EP 92: Mike Volpi (Partner, Index Ventures) Top AI Investor Predicts How The AI Wave Will Play Out

27:41And so they find their moment in time. But you see a lot of fantastic entrepreneurs who are just sitting out there on board with no waves. Yeah, yeah. So you've got to think through that. That's probably the most important element. But ideally, you want all three. When you're actually going about like, um, diligencing a deal, uh, how, how, how does Index do it? Do you guys pair up and have two people prosecuted? Are you sort of on your own hunting? Do you have a junior person helping you? Like, how does that kind of work? Yeah. Generally we have a team effort. Uh, usually have a, uh, uh, a partner and a secondary partner that are working on it together.

28:19And we have a team, uh, of, uh, younger folks on the team that help us out. So it's usually a team of three or four folks that are working on any particular transaction. I heard you say that 80 % of your investments are ones with good confidence you'll make money, which allows you to do 20%, which are the moonshots and who knows. And how do you sort of think about what the 80 % is versus the 20 %? Is that something you actually articulate internally? Like, hey, this is one of my 20 %? It's not. Yeah. No, I think my partners know about it. But, you know, for example, I've had good success in my career investing in a lot of open source data infrastructure companies.

29:01You know, Hortonworks, Cloudera, Elastic, Confluent, ClickHouse now, Cockroach Labs, Kong, etc. et cetera. So I sort of, you know, I'm a student of how the mechanics of how that works, how you turn it into a business. And I feel like, okay, that's middle of the fairway for me. I know how this business works. I know what to look for. I know how they monetize. And, you know, for me, they've produced, you know, five to$15 billion outcomes as market cap companies. and sort of that's kind of what I think of as my 80%, like stay in the lane. If I produce that output for my partners, which, you know, generates returns for them, generates return for the LPs, occasionally they're going to let me do some crazy shit, which is like, you know, self-driving cars or robotics or early investments in AI.

29:56And so I think as an investor, I like to have a little bit of that balance. and that I think gives me a platform to do crazy things. And sometimes those crazy things, they work out or even derivatives of those work out, right? Because Aurora has been a good investment for us. As a public company, we've made some money on it, but I made the scale investment because of Aurora and scale is going to turn out to be a fantastic return for us. So, you know, the crazy things sometimes lead to good stuff later. Yeah. Hey, guys. I'm Jacob Efron, a partner of Logan's at Redpoint. Wanted to take a quick break from the episode to let you know that Redpoint's AI podcast, Unsupervised Learning, now has its own YouTube channel.

30:40We have an incredible set of guests really at the forefront of the AI revolution. So if you're interested in what's happening in AI, what it means for businesses in the world, definitely subscribe. Now back to the show. I'm curious, actually, because you bring it up in scale. I was going to ask this later. But what did you – Alex was 19? I think it was 20. 20 when you invested in him? What did you uniquely see in him? I've sat down and done a podcast with him, and he's obviously a fantastically intelligent sort of cerebral individual. But investing in a 20-year-old is a risk in and of itself, I guess.

31:15What did you see in him at that time? I mean, first of all, as far as Alex, I can wax poetically about what an amazing entrepreneur he is. Everything you want out of an entrepreneur, he's twitchy, restless. He's incredibly smart. He's super commercial. He works his ass off. He's a great networker. He sees technology before it arrives. You know, he adjusts and shifts. I mean, so many good qualities. Were those things that you intuitively knew at 20 years old or are those now that he's 26 or 27 or whatever? No. And actually, I think that's the interesting part of your question, which is that when you invest in a 45-year-old, you more or less have the final product.

31:56That is what that person is going to be. When you invest in a 20-year-old, it's not a finished product. It's got rough edges. You're not sure about this. And I think what you have to do as a VC is to sort of squint and ask yourself, this person looks like this at 20. What will they look like at 25 or 30? Can you extrapolate the trajectory of this individual? and it's really hard because humans change enormously between age 20 and age 30. Like, you know, it's a life-defining decade for us. We find our motivation, our ambitions, our aspirations. We face our first challenges as an adult. And so the extrapolation is inaccurate at best, but you try your best to see what this person is going to turn into.

32:49And I think, honestly, being a parent of somewhat older children is helpful in that assessment because, you know, I've seen my own kids like evolve and change and become different kinds of people. So I think that's an art form. I don't always get it right. But I think oftentimes when I read briefing memos from VCs, it always says, this is what the entrepreneur is. And it never talks about what is the entrepreneur going to be in five years. And I think that that's a bit of an art And if you look at the greatest returns in our business, whether it's an Amazon or a Facebook or whatever, oftentimes you see the leader evolving a lot as a leader in time.

33:32And it's funny how we don't actually pay attention to it. We just look at it very statically. Yeah, I guess it's hard to, it's much easier to take that snapshot than it is to try to project the person in some ways, I guess. I think the projection can lead to maybe some level of false precision. I've always found that the in-between when you write a check and then you sort of go quiet for four weeks or whatever after, and then you go to your first board meeting. And the entrepreneur has been through a bunch of fundraise conversations and how much they've changed by the time your last conversation with them to your first board meeting or whatever with them is usually a pretty good sign of like the slope of the line and how quickly they're going to grow.

34:12Yeah. So, yeah, I guess that's one of the things of getting to know entrepreneurs over long periods of time and getting them to see them evolve as they as you have those conversations. Yeah. And, you know, there's also, you know, there's always this kind of question about where is the value that a VC brings to the table, right? And it is true that, you know, a lot of what we do is just invest. Like, that's our primary act. But I think when you're investing in a 45-year-old leading or a group of established founders, you are more along for the ride. When you're investing in a 20-year-old, and I've experienced this firsthand with Alex or George Sivulka at Hebbia and so forth, is you are shaping who they become also.

34:59And I find that absolutely fascinating. It's an absolute privileged position to take these incredible people who have so much talent and to be able to sort of unlock aspects of them. Mostly they're growing on their own. Make no mistake. But you can clearly feel your influence much more than what you can do. You know, you give a nice piece of advice to a 45-year-old, but they are who they are. You started full-time investing in 2009. You went over to Index. But then you were investing in the 90s at Cisco when you were 12 years old, going through that stretch. If you could go back in time, maybe to when you started at Index, what's something you know now that you wish you could have told yourself then about investing, about working with entrepreneurs?

35:48I mean, so much. First of all, I think it takes a while to become a decent venture capitalist. It's not a profession that you can write down and explain. I'm sure you know this, but it's very experiential. I think it's very artisanal in its nature. You've got to understand a lot of different details and how things come together. Probably most of my professional career prior to going to work for Index was operational in nature. I had done some investing. And I think probably the first thing I would tell myself back then is actually let go of some of those operational first principles. Because I think operators tend to think too much in the first person when they look at a company.

36:43Psychologically, you're like, if I had this product and this market, I could lead this company to win. Big problem is it's not you. It's another person that's doing it. And so you have to kind of let go a little bit of your sense of analytical structure of how does this market structure? What is the competitive nature of it? Can I do due diligence on the technology and embrace more of the understanding of the person, of the founders, and their ability to execute against that idea and that technology? So that was probably, I was more focused on markets, on competitive dynamics, on technology, and less focused on the people.

