and trying to understand what they care about.

15:57And then in terms of the winning, you know, I think the hardest part that a lot of people don't share is once you've issued a term sheet to someone, and you know that they have term sheets from other VC firms, like what happens in that gap of time until they sign? And so I try to map out the entire process of, okay, if they're going to signed by X date, and most likely we're going to give them a term sheet on this date, what needs to happen in that gap of time? And it could be like this touch point, this thoughtful note, this special, you know, event that we're going to invite them to. And so I mapped that all out ahead of time.

16:31And as the conversation goes, I'm continuously like tweaking what I do in which order. Joe, you kind of did that to me when you were trying to get me to go to Bloomberg. I remember that. And it was successful. Yes, it was successful. Which actually dovetails into to a question, which is that we have listeners who, many of them, some of them in college, and maybe one of the things they think about is venture capital. And it looks pretty cool. You really do seem to meet a lot of very interesting people, if nothing else, in this industry. Some people make a lot of money. Your offices are a lot nicer than, say, other offices where people might go into the investing realm.

17:11But you don't know if you're So if I were in college and I was like, I want to be VC, but I don't know if I'm good at it. What would you have to know about yourself to know if like, oh, this is a path I want to pursue? Yeah. So first, it goes without saying for me, at least, that I think this is one of the most incredible jobs in the entire world. Because you are getting to be on the front row seat of technology and innovation and the people you interact with. I mean, every day I have to pinch myself that I'm getting to meet these entrepreneurs. This is how Tracy and I feel, by the way, about our job.

17:46Yeah, it's incredible, right? Like you get to meet these incredible people who are putting their life on the line to pursue something because they think, you know, this business or this product or this broken system needs to be fixed. And so, you know, if even that sentence inspires you, you know, I would certainly encourage you to think about venture capital. The beauty is right now there's so much information about VC. When I tried to get into venture capital back in 2015, 2016, there was nothing. VC firms didn't have websites. There was no YouTube videos, podcasts. So the first thing I would say is try to determine if you get excited listening to Invest Like the Best or some of these, a lot of these VCs that share their journey and how they think about their day-to-day and what the trade-offs are of investing at this stage.

18:37Second, I would say in order to be good at this job, you kind of have to have some raw ingredients. One of them is definitely thriving in ambiguity. So when you show up at a VC fund, usually you're given a laptop with a blank calendar. And a lot of type A people try to get into VC, myself included, right? Like where it's like, give me the milestones, tell me what the goalposts are, and I'm just going to like crush them. Well, when you get to VC, you don't really have that. It's like, make magic, make money, find great entrepreneurs. And you're like, where do I start? So you really need to love thriving in ambiguity and kind of breaking down.

19:15So it's just your job to fill up that calendar. It's your job. And no one else is going to tell you like how to do it. No one is going to tell you how to spend your time. Of course, like you get some guidance on like, hey, find a market, go deep, find the founders. So that's one, thrive in ambiguity. The second thing is being able to take the ball. So oftentimes, VC firms are pretty lean. That means a lot of responsibility for a young person. So that means, hey, you met a great founder at a conference? It's on you to figure out how we get a second meeting. Do you write them a really thoughtful email?

19:48Do you invite them to this dinner? Follow up, follow up, follow up. And then the third thing that I don't think a lot of people really appreciate is these very long feedback cycles, right? So again, type A people are usually like very, you know, driven by positive affirmation because, you know, you do something, you do well, great, next thing, next thing. You get the sort of immediate feedback. Yeah, exactly. The dopamine hit of like, I'm good at this. At VC, like in VC, you really don't get that because it's like years before you know. And, you know, anyone that tells you like any company has only been like good news and up and to the right is lying to you because it is such an emotional rollercoaster.

20:25Things go wrong. You know, things go right. You think you're a genius one day and then the next day. It's very humbling. So I think like those are core attributes that you should have. And then finally, of course, you need to be able to sell yourself. And that's where a lot of people, I think, feel very uncomfortable, you know, because it's one thing if you can sell a product. It's another thing if you can convince someone to take a bet on you as a board member. And, you know, being able to articulate like your personal pitch and why you, I think is really important.

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22:07EasyCater, your business tool for food. To learn more, visit easycater.com slash podcast. So you mentioned trying to get into VC circa 2015. Can you talk a little bit more about your previous job history? Because I was saying earlier before we started the podcast, but honestly, one of the most eclectic bios I have ever read. So in addition to being a high yield bond trader at Citi, you also worked at a bakery in Istanbul for unknown reasons. Yes, sure. So I grew up in the Bay Area. I'm Armenian. My parents moved to the US from Iraq, actually. We were part of the Armenians that originally lived in the southern part of Turkey before the Armenian genocide.

22:52And basically, my parents, you know, raised me with this philosophy that I was so lucky to have the right to work in the U.S. My dad, who had the equivalent of a Ph.D. in electrical engineering, when he moved here, he had to wait seven years for a green card. And so, you know, I grew up with this perspective that, wow, I'm so lucky to be able to even work in the United States and, of course, speak English. And so that really always drove me and, of course, my Armenian heritage. And so when I got to college, as many immigrant kids do, it was either like become a lawyer or a doctor. And I thought, you know, I'd love to be a lawyer.

23:26So I originally decided to study pre-law and then I interned at a law firm one summer and I was like, this is just not for me. It was just like I knew that it would take so long for me to like actually do what I thought a lawyer did based on what I saw on TV. So I asked a couple of my friends who had done some finance internships what their experience was like. And most of them were investment banking, which honestly sounded very similar to doing the lawyer path of just sitting and doing spreadsheets and PowerPoints. But a few of my friends had done trading. And it just struck me as, wow, here's something where you can form conviction very quickly.

24:04You have an opportunity to put your money where your mouth is. and I was like, this seems like the most intense job I could possibly do after college. So if I do this as like a training ground, worst case scenario, any other job after this would be like a cakewalk. And so I was really fortunate to get this offer at Citi and I really wanted to be on the high yield bond desk because the number one trader, this guy, Scott Goodwin, who now runs an incredible fund himself called Diameter, was running that desk and I really wanted to learn from him. However, I had this terrible timing of graduating college in 2008.