37:26And over the last 15 years that I've done this, I've learned that it's more about the people and a lot less about the technology. I mean, technology is important and so on and so forth. So that's probably the biggest shift, I would say, that I've tried to internalize. And then, you know, the other thing is this is a pattern recognition job. And so it is about seeing an opportunity and saying, can I, do I have any other situations where this pattern has repeated and I can perform, you know, I can sort of follow that trend. And that's true both in terms of the business opportunity, but also the individual founder.

38:07Now, founders are hugely diverse. There's all sorts, but there are patterns, right? And so can I see a pattern in this person? And those are probably things that I didn't really understand super well when I got to the job day one. In talking to a few folks at Index, more than one said that you were the best mentor they've ever had in their careers. They must not have had very good careers. Yeah, yeah, yeah. Well, it's a limited number of people, I guess, they're working with. Yeah. We do pay their salaries. Yeah, exactly. I think they're obligated to. Yeah, yeah. I don't have to – I'll tell you the names after.

38:42They're maybe looking for a pay bump. So when you think about developing young venture capitalists or helping them learn this artisanal craft that comes with experience and all the sort of – some of the things that you've learned over the course of the last 15 or 25 years or however you want to score it, But how do you think about nurturing those people and helping them find their own lane? Because what's true of Mike Volpe, what's true of Doug Leone and Peter Fenton and Mike Moritz and all these people that are iconic names in the industry is going to be slightly different, right? We're all sort of throwing different pitches.

39:17We're doing things slightly differently. But how do you help pull out the best of the people that you're working with? Yeah. I mean, there's a lot of things, but I'd highlight two, which is first, in the venture capital business, you have a lot of very hardworking, very intelligent, talented people. This is a very high density of that type of profile. that type of profile is best managed or best mentored by giving them a lot of free space and allowing them to take risk, right? The core thing is jump into the deep end of the pool. And I think that the best people shine the most in that circumstance.

40:03And the venture capital is populated by a lot of smart people. The ones that have performed very, very well are few and far between. But all of those, you just wanted to throw them into the deep end of the pool. What does that translate to? It's like, pick a sector and you go invest in that sector and let me know how I can help. So take one of my amazing partners at Index, Shardul Shah. He joined us and the US team is the first person we hired on the US team back in 2011. And we didn't really have a person covering security. And I was like, okay, sure, do all. Take security, it's yours. Go build a network, figure out what to do, do your investments.

40:46I'm here to help. I'm here to open doors if I need to. But really, it's about giving them the freedom and the flexibility, and most importantly, the self-confidence that they can tackle whatever problem is faced in front of them. That's one dimension. The other thing that I try to do is not give people answers, but give people frameworks to figure out their own answer. So you asked, I have this problem, should I invest in this company? I'm not going to tell you whether I should invest in the company. I will give you a way to think about whether you should invest in this company. And then you are in the details.

41:19You know the people better. You've studied the market better, whatever. You have all the data. I'm going to give you a framework, like the one I just gave you about the surfboard. And hand you that framework and say, you figure it out and I'm going to back you up. And by the way, look, as a VC, maybe you're better than I am, but I don't think I get half the time right. And so you better get used to like letting people make mistakes. I mean, everybody, I've made so many. And as a venture capitalist, it's sort of like, it completely comes with the territory. So letting people feel like they should not fear making a mistake.

41:57If you went through a rational process using the right frameworks, you came up with the answer, you invested, the company didn't work out, it's fine. It's totally fine. Just go back at it, right? As long as you're using those frameworks. So don't quibble with the decision of whether you did or did not do a right thing. Just focus on the fact that you use the right mental frameworks to make the decision that you did. The mistakes you've made, are there commonalities or through lines between them that you've now learned a course correct? Maybe it was you invested too much in the board and not the wave or anything along those lines that you look back and you're like, I wouldn't have done that again.

42:40Because we're always going to be wrong, right? Just statistically. Yeah, no, for sure. I think, look, one of the most important things we understand we have to do as people is to understand our own weaknesses, right? What are my pitfalls? And in some ways, those are often the flip side of the coin of your greatest strength. So I said earlier, I love tech. My weakness as an investor is I fall in love with tech. And so, you know, what I have to do oftentimes in the moment of like, should we do this? Should we not do this? Is pause and say, am I doing this because I love the tech? Or am I doing this because we think we're going to make money at this?

43:18And the most frequent problem I've, mistake I've made in my career is just falling in love with the technology more than falling in love with the business and the people and all that good stuff. So that's what I have to guard band myself against. Although that's just me. Every one of us has blind spots. And so the most important thing is just recognizing what's yours. And then, you know, surrounding yourself with people or surrounding yourself with frameworks that, you know, prevent you from going off the rails given that blind spot. Is there an investment that stands out that you didn't make that's particularly painful?

43:55And what was – I'm sure there is. We all have them. I can think of a list of five of them or something. But that you tweaked your mental model going forward saying, hey, I was off on this and it's something I need to think about going forward. Yeah. I mean, I'll cite one that gives kudos to Redpoint, which is Snowflake. Yep.

44:16But the first investor in Snowflake was Mike Spicer at Sutter Hill. Credit to him. He was kind enough to show us and me the Series B and then probably a number of subsequent rounds. And I sort of used market logic to convince myself it wasn't a good idea because it was like, well, Amazon has Redshift. It's their fastest growing, most competitive product in the market. this is just an analytical database there's lots of those there's Netiza and Vertica and Teradata and all these and technically speaking it was more scalable on a cloud basis but I sort of essentially used market logic to talk myself out of it and what I didn't appreciate for one Benoit and the founders there who were amazing and then the ability that Mike had to bring in first Bog Muglia, who was a great leader, and Frank Slootman, who was also another great leader, to evolve the company.

45:19It just didn't enter my framework well. So, you know, but those ones hurt. Yeah. When you're wrong on things that you invest in, it goes to zero. When you're wrong on things that work out, they go very far. You can only lose your money once. You can make it 50 times over. You said something that I found pretty profound. I'd like to read back to you and get you to elaborate on. But most companies and people define themselves and who they are in too narrow of a way. When you're getting started, it's important to focus. But then over time, you need to redefine yourself more expansively. Can you elaborate on that sentiment, either for companies or people?

46:03Yeah, I mean, that was sort of my big lesson in my first adventure in a professional life at Cisco. I joined the company when we were about 1 ,000 employees, I think, something like that. And seven years later, we had 50 ,000 employees. And I think the company succeeded in many ways because it kept reinventing itself with additional chapters. to, you know, first it was a router company, then it was a router and switch company, then it was an internetworking company, then it was like, you know, it kept reinventing its existence. And in some ways, the phrase I often try to use is like, you know, we sort of define the sandbox of what it is that we are, and we try to excel within that sandbox.

46:50But then we ultimately just live in that sandbox. And we forget that the whole point is to make the sandbox bigger. That lesson applied to Cisco, I think it really applies to people a lot, especially capable people, many of them in our business and venture capital, but also in other professional walks of life that define themselves as this is who I am. I am a programmer. I am a salesperson. I am a marketeer. I'm really good at Java. And you sort of, you kind of in the moment feel good because you excel at this thing, which ultimately actually doesn't fully expose who you are as a person. And so being able to sort of assess where you are and say, you know what, I'm going to make that sandbox bigger.

47:39I'm going to try something different. I'm going to try to expand my competence. That allows us to really fulfill our full potential. You know, I was not a software engineer, right? I programmed, but I was a mechanical engineer. and if someone says like well how does mechanical engineer understand anything about ai you're probably right but then you know if you just sit there and you know you read papers and you try it and you download the software and so on and so forth and you redefine you say well no turns out i'm not a mechanical engineer i can understand this other stuff and i can understand this other stuff over here you gradually expand the sandbox and i think that you know it's not such a blind process because if your sandbox is two by four and you sort of say, I'm going to go to 30 by 50 feet, not so much.

48:33But there's a gradual process associated, but it's really important for people to continue to grow. I mean, another way to put it is this whole growth mindset mentality, but I kind of think of it as expand the domain in which you can act to allow yourself to learn new things and excel at more things. Similarly, you said evolution has taught us that mistakes are bad, but that's not true, which is a weird thing, especially as a venture capitalist. You need to be willing to make mistakes so that you can hit the ball far out of the park. But how do you think about that? Look, I think of it as I actually think the VC job is very statistically oriented job right at the end of the day uh much as a baseball player goes up to to the plate and tries to hit you're only gonna if you're really good you're gonna hit it there about 33 percent of the time yeah but if you don't swing you're never gonna hit it and so i i do think that it is absolutely critical to embrace the idea that mistakes are part of what you do like it's just, it's fine.

49:37And before even saying like, I learned from my mistakes, that's kind of obvious. It's just forgiving yourself for your mistakes. Like saying, it's fine. It's totally okay to make a mistake. And if you're not, it's probably worse, right? If you make no mistakes at all, you're sitting in that small sandbox and just bunting every time the ball comes at you, right? Yeah. So, you know, making mistakes is about, comes with the territory when you expand it. And then obviously you try to learn from your mistakes, but some of your mistakes, the lessons you learned are pretty obvious. They just show up and you're like, oh God, I'm not doing that again.

50:16But I think the most important part, and I think particularly for very competent people, you hate making mistakes. We hate making errors. And it's a very human, it's interesting because It's a human thing, right?

50:34Like 10 ,000 years ago, when I came out of my cave and I did it at the wrong time, the lion ate me. You died. It was really bad to make a mistake. Mistakes translated into tragic endings. Today, professional mistakes. Like, you know, people give us 3 ,000 shots. And so I think we overweight the idea of making a mistake in our own mind. It's a sort of psychological factor. And I think the most important thing is just to let it go. Like, all right, fine, screwed it up. Let's move on. Try again. So there's a book called Done Deals that was written in 1999 that I read when I got into the venture industry.

51:16And I actually still had sitting on my bookshelf. and I went back and I remembered there was a chapter that you wrote about when you were at Cisco and Cisco's investing strategy. In there, there was a comment that you made about getting credibility with entrepreneurs. And there was two people you referenced. You said you can call them and ask about me and ask about Cisco. And the two people were Don Valentine and John Doerr, two of the most prominent people in, I think, our industry's history. What do you remember about both of those people, their style? Were there things that you internalized about interacting with them that you carry with you today?

51:56Yeah. I mean, the interesting thing about those people is they, in some ways, interestingly represent the venture capital business. Both are not active VCs now, but in their era, they were the titans of our industry. And they were completely different human beings. Don, unfortunately, has passed. John is still active doing a lot of really amazing philanthropic things. But Don was a guy that, you know, he would show up at the board meeting. He had his little Sequoia notepad with a green pen, only green pen. And oftentimes he wouldn't talk. He would just like write notes and hand them to you. And he commanded extraordinary presence.

52:36And he was the guy that you were completely afraid of, you know, saying something stupid. Now, he also had this uncanny ability to see a situation, a person, a thread of logic or whatever, and see flaws, chinks in their armor, and use that to go drill in and figure out what's really going on here. John was enthusiasm, drive, contagious sort of ability. In some sense, he was an entrepreneur himself, that he sold you the vision, right? Both turn out to be very, very successful at what they do. And the lesson you take away from it is that there really isn't a mold for a successful venture capitalist.

53:18You know, there's those two. There's, you know, Mike Moritz, who was a journalist. There's Peter, who is, I think, fourth generation VC or something, like he's sort of born and bred. At birth, he started writing checks to people. So you have this huge variance of how you undertake the task of being a venture capitalist. And the big lesson from those two was how you have to actually design your own approach as an investor. In doing it in your own way, you can also inspire others. Both of them were very inspirational. Both of them also, I think for me at least, were extraordinarily generous with their time.

53:59And when you think about it in reverse, I was some kid that's 26, 27 years old or something, going up to Don Valentine, one of the greats, or Dora, one of the greats, and being like, hey, can I grab lunch with you? Sure. Come on in, talk. Anytime you want to come by for advice, come on in. And so, you know, you got to pass that down to the next generation. And the way I think of it is like, you know, I've had some reasonable success being a venture capitalist when some kid calls you up and say, hey, can I grab lunch? Yes. Yes, absolutely. Then you can make your assessment as to whether that person is worthy of more time or less.

54:36But keep that door open as they did for me and hopefully I've done for others and hopefully many people will continue. There is a comment you made in that book about recommending buying the market leader instead of the lesser players despite paying a higher price. I think the quote you had was, the right way to frame the question is not how much you're paying for an equivalent asset, but rather how much better can the market leader perform when combined with the asset of the larger company. Is that something you think about today in investing, paying a premium for the market leader rather than going in for the number two at a lesser price?

55:13Absolutely. I think that that is, you know, we live in an industry where the leader gets 70, 80 % of the value. Yeah. I think the concept of the cheap and cheerful number two doesn't work in our business. And at Index, we've seen the same thing where we invested in a number two player. And occasionally, you get a decent return. But by and large, investing in the number one player, I think in that context, I was speaking more about M &A. And I still think that is absolutely true. where if you're going to buy somebody to integrate them into your company, today it's much more difficult because there's a lot of regulatory issues and so forth.

55:56100 % pay more. What people forget is that you're sitting there saying, company A, market leader,$200 million valuation. Company B, second place in the market,$50 million valuation. In one case, I own 15 % of the company. In that case, I own 20 % of the company for a little less money. Five years later, they go public. You will make or lose more of that in intraday trading in the stock price. So you're fixated on complete. If you really believe that the thing is going to be public, or if you really believe that this particular acquisition will transform your business in some way, you're completely crazy to think that plus or minus 20 or 30 % of the price makes any difference when you invest or when you buy in the company.

56:44It's you're focusing on super micro instead of like the big picture of what's going to happen over a longer time horizon. Yeah. And that's even from a M &A or a return standpoint. And then there's the benefits of the reference ability of being in the market leader as well, which is very beneficial to at least our job, right? For sure. Being in the number one versus the number two. For sure. I mean, I'll give you a concrete example. I was fortunate enough to enter this business with a little bit of a brand and a reputation when I entered it. But that wasn't to say that I was going to be any good at investing.

57:24One of my first investments that I did with Satish was Pure Storage. And I want to say we did the series maybe C or D in the company at a pretty high valuation, like$500 million valuation. I forget how much money we put into it. So I wouldn't say this was like a premium whatever, but fast forward, I think Pure Storage today is worth, I don't know,$15 billion something in that neighborhood. So clearly a perfectly good investment. And then you start to build a brand with Frank Slootman's on the board, Anil Bousseri's on the board, Satish, Spizer. You've got this really great group of people that are like, hey, that guy Volpe, he's all right.

58:11He knows what he's doing. And he invested in this. And then people are like, ah, Pure Stories, this, that. And then that opens the door for the next thing, which I think was Hortonworks with Fenton. And that opens the door to the next thing and the next thing. And so, you know, playing with the win as you're getting started, somehow being associated with the winner. And, of course, it's not just making the investment. You've got to work hard after that for the company. But that sort of, you know, gives you the platform to do a little bit better and a little bit better. So shifting gears a little bit, you were born in Italy and then grew up in Japan.

58:47Yeah. How does someone born in Italy, growing up in Japan, end up in California in the middle of the internet bubble? Well, it's kind of serendipity. I was born in Milan, Italy. My dad worked for a local bank. When I was six, my mom and dad were kind of the adventurous type. And so the bank offered them an expat job transfer to Tokyo. They took it. I started first grade in Tokyo. And I had this kind of an eclectic life of going to an American school in a society that was totally different. Made some really interesting friends along the way because a lot of the other kids that I went to school with were sort of like me.

59:34You know, kids of executives at IBM, diplomats, kids, whatnot. not. And then, you know, I liked science and math. And so, you know, because the education was in English, when I got to applying to college, sort of going to America was sort of the obvious thing. And then I applied to a variety of American universities. Several of them were in Boston, and one was in California, and I visited in February. And so, truth be told, the weather, I drove down Palm Drive and I was like, wow, this is nice. This is different. Yeah, yeah, that's good. So that led me to the Bay Area. And I think after a few years, even as an undergrad, I started to recognize, wow, there's something very, very special happening in the field that I love in this area.

1:00:25And obviously, it became infectious after that. Did going from Italy first grade to Japan, is that right? Do you think that has helped you in being able to resonate with different people and get along in different environments? Yeah, 100%. I mean, probably the biggest takeaway lesson is adaptability, which is being able to change yourself a little bit to adjust to the environment. but uh i think the less obvious one is being able to see things from another person's perspective You know, where I find it's most useful is in negotiations. You know, when you're oftentimes you're negotiating, it's a term sheet, it's an M &A transaction, whatever.

1:01:13The thing that I find most useful is I look at the problem from the other person's perspective. And I try to orient where we're going to fulfill what's important to them, which is oftentimes not exactly what's important to you. or in some cases I want them to get to get them to see the world a little more the way I see it so how do I change their prism a little but the ability to see things from another person's perspective obviously being thrown from and by the way Japan and Italy there are no two countries with more diametrically different cultures like it's crazy how different they are but you sort of have to adjust to that and see things from the other person's perspective and that's been you know, a good lifelong lesson for me.

1:01:59Would you walk into an Italian home and then walk out to a Japanese culture? Is that sort of the, so you're flipping context? It was pretty, it was a three-way context flip because my school largely, I'd say my high school experience was comparable to any American kids, but I had friends in the neighborhood. I spoke Japanese. I still speak Japanese. I had Japanese friends that were local neighborhood kids. And then at home, it was, you know, pasta and osabuco, right? So probably a little louder at home too. Yeah. But you know, honestly, it's one of those strange things. I think this is the beauty of youth.

1:02:32Like didn't really think much of it. It was only when I got to America that people were like, wow, that's really unusual. I was like, I guess. Yeah. You're fishing water the whole time. I, you know, it's like, you don't really appreciate it. Exactly. So, so, so you graduated Stanford in 94? Uh, no, I'd finished my undergrad in, uh, 88. I stayed an extra year, got a master's degree in 89. And then I went back for my MBA and I finished that in 94. Okay, got it. So that was your business school. Fortuitous timing to be graduating in 94. I assume that was, internet was starting to take off. Had Netscape been started then?

1:03:10Netscape had started. They released the Netscape Navigator, which was the browser in, I want to say, February of 94. Okay. So, so right around then. And you think this is the big thing. This is what you want to be a part of. And you apply to Netscape and Mark and Ben say, no, thank you. Ben was not that senior yet. No, what actually happened was I, I was an engineer. I was a mechanical engineer at Hewlett Packard before business school. When I got into business school, I had all these smart bankers and consultants. They were like, oh, that's the way to go. So I got a job in management consulting over the summer.

1:03:53Didn't like it at all. I was like, no, no, I'm going back to tech. And I was organizing a conference. And a friend of mine, Greg Sands, who's actually got his own venture firm now, was like, hey, rather than doing all these posters, I think we should make this thing called a website. And I was like, hmm, a website. and he goes like, yeah, there's this thing called a web browser and you can go check out the Louvre and all these things and we should make one of those. And we'll advertise the conference there. And we had email, so we'll just get people's emails and we'll make an Excel spreadsheet.

1:04:31I'm like, okay, how hard is this making a website thing? And so a little HTML and whipped up a website. And then we got, the conference was completely oversubscribed and people from all over the world showed up for this conference. and I was like, hallelujah, wow, this thing is like, this web thing is super cool. And so my friend Sands had a job offer to go to Netscape. He was like ahead of me in terms of figuring it out. So I called Sands and I'm like, yeah, you think there might be one more job there? And he actually talked to the guys like, now look, MBA with a mechanical engineering degree, you're utterly useless.

1:05:08Like, no thank you. So then that's when I sort of took a step back and said, okay, well, how is an internet made? And what are the pieces in there? And I figured out that the internet's made out of routers, and there's one company that makes all the routers. And so I called the CEO of Cisco, who happened to be a Stanford grad also. And he was, again, kind enough to open his door to me, and that led to a job. Who was the CEO of Cisco? It's a guy named John Mortgage. Okay. He's the predecessor to John Chambers, who was largely my boss during my tenure at Cisco. but Mortgage was the CEO. He's sort of this man from Wisconsin who now lives in New Hampshire.

1:05:47He's kind of a grumpy, simple man, but amazing mentor for me when I was young. And yeah, he found me interesting enough to give me a job. So you were there for a while and basically ran M &A, bought, I think, over 100 companies, invested in 250 plus. Is there something that you learned about M &A that would be broadly applicable to an entrepreneur to be thinking about, even if everyone's aspirations are to go public and build a$20 billion company? But that's a logical landing spot for the vast, vast, vast majority of companies. Is there anything that you experienced or saw that is worth imparting to an entrepreneur or listening?

1:06:35I would say that M &A is something that makes sense at times. In particular, when you are at a distribution disadvantage to an incumbent and in roughly the same field. It's something that's worthy of thinking about because the incumbent tends to have a lot of staying power and will fight you for long, long periods, especially if they're a large company. So in the case of Cisco, if you're making a moderately competitive product, you could sell the company, hopefully get a reasonably good position in the company and sort of continue to grow with it and at the same time not have to fight the fight forever.

1:07:25Now, not every entrepreneur faces that situation. Not everybody's got like a giant incumbent that they have to deal with. So it's, you know, it's case by case. The other thing would be if you're going to sell your company, sell it to someplace where you're excited to go. You know, thankfully at the time Cisco was growing by leaps and bounds, right? Growing 200 % year on year. And if you get to join that and ride the wave? Absolutely. A lot of times, I think entrepreneurs just kind of think of it as, oh, you know, I'm done. I'm just selling out. I'm going to go there, waste my time for two years and then go away again.

1:07:57And, you know, in truth, I think if I were an entrepreneur, I would not necessarily try to maximize value of how much money am I getting from NA, but am I going to the right kind of company where I'll actually not waste two years of my life vesting, but I'll actually do something productive and meaningful. And you've sort of seen that, you know, um, when Facebook bought, uh, Instagram, Kevin Systrom was there for a long time. He didn't just sort of say like, Oh, great. That was a billion dollars. Thank you very much. Goodbye. He became an integral part of the company. And I think he enjoyed his ride at Facebook just much before as afterwards.

1:08:33And I think that that's a, he probably could have sold Instagram to somebody else for more money. But I think in the end, both financially and personally, that became a much more fruitful endeavor. Yeah. Is there something that companies do to, or should do to set M &A up for success on the acquirer side that you've kind of seen play out or that you would recommend? I mean, when I was at Cisco, just during the period that I managed that part of the organization, I think we bought 75 companies in, as was the case as a VC, made every mistake in the book, like screwed all of them up. But some of them turned out to be meaningful.

1:09:12I think the most important thing that I've often talked about is that companies are not made to be bought and companies are not created to be acquirers. It's a very unnatural process. and when you do unnatural things as an organization or as a person, you tend to make a lot of mistakes when you do those. And so if acquisitions are going to be a core part of your strategy, make sure that you have processes built around it, you hire people that know what they're doing around it, that you think of the end-to-end process of both evaluating, acquiring, integrating, and then measuring the success of that.

1:09:53Accept the fact that you're going to make mistakes, just like for us VCs, you're going to make mistakes. But the good ones really work out and the bad ones turn to zero. So understand that you can't just buy one and hope it's going to work, but you have to avail business processes around it. And in the end, in all candor, I think Cisco probably won't necessarily say this in their public media, but my guess is their success rate on acquisitions was probably comparable to what we would expect as a success rate as VCs. They're sort of doing VC at a slightly larger scale. But imagine being a VC and only doing one deal a year or one deal every two years.

1:10:30Would you get good at it? Not really. You just got to do it more. And most companies that acquire don't think of it that way. They're just like, oh, we found this very strategic thing. We'll do it one-off. Well, chances are you're probably not going to get good at it doing that. You were a CEO for two years? Yeah. Juice. Was there anything, I'm sure there's things you wish you did differently, but did you, in retrospect, wish you had gone and been a CEO or founder earlier in the journey? Or was that the right time for you to try it out? Okay. So I should have done it sooner. Yeah. It was hard for me to leave Cisco because it was home.

1:11:11You know, I'd grown up as a person in that process. I still, some of the people that I worked with there, Jay Shree Lal, Tony Bates, Charlie Giancarlo, these are people that are still my close friends. I became a person during that period of time, so it was very hard for me to go like, okay, I'm out of here. Probably means I overstayed my welcome there. And also, I think in the latter years, from about 2001 until 2007 when I left, the company was relatively static at 50 ,000, 60 ,000 employees. So you don't even notice, but your mindset becomes big company. Like you start to think big company.

1:11:57And the values of what makes a big company good and a small company good are very, very different. Right. And so I think when I became a CEO, the first mistake is that my mindset, you know, in things like velocity of decision making was very big company. And I didn't appreciate how much I needed to unwind the last five, six years of experience that I had had to be a better leader of a small company. You know, it's in big companies. There's a heavier cost when you change your mind on things. If I say like, okay, I had like 5 ,000, 6 ,000 people working for me at Cisco. And I was like, okay, well, we're going to take like 500 of them and have them go do this.

1:12:41You just like, you know, blew up 500 people's lives. In a startup, it's like, you know, we're going to take three of you guys and you go do that. And it's like, tomorrow morning we wake up and it's like, oh, that was a bad decision. Let's come back and do this. And that's like no foul, no harm. It's a total two-way door in decision making. whereas big company decision making is more of a one-way door. It is reversible, but it's pretty painful. And so you become cautious, right? You do what I call, you play a little more defense than you play offense. And I think I stepped into the CEO role with too much defense in my mind and not enough offense in my mind.

1:13:17So that was probably a big, and I think had I done it earlier when Cisco was still in its growth mode, I think my mindset would have been in a little different phase that was more aligned with what you needed to do in a small entrepreneurial company. Did that experience benefit you more as a board member, investor, or neither? My startup, I juiced. Probably the best two years of learning I've ever had. Is that right? Honestly. You know, more than my time at Cisco, I felt personal ownership of the decisions that were made and the weight of them. um you know things had gone so well for me both personally and for the company at cisco that i felt a little bit invincible maybe and i got my ass kicked uh so that was good um recognizing what one's good at what what bad i was you know i worked with ruloff and danny where ruloff at dani at index were my board members both were amazing learned a lot from them and that the the I admired and respected Danny so much that that actually led me to deciding to join him as a partner at that point.

1:14:28So yeah, I'd learned a lot about board members. I learned a lot about board members when the company is not executing at the way you want it to. So yeah, great, really great learning years. The company didn't really make much money. I think it was sold for some return to capital to the investors, but it wasn't great. But still, for me, probably the two best years of learning. So 2009-ish, you leave, and you mentioned Danny Reimer from Index. Was he based in Europe at the time? He was, yeah. So he was in Europe, and then Roloff was at Sequoia. There was a period of time in which you were EIR at Sequoia?

1:15:09Yeah, I spent time with Sequoia before I joined the startup, though. Oh, before. Okay. So we're going back in time. So Index was a European founded and headquartered firm. What drew you? It sounds like Danny was an important part of it. But what drew you to, hey, I want to help set up a West Coast office for these guys? Well, I think the first big decision, I was 42 at the time, was should I be a venture capitalist or not? Because it wasn't that obvious. My wife said something really thoughtful at the time. She said, well, of all the professional years that you had, when did you have the most fun?

1:15:42And I was like, oh, in the early days of Cisco when I was doing M &A and investing. She was like, well, pro tip. That's good advice. Listen to yourself. So I think the first decision was to do venture capital. And then Index provided a fascinating pseudo-entrepreneurial opportunity, which is that it was a very well-recognized and good firm in Europe. It had a lot of resources. Raising money as a solo GP or a small GP was very hard to imagine at the time. And so having the backing of a very established firm in Europe to go launch what became Index in the U.S. was a very unique, it's sort of like I get all the capital in the world to go exercise in entrepreneurial activity to try to launch a firm in the U.S.

1:16:29And that was a very exciting opportunity. And on top of which, it was going to be both Danny and I. We both moved to the U.S. to – or he moved to Silicon Valley to do this. And I was like, get to work with a great guy that I respect a lot, got the backing of a firm that's very serious and committed to this. And I get to do something that's reasonably entrepreneurial, which is to build a firm and sort of a trifecta. How does Index view the world from an investment perspective? Like, are there certain types of deals that you think about? These are index deals or the types of things we want to be in?

1:17:06Yeah, I mean, I think the philosophy that I was talking about earlier is consistent within index. We are a very entrepreneur-centric investor, so we sort of have to fall in love with the entrepreneur to invest. We are less of a market segmentation investor. So market segmentation investors are like, there's four sectors, four stages. We've got to have one in each one of these. That's not really us. So as a result, our better success stories are almost always aligning ourselves with founders that have done amazing things. We don't incubate. We don't have an EIR program per se. It's really more about identifying these people and investing in them.

1:17:53and we have a growth fund. The purpose of the growth fund is to follow up on the ones that we missed last time. Yes. Or double down on the ones that we like most. But it is unique in that sense also because a lot of firms are organized differently, but in our case, there's only one team. There's no growth team and venture team. And so it's the same group of people following the same great entrepreneurs and either investing the first amount of capital or catching up later. Uh, I, because you referenced, uh, I heard you say you don't believe in incubation as a core strategy or it's not a core strategy of yours that you guys pursue.

1:18:32Why is that the case? Well, um, I think in order for a great entrepreneur to build a business, it, it has to be their idea, right it has to be they came up with the concept and they have the skill set and the aspiration to build it into a business i i you know incubation as defined often feels more like transplanting so like i start something it's my idea i'm going to convince you that it's a great idea to become the ceo of this company and i'm not saying that never works but i think more organic growth, if you look at all the great companies that have been built, they've all built that way, right?

1:19:16Amazon, Facebook, Apple, Google, you know, you go on down the list almost always, it's the people that started it, that had the vision, that carried it forward, it was their baby and all that. So I think it's not to say that incubations won't succeed, but I don't view it as a scalable, viable strategy. And I think for venture capital, it's much better to try to find the great entrepreneur who's going to lead you and follow that thread. How do you think about the role of the individual? So Mike at the first part of the email address versus index.com. How do you think about the relationship between those two and the brand that an individual might carry versus the brand that the institution may carry?

1:20:05Well, in the venture business, it's an intricate and complex thing. What we've tried to do at Index over the last 15 years is to build the brand of the firm to give a platform for our younger investors to be successful. And we always tried to not make it about Mike or Danny or Jan or Neil or anybody else and really make it about Index and have a succession plan that aligns with that philosophy. So the idea is build the institution. The institution serves as a platform for individuals to excel. You know, the world doesn't love that message. I'd say the world tends to like the superhero, right? The superhero of the moment, the number one on the Midas list and so forth.

1:20:56So you have to contort the world a little bit to make that happen. I think in that context, like Sequoia is a really good role model because they've gone through several generational changes. And I always find that, you know, obviously in our business, we compete. Any person I compete with Sequoia is tough to compete with. Why? Because they have a Sequoia brand. So in some sense, we admire and respect what they've done and we've attempted to do the same thing at Index. But inevitably, you do have to think about your personal brand and in some ways try to grow it in parallel with the firm brand.

1:21:30Because entrepreneurs know. It's a reality that they think about the individual. And I think not everybody thinks about how to build their individual brand and how to evolve it over time. But I think as a venture capitalist, it's important to do that. And you build your brand in a lot of different ways, right? Some people blog and some people tweet. Listen, you're talking to a guy with a podcast name. Yeah, you're preaching to the choir. Yeah, yeah. How's that brand building going, by the way? Yeah, I don't know. We'll see if anyone listens to this. No, it's an interesting thing because the two do kind of feed on themselves.

1:22:04It would be much better if you could swap out anyone's name before the at sign of the email address and have that carry the equal weight. But it's hard. It's hard to just get the brand itself to continue to rise absent the players that are on the team. Yeah, but you know what I'll tell you is that I think you have different responsibilities at a different stage in your career. You know, if you're 27 years old or 30 years old and you're trying to build your brand, forget the company. Like, your job is to build your brand. My job, I have a reasonable brand in the industry. It's not my job to enhance that anymore.

1:22:38It's to enhance the index brand and help all those people around me. Because let's not forget, I'm GP, but I'm also a significant LP in Index. And I want them to be very successful going to the future. So I think you change your responsibilities through your career. And once you have that platform, then you use it to elevate others. Interesting. How do you approach your role as a board member? And what is the impact you hope you make on a board when you join it? So first, I found it to be probably one of the funnest things as a venture capitalist is to do a good job as a board member. Almost to my mind where like the investing part is a little bit incidental and then the real job starts, right?

1:23:29I think it's important to recognize the balance in the relationship that you have with the leaders of the company. in some models you are subservient to them right they are amazing and i'm here to help what can i do for you like let me know if i can help uh another modality is i know better than you i'm gonna tell you what you got to do i think both of those are failure modes as a board member the the board member relationship that i like is a peer and a friend relationship where if you're my CEO and in front of everybody else, I'm always going to support you. I'm behind you. But it is also my job to put a mirror in front of you and say, hey, Logan, this isn't working.

1:24:20Like what you're the words you're saying to me don't reflect the reality of the rest of the world. And, you know, this is sort of the optimist's pitfall. Every CEO has to be an optimist. otherwise they're not going to do that job especially in venture and they often see the world a little bit through a rose-colored lens but it is my job as a board member to hold the mirror and say this is what it actually looks like good and bad right and um i'm not going to play games with you it's going to be transparent i'm going to tell you you're doing great when you're doing great but when i'm telling you it's not working it's not that that's not because i don't support you, but I want you to get better.

1:25:00And you're not going to get better if I don't give you that feedback. So it is that, it's sort of like what a good friend should do to another good friend is sort of the way I think about the relationship. And board membership is, the board meetings are the least important thing about a board membership. It's about the phone calls and the meetings and the coffees and the text messages and the whatever else that happens in between that creates a foundation. And if you get to a board meeting and you're surprised or you have to have a giant debate, well, you probably weren't doing your job right.

1:25:31How do you establish that? Do you set up regular one-on-ones with the CEOs? Is it just something that happens on an ad hoc basis that you're constantly thinking of them and communicating as things come up or how does that work? No, I do. I have regular meetings set up. I do a regular meeting every two weeks and then obviously a lot of stuff in between that's a little more ad hoc. In the beginning, you might even do it like once a week to just establish the relationship. I try to also not rely just on the calls or the Zooms, but to see them in person, go to dinner with them, have a glass of wine.

1:26:09So, well, with Alex, that would have been illegal. But, you know, to got him a fake ID and that helped. Sort of create the foundation for transparency to occur. Any surprising experiences from investments that have changed your perspective on how companies should be run maybe from 2009 when you first got into this industry to today? I don't know that this was like a revelation, but it became more self-evident to me in time is just make sure that the main thing is the main thing. Like at the end of the day, a business is about making a great product and selling a lot of it or distributing a lot of it.

1:26:58There's a lot of other stuff that goes around that, but those are the two main things. and obviously, you know, having the capital to execute against that. But, you know, simplify it down to the essentials, what matters. And don't, you know, oftentimes I go to board meetings and people talk about all sorts of stuff. And I try to sort of say, no, you know what? There's only two things. And I often do this, I do my pre-read. And on the board deck that they sent out, I'll write down. I'm like, there's two things that I'm going to talk about today. All I'm going to do is spot to, you tell a CEO 15 things, they won't remember one of them.

1:27:34But if there's like, you know, today we're going to talk about churn rate and next generation product. Those are the only two things that matter. Everything else, people might have opinions. They might say good things or bad things, but I'm going to concentrate on just those two main things because I want the CEO to walk away and we're going to meet again in three months as a board. And I've thought about like these two things matter. And then to follow up like two weeks later he's down and say hey last time we talked about churn what do you what do you think what have you done differently in the last couple of weeks about to address that issue so uh rather than 30 small number critical things that are fundamental to the business's success and the rest of the stuff you know who you're going to hire for vp of hr whatever it doesn't matter like pick somebody and hire them it's okay yeah interesting uh you're on the board of opswear for how long?

1:28:25I think it was like three, four years until they got bought by HP. HP. What did you learn from watching, I guess, Ben Horowitz operate and also being on the board with Mark Andreessen through that time? I mean, first of all, it was the most amazing board. Who else was on the board with you? Mike Ovitz. Okay. The legendary Bill Campbell. Wow. Mike Homer, who's VP Marketing at Netscape. He's also sadly passed. uh, Andy Ratcliffe, Mark, Ben, me, um, Gordie Davidson was the general counsel. Um, so it's a lot of heavy hitters. Yeah. Yeah. Well, let's just say I was careful what I said. Measure it in your words.

1:29:06There's two things you wrote down. It was like two things and maybe I'll say one. Um, but, um, I mean, probably the most amazing thing is how much Ben and Mark have matured and evolved over the last, you know, I think it's probably 20 plus years now that we're talking. Um, Ben was a, you know, first time CEO, uh, Mark was wunderkind. Um, they made a lot of interesting decisions. Uh, they were, it was a tough competition with the folks at BladeLogic that were also eventually acquired. I was ultimately struck by their pragmatism. You know, they paint the picture of being visionary. But if you think about the story of Opsware, you know, first of all, they sold off their hosting business to EDS.

1:30:04So like a complete transformation of the business. And then ultimately when they got a decent offer from HP, it was like, boom, we're out of here. Why did they do that? Because it was tough going. right and uh so you know while you have these you know visionary people which arguably they they were in fact super visionary because the the concept of the company what is what today is called aws yeah right that's what that's what the company was supposed to be that concept didn't work because of the timing so they basically took the software that was the control system of aws and turned that and made it into opsware but when it came down to the key decisions they were like oh you know it's just black white we're you know we're not going to be a very successful company we can sell it and smartly they got out so interesting balance between sort of you know the concept we talked about earlier where they had a vision but they were off on timing and they pragmatically turned out and you know made lemons lemonade out of lemons and sold it to hp it's pretty wild i i don't know how many people appreciate this today but just the fact that you had Opsware with those groups and then you had Blade Logic with David Charia, Mark Cranny, and John McMahon, all those guys.

1:31:16It's just such an accumulation of talent battling it out in a single industry going after one another. It's pretty wild that there was those many people in that together. Yeah. And I think at the time there were just less startups and there was more concentration of talent. It was pretty extraordinary. And by the way, the Opsware team, Eric Vistria was a member there. Sharmila Mulligan was a member there. there's some pretty amazing folks on that team. Yeah. You're on the board of Ferrari. Yes, I am. What have you learned from being a board member of, Ferrari's been around for how long? 150 years?

1:31:54No, I think it's like 75. So a long time. Yeah. What have you learned from being on that board that either perspective or attitude or something that you think Silicon Valley companies should port over? I don't, well, I mean, actually I'll answer the question slightly differently, which is I have observed something which that company and others do incredibly well. I don't know if it ports to Silicon Valley, but it's an interesting concept. You know, Ferrari is a car company. They make 13, 14 ,000 cars a year. They sell them at 70 % gross margin, 65, 70 % gross margin, which is absurd in the car business, like completely insane.

1:32:35They have a two-year wait list if you want to buy a car. Now, if you were to take the nuts and bolts of a Ferrari and say, like, let's put that up against a Lamborghini and an Aston Martin. I mean, yeah, the Ferrari is better, but it's maybe 10 % better, 5 % better, depending on how you measure it. But the distance in terms of, like, Ferrari is a$65 billion market cap company. They sell about the same number of vehicles as their competitors, but way more valuable and way more desirable. Like, what's going on, right? Like, actual technical differentiation, very modest. Better, but modest. Value to the consumer, gigantic, right?

1:33:11And what they've been able to construct over the last 50, 60 years is the brand. They have an extraordinary brand, right? People want to associate with it because owning one or being associated with one defines who you are. It's this hugely desirable, hugely wanted thing to be associated with that brand. It means things culturally and societally and so forth. And you see that in other sectors as well. Hermes is another very, very good example of it. That concept of brand building, obviously for those brands, took tens of years. And sometimes I wonder, is there a way to translate that concept of brand into the world that we live in?

1:33:55right loosely speaking big companies generally do because i usually when i use a google product even if it sucks i go well it's you know it's google it's you know it's okay uh apple sort of has established that but i sometimes wonder like is there a way of sort of turbocharging brand or finding a way where uh you you know tech capable tech companies can reconstruct that somehow um of creating sort of that desirability. You know, we've tried at Sonos. Yes and no. I'd say people kind of go like, it's a good technical product, but, you know, is it aspirational? Probably got some work to do there.

1:34:32But I think that's probably the concept that I've taken away the most about that company. I also have, you know, this is sort of learning that I've done as a board member. They are extraordinarily developing their internal talent pool. Like, because in Italy, if you're a smart kid, that's the company you want to go work for, right? There is no better company to work for than that one. But so they get this extraordinary talent pool. Like I get a chance, I love doing this, but I was like, can I have a lunch with your top 20 engineers? These brilliant kids, like, you know, out of the best universities in Italy, whatever, best grades, super smart, mathematics majors, this, that, whatever.

1:35:11And they groom them and largely the company, the CEO was hired from the outside, but largely the company's all people that they've developed over time. and um you know in a world where a lot of what we say is like oh you got to hire higher higher higher their ability to kind of develop that talent is is quite unique and interesting is there a is there an example or something you can speak to of them being very purposeful in their brand like a manifestation of it that might not be obvious just from the outside like are they purposely limiting the 13 000 cars a year just to make sure it maintains that exclusivity or is there anything that's just particularly interesting?

1:35:50There's a lot of things that I would call brand management, which they do quite well. It's like, you can't use our logo here. You can't use our logo there. This person shouldn't be seen. If they have some gangster that's got their photo with a Ferrari on Instagram, they ask them to take it down. They do a lot of policing stuff. But I think the more interesting bit is the idea of scarcity, which you brought up. they administer scarcity. And any salesperson that's hopefully listening to this podcast will resonate with this, but selling is a process of introducing scarcity in however way you can to the buyer.

1:36:34The buyer will pay more, will desire more an object, which is scarce. Scarcity can be introduced in a lot of different ways. It could be limiting the number of cars, it could be limiting your time. It could be limiting the amount of emotion that you convey to another person, right? Because when you and I are negotiating, what you actually kind of want is my positive emotion towards you. And if I restrict that, right, I create scarcity, which you actually desire more. So the idea of administering scarcity in whatever unit you're counting whether it's cars it's emotion it's time uh it's availability of something that ability to administer it is the thing that creates uh that that brand value ultimately and even as an executive or as a venture capitalist you know a mistake a lot of people make is to be too present right to be too available you actually want to restrict that a little bit because what you want is that trade-off that you want something i have and I'm only going to give you a little bit of it.

1:37:40I'm sure you get asked by young people in their careers, uh, can I pick your brain or any career advice you have any lesson or insight that you would impart to people that are early in their careers, either things you did right, things you wish you had done, just, just general advice to people that are trying to climb the ladder trying to to be the next mike volpe well i don't know i don't wish that upon anybody yeah i don't know um uh i would say uh in a number of dimensions i would uh delineate first of all the different functions that exist in our industry because this podcast is going to be mostly tech people so i'd say first of all in tech figure out whether you want to be an investor or whether you're going to be an operator.

1:38:30You can always change your mind later, but stick with that to start with and try to get good at it. Like, don't just give it like, oh, I'm going to be an operator for two years and then I may be a VC. Well, you're not going to be a very good operator for two years. Right? So like, you know, dedicate energy and time to being good at it. There isn't one thing that's better than the other, but either way, you got to love it and not just think that you're checking a box. So pursue it. And it's totally fine to be a VC from the get-go. Just pursue it with passion because you love it rather than like, I'm going to do it for a while so I can find a job.

1:39:03To stop thinking about something as a interim step, distasteful, but must be done in order for me to do the next thing. It's impossible to commit to doing that. Like as a weighing station to get to the next row. I couldn't do it. Some people are maybe able to do it. A lot of people are, but it's not fruitful. It's hard. Yeah. It's a hard thing to do. so that that would be probably the most important thing the the other thing is just be cognizant of what you're good at and what you're bad at and i actually think the best path to success is to put yourself in a position where your best strengths allowed are most expressed and your weaknesses are mitigated by other factors.

1:39:54Every one of us has strengths and weaknesses of what we do well, what we do poorly. You know, if you run fast, run for a living, right? If you're good at math, take a job where math is good. You know, so just like, and, but you have to be very cold with yourself and say, what am I good at? And what am I actually not good at. And then position yourself to do the thing that allows you to express your greatest strength. And there's so many ways to succeed in life. And then success, oftentimes here we measure it by money. But there's a lot of other ways where you can achieve success that generates happiness and so forth.

1:40:37But it's usually for people to align what you're doing with what you're good at and being thoughtful about knowing what you're good at and what you're bad at. I think that's probably the thing that I would try to impart the most on a younger person that's trying to be successful in business. The one thing we didn't talk about is state of the industry today. I don't know if you have any thoughts on that, but there's a lot of capital out there right now, which I feel like has been a refrain always, but in particular, It feels like there's a lot of capital out there right now. Do you have any opinions on how this stuff's going to play out?

1:41:16You lived through the 99, 2000, 2001 cycle. Any thoughts on where we are right now? I'll tell you what I think I tell our younger folks at Index, right, which is now is a really tricky time to be a VC. Yeah. It's really hard. The first is that we went through this period, 10 very, very plus, very positive years. You could invest in a lot of different sectors, right? like consumer, fintech, do crypto, you can do AI, you can do data infrastructure, you can do SaaS, like lots of successful areas. So people could like move around and try different things and find areas where they had passion and were well adapted to.

1:41:53Today, one sector is hot, just one. So kind of a pain in the ass because like, you know, everybody's doing the same thing. Second is you've got a portfolio that's sick. Like everybody's portfolio is struggling right now it's just a tough time for companies right so you're getting no positive reinforcement from your portfolio you know you just spent six years of your time life in you know figuring out fintech and there's nothing in fintech to do so now you got to pivot over to ai and then the ai's bubble so the valuations are crazy and your older partners are telling you like are you nuts why would we pay 500 million dollar for a thing with 1 million in revenue that's that's sort of like what you're faced with today.

1:42:30And so I think it's really hard. Oh, and I think there's one more factor, which is by and large, as a venture capitalist, you progress in your career by investing. That's what you do. And so if you don't invest much, which in truth, people's investments outside of some very big dollars in AI, it's slow, actually. It's still pretty slow. So people are worried about career progression. And it's the state of the industry in the transition that we're going through, we're still kind of hung over from the euphoria period where things were better than they normally were. And now things are actually worse than they normally are.

1:43:09And you sort of have to just kind of as an individual investor, try to power through it and saying like, you know what, I know this is hard. I'm just going to, I'm going to put my head down, keep looking at stuff, keep saying no, when it doesn't make sense, trying a few things where they do make sense, but just try to keep doing my job every day. Just keep doing it. And ignore the like, are things moving? Has this person like pivoted over to this? And, you know, have I met the latest AI thing? You know, just do your thing. And then eventually the fog will clear and we'll get back to a reasonable state of being.

1:43:43You know, interest rates will help. I think when things go down in the two, 3 % range, you know, companies will be valued more and then people will get excited again and capital will flow in the right direction and so on and so forth. The other thing that I would say is, I think there's two skills that are very relevant to a venture capitalist. One is velocity, like move fast, very important. The other one is good judgment. And you sort of balance the two, right? Right. Sometimes there's periods of time where velocity matters more than judgment. Like being fast is what matters more than being capable of assessing a situation.

1:44:16I think what we're entering now is a phase where judgment is more important than velocity. And the challenge with young venture capitalists, maybe you feel that way, too, is that you've been trained on speed for 10 years. It was like, go find the entrepreneur, get in there first, you know, first term sheet, boom, boom, boom, fast, fast, fast. Right. And now you don't get rewarded for fast. You get rewarded for whys. And I think it's a period of time where as an investor, you have to switch your mindset to like, what's the play that makes that is advantageous in this time? And how do I get good at that play?

1:44:52Right. And I think that that's what the state of the industry resembles. I think in the end game, there's a lot of interesting strategies that are being played out and firms will diverge in their strategy. You've sort of got the everything funds managing 15 billion plus dollars. You've got Middle Eastern money showing up and so forth. People are buying hospitals. Yeah. But the craft of what we talked about earlier, of the relationship with the founder, of the ability to develop stuff early on and seeing the development of people, that's not changed. That's still there. And so if that's the game you want to play, which is more what I would characterize as a classical venture game, there is absolutely room and space.

1:45:31You just have to be patient with it because it's a complicated time. Cool. Mike, thank you for doing this. Appreciate it